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Risk Management

Just because digital assets are volatile doesn’t mean they are inherently risky. Utilizing a multilayered approach to risk, that covers every aspect of our operations, from cybersecurity and physical hardware, to trading and counterparty risk, risk management is at the heart of everything we do.


Concentration

We believe that an actively managed digital asset strategy should be fairly concentrated during times of market dislocations and periods of gross inefficiencies, to generate above-benchmark long-term returns.


Sizing

We will invest greater amounts of capital in digital assets where we find greater risk-adjusted value and vice versa. If blockchain flow data suggests that target prices can no longer be supported, we will reduce the weighting of that position or exit the position altogether.


Active Hedging

We believe our risk-adjusted value approach to digital asset selection that melds blockchain data analytics and in-depth research, with active hedging using derivatives, can generate superior risk-adjusted returns over a three-year to five-year time horizon.



Trade Profit & Loss

Trade Profit & Loss algorithms use mark-to-market valuations of open contracts with realized profit and loss, providing intraday insight into actual portfolio performance, split up in strategy types, instruments and any other dimension required by our traders.


Max Drawdown

Automated monitoring of any declines in Trade Profit & Loss is a key portfolio preservation tool. Our software calculates the drop from the last cumulative Trade Profit & Loss peak and automated trading algorithms are authorized to liquidate trading positions if maximum allowed drawdown has occurred.


Limit Structures

Active trading limits are set based on a broad category of factors including, trade size, instrument, segment, strategy and liquidity across the entire trading portfolio.


Our risk management software actively calculates at-the-moment cryptocurrency values and portfolio preservation actions are automated to act decisively during market externalities.


Execution-To-Model

We constantly compare actual performance against our modeled performance and trading programs are designed to automatically improve and/or report on areas where results have not reflected model projections as well as opportunities to optimize performance.


Execution-To-Model uses model-simulated performance and pre-defined trading costs and slippage as a reference, constantly overlaying and mapping actual performance against modeled performance.

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Important Risk Information



Carefully consider each Product’s investment objectives, risk factors, fees and expenses before investing. This and other information can be found in each Product’s private placement memorandum, which may be obtained from Grayscale and, for each Product registered with the SEC and/or listed on the OTC Markets, such Product’s annual report or information statement, which may be obtained by visiting the SEC’s website for Grayscale Bitcoin Trust (Symbol: GBTC) and Grayscale Ethereum Trust (Symbol: ETHE) or the OTC Markets website for Grayscale Bitcoin Cash Trust (Symbol: BCHG), Grayscale Ethereum Classic Trust (Symbol: ETCG), Grayscale Litecoin Trust (Symbol: LTCN) and Grayscale Digital Large Cap Fund (Symbol: GDLC). Reports on OTC Markets are not prepared in accordance with SEC requirements and may not contain all information that is useful for an informed investment decision. Read these documents carefully before investing.


Investments in the Products are speculative investments that involve high degrees of risk, including a partial or total loss of invested funds. Grayscale Products are not suitable for any investor that cannot afford loss of the entire investment. The shares of each Product are intended to reflect the price of the digital asset(s) held by such Product (based on digital asset(s) per share), less such Product’s expenses and other liabilities. Because each Product does not currently operate a redemption program, there can be no assurance that the value of such Product’s shares will reflect the value of the assets held by such Product, less such Product’s expenses and other liabilities, and the shares of such Product, if traded on any secondary market, may trade at a substantial premium over, or a substantial discount to, the value of the assets held by such Product, less such Product’s expenses and other liabilities, and such Product may be unable to meet its investment objective.


This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.


The shares of each Product are not registered under the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (except for Grayscale Bitcoin Trust and Grayscale Ethereum Trust), the Investment Company Act of 1940, or any state securities laws. The Products are offered in private placements pursuant to the exemption from registration provided by Rule 506(c) under Regulation D of the Securities Act and are only available to accredited investors. As a result, the shares of each Product are restricted and subject to significant limitations on resales and transfers. Potential investors in any Product should carefully consider the long-term nature of an investment in that Product prior to making an investment decision. The shares of certain Products are also publicly quoted on OTC Markets and shares that have become unrestricted in accordance with the rules and regulations of the SEC may be bought and sold throughout the day through any brokerage account.