Grayscale Investments LLC, a wholly-owned subsidiary of Digital Currency Group, Inc., recently filed to list its Bitcoin Investment Trust (BIT) on the New York Stock Exchange (NYSE) in a $500 million initial public offering, according to a Securities and Exchange Commission (SEC) filing. Shares of the trust, which have traded over the counter, have traded at a premium to the bitcoin price, according to Marketwatch.
The trust, which launched in 2013 and exclusively invests in bitcoin, is one of the few options available to institutional investors who seek to exposure to bitcoin. BIT began trading on the OTCQX market May 4 under the ticker symbol GBTC.
Restrictions On Share Purchases
The offering will be made only by means of a prospectus. According to the SEC filing, the shares can be purchased from the trust only in one or more blocks of 100 shares. The trust issues baskets (100 shares) to certain authorized participants. Each authorized participant must be a registered broker-dealer and have entered into a participant agreement with the sponsor.
The trust is currently in discussions with KCG Americas LLC and Wedbush Securities to serve as authorized participants.
The Bank of New York Mellon will serve as the transfer agent for shares of the fund. Xapo Inc., a bitcoin wallet, will act as custodian of the BIT bitcoins.
As of Sept. 30, 2016, the trust’s net asset value was $102,639,992 and its net asset value per share was $56.94. As of Sept. 30, 2016, its bitcoin holdings were $102,767,265 and its bitcoin holdings per share was $57.01.
Filing Notes Risk Factors
Under the section on risk factors, the filing noted the growth of bitcoin is subject to a high degree of uncertainty. The factors affecting the further development of this industry include:
• continued worldwide growth in the adoption and use of bitcoins and other digital currencies;
• regulation of bitcoins and other digital assets and their use;
• changes in consumer demographics and public tastes and preferences;
• maintenance and development of the open-source software protocol;
• availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;
• general economic conditions and the regulatory environment relating to digital assets; and
• negative consumer perception of bitcoins specifically and cryptocurrencies generally.
The filing also noted that in 2014 and 2015 and the nine months ended September 30, 2016, the trust considered Bitstamp to be its principal market, with an exception for the period of Jan. 5, 2015 through Jan. 31, 2015 when it relied on pricing from Bitfinex. On Jan. 5, 2015, Bitstamp suffered a disruption of operations, and in accordance with the trust’s procedures for determining its principal market, Bitfinex was relied upon until Jan. 31, 2015 when the trust determined that it could again rely upon Bitstamp as the principal market.
SEC Considers 2 Bitcoin ETFs
The SEC is now considering whether to approve two proposed bitcoin ETFs. If approved, they would be the first ETFs exclusively focused on bitcoin.
The Winklevoss Bitcoin Trust listed its first application to list on Nasdaq, with the SEC three and a half years ago, then switched to BATS Global Markets in June.
Some analysts think the BIT could prompt speculative interest in bitcoin like the launch of gold ETFs in precious metals a decade ago.
Ark Investment Management LLC, which invests in EFTs, almost doubled its money from September to November after investing in BIT.
SolidX Partners Inc., a company that specializes in blockchain-based identity services, in July registered with the SEC to launch the SolidX Bitcoin Trust, an EFT to provide shareholders exposure to the daily change in the U.S. dollar price of bitcoin, minus expenses and liabilities of the trust.