10-Q 1 gdlc-20240331.htm 10-Q 10-Q
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H

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 000-56284

 

Grayscale Digital Large Cap Fund LLC

MANAGED BY GRAYSCALE INVESTMENTS, LLC

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Cayman Islands

98-1406784

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

c/o Grayscale Investments, LLC

290 Harbor Drive, 4th Floor

Stamford, Connecticut 06902

(Address of Principal Executive Offices) (Zip Code)

(212) 668-1427

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Grayscale Digital Large Cap Fund LLC Shares

GDLC

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

Number of Shares of the registrant outstanding as of April 30, 2024: 15,867,400

 

 


 

Grayscale® Digital large Cap Fund LLC

Table of Contents

 

 

Page

 

Forward-Looking Statements

3

 

 

 

 

Industry and Market Data

3

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

4

 

 

Statements of Assets and Liabilities at March 31, 2024 and June 30, 2023

4

 

 

 

Schedules of Investments at March 31, 2024 and June 30, 2023

5

 

 

 

Statements of Operations for the Three and Nine Months Ended March 31, 2024 and 2023

6

 

 

 

Statements of Changes in Net Assets for the Three and Nine Months Ended March 31, 2024 and 2023

7

 

 

 

Notes to the Unaudited Financial Statements

8

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

36

 

 

 

Item 4.

Controls and Procedures

36

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

37

 

Item 1A.

Risk Factors

37

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

Item 3.

Defaults Upon Senior Securities

38

 

Item 4.

Mine Safety Disclosures

38

 

Item 5.

Other Information

38

 

Item 6.

Exhibits

39

 

 

 

GLOSSARY OF DEFINED TERMS

40

 

 

SIGNATURES

45

 

 

 

2


 

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” with respect to the financial conditions, results of operations, plans, objectives, future performance and business of Grayscale Digital Large Cap Fund LLC (the “Fund”). Statements preceded by, followed by or that include words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other similar expressions are intended to identify some of the forward-looking statements. All statements (other than statements of historical fact) included in this Quarterly Report that address activities, events or developments that will or may occur in the future, including such matters as changes in market prices and conditions, the Fund’s operations, the plans of Grayscale Investments, LLC (the “Manager”) and references to the Fund’s future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially from such statements. These statements are based upon certain assumptions and analyses the Manager made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Manager’s expectations and predictions, however, is subject to a number of risks and uncertainties, including, but not limited to, those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K and in “Part II, Item 1A. Risk Factors” herein. Forward-looking statements are made based on the Manager’s beliefs, estimates and opinions on the date the statements are made and neither the Fund nor the Manager is under a duty or undertakes an obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, other than as required by applicable laws. Investors are therefore cautioned against relying on forward-looking statements.

Unless otherwise stated or the context otherwise requires, the terms “we,” “our” and “us” in this Quarterly Report refer to the Manager acting on behalf of the Fund.

A glossary of industry and other defined terms is included in this Quarterly Report, beginning on page 40.

This Quarterly Report supplements and where applicable amends the Memorandum, as defined in the Fund’s Second Amended and Restated Limited Liability Company Agreement, for general purposes.

Industry and Market Data

Although we are responsible for all disclosure contained in this Quarterly Report on Form 10-Q, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications in conjunction with our assumptions regarding the digital asset industry and market. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings “Forward-Looking Statements,” “Part I, Item 1A. Risk Factors” in the Annual Report on Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission (the “SEC”) on September 1, 2023 (the “Annual Report”), and “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.

3


 

PART I – FINANCIAL INFORMATION:

Item 1. Financial Statements (Unaudited)

GRAYSCALE Digital Large Cap Fund LLC

STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

(Amounts in thousands, except Share and per Share amounts)

 

 

 

March 31, 2024

 

 

June 30, 2023

 

Assets:

 

 

 

 

 

 

Investments in digital assets, at fair value (cost $131,519 and $124,888 as of March 31, 2024 and June 30, 2023, respectively)

 

$

606,262

 

 

$

272,632

 

Total assets

 

$

606,262

 

 

$

272,632

 

Liabilities:

 

 

 

 

 

 

Manager’s Fee payable, related party

 

$

-

 

 

$

-

 

Total liabilities

 

 

-

 

 

 

-

 

Net assets

 

$

606,262

 

 

$

272,632

 

Net Assets consists of:

 

 

 

 

 

 

Paid-in-capital

 

$

114,568

 

 

$

114,568

 

Accumulated net investment loss

 

 

(31,206

)

 

 

(24,760

)

Accumulated net realized gain on investments in digital assets

 

 

48,157

 

 

 

35,080

 

Accumulated net change in unrealized appreciation on investments in digital assets

 

 

474,743

 

 

 

147,744

 

 

$

606,262

 

 

$

272,632

 

Shares issued and outstanding, no par value (unlimited Shares authorized)

 

 

15,867,400

 

 

 

15,867,400

 

Principal market net asset value per Share

 

$

38.21

 

 

$

17.18

 

 

 

See accompanying notes to the unaudited financial statements.

4


 

GRAYSCALE Digital Large Cap Fund LLC

SCHEDULES OF INVESTMENTs (UNAUDITED)

(Amounts in thousands, except quantity of each Fund Component and percentages)

 

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantity

 

 

Cost

 

 

Fair Value

 

 

% of Net Assets

 

Investment in Bitcoin

 

 

5,964.88248641

 

 

$

70,172

 

 

$

423,664

 

 

 

69.88

%

Investment in Ether

 

 

36,608.43097820

 

 

 

17,777

 

 

 

133,179

 

 

 

21.97

%

Investment in SOL

 

 

130,406.54140261

 

 

 

15,320

 

 

 

26,104

 

 

 

4.31

%

Investment in XRP

 

 

16,439,744.034764

 

 

 

9,598

 

 

 

10,336

 

 

 

1.70

%

Investment in ADA

 

 

10,769,799.360314

 

 

 

14,562

 

 

 

6,972

 

 

 

1.15

%

Investment in AVAX

 

 

110,978.33346912

 

 

 

4,090

 

 

 

6,007

 

 

 

0.99

%

Net assets

 

 

 

 

$

131,519

 

 

$

606,262

 

 

 

100.00

%

 

June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantity

 

 

Cost

 

 

Fair Value

 

 

% of Net Assets

 

Investment in Bitcoin

 

 

6,230.97866186

 

 

$

72,585

 

 

$

189,185

 

 

 

69.39

%

Investment in Ether

 

 

39,445.13266916

 

 

 

19,154

 

 

 

75,964

 

 

 

27.86

%

Investment in ADA

 

 

11,194,902.551275

 

 

 

15,246

 

 

 

3,195

 

 

 

1.17

%

Investment in SOL

 

 

123,915.89529091

 

 

 

15,416

 

 

 

2,366

 

 

 

0.87

%

Investment in MATIC

 

 

2,926,029.61320324

 

 

 

2,487

 

 

 

1,922

 

 

 

0.71

%

Net assets

 

 

 

 

$

124,888

 

 

$

272,632

 

 

 

100.00

%

 

 

See accompanying notes to the unaudited financial statements.

5


 

GRAYSCALE Digital Large Cap Fund LLC

STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Investment income:

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Manager’s Fee, related party

 

 

2,882

 

 

 

1,337

 

 

 

6,446

 

 

 

3,766

 

Net investment loss

 

 

(2,882

)

 

 

(1,337

)

 

 

(6,446

)

 

 

(3,766

)

Net realized and unrealized gain from:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investments in digital assets

 

 

10,033

 

 

 

(6,745

)

 

 

13,077

 

 

 

(19,769

)

Net change in unrealized appreciation on investments in digital assets

 

 

225,325

 

 

 

110,821

 

 

 

326,999

 

 

 

111,177

 

Net realized and unrealized gain on investments in digital assets

 

 

235,358

 

 

 

104,076

 

 

 

340,076

 

 

 

91,408

 

Net increase in net assets resulting from operations

 

$

232,476

 

 

$

102,739

 

 

$

333,630

 

 

$

87,642

 

 

 

See accompanying notes to the unaudited financial statements.

6


 

grayscale digital Large cap fund llc

STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

(Amounts in thousands, except change in Shares outstanding)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Increase in net assets from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Net investment loss

 

$

(2,882

)

 

$

(1,337

)

 

$

(6,446

)

 

$

(3,766

)

Net realized gain (loss) on investments in digital assets

 

 

10,033

 

 

 

(6,745

)

 

 

13,077

 

 

 

(19,769

)

Net change in unrealized appreciation on investments in digital assets

 

 

225,325

 

 

 

110,821

 

 

 

326,999

 

 

 

111,177

 

Net increase in net assets resulting from operations

 

 

232,476

 

 

 

102,739

 

 

 

333,630

 

 

 

87,642

 

Increase in net assets from capital share transactions:

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net increase in net assets resulting from capital share transactions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total increase in net assets from operations and capital share transactions

 

 

232,476

 

 

 

102,739

 

 

 

333,630

 

 

 

87,642

 

Net assets:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

373,786

 

 

 

158,755

 

 

 

272,632

 

 

 

173,852

 

End of period

 

$

606,262

 

 

$

261,494

 

 

$

606,262

 

 

$

261,494

 

Change in Shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding at beginning of period

 

 

15,867,400

 

 

 

15,867,400

 

 

 

15,867,400

 

 

 

15,867,400

 

Shares issued

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net increase in Shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares outstanding at end of period

 

 

15,867,400

 

 

 

15,867,400

 

 

 

15,867,400

 

 

 

15,867,400

 

 

 

See accompanying notes to the unaudited financial statements.

7


 

GRAYSCALE digital large cap fund llc

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1. Organization

The Grayscale Digital Large Cap Fund LLC (the “Fund”) was constituted as a Cayman Islands limited liability company on January 25, 2018 (the inception of the Fund) and commenced operations on February 1, 2018. In general, the Fund will hold digital assets. Historically, and through the period ending June 30, 2022, a digital asset had been eligible for inclusion in the Fund’s portfolio if it satisfied market capitalization, liquidity and coverage criteria as determined by the Manager (as defined below). Effective July 1, 2022, the Fund’s digital assets consist of digital assets that comprise the CoinDesk Large Cap Select Index (the “DLCS”), as rebalanced from time to time, subject to the Manager’s discretion to exclude individual digital assets in certain cases. The DLCS is designed and managed by CoinDesk Indices, Inc. (in this capacity, the “Index Provider”) as discussed in Note 5. As of March 31, 2024, the digital assets included in the Fund’s portfolio were: Bitcoin (“Bitcoin”), Ethereum (“Ether”), Solana (“SOL”), Cardano (“ADA”), Avalanche (“AVAX”), and XRP (collectively, the “Fund Components”). On a quarterly basis beginning on the second business day of January, April, July and October of each year, the Manager performs an analysis and may rebalance the Fund’s portfolio based on these results in accordance with policies and procedures as set forth in the Fund’s Limited Liability Company Agreement (the “LLC Agreement”). The Fund is authorized under the LLC Agreement to create and issue an unlimited number of equal, fractional, undivided interests in the profits, losses, distributions, capital and assets of, and ownership of, the Fund (“Shares”) (in minimum baskets of 100 Shares, referred to as “Baskets”) in connection with creations. The redemption of Shares is not currently contemplated and the Fund does not currently operate a redemption program. Subject to receipt of regulatory approval and approval by the Manager in its sole discretion, the Fund may in the future operate a redemption program. The Fund currently has no intention of seeking regulatory approval to operate an ongoing redemption program. The Fund’s investment objective is to hold the top digital assets by market capitalization and for the value of the Shares to reflect the value of such Fund Components at any given time, less the Fund’s expenses and other liabilities.

From time to time, the Fund may hold cash in U.S. dollars and positions in digital assets as a result of a fork, airdrop or similar event through which the Fund becomes entitled to another digital asset or other property by virtue of its ownership of one or more of the digital assets it then holds (each such new asset, a “Forked Asset”).

Grayscale Investments, LLC (“Grayscale” or the “Manager”) acts as the Manager of the Fund and is a wholly owned subsidiary of Digital Currency Group, Inc. (“DCG”). The Manager is responsible for the day-to-day administration of the Fund pursuant to the provisions of the LLC Agreement. Grayscale is responsible for preparing and providing annual and quarterly reports on behalf of the Fund to investors and is also responsible for selecting and monitoring the Fund’s service providers. As partial consideration for the Manager’s services, the Fund pays Grayscale a Manager’s Fee as discussed in Note 7. The Manager also acts as the sponsor and manager of other investment products including Grayscale Basic Attention Token Trust (BAT) (OTCQB: GBAT), Grayscale Bitcoin Trust (BTC) (NYSE Arca: GBTC), Grayscale Bitcoin Cash Trust (BCH) (OTCQX: BCHG), Grayscale Chainlink Trust (LINK) (OTCQX: GLNK), Grayscale Decentraland Trust (MANA) (OTCQX: MANA), Grayscale Ethereum Trust (ETH) (OTCQX: ETHE), Grayscale Ethereum Classic Trust (ETC) (OTCQX: ETCG), Grayscale Filecoin Trust (FIL) (OTCQB: FILG), Grayscale Horizen Trust (ZEN) (OTCQX: HZEN), Grayscale Litecoin Trust (LTC) (OTCQX: LTCN), Grayscale Livepeer Trust (LPT) (OTCQX: GLIV), Grayscale Solana Trust (SOL) (OTCQX: GSOL), Grayscale Stellar Lumens Trust (XLM) (OTCQX: GXLM), Grayscale Zcash Trust (ZEC) (OTCQX: ZCSH), Grayscale Decentralized Finance (DeFi) Fund LLC (OTCQB: DEFG), and Grayscale Smart Contract Platform Ex Ethereum (ETH) Fund LLC, each of which is an affiliate of the Fund. The following investment products sponsored or managed by the Manager are also SEC reporting companies with their shares registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): Grayscale Bitcoin Cash Trust (BCH), Grayscale Ethereum Trust (ETH), Grayscale Ethereum Classic Trust (ETC), Grayscale Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC), Grayscale Stellar Lumens Trust (XLM), and Grayscale Zcash Trust (ZEC). On January 10, 2024, the Securities and Exchange Commission (the “SEC”) approved an application under Rule 19b-4 of the Exchange Act by NYSE Arca, Inc. (“NYSE Arca”) to list the shares of the Grayscale Bitcoin Trust (BTC), which began trading on NYSE Arca on January 11, 2024. Grayscale Bitcoin Trust (BTC) is an SEC reporting company with its shares registered pursuant to Section 12(b) of the Exchange Act. Grayscale Advisors, LLC, a Registered Investment Advisor and an affiliate of the Manager, is the advisor to the Grayscale Future of Finance (NYSE Arca: GFOF) product.

Authorized Participants of the Fund are the only entities who may place orders to create or, if permitted, redeem Baskets. Grayscale Securities, LLC (“Grayscale Securities” or, in such capacity, an “Authorized Participant”), a registered broker-dealer and wholly owned subsidiary of the Manager, is the only Authorized Participant, and is party to a participant agreement with the Manager and the Fund. Additional Authorized Participants may be added at any time, subject to the discretion of the Manager. Liquidity Providers who are unaffiliated with the Fund may be engaged from time to time and at any time. Genesis Global Trading, Inc. (“Genesis”), a wholly owned subsidiary of DCG, served as a Liquidity Provider from October 3, 2022 to September 12, 2023.

The custodian of the Fund is Coinbase Custody Trust Company, LLC (the “Custodian”), a third-party service provider. The Custodian is responsible for safeguarding the Fund Components and Forked Assets held by the Fund, and holding the private key(s) that provide access to the Fund’s digital wallets and vaults.

8


 

The transfer agent for the Fund (the “Transfer Agent”) is Continental Stock Transfer & Trust Company. The responsibilities of the Transfer Agent are to maintain creations, redemptions, transfers, and distributions of the Fund’s Shares which are primarily held in book-entry form.

On October 14, 2019, the Fund received notice that its Shares were qualified for public trading on the OTCQX U.S. Marketplace of the OTC Markets Group, Inc. (“OTCQX”). The Fund’s trading symbol on OTCQX is “GDLC” and the CUSIP number for its Shares is G40705108. The Fund’s previous trading symbol was “GDLCF” on OTCQX and was changed to “GDLC” on April 14, 2020.

On July 21, 2020, the Fund registered with the Cayman Islands Monetary Authority (reference number: 1688783). The Fund is registered and regulated as a private fund under the Private Funds Act (As Revised) of the Cayman Islands (the “Private Funds Act”).

2. Summary of Significant Accounting Policies

In the opinion of management of the Manager of the Fund, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2024 and June 30, 2023 and results of operations for the three and nine months ended March 31, 2024 and 2023 have been made. The results of operations for the periods presented are not necessarily indicative of the results of operations expected for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2023 included in the Fund’s Annual Report on Form 10-K.

The following is a summary of significant accounting policies followed by the Fund:

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Fund qualifies as an investment company for accounting purposes pursuant to the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. The Fund uses fair value as its method of accounting for digital assets in accordance with its classification as an investment company for accounting purposes. The Fund is not a registered investment company under the Investment Company Act of 1940. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.

The Fund conducts its transactions in Fund Components, including receiving Fund Components for the creation of Shares and delivering Fund Components for the redemption of Shares and for the payment of the Manager’s Fee. At this time, the Fund is not accepting redemption requests from shareholders. Since its inception, the Fund has not held cash or cash equivalents.

Principal Market and Fair Value Determination

To determine which market is the Fund’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of calculating the Fund’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”), the Fund follows ASC 820-10, which outlines the application of fair value accounting. ASC 820-10 determines fair value to be the price that would be received for each Fund Component in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Fund to assume that each Fund Component is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

The Fund only receives Fund Components in connection with a creation order from the Authorized Participant (or a Liquidity Provider) and does not itself transact on any Digital Asset Markets. Therefore, the Fund looks to market-based volume and level of activity for Digital Asset Markets. The Authorized Participant(s), or a Liquidity Provider, may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets (referred to as “Trading Platform Markets” in this Quarterly Report), each as defined in the FASB ASC Master Glossary (collectively, “Digital Asset Markets”).

In determining which of the eligible Digital Asset Markets is the Fund’s principal market, the Fund reviews these criteria in the following order:

First, the Fund reviews a list of Digital Asset Markets that maintain practices and policies designed to comply with anti-money laundering (“AML”) and know-your-customer (“KYC”) regulations, and non-Digital Asset Trading Platform Markets that the Fund reasonably believes are operating in compliance with applicable law, including federal and state licensing requirements, based upon information and assurances provided to it by each market.

Second, the Fund sorts these Digital Asset Markets from high to low by market-based volume and level of activity of each Fund Component traded on each Digital Asset Market in the trailing twelve months.

9


 

Third, the Fund then reviews pricing fluctuations and the degree of variances in price on Digital Asset Markets to identify any material notable variances that may impact the volume or price information of a particular Digital Asset Market.

Fourth, the Fund then selects a Digital Asset Market as its principal market based on the highest market-based volume, level of activity and price stability in comparison to the other Digital Asset Markets on the list. Based on information reasonably available to the Fund, Trading Platform Markets have the greatest volume and level of activity for the Fund Components. The Fund therefore looks to accessible Trading Platform Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets to determine its principal market for each Fund Component. As a result of the aforementioned analysis, a Trading Platform Market has been selected as the Fund’s principal market for each Fund Component.

The Fund determines its principal market (or in the absence of a principal market the most advantageous market) annually and conducts a quarterly analysis to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume and level of activity in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Fund has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Fund’s determination of its principal market.

The cost basis of each Fund Component received in connection with a creation order is recorded by the Fund at the fair value of such Fund Component at 4:00 p.m., New York time, on the creation date for financial reporting purposes. The cost basis recorded by the Fund may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.

Investment Transactions and Revenue Recognition

The Fund considers investment transactions to be the receipt of Fund Components for Share creations and the delivery of Fund Components for Share redemptions, the payment of expenses in Fund Components or the sale of Fund Components when the Manager rebalances the Fund’s portfolio. At this time, the Fund is not accepting redemption requests from shareholders. The Fund records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Manager’s Fee and selling Fund Component(s) when the Manager rebalances the Fund’s portfolio.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the ‘exit price’) in an orderly transaction between market participants at the measurement date.

GAAP utilizes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, these valuations do not entail a significant degree of judgment.
Level 2—Valuations based on quoted prices in markets that are not active or for which significant inputs are observable, either directly or indirectly.
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary by investment. To the extent that valuations are based on sources that are less observable or unobservable in the market, the determination of fair value requires more judgment. Fair value estimates do not necessarily represent the amounts that may be ultimately realized by the Fund.

10


 

 

 

 

 

 

Fair Value Measurement Using

 

(Amounts in thousands)

 

Amount at
Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bitcoin

 

$

423,664

 

 

$

423,664

 

 

$

-

 

 

$

-

 

Investment in Ether

 

 

133,179

 

 

 

133,179

 

 

 

-

 

 

 

-

 

Investment in SOL

 

 

26,104

 

 

 

26,104

 

 

 

-

 

 

 

-

 

Investment in XRP

 

 

10,336

 

 

 

10,336

 

 

 

-

 

 

 

-

 

Investment in ADA

 

 

6,972

 

 

 

6,972

 

 

 

-

 

 

 

-

 

Investment in AVAX

 

 

6,007

 

 

 

6,007

 

 

 

-

 

 

 

-

 

 

 

$

606,262

 

 

$

606,262

 

 

$

-

 

 

$

-

 

June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bitcoin

 

$

189,185

 

 

$

189,185

 

 

$

-

 

 

$

-

 

Investment in Ether

 

 

75,964

 

 

 

75,964

 

 

 

-

 

 

 

-

 

Investment in ADA

 

 

3,195

 

 

 

3,195

 

 

 

-

 

 

 

-

 

Investment in SOL

 

 

2,366

 

 

 

2,366

 

 

 

-

 

 

 

-

 

Investment in MATIC

 

 

1,922

 

 

 

1,922

 

 

 

-

 

 

 

-

 

 

 

$

272,632

 

 

$

272,632

 

 

$

-

 

 

$

-

 

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. The Manager of the Fund is evaluating this new guidance as of March 31, 2024. If the Manager elects to adopt in a subsequent interim period prior to the effective date, such adoption would be reflected retroactive to the beginning of the fiscal year. The Manager does not anticipate any material impact on its financial statements and disclosures as the Fund historically used fair value as its method of accounting for digital assets in accordance with its classification as an investment company for accounting purposes.

 

3. Fair Value of Investments in Digital Assets

The Fund Components are held by the Custodian on behalf of the Fund and are carried at fair value. The following table represents the fair value of each Fund Component using the price provided at 4:00 p.m., New York time, by the relevant Digital Asset Trading Platform Market considered to be its principal market, as determined by the Fund:

Fund Component

 

Principal Market

 

March 31, 2024

 

 

June 30, 2023

 

Bitcoin

 

Coinbase

 

$

71,026.32

 

 

$

30,361.94

 

Ether

 

Coinbase

 

$

3,637.95

 

 

$

1,925.83

 

SOL(1)

 

Coinbase

 

$

200.17

 

 

$

19.09

 

XRP(4)

 

Coinbase

 

$

0.63

 

 

N/A

 

ADA(2)

 

Coinbase

 

$

0.65

 

 

$

0.29

 

AVAX(4)

 

Coinbase

 

$

54.13

 

 

N/A

 

MATIC(3)(4)

 

Coinbase

 

N/A

 

 

$

0.66

 

 

(1)
Effective October 1, 2021, the Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase SOL in accordance with the Fund Construction Criteria. See Note 5. Portfolio Rebalancing for a description of the portfolio rebalancing.
(2)
Effective July 1, 2021, the Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase ADA in accordance with the Fund Construction Criteria. See Note 5. Portfolio Rebalancing for a description of the portfolio rebalancing.
(3)
Effective October 5, 2022, the Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase MATIC in accordance with the DLCS Methodology. See Note 5. Portfolio Rebalancing for a description of the portfolio rebalancing.

11


 

(4)
Effective January 3, 2024, the Manager removed MATIC from the Fund’s portfolio and used the cash proceeds to purchase Avalanche and XRP and adjusted the existing Fund Components in proportion to their respective weightings in accordance with the DLCS Methodology. See Note 5. Portfolio Rebalancing for a description of the portfolio rebalancing.

The following represents the changes in quantity of each Fund Component and their respective fair values:

(Amounts in thousands, except Bitcoin amounts)

 

Quantity

 

 

Fair Value

 

Bitcoin balance at June 30, 2022

 

 

6,231.43654040

 

 

$

117,743

 

Bitcoin contributed

 

 

-

 

 

 

-

 

Bitcoin contributed from portfolio rebalancing

 

 

157.11106568

 

 

 

3,049

 

Bitcoin distributed for Manager’s Fee, related party

 

 

(157.56894422

)

 

 

(3,549

)

Net change in unrealized appreciation on investment in Bitcoin

 

 

-

 

 

 

69,386

 

Net realized gain on investment in Bitcoin

 

 

-

 

 

 

2,556

 

Bitcoin balance at June 30, 2023

 

 

6,230.97866186

 

 

$

189,185

 

Bitcoin contributed

 

 

-

 

 

 

-

 

Bitcoin distributed from portfolio rebalancing

 

 

(150.37755071

)

 

 

(6,910

)

Bitcoin distributed for Manager’s Fee, related party

 

 

(115.71862474

)

 

 

(4,516

)

Net change in unrealized appreciation on investment in Bitcoin

 

 

-

 

 

 

236,892

 

Net realized gain on investment in Bitcoin

 

 

-

 

 

 

9,013

 

Bitcoin balance at March 31, 2024

 

 

5,964.88248641

 

 

$

423,664

 

 

(Amounts in thousands, except Ether amounts)

 

Quantity

 

 

Fair Value

 

Ether balance at June 30, 2022

 

 

39,359.77040671

 

 

$

40,136

 

Ether contributed

 

 

-

 

 

 

-

 

Ether contributed from portfolio rebalancing

 

 

1,087.50823575

 

 

 

1,095

 

Ether distributed for Manager’s Fee, related party

 

 

(1,002.14597330

)

 

 

(1,568

)

Net change in unrealized appreciation on investment in Ether

 

 

-

 

 

 

34,695

 

Net realized gain on investment in Ether

 

 

-

 

 

 

1,606

 

Ether balance at June 30, 2023

 

 

39,445.13266916

 

 

$

75,964

 

Ether contributed

 

 

-

 

 

 

-

 

Ether distributed from portfolio rebalancing

 

 

(2,122.80894251

)

 

 

(4,426

)

Ether distributed for Manager’s Fee, related party

 

 

(713.89274845

)

 

 

(1,568

)

Net change in unrealized appreciation on investment in Ether

 

 

-

 

 

 

58,592

 

Net realized gain on investment in Ether

 

 

-

 

 

 

4,617

 

Ether balance at March 31, 2024

 

 

36,608.43097820

 

 

$

133,179

 

 

(Amounts in thousands, except SOL amounts)

 

Quantity

 

 

Fair Value

 

SOL balance at June 30, 2022

 

 

111,216.13265694

 

 

$

3,557

 

SOL contributed

 

 

-

 

 

 

-

 

SOL contributed from portfolio rebalancing

 

 

15,665.43529877

 

 

 

384

 

SOL distributed for Manager’s Fee, related party

 

 

(2,965.67266480

)

 

 

(73

)

Net change in unrealized depreciation on investment in SOL

 

 

-

 

 

 

(1,186

)

Net realized loss on investment in SOL

 

 

-

 

 

 

(316

)

SOL balance at June 30, 2023

 

 

123,915.89529091

 

 

$

2,366

 

SOL contributed

 

 

-

 

 

 

-

 

SOL contributed from portfolio rebalancing

 

 

8,939.48966974

 

 

 

200

 

SOL distributed for Manager’s Fee, related party

 

 

(2,448.84355804

)

 

 

(163

)

Net change in unrealized appreciation on investment in SOL

 

 

-

 

 

 

23,834

 

Net realized loss on investment in SOL

 

 

-

 

 

 

(133

)

SOL balance at March 31, 2024

 

 

130,406.54140261

 

 

$

26,104

 

 

 

 

12


 

(Amounts in thousands, except XRP amounts)

 

Quantity

 

 

Fair Value

 

XRP balance at June 30, 2023

 

 

-

 

 

$

-

 

XRP contributed

 

 

-

 

 

 

-

 

XRP contributed from portfolio rebalancing

 

 

16,538,863.154097

 

 

 

9,656

 

XRP distributed for Manager’s Fee, related party

 

 

(99,119.119333

)

 

 

(57

)

Net change in unrealized appreciation on investment in XRP

 

 

-

 

 

 

738

 

Net realized loss on investment in XRP

 

 

-

 

 

 

(1

)

XRP balance at March 31, 2024

 

 

16,439,744.034764

 

 

$

10,336

 

 

(Amounts in thousands, except ADA amounts)

 

Quantity

 

 

Fair Value

 

ADA balance at June 30, 2022

 

 

10,916,582.900254

 

 

$

4,803

 

ADA contributed

 

 

-

 

 

 

-

 

ADA contributed from portfolio rebalancing

 

 

559,615.581934

 

 

 

231

 

ADA distributed for Manager’s Fee, related party

 

 

(281,295.930913

)

 

 

(108

)

Net change in unrealized depreciation on investment in ADA

 

 

-

 

 

 

(1,401

)

Net realized loss on investment in ADA

 

 

-

 

 

 

(330

)

ADA balance at June 30, 2023

 

 

11,194,902.551275

 

 

$

3,195

 

ADA contributed

 

 

-

 

 

 

-

 

ADA distributed from portfolio rebalancing

 

 

(216,560.642532

)

 

 

(149

)

ADA distributed for Manager’s Fee, related party

 

 

(208,542.548429

)

 

 

(88

)

Net change in unrealized appreciation on investment in ADA

 

 

-

 

 

 

4,461

 

Net realized loss on investment in ADA

 

 

-

 

 

 

(447

)

ADA balance at March 31, 2024

 

 

10,769,799.360314

 

 

$

6,972

 

 

(Amounts in thousands, except AVAX amounts)

 

Quantity

 

 

Fair Value

 

AVAX balance at June 30, 2022

 

 

88,973.97836461

 

 

$

1,445

 

AVAX contributed

 

 

-

 

 

 

-

 

AVAX distributed from portfolio rebalancing

 

 

(87,745.50702693

)

 

 

(974

)

AVAX distributed for Manager’s Fee, related party

 

 

(1,228.47133768

)

 

 

(21

)

Net change in unrealized appreciation on investment in AVAX

 

 

-

 

 

 

6,936

 

Net realized loss on investment in AVAX

 

 

-

 

 

 

(7,386

)

AVAX balance at June 30, 2023

 

 

-

 

 

$

-

 

AVAX contributed

 

 

-

 

 

 

-

 

AVAX contributed from portfolio rebalancing

 

 

111,647.44818623

 

 

 

4,115

 

AVAX distributed for Manager’s Fee, related party

 

 

(669.11471711

)

 

 

(28

)

Net change in unrealized appreciation on investment in AVAX

 

 

-

 

 

 

1,917

 

Net realized gain on investment in AVAX

 

 

-

 

 

 

3

 

AVAX balance at March 31, 2024

 

 

110,978.33346912

 

 

$

6,007

 

 

(Amounts in thousands, except MATIC amounts)

 

Quantity

 

 

Fair Value

 

MATIC balance at June 30, 2022

 

 

-

 

 

$

-

 

MATIC contributed

 

 

-

 

 

 

-

 

MATIC contributed from portfolio rebalancing

 

 

2,979,195.20726440

 

 

 

2,524

 

MATIC distributed for Manager’s Fee, related party

 

 

(53,165.59406116

)

 

 

(51

)

Net change in unrealized depreciation on investment in MATIC

 

 

-

 

 

 

(565

)

Net realized gain on investment in MATIC

 

 

-

 

 

 

14

 

MATIC balance at June 30, 2023

 

 

2,926,029.61320324

 

 

$

1,922

 

MATIC contributed

 

 

-

 

 

 

-

 

MATIC distributed from portfolio rebalancing

 

 

(2,887,850.26244458

)

 

 

(2,486

)

MATIC distributed for Manager’s Fee, related party

 

 

(38,179.35075866

)

 

 

(26

)

Net change in unrealized appreciation on investment in MATIC

 

 

-

 

 

 

565

 

Net realized gain on investment in MATIC

 

 

-

 

 

 

25

 

MATIC balance at March 31, 2024

 

 

-

 

 

$

-

 

 

13


 

(Amounts in thousands, except DOT amounts)

 

Quantity

 

 

Fair Value

 

DOT balance at June 30, 2022

 

 

328,187.49357863

 

 

$

2,235

 

DOT contributed

 

 

-

 

 

 

-

 

DOT distributed from portfolio rebalancing

 

 

(328,052.64509826

)

 

 

(2,247

)

DOT distributed for Manager’s Fee, related party

 

 

(134.84848037

)

 

 

(1

)

Net change in unrealized appreciation on investment in DOT

 

 

-

 

 

 

5,103

 

Net realized loss on investment in DOT

 

 

-

 

 

 

(5,090

)

DOT balance at June 30, 2023

 

 

-

 

 

$

-

 

 

(Amounts in thousands, except LTC amounts)

 

Quantity

 

 

Fair Value

 

LTC balance at June 30, 2022

 

 

23,725.08718334

 

 

$

1,220

 

LTC contributed

 

 

-

 

 

 

-

 

LTC distributed from portfolio rebalancing

 

 

(23,715.33881688

)

 

 

(1,177

)

LTC distributed for Manager’s Fee, related party

 

 

(9.74836646

)

 

 

(1

)

Net change in unrealized appreciation on investment in LTC

 

 

-

 

 

 

574

 

Net realized loss on investment in LTC

 

 

-

 

 

 

(616

)

LTC balance at June 30, 2023

 

 

-

 

 

$

-

 

 

(Amounts in thousands, except UNI amounts)

 

Quantity

 

 

Fair Value

 

UNI balance at June 30, 2022

 

 

232,687.02308212

 

 

$

1,122

 

UNI contributed

 

 

-

 

 

 

-

 

UNI distributed from portfolio rebalancing

 

 

(232,591.41465073

)

 

 

(1,236

)

UNI distributed for Manager’s Fee, related party

 

 

(95.60843139

)

 

 

-

 

Net change in unrealized appreciation on investment in UNI

 

 

-

 

 

 

3,937

 

Net realized loss on investment in UNI

 

 

-

 

 

 

(3,823

)

UNI balance at June 30, 2023

 

 

-

 

 

$

-

 

 

(Amounts in thousands, except LINK amounts)

 

Quantity

 

 

Fair Value

 

LINK balance at June 30, 2022

 

 

158,987.59087114

 

 

$

960

 

LINK contributed

 

 

-

 

 

 

-

 

LINK distributed from portfolio rebalancing

 

 

(158,922.26469191

)

 

 

(989

)

LINK distributed for Manager’s Fee, related party

 

 

(65.32617923

)

 

 

(1

)

Net change in unrealized appreciation on investment in LINK

 

 

-

 

 

 

3,726

 

Net realized loss on investment in LINK

 

 

-

 

 

 

(3,696

)

LINK balance at June 30, 2023

 

 

-

 

 

$

-

 

 

(Amounts in thousands, except BCH amounts)

 

Quantity

 

 

Fair Value

 

BCH balance at June 30, 2022

 

 

6,314.20828653

 

 

$

631

 

BCH contributed

 

 

-

 

 

 

-

 

BCH distributed from portfolio rebalancing

 

 

(6,311.61385070

)

 

 

(660

)

BCH distributed for Manager’s Fee, related party

 

 

(2.59443583

)

 

 

-

 

Net change in unrealized appreciation on investment in BCH

 

 

-

 

 

 

1,662

 

Net realized loss on investment in BCH

 

 

-

 

 

 

(1,633

)

BCH balance at June 30, 2023

 

 

-

 

 

$

-

 

 

4. Portfolio Rebalancing

From inception through June 30, 2022, the Fund sought to hold digital assets with market capitalizations that collectively constituted at least 70% of the market capitalization of the entire digital asset market (the “Target Coverage Ratio”) and determined the Fund Components by reference to fund construction criteria that consisted of market capitalization, liquidity and coverage criteria established by the Manager (the “Target Coverage Ratio Methodology”). Through the Target Coverage Ratio Methodology, the Fund sought to (i) provide large-cap coverage of the digital asset market; (ii) minimize transaction costs through low turnover of the Fund’s portfolio; and (iii) create a portfolio that could be replicated through direct purchases in the Digital Asset Market.

Effective July 1, 2022, the Manager replaced the Target Coverage Ratio Methodology as the fund construction criteria and no longer seeks to hold Fund Components meeting the Target Coverage Ratio. Instead, the Fund Components consist of the digital assets that make up the DLCS, as rebalanced from time to time, subject to the Manager’s discretion to exclude individual digital assets in certain

14


 

cases. The DLCS is designed and managed by the Index Provider. The process followed by the Index Provider to determine the digital assets included in the DLCS and their respective weightings in the DLCS is referred to as the “DLCS Methodology.”

Effective July 1, 2022, the Index Provider reviews the DLCS for rebalancing according to the DLCS Methodology quarterly during a period beginning 14 days before the end of each March, June, September and December (each such period, an “Index Rebalancing Period”). At the start of each Index Rebalancing Period, the Index Provider applies the DLCS Methodology to determine any changes to the Index Components and the respective weightings of the Index Components within DLCS, as determined by the Index Provider based on market capitalization criteria (the “Index Weightings”), after which the Manager rebalances the Fund’s portfolio accordingly, subject to application of the Exclusion Criteria. In order to rebalance the Fund’s portfolio, the Manager will (i) determine whether any Fund Components have been removed from the DLCS and should therefore be removed as Fund Components, (ii) determine whether any new digital assets have been added to the DLCS and should therefore be included as Fund Components, and (iii) determine how much cash and Forked Assets the Fund holds. If a Fund Component is no longer included in the DLCS, the Manager will adjust the Fund’s portfolio by selling such Fund Component in the Digital Asset Markets in proportion to their respective weightings in the Fund (“Weightings”) and using the cash proceeds to purchase additional tokens of the remaining Fund Components and, if applicable, any new Fund Component in proportion to their respective Weightings. The Weightings of each Fund Component are generally expected to be the same as the weighting of each digital asset in the DLCS except when the Manager determines to exclude one or more digital assets included in the DLCS from the Fund Components. If a digital asset not then included in the Fund’s portfolio is newly eligible for inclusion in the Fund’s portfolio because it was added to the DLCS and not excluded through the Exclusion Criteria, the Manager will adjust the Fund’s portfolio by selling tokens of the then-current Fund Components in the Digital Asset Markets in proportion to their respective Weightings and using the cash proceeds to purchase tokens of the newly eligible digital assets.

The Manager will rebalance the Fund’s portfolio quarterly during a period beginning on the second business day of each January, April, July and October (each such period, a “Fund Rebalancing Period”). The Manager expects each Fund Rebalancing Period to last between one and five business days. The DLCS, and therefore the Fund, may also be rebalanced mid-quarter, prior to the Index Rebalancing Period under extraordinary circumstances, if, for example, a digital asset is removed from the Index.

On April 6, 2021, the Manager of the Fund announced the updated Fund Component weightings for the Fund in connection with its quarterly review. Effective April 2, 2021, the Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase LINK in accordance with the Fund’s construction criteria. On April 2, 2021, the Fund recognized a realized gain of $4,398,884 in connection with the sale of 90.96800168 Bitcoin and 58.85027824 BCH, to purchase 381.07775172 Ether, 5.31504341 LTC and 154,021.49829970 LINK.

On July 2, 2021, the Manager of the Fund announced the updated Fund Component weightings for the Fund in connection with its quarterly review. Effective July 1, 2021, the Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase ADA in accordance with the Fund’s construction criteria. On July 1, 2021, the Fund recognized a realized gain of $11,651,902 in connection with the sale of 225.33929087 Bitcoin, 3,622.13172739 Ether, 68.33481591 BCH and 722.93691458 LTC, to purchase 11,256,632.53387140 ADA and 13,460.14709855 LINK.

On October 1, 2021, the Manager of the Fund announced the updated Fund Component weightings for the Fund in connection with its quarterly review. The Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase SOL and UNI in accordance with the Fund’s construction criteria. On October 1, 2021, the Fund recognized a realized gain of $14,980,028 in connection with the sale of 431.18779320 Bitcoin, 568.90340080 Ether, 312.68264910 BCH, 1,332.29529100 LTC and 4,669.36765100 LINK, to purchase 393,666.73666700 ADA, 106,015.34887688 SOL and 213,332.22308637 UNI.

On April 5, 2022, the Manager of the Fund announced the updated Fund Component weightings for the Fund in connection with its quarterly review. The Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective weightings and using the cash proceeds to purchase DOT and AVAX in accordance with the Fund’s construction criteria. On April 5, 2022, the Fund recognized a realized gain of $12,437,503 in connection with the sale of 299.12356960 Bitcoin, 799.44969220 Ether, 525.96222080 BCH, and 471,808.63300000 ADA, to purchase 154.01722821 LTC, 600.38311024 LINK, 7,207.59678111 SOL, 23,446.19411389 UNI, 89,505.76684675 AVAX and 330,149.03708006 DOT.

Effective July 1, 2022, the Fund replaced the Target Coverage Ratio Methodology with the DLCS Methodology. The change in methodology resulted in the removal of BCH, LINK, LTC, DOT, and UNI in proportion to their respective weighing on July 7, 2022 following the quarterly Fund Rebalancing Period. On July 7, 2022, the Fund recognized a realized loss of $14,895,069 in connection with the sale of 6,311.61385070 BCH, 23,715.33881688 LTC, 158,922.26469191 LINK, 232,591.41465073 UNI and 328,052.64509826 DOT, to purchase 199.83559815 Bitcoin, 1,507.83089471 Ether, 451,468.27947474 ADA, 4,253.16323862 SOL and 5,714.46623435 AVAX.

15


 

On October 4, 2022, the Index Provider completed the quarterly rebalancing of the DLCS and determined that Bitcoin, Ether, ADA, SOL, MATIC and AVAX met the inclusion criteria of the DLCS Index. On October 4, 2022, following the rebalancing of the Index, the Manager completed its quarterly review of the Fund’s portfolio and initiated the process of rebalancing the Fund. The Manager adjusted the Fund’s portfolio by selling the existing Fund Components in proportion to their respective Weightings and using the cash proceeds to purchase SOL, AVAX and MATIC. As a result, MATIC was added to the Fund. No tokens were removed from the Fund. On October 5, 2022, following the rebalancing, the Fund recognized a realized gain of $1,133,040 in connection with the sale of 98.97782869 Bitcoin, 363.52443217 Ether and 54,505.66521500 ADA, to purchase 1,776.60193605 SOL, and