Mar. 02, 2022
Dear SEC, I’m writing to support the conversion of Grayscale Bitcoin Trust (Symbol: GBTC), currently the world’s largest Bitcoin fund, to the first Spot Bitcoin ETF in the United States. I live in the state of California with my wife and child. We’re long-term holders of GBTC. We believe Bitcoin is a great tool for storing generational wealth. Bitcoin trades in an open and transparent global market of buyers and sellers. GBTC gave us the opportunity to allocate a large percentage of our retirement portfolio into a fund that owns 654,885 BTC. We deserve fair consideration at being the first spot Bitcoin ETF in the United States of America. Bitcoin is a savings tool for everyone. 1. What are commenters' views on whether the proposed Trust and Shares would be susceptible to manipulation? I have no concerns the proposed Trust and Shares would be susceptible to manipulation. There’s no difference to me whether I put my money in VOO vs. GBTC. In fact, I have liquidated all VOO but not GBTC. I trust holding GBTC equally as much as I would hold my money with Vanguard or any of their funds. What are commenters' views generally on whether the Exchange's proposal is designed to prevent fraudulent and manipulative acts and practices? The Exchange’s proposal to use volume-weighted average prices from multiple spot market trading platforms appears logical and straight forward. It’s possible the probability to prevent fraudulent and manipulative acts and practices is much higher with the Exchange’s spot Bitcoin ETF proposal since it only needs to observe a few data sets from a few trading platforms. Unlike funds managed by Vanguard, State Street Global Advisors, et al., that need to buy/sell and track hundreds of stocks, dividends, etc. What are commenters' views generally with respect to the liquidity and transparency of the bitcoin markets, the bitcoin markets' susceptibility to manipulation, and thus the suitability of bitcoin as an underlying asset for an exchange-traded product? We believe Bitcoin is a global open ledger that cannot be forged or counterfeited, and is not managed, owned or controlled by any single entity, person or group. Bitcoin as an underlying asset for an ETF is a simple and pure asset with sufficient and growing liquidity. 2. The Exchange asserts that “the Index represents a novel means to prevent fraud and manipulation from impacting a reference price for [b]itcoin and that it offers protections beyond those that exist in traditional commodity markets or equity markets.” [25] Specifically, the Exchange states that the Index Price is determined through a process in which trade data is cleansed and compiled “in such a manner as to algorithmically reduce the impact of anomalistic or manipulative trading . . . by adjusting the weight of each data input based on price deviation relative to the observable set, as well as recent and long-term trading volume at each venue relative to the observable set” [26] and that the Index Price only includes data from executed trades on Constituent [Platforms] that charge trading fees to its users “in order to attach a real, quantifiable cost to any manipulation attempts.” [27] The Exchange concludes that, “[b]y referencing multiple trading venues and weighting them based on trade activity, . . . the impact of any potential fraud, manipulation or anomalous trading activity occurring on any single venue is reduced.” [28] What are commenters' views of these assertions and conclusion? The digital and open nature of Bitcoin should make price referencing highly transparent. Therefore, I agree with the Exchange’s assertion that they can “offer protections beyond those that exist in traditional commodity markets or equity markets.” Trying to reference spot gold prices seems more susceptible to fraud and manipulation since it is reliant on a single OTC desk compared to collecting volume-weighted average prices through several trading platforms that serve sovereign nations, corporations, and retail investors alike. 3. The Exchange also asserts that, although the global spot bitcoin market “is not inherently resistant to fraud and manipulation, the Index serves as a means sufficient to mitigate the impact of instances of fraud and manipulation on a reference price for [b]itcoin.” [29] Are the characteristics of the Index that the Exchange identifies sufficient to support a determination that the proposal to list and trade the Shares is designed to protect investors and the public interest and is consistent with the other applicable requirements of Section 6(b)(5) of the Act? Yes. Since the Exchange proposes to collect volume-weighted average prices from multiple sources, I feel confident as an investor the correct price will always be reflected. 4. The Exchange asserts that the Sponsor “conducted a lead/lag analysis of per minute data comparing the [b]itcoin futures maker, as represented by the [Chicago Mercantile Exchange (“CME”)] futures market, to the [b]itcoin spot market, as represented by the Index” and that “[b]ased on this analysis, the Sponsor has concluded that there does not appear to be a significant lead/lag relationship between the two instruments for the period of November 1, 2019 to August 31, 2021.” [30] What are commenters' views on this assertion? Good on the Sponsor for conducting this research. This claim should be no different than claims made by other equity and commodity sponsors for their own spot fund. 5. The Exchange states that, “[a]lthough there is no significant lead/lag relationship” between the bitcoin futures and the bitcoin spot market, “the CME futures market represents a large, surveilled and regulated market.” [31] The Exchange also asserts that “[g]iven the significant size of the CME futures markets . . . there is a reasonable likelihood that a person attempting to manipulate the ETP would also have to trade on that market to successfully manipulate the ETP, since arbitrage between the derivative and spot markets would tend to counter an attempt to manipulate the spot market alone.” [32] What are commenters' views regarding these assertions? This assertion is sound. It demonstrates a framework being built from a solid foundation. Do these assertions provide an appropriate basis for determining that the proposal is consistent with the applicable requirements of Section 6(b)(5) of the Act? If the requirement is consumer protection and fair and free market dealings, then yes. Based on data provided by the Exchange, do commenters agree that the CME bitcoin futures market now represents a regulated market of significant size? I think so. I do not trade in futures markets so I can’t comment on the size but I must assume any market hosted by CME is well regulated. What are commenters' views on whether there is a reasonable likelihood that a person attempting to manipulate the Shares would also have to trade on CME to manipulate the Shares? After briefly researching general lead/lag relationships between futures and spot markets, it’s likely the concern is reasonable. 6. The Exchange states that, if “the Commission is open to reviewing and potentially approving proposals for [b]itcoin-based ETPs registered under the [Investment Act of 1940], then it should take a similar view towards proposals for [b]itcoin based ETPs registered under the [Securities Act of 1933], given that both products would be reliant on [b]itcoin's underlying price in the spot markets.” [34] The Exchange further states that “any potential fraud or manipulation in the underlying [bitcoin spot market] would impact both types of ETP proposals.” [35] What are commenters' views on such assertions? I believe the Bitcoin spot market is much more transparent than commodities and equities. There is less human error and less centralization in the Bitcoin spot market. This is ideal for investors and holding companies because there is less probability for central points of failure to manipulate the market and defraud the asset. Bitcoin is a safe haven from the human desire to control power because there is limited economic barriers to participate. The impact to both types of ETP proposals is negligible because the underlying asset itself is essentially a free and open market form of money. Sincerely, Steven Quach & Family