Mar. 05, 2022
Dear S.E.C. Representative, I'm writing this letter to support the conversion of Grayscale Bitcoin Trust (GBTC), currently the world's largest Bitcoin fund, to the first Spot Bitcoin ETF in the United States. Disclaimer: I do have a vested interest in this investment product seeing progress made with the SEC. I’m not professionally trained to write documents such as this and don’t know the proper terminology or language I should use, but will do my best to outline what my thoughts are on Bitcoin, cryptocurrency and Grayscale. My understanding is that Grayscale Bitcoin Trust (GBTC) allows investors to invest in something that closely tracks the price of Bitcoin, a specific cryptocurrency, similarly to how an investor can invest in a gold trust fund such as the GraniteShares Gold Trust (BAR), the Aberdeen Standard Physical Gold Shares ETF (SGOL), and the SPDR Gold MiniShares Trust (GLDM) to generate returns as if they were holding physical gold, without the burden of physically managing the gold. Although Bitcoin and cryptocurrencies are digital assets that don't have physical form like gold, they still come with the burden of storage and security that I believe most investors wouldn't want to spend time or energy on. Grayscale provides a valuable product/service in providing options such as GBTC. Bitcoin by itself, due to its fixed supply, has a high probability of maintaining or increasing in value as people around the world begin using it. Around the world it is clear that Bitcoin and cryptocurrencies are seeing increased adoption if not awareness, it has good name recognition and seems unlikely to suddenly see zero use in the near future. Although Bitcoin is well known for extremely volatile price movement, it is important to remember that even mainstream investment vehicles such as the S&P 500 or the Nasdaq index have seen swings with losses of greater than 50% in their lifetime. Investing in Bitcoin or any vehicle that closely tracks the price of Bitcoin should be relatively safe compared to investing in staples such as the S&P 500 from a long term performance perspective. This is why traditionally, GBTC has been seen as a way for investors to gain exposure to Bitcoin on retirement accounts such as 401ks and IRAs. I have read the arguments against the conversion of GBTC to a spot ETF and it seems the S.E.C. is mostly concerned about the volatility, risk and safety of such a product. Currently, the only S.E.C.-approved product that attempts to track Bitcoin is the ProShares Trust - ProShares Bitcoin Strategy ETF (BITO). It attempts to track Bitcoin using futures contracts as a medium, which due to the nature of how future contracts are used exposes investors to value decay when the contracts are rolled over from time period to time period. This makes BITO a poor long-term investment and more so a short-term speculative investment for Bitcoin, further exacerbating the image Bitcoin has as a speculative asset. I believe that if the S.E.C. approves a futures-based ETF, they must also accept a spot ETF as both of them share the same exposure to price manipulation due to tracking the same underlying asset. Both products simply provide investors as a way to obtain the market performance of Bitcoin without the cost of managing the digital asset. If as is popularly mentioned by pundits, “bitcoin goes to zero”, Investors of both the futures-based product and spot-based product see the same result. I have been invested in GBTC for more than a year and not once has Grayscale asked me to manage the Bitcoin my money represents, and Grayscale is very transparent by providing data and information on their assets under management. It would be obvious (and against their long-term interest) if they were to attempt price manipulation via selling their assets. Since early 2021, spot-based Bitcoin products have begun to be available outside the U.S. such as Canada. This is suspected to have caused investor appetite in GBTC to wane, causing it to begin failing at closely tracking Bitcoin's price movements. At the present, GBTC is beholden to forces beside simply the price movement of Bitcoin, which may lead future investors to take their capital outside the U.S. (which puts American capital outside the protection of the S.E.C.) or into cryptocurrency exchanges. I believe it is in the S.E.C.'s best interest to approve the conversion of GBTC to a spot-based Bitcoin ETF product even if it's the only such product in the U.S. This allows investors to invest in Bitcoin without the risk and burden of managing accounts at cryptocurrency exchanges or holding shares of spot-based Bitcoin products from overseas. Thanks for spending the time to read this letter, I wish you the best in this year as well. -- -Victor Tang Software Engineer