Bitcoin Investment Trust
Our assets under management increased 42.45%, as accredited investors continue to purchase restricted shares of the Trust at the daily net asset value (NAV) coupled with the increase in the bitcoin price. In fact, the Bitcoin Investment Trust’s NAV returned 32.67% in 2015 and 215.61% since inception.
Our team successfully transitioned the Bitcoin Investment Trust onto the public markets this May, under the symbol: GBTC. As the first publicly available bitcoin investment vehicle in the US, the response has been overwhelmingly positive. Trading volume grew steadily throughout the year, as did institutional research coverage of the Trust.
The Grayscale team continues to implement best practices for the investment community to gain transparent and secure bitcoin exposure. In August, we appointed Xapo, Inc. as Custodian for the Bitcoin Investment Trust. Xapo is the leader in bitcoin vaulting and storage, and we are encouraged by their involvement with the Trust, alongside other leading service providers.
In September, ARK Investment Management became the first public fund manager to invest in bitcoin by purchasing GBTC shares for their ARK Web x.0 ETF. They subsequently purchased GBTC for their ARK Innovation ETF. It has been exciting to partner with an innovative firm such as ARK, which signals Wall Street’s continued interest and investment in the space. In September we also celebrated the two-year anniversary since the launch of the Bitcoin Investment Trust.
The Digital Currency Ecosystem
During 2015, large financial institutions recognized bitcoin’s potential and its ability to disrupt their businesses. As a result, investments into the space grew 34% from 2014, bringing this year’s total investments close to $480MM. Investments made in bitcoin and blockchain companies came from financial services players including Goldman Sachs, Citi, Capital One, American Express, and Visa. There was also continued investment from major venture firms including Kleiner Perkins, Andreessen Horowitz, and Accel Partners.
In 3Q15, our team took part in the launch of Digital Currency Group, our parent company. DCG’s mission is to accelerate the development of a better financial system by building and investing in bitcoin and blockchain businesses. The Grayscale team continues to finds synergies and partnerships within the DCG portfolio of companies, which now encompass nearly sixty companies across nineteen countries. DCG’s own funding round included investors such as CIBC, CME Group, MasterCard, New York Life and Transamerica.
The Global Landscape & Regulation
Throughout the year, a number of global events demonstrated bitcoin’s power and its international reach. The shutdown of the Greek banks, and halt on their monetary system, exemplified how consumers may want to consider other stores of value besides fiat currencies, particularly when access to capital is constrained. The Chinese devaluation of the yuan also highlighted the negative effects of government intervention and capital controls. During these events, many proponents advocated for the benefits of a decentralized digital currency like bitcoin.
Much of this discussion also sparked a number of regulators to start a dialogue with the bitcoin community to apply legislation and frameworks around the use of bitcoin. New York State implemented ‘the BitLicense,’ the world’s first digital currency-specific licensing directive. Regulatory bodies are also categorizing bitcoin within existing frameworks. The US Commodity Futures Trading Commission (CFTC) ruled digital currencies to be commodities. The European Court of Justice ruled bitcoin as another currency, exempting bitcoin transactions from VAT, similar to other FX transactions. As bitcoin continues to gain adoption, we would expect to see additional regulatory bodies taking a closer look at this technology.
Bitcoin Price Performance
With robust activity across investment, adoption, and regulation, bitcoin experienced significant price appreciation well into the end of the year. Bitcoin rose 36.29% in 2015 to end the year at $431.63 (as measured by the XBX Index Spot Price). Trading volumes increased significantly into the last three months of the year, with over 2 million bitcoins trading globally almost every day.
2016: Looking Ahead
As we look to 2016, we expect to see bitcoin’s volatility to continue to dampen, as more well-established players get further involved and transaction volume increases. We anticipate more financial institutions and firms from various industries exploring bitcoin and blockchain technology. With Wall Street getting an early foot in the door, we can expect to see plans for how bitcoin and blockchain technology will be implemented into or replace existing financial systems.
Ultimately, what hasn’t killed bitcoin has only made it stronger — 2015 was evidence of just that. As we head into 2016 and look beyond, our team is committed to providing unparalleled market insight and investment exposure to this burgeoning asset class.
To all of you, thank you for a fantastic 2015 and we look forward to the year ahead!
The Grayscale Team