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Grayscale's Bitcoin Cash Trust to Become SEC Reporting Company

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Written by   903
6 months ago

Grayscale is the only financial vehicle for institutional exposure in Cryptocurrency in the USA. With its GBTC (Grayscale Bitcoin Trust) fund since 2013, it purchases BTC from the crypto market, divides the BTC into shares and makes them available for sale to accredited and institutional investors.

Grayscale announced yesterday a new filing with the SEC on behalf of its BCHG (Bitcoin Cash Trust) fund.

When accepted the shares of the BCHG Trust will be registered under the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 and become SEC reporting funds.

Source: Twitter

Also announced similar filing for the Litecoin and Ethereum Classic funds, as well as for is "Digital Large Cap Fund" that is a basket of cryptocurrencies including BTC, ETH, BCH, ADA, LTC, and LINK.

Grayscale founded the Bitcoin Cash Trust (BCHG) in March 2018. Grayscale shares from all of its Trusts are traded in the OTC (Over-The-Counter) Exchange: OTCQX. BCHG is the ticker Bitcoin Cash shares are trading in this exchange.

Trading for BCHG in OTCQX started in August 2020. This is trading of the shares of the underlying assets, not the actual cryptocurrencies themselves. The Cryptocurrencies remain under Grayscale's custody, unredeemable without an option to sell back to the cryptocurrency markets.

BCHG - Grayscale's Bitcoin Cash Trust

The importance for investors of BCHG becoming SEC Reporting fund means that BCHG unlocking period will be reduced from 12 to 6 months. The GBTC fund was changed to SEC reporting at the beginning of 2020. This event helped Grayscale and BTC with increased interest for the shares of its Trust.

The price of BCHG to NAV is on a substantial premium that could create arbitrage trading opportunities due to the reduced lockup period.

Grayscale offers Bitcoin Cash to institutions and wealthy investors in the US and there is a growing interest for exposure in BCH by these investors.

Volumes of BCHG Shares and Holdings

Source: Bybt

There was immense interest for BCHG at the end of 2020 and Q1 2020, and some more shares purchases lately in June.

BCHG Performance (Premium to NAV)

Source: Flagticker

While GBTC is traded on a 10-15% discount for months, BCHG is traded on a premium of 160% in the OTC market, having reached even highs of 2000% premium to NAV price earlier in December 2020.

Grayscale profits with a standard yearly fee for its services. For the BCHG Trust, these fees are 2,5% annually. The minimum investment to participate in the Bitcoin Cash Trust is $25,000.

Bitcoin Cash Holdings

Source: Bybt

Grayscale currently holds about 298,600 BCH in its custody and with the recent filing, it is expected for institutional interest to increase.

Price action of BCHG

A full-time chart of the BCHG price action can be found on the OTC Markets website:

Source: OTCMarkets

Institutional Adoption will Eventually Rise

Increased institutional adoption of cryptocurrencies is to be expected, especially for those assets that fit the investors' demands for certain characteristics of innovation, potential, network user base, and efficiency.

Grayscale has seen huge inflows of institutional funds for BTC and Ethereum so far. Both ETHE and GBTC Trusts became SEC reporting in 2020 and this helped the fund increase sales of shares. This was also reflected with increased volumes of ETH and BTC in the spot market.

While interest for Grayscale's Bitcoin Cash Trust was on the rise at the beginning of the year, the interest faded especially after the market correction this May. This news will certainly renew the institutional interest in Bitcoin Cash and the rest of Grayscale assets (Litecoin and Ethereum Classic).

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Avatar for Pantera
Written by   903
6 months ago
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Comments

Great info. For someone who doesn't mind the custodial issues and is long term optimistic on BCH valuation, would the smart move be to deposit BCH in the trust or to buy shares? Or something else? I don't have much experience with that type of financial instrument so it's not obvious to me.

$ 0.10
6 months ago

Grayscale accepts both, what should be better is to consult a tax advisor though, since these will all be taxable events.

Grayscale® Bitcoin Cash Trust 2020 Tax Letter: https://grayscale.com/tax-documents/

Honestly, I have no experience in this but I try to learn the basics and inform when I find useful news coming from Grayscale. I would be a wrong person to instruct correctly.

However, Grayscale states that contributing in "coins" is a non taxable event. So perhaps it reduces the actual cost of buying their share:

"Assuming that each Product is treated as a grantor trust for U.S. federal income tax purposes, such contributions should be a non-taxable event. All investors should discuss the tax consequences of an investment in Grayscale’s family of Products with their tax advisors and review the section entitled “Certain U.S. Federal Income Tax Consequences” Source: https://grayscale.com/faqs/

You will be buying shares of the Grayscale Trust for a lockup period that will be 6 months (when SEC approves the request) and after 6-months you will be able to trade these stocks for USD in OTCQX which is the exchange where these stocks trade.

I'm sorry I can't advise though on the best course of action.

$ 0.50
6 months ago

I don't touch the custodial world often and that is interesting info. Thanks.

$ 0.00
6 months ago

I will not be active on Reddit for questions or comments. Any comments or questions can be asked here, in Read Cash.

That's a very good Idea. Everyone should do it that way. Post on Reddit and link here for commenting and discussion.

$ 0.00
6 months ago

I've thought about this for a while. If someone wants to ask questions, discuss or even troll, should be here where the main part of the information lies.

$ 0.00
6 months ago

What is the effect of SEC report actually bro? I meant SEC can change the rule of Grayscale investment rule??

$ 0.00
6 months ago

The change for investors is that the lockup period is reduced down to 6-months. This is also what helped GBTC and ETHE attract institutional funds.

For Grayscale it is bureaucratic procedures that change, it doesn't matter a lot to us.

$ 0.00
6 months ago

owhh got something bro ..

$ 0.00
6 months ago