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grayscale.co Digital Asset Investment Report Q3 2018

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Page 1: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

grayscale.co

Digital Asset InvestmentReport

Q3 2018

Page 2: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

18 G

rays

cale

Inve

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, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 2

Q3 | 2018

Digital AssetInvestment Report Digital Asset

Investment Report

Q3 2018 Highlights2

• Total Investment into Grayscale Products in Q3 2018: $81.1 million • Average Weekly Investment – All Products: $6.2 million • Average Weekly Investment – Bitcoin Investment Trust: $4.5 million• Average Weekly Investment – “Non-Bitcoin” Investment Products3: $1.7 million• Majority of investment (70%) came from institutional investors.

YTD 2018 Highlights4

• Total Investment into Grayscale Products in 2018: $329.5 million ( 33% in Q3)• Average Weekly Investment – All Products: $8.4 million • Average Weekly Investment – Bitcoin Investment Trust: $5.5 million• Average Weekly Investment – “Non-Bitcoin” Investment Products5: $2.9 million• Majority of investment (59%) has come from institutional investors.

The Takeaway

Despite a slight deceleration in the most recent quarter, new investment into Gray-scale products remains strong. Grayscale raised $81.1 million in Q3, bringing our year-to-date inflows to nearly $330 million. This marks the strongest year-to-date inflows through September that we’ve experienced during any calendar year since the incep-tion of our business.

Capital inflows continue across the entire Grayscale family of products, but Bitcoin is still king. In Q3, 73% of inflows were into Bitcoin Investment Trust, while 27% were into Grayscale products tied to other digital assets.

$1.5BTOTAL AUM1

1. As of September 30, 2018.2. For the period from June 30, 2018 through September 30, 2018.3. “Non-Bitcoin” Investment Products include Bitcoin Cash Investment Trust, Ethereum Investment Trust, Ethereum Classic Investment Trust, Lite-coin Investment Trust, XRP Investment Trust, Zcash Investment Trust, Zen Investment Trust, and Grayscale Digital Large Cap Fund LLC.4. For the period from December 31, 2017 through September 30, 2018.5. See footnote 3.

Page 3: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

18 G

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, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 3

Q3 | 2018

Digital AssetInvestment Report

Institutional investors remain engaged with Grayscale products, legging into their digital asset allocations over time. Institutional investors’ share of new investment increased to 70% in Q3, though the dollar-value invested was lower than in the two previous quarters.

A potential reversal? Bitcoin Investment Trust and XRP Investment Trust are bucking the trend on a possible reversal, generating the first positive quarterly returns for Grayscale products in 2018.

Investment Activity through the Grayscale Lens

As we first outlined in our inaugural quarterly investment report, the digital asset market remains in the midst of one of the largest price drawdowns since the inception of Bit-coin. While Q3 marked the lowest point of the 2018 drawdown, the Bitcoin Investment Trust and XRP Investment Trust seem to be bucking the trend on a potential reversal, generating the first positive quarterly returns for the Grayscale products this year.

FIGURE 1: GRAYSCALE INVESTMENT PRODUCT PERFORMANCE

Net Total Return (Cumulative %)

INVESTMENT PRODUCT

BitcoinInvestment

Trust

Ethereum Classic

Investment Trust

Zcash Investment

Trust

Ethereum Investment

Trust

Digital Large

Cap Fund

Bitcoin Cash

Investment Trust

XRP Investment

Trust

Litecoin Investment

Trust

ZenInvestment

Trust

Q3 2018 12.6% -22.8% -10.8% -46.0% -3.3% -17.4% 21.3% -16.4% -27.7%

YTD 2018 -54.7% -59.6% -72.8% -69.7% -49.6% -56.7% -41.8% -70.1% -27.7%

Since Inception* 4635.7% 185.8% -37.7% -69.0% -49.6% -56.7% -41.8% -70.1% -27.7%

*Inception dates were as follows: Bitcoin Investment Trust – September 25, 2013; Ethereum Classic Investment Trust – April 24, 2017; Zcash Invest-ment Trust – October 24, 2017; Ethereum Investment Trust – December 14, 2017; Grayscale Digital Large Cap Fund LLC – February 1, 2018; Bitcoin Cash Investment Trust, XRP Investment Trust, Litecoin Investment Trust – March 1, 2018; Zen Investment Trust – August 6, 2018.

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

12/31/17 01/31/18 02/28/18 03/31/18 04/30/18 05/31/18 06/30/18 07/31/18 08/31/18 09/30/18

Tota

l Ret

urn

% (C

umul

ativ

e)

Low

BitcoinEthereum ClassicZcash

EthereumDigital Large CapBitcoin Cash

XRPLitecoinZen

Page 4: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

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, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 4

Q3 | 2018

Digital AssetInvestment Report

Despite a slight deceleration of investment into digital assets coinciding with the summer slowdown, Grayscale raised $81.1 million over the last three months, bringing our year-to-date inflows to nearly $330 million. This marks the strongest year-to-date inflows through September that we’ve experienced during any calendar year since the inception of our business. For example, through the third quarter of 2016 and 2017 we raised $17.6 million and $25.4 million, respectively. Moreover, it was the fourth highest asset raising quarter since Grayscale has been sponsoring and managing investment products.

FIGURE 2: GRAYSCALE CUMULATIVE INFLOWS BY INVESTMENT PRODUCT – Q3 2018June 30, 2018 through September 30, 2018

FIGURE 3: GRAYSCALE CUMULATIVE INFLOWS BY INVESTMENT PRODUCT – YTD 2018December 31, 2017 through September 30, 2018

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

$100,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Total: $81.1M

Total: $329.5M

BitcoinEthereum ClassicZcash

EthereumDigital Large CapBitcoin Cash

XRPLitecoinZen

BitcoinEthereum ClassicZcash

EthereumDigital Large CapBitcoin Cash

XRPLitecoinZen

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

Page 5: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

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PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 5

Q3 | 2018

Digital AssetInvestment Report

As shown in Figure 4, our average weekly investment across all products this quarter was $6.2 million.

FIGURE 4: GRAYSCALE WEEKLY INFLOWS BY INVESTMENT PRODUCT – Q3 2018June 30, 2018 through September 30, 2018

Which was strong, but a bit lower than our average weekly investment across all prod-ucts for 2018.

FIGURE 5: GRAYSCALE WEEKLY INFLOWS BY INVESTMENT PRODUCT – YTD 2018December 31, 2017 through September 30, 2018

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Average: $6.2M

Average: $8.4M

BitcoinEthereum ClassicZcash

EthereumDigital Large CapBitcoin Cash Total Weekly Average

XRPLitecoinZen

BitcoinEthereum ClassicZcash

EthereumDigital Large CapBitcoin Cash Total Weekly Average

XRPLitecoinZen

Page 6: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

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rays

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, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 6

Q3 | 2018

Digital AssetInvestment Report

FIGURE 6: BITCOIN INVESTMENT TRUST CUMULATIVE INFLOWS – Q3 2018June 30, 2018 through September 30, 2018

FIGURE 7: BITCOIN INVESTMENT TRUST CUMULATIVE INFLOWS – YTD 2018December 31, 2017 through September 30, 2018

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Total: $59.0M

Total: $216.0M

Bitcoin

Bitcoin

Consistent with what we observed during the first half of the year, the majority of new investment this quarter continued to flow into Bitcoin Investment Trust.

Page 7: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

18 G

rays

cale

Inve

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, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 7

Q3 | 2018

Digital AssetInvestment Report

However, we still see investors diversifying into other digital assets.

FIGURE 8: GRAYSCALE NON-BITCOIN CUMULATIVE INFLOWS – Q3 2018June 30, 2018 through September 30, 2018

FIGURE 9: GRAYSCALE NON-BITCOIN CUMULATIVE INFLOWS – YTD 2018December 31, 2017 through September 30, 2018

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Total: $22.1M

Non-Bitcoin

Total: $113.5M

Non-Bitcoin

Page 8: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

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PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 8

Q3 | 2018

Digital AssetInvestment Report

In Q3, 73% of inflows were into Bitcoin Investment Trust, while 27% were into Grayscale products tied to other digital assets.

FIGURE 10: INVESTMENT PRODUCT TYPE AS % OF TOTAL ASSETS RAISED – Q3 2018June 30, 2018 through September 30, 2018

For Bitcoin Investment Trust, inflows relative to other products were higher than what we’ve seen over the course of the full year. Through September, 66% of inflows have gone into Bitcoin Investment Trust and 34% have gone into Grayscale products tied to other digital assets.

FIGURE 11: INVESTMENT PRODUCT TYPE AS % OF TOTAL ASSETS RAISED – YTD 2018December 31, 2017 through September 30, 2018

66%

34%

73%

27%

Bitcoin as % of Total Assets Raised

Non-Bitcoin as % of Total Assets Raised

Bitcoin as % of Total Assets Raised

Non-Bitcoin as % of Total Assets Raised

The average weekly inflow into Bitcoin Investment Trust was $4.5 million, down from the year-to-date average of $5.5 million.

Page 9: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

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PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 9

Q3 | 2018

Digital AssetInvestment Report

Bitcoin Bitcoin Weekly Average

FIGURE 12: BITCOIN INVESTMENT TRUST WEEKLY INFLOWS – Q3 2018June 30, 2018 through September 30, 2018

FIGURE 13: BITCOIN INVESTMENT TRUST WEEKLY INFLOWS – YTD 2018December 31, 2017 through September 30, 2018

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Bitcoin Bitcoin Weekly Average

Average: $4.5M

Average: $5.5M

Page 10: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

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PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 1 0

Q3 | 2018

Digital AssetInvestment Report

Furthermore, the average weekly inflow into “Non-Bitcoin” investment products was $1.7 million, down from the year-to-date average of $2.9 million.

FIGURE 14: GRAYSCALE NON-BITCOIN WEEKLY INFLOWS – Q3 2018June 30, 2018 through September 30, 2018

FIGURE 15: GRAYSCALE NON-BITCOIN WEEKLY INFLOWS – YTD 2018December 31, 2017 through September 30, 2018

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

01/0

5/20

18

01/12

/201

8 01

/19/2

018

01/2

6/20

18

02/0

2/20

18

02/0

9/20

18

02/16

/201

8 02

/23/

2018

03

/02/

2018

03

/09/

2018

03

/16/2

018

03/2

3/20

18

03/3

0/20

18

04/0

6/20

18

04/13

/201

8 04

/20/

2018

04

/27/

2018

05

/04/

2018

05

/11/2

018

05/18

/201

8 05

/25/

2018

06

/01/2

018

06/0

8/20

18

06/15

/201

8 06

/22/

2018

06

/29/

2018

07

/06/

2018

07

/13/2

018

07/2

0/20

18

07/2

7/20

18

08/0

3/20

18

08/10

/201

8 08

/17/2

018

08/2

4/20

18

08/3

1/201

8 09

/07/

2018

09

/14/2

018

09/2

1/201

8 09

/28/

2018

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

07/06/2018

07/13/2018

07/20/2018

07/27/2

018

08/03/2018

08/10/2018

08/17/2018

08/24/2018

08/31/2018

09/07/2018

09/14/2018

09/21/2018

09/28/2018

Non-Bitcoin Non-Bitcoin Weekly Average

Average: $1.7M

Non-Bitcoin Non-Bitcoin Weekly Average

Average: $2.9M

Page 11: Q3 2018 - Grayscale® · 2020-03-11 · 2018 Grayscale Investments LLC PLA RI IPORTAT DICLOR & OTHR IORATIO AT TH D O THI RPORT. 2 Q3 | 2018 Digital Asset Investment Reort Digital

©20

18 G

rays

cale

Inve

stm

ents

, LLC

PLEASE REVIEW IMPORTANT DISCLOSURES & OTHER INFORMATION AT THE END OF THIS REPORT. 1 1

Q3 | 2018

Digital AssetInvestment Report

Despite a slowdown in investment across the board, the data continues to provide evidence that investors appreciate the notion that multiple digital assets can survive, thrive, and complement one another in the new digital economy, allowing them to play a diversifying role within investor portfolios.

Investor Profiles

Just as we saw in the first half of the year, the majority of capital this quarter came from institutional investors. This group’s share of new investment increased to 70% in Q3, though the dollar-value invested was lower than in the two previous quarters.

FIGURE 16: GRAYSCALE INVESTOR PROFILE BY TYPE – Q3 VS. YTD 2018

Finally, by breaking down our investor base by geography, we can see that the quarter-ly results are roughly consistent with what we have observed during the rest of 2018. Roughly 64% of all new investment came from U.S. investors, followed by offshore investors (e.g., Cayman-domiciled entities), and investors in other regions of the world.

70%

11%

18%

1%

59%

18% 17%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Institutional Investors Accredited Individuals Retirement Accounts Family Offices

Q3 2018

YTD 2018

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FIGURE 17: GRAYSCALE INVESTOR PROFILE BY GEOGRAPHY – Q3 VS. YTD 2018

Conclusion

Grayscale Investments is a leader in digital currency investing. We have brought sin-gle-asset and diversified investment products to market over the last 5+ years, including the publicly quoted Bitcoin Investment Trust™ (OTCQX: GBTC) and Ethereum Classic Investment Trust™ (OTCQX: ETCG), as well as our flagship diversified offering, Digital Large Cap Fund™.

Through our experience working with prominent investors around the world, we have compiled a proprietary dataset of digital asset investment activity. On a quarterly basis we will update and share this data with the market for two major reasons:

1. We believe it provides a unique perspective on digital asset investment activity that is distinct from what may be commonly understood.

2. It may be useful to both value and momentum investors as they seek to identify dislocations between market prices and capital flows.

As our dataset grows, we will create new analytics that can be used to identify trends in the digital asset investment landscape through the Grayscale lens.

64%

34%

2%

64%

28%

8%

0%

10%

20%

30%

40%

50%

60%

70%

U.S. Investors Offshore Investors (e.g. Cayman-domiciled entities)

Other Investors

Q3 2018

YTD 2018

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About Grayscale Investments

Grayscale Investments, LLC (“Grayscale”) is the world’s largest digital currency asset manager, with a proven track record and unrivaled experience. We give investors the tools to make informed investing decisions in a burgeoning asset class. As part of Digital Currency Group, Grayscale accesses the world’s biggest network of digital currency intelligence to build better investment products. We have removed the barrier to entry so that institutions and investors can benefit from exposure to digital currencies. Now, forward-thinking investors can embrace a digital future within an institutional grade investment.

Grayscale is headquartered in New York City. For more information on Grayscale, please visit, please visit www.grayscale.co or follow us on Twitter @GrayscaleInvest.

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Important Disclosures & Other Information

Copyright © 2018 Grayscale Investments, LLC. All content is original and has been researched and produced by Grayscale Investments, LLC (“Grayscale”) unless otherwise stated herein. No part of this content may be reproduced in any form, or referred to in any other publication, without the express consent of Grayscale.

This paper is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to sell or buy any security in any jurisdiction where such an offer or solicitation would be illegal. There is not enough information contained in this paper to make an investment decision and any information contained herein should not be used as a basis for this purpose. This paper does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of investors. Investors are not to construe the contents of this Memorandum as legal, tax or investment advice, and should consult their own advisors concerning an investment in digital assets. The price and value of assets referred to in this re-search and the income from them may fluctuate. Past performance is not indicative of the future performance of any assets referred to herein. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Investors should be aware that Grayscale is the sponsor of Bitcoin Investment Trust, Bitcoin Cash Investment Trust, Ethereum Investment Trust, Ethereum Classic Investment Trust, Litecoin Investment Trust, XRP Invest-ment Trust, Zcash Investment Trust, and Zen Investment Trust (each, a “Trust”) and the manager of Grayscale Digital Large Cap Fund LLC (the “Fund”); each of the Fund and the Trusts, a “Vehicle”). Information provided about a Vehicle is not intended to be, nor should it be construed or used as investment, tax or legal advice, and prospective investors should consult their own advisors concerning an investment in such Vehicle. This paper does not constitute an offer to sell or the solicitation of an offer to buy interests in any of the Vehicles. Any offering or solicitation will be made only to certain qualified investors pursuant to a formal offering with additional documentation, all of which should be read in its entirety. Any offer or solicitation of an investment in a Vehicle may be made only by delivery of such Vehicle’s confidential offering documents (the “Offering Documents”) to qualified accredited investors (as defined under Rule 501(a) of Regulation D of the U.S. Secu-rities Act of 1933, as amended (the “Securities Act”)), which contain material information not contained herein and which supersede the information provided herein in its entirety.

Grayscale’s Vehicles are private, unregistered investment vehicle and not subject to the same regulatory requirements as exchange traded funds or mutual funds, including the requirement to provide certain periodic and standardized pricing and valuation information to investors. The Vehicles are not registered with the Securities and Exchange Commission (the “SEC”), any state securities laws, or the U.S. Investment Company Act of 1940, as amended. There are substantial risks in investing in one or more Vehicles. Any interests in each Vehicle described herein have not been recommended by any U.S. federal or state, or non-U.S., secu-rities commission or regulatory authority, including the SEC. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense.

Certain of the statements contained herein may be statements of future expectations and other forward-look-ing statements that are based on Grayscale’s views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those ex-pressed or implied in such statements. In addition to statements that are forward-looking by reason of context, the words “may, will, should, could, can, expects, plans, intends, anticipates, believes, estimates, predicts, potential, projected, or continue” and similar expressions identify forward-looking statements. Grayscale assumes no obligation to update any forward-looking statements contained herein and you should not place undue reliance on such statements, which speak only as of the date hereof. Although Grayscale has taken reasonable care to ensure that the information contained herein is accurate, no representation or warranty (in-cluding liability towards third parties), expressed or implied, is made by Grayscale as to its accuracy, reliability or completeness. You should not make any investment decisions based on these estimates and forward-look-ing statements.

Certain Risk Factors

Each Vehicle is a private, unregistered investment vehicle and not subject to the same regulatory require-ments as exchange traded funds or mutual funds, including the requirement to provide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in a Vehi-cle, including but not limited to:

• PRICE VOLATILITYDigital assets have historically experienced significant intraday and long-term price swings. In ad-dition, none of the Vehicles currently operates a redemption program and may halt creations from time to time. There can be no assurance that the value of the common units of fractional undivided

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beneficial interest (“Shares”) of any Vehicle will approximate the value of the digital assets held by such Vehicle and such Shares may trade at a substantial premium over or discount to the value of the digital assets held by such Vehicle. At this time, none of the Vehicles is operating a redemption program and therefore Shares are not redeemable by any Vehicle. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor or Manager, as applicable, in its sole discretion, any Vehicle may in the future operate a redemption program. Because none of the Vehicles believes that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, none of the Vehicles currently has any intention of seeking regulatory approval from the SEC to operate an ongoing redemption program.

• MARKET ADOPTIONIt is possible that digital assets generally or any digital asset in particular will never be broadly adopt-ed by either the retail or commercial marketplace, in which case, one or more digital assets may lose most, if not all, of its value.

• GOVERNMENT REGULATION The regulatory framework of digital assets remains unclear and application of existing regulations and/or future restrictions by federal and state authorities may have a significant impact on the value of digital assets.

• SECURITYWhile each Vehicle has implemented security measures for the safe storage of its digital assets, there have been significant incidents of digital asset theft and digital assets remains a potential target for hackers. Digital assets that are lost or stolen cannot be replaced, as transactions are irrevocable.

• TAX TREATMENT OF VIRTUAL CURRENCY*For U.S. federal income tax purposes, Digital Large Cap Fund will be a passive foreign investment company (a “PFIC”) and, in certain circumstances, may be a controlled foreign corporation (a “CFC”). Digital Large Cap Fund will make available a PFIC Annual Information Statement that will include information required to permit each eligible shareholder to make a “qualified electing fund” election (a “QEF Election”) with respect to Digital Large Cap Fund. Each of the other Vehicles intends to take the position that it is a grantor trust for U.S. federal income tax purposes. Assuming that a Vehicle is properly treated as a grantor trust, Shareholders of that Vehicle generally will be treated as if they directly owned their respective pro rata shares of the underlying assets held in the Vehicle, directly received their respective pro rata shares of the Vehicle’s income and directly incurred their respective pro rata shares of the Vehicle’s expenses. Most state and local tax authorities follow U.S. income tax rules in this regard.Prospective investors should discuss the tax consequences of an investment in a Vehicle with their tax advisors.

• NO SHAREHOLDER CONTROLGrayscale, as sponsor of each Trust and the manager of the Fund, has total authority over the Trusts and the Fund and shareholders’ rights are extremely limited.

• LACK OF LIQUIDITY AND TRANSFER RESTRICTIONSAn investment in a Vehicle will be illiquid and there will be significant restrictions on transferring in-terests in such Vehicle. The Vehicles are not registered with the SEC, any state securities laws, or the U.S. Investment Company Act of 1940, as amended, and the Shares of each Vehicle are being offered in a private placement pursuant to Rule 506(c) under Regulation D of the Securities Act. As a result, the Shares of each Vehicle are restricted Shares and are subject to a one-year holding period in ac-cordance with Rule 144 under the Securities Act. In addition, none of the Vehicles currently operates a redemption program. Because of the one-year holding period and the lack of an ongoing redemption program, Shares should not be purchased by any investor who is not willing and able to bear the risk of investment and lack of liquidity for at least one year. No assurances are given that after the one year holding period, there will be any market for the resale of Shares of any Vehicle, or, if there is such a market, as to the price at such Shares may be sold into such a market.

• POTENTIAL RELIANCE ON THIRD-PARTY MANAGEMENT; CONFLICTS OF INTERESTThe Vehicles and their sponsors or managers and advisors may rely on the trading expertise and experience of third-party sponsors, managers or advisors, the identity of which may not be fully disclosed to investors. The Vehicles and their sponsors or managers and advisors and agents may be subject to various conflicts of interest.

• FEES AND EXPENSES Each Vehicle’s fees and expenses (which may be substantial regardless of any returns on investment) will offset each Vehicle’s trading profits.

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Additional General Disclosures

Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an in-vestment. Any offering or solicitation will be made only to qualified accredited investors as defined under Rule 501(a) of Regulation D pursuant to a formal offering with additional documentation, all of which should be read in their entirety and contain material information not contained herein. Any offer or solicitation of an invest-ment in a Vehicle may be made only by delivery of its confidential offering documents to qualified accredited investors. You should rely solely on such offering documents in making any investment decision. An invest-ment in Grayscale’s Vehicles are not suitable for all investors.

This document is intended for those with an in-depth understanding of the high risk nature of investments in digital assets and these investments may not be suitable for you. This document may not be distributed in either excerpts or in its entirety beyond its intended audience and the Vehicles and Grayscale will not be held responsible if this document is used or is distributed beyond its initial recipient or if it is used for any unin-tended purpose. This document shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful, and there is not enough information contained in this message on which to make an investment decision and any information contained herein should not be used as a basis for this purpose.

The Vehicles and Grayscale do not: make recommendations to purchase or sell specific securities; provide investment advisory services; or conduct a general retail business. None of the Vehicles or Grayscale, its affil-iates, nor any of its directors, officers, employees or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in it or lack of care in its preparation or publication, provided that this shall not exclude liability to the extent that this is impermissible under applicable securities laws.

The logos, graphics, icons, trademarks, service marks and headers for each Vehicle and Grayscale appearing herein are service marks, trademarks (whether registered or not) and/or trade dress of Digital Currency Group, Inc. (the “Marks”). All other trademarks, company names, logos, service marks and/or trade dress mentioned, displayed, cited or otherwise indicated herein (“Third Party Marks”) are the sole property of their respective owners. The Marks or the Third Party Marks may not be copied, downloaded, displayed, used as metatags, misused, or otherwise exploited in any manner without the prior express written permission of the relevant Vehicle and Grayscale or the owner of such Third Party Mark.

The above summary is not a complete list of the risks and other important disclosures involved in investing in the Vehicles and is subject to the more complete disclosures contained in each Vehicle’s Offering Documents, which must be reviewed carefully.

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General Inquiries:

[email protected]: 250 Park Ave S 5th floor, New York, NY 10003Phone: (212) 668-1427@GrayscaleInvest