Item 1.01. Entry into a Material Definitive Agreement.
On February 1, 2022, Grayscale Investments, LLC, the sponsor (the "Sponsor") of Grayscale Litecoin Trust (LTC) (the "Trust"), and CoinDesk Indices, Inc., formerly known as TradeBlock Inc. (the "Index Provider"), entered into an Index License Agreement (the "Index License Agreement") governing the Sponsor's use of the CoinDesk Litecoin Price Index (LTX) (the "Index") to calculate the Index Price (as defined below), among other things. The foregoing description is a summary, does not purport to be a complete description of the Index License Agreement, and is qualified in its entirety by reference to the Index License Agreement, which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.
Item 1.02. Termination of a Material Definitive Agreement.
On January 31, 2022, in connection with the entry into the Index License Agreement, the Sponsor and the Index Provider agreed to terminate that certain Index License Agreement, dated February 28, 2019, between the Sponsor and the Index Provider, that governed the Sponsor's use of the Index to calculate the Old Index Price (as defined below).
Item 8.01. Other Events.
Grayscale Litecoin Trust (LTC) (the "Trust") has historically valued its
Litecoin ("LTC") for operational purposes by reference to a volume-weighted
average index price (the "Old Index Price") of an LTC in U.S. dollars calculated
by applying a weighting algorithm to the price and trading volume data for the
immediately preceding 24-hour period as of 4:00 p.m., New York time derived from
the selected digital asset exchanges that are reflected in the Index on such
trade date. The methodology used exclusively by Grayscale and calculated by the
Index Provider to calculate the Old Index Price overlaid an additional averaging
mechanism to the price produced, resulting in the Old Index Price reflecting an
average price for the 24-hour period. The Old Index Price was provided to the
Sponsor once per day at 4:00 p.m., New York time.
Effective February 1, 2022, the Trust will value its LTC for operational
purposes by reference to the index price (the "Index Price") of an LTC in U.S.
dollars calculated by applying the same methodology to the price and trading
volume data for the immediately preceding 24-hour period as of 4:00 p.m., New
York time derived from the selected digital asset exchanges that are reflected
in the Index on such trade date without the additional averaging mechanism being
applied to the Index Price. The methodology used to calculate the Index Price is
consistent with the publicly available LTC price that is published by the Index
Provider continuously throughout the day, and as a result the Sponsor believes
that using the Index Price will provide more transparency to investors. There
will be no change to the Index used to determine the Index Price or the criteria
used to select the digital asset exchanges included in the Index. The Index
Price is calculated using non-GAAP methodology and is not used in the Trust's
financial statements.
Historical Digital Asset Holdings and LTC Prices
For the period from January 1, 2019 and December 31, 2021, the average
difference in price between the Old Index Price and the Index Price and the
average difference in Digital Asset Holdings of the Trust as calculated using
the Old Index Price and the Index Price of was 0.31%.
The following chart illustrates the movement in the Index Price, the Old Index
Price, the Trust's Digital Asset Holdings per Share based on the Old Index Price
and the Index Price and the Trust's net asset value per share as calculated in
accordance with GAAP from March 1, 2018 to December 31, 2021. For more
information on the determination of the Trust's Digital Asset Holdings, see
"Overview of Litecoin-LTC Value-The Index and the Index Price" in Exhibit 99.1
to Amendment No. 4 to the Trust's Registration Statement on the Form 10 filed
with the Securities and Exchange Commission on February 4, 2022 (the
"Information Statement").
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The following table illustrates the movements in the Old Index Price from the
beginning of the Trust's operations on March 1, 2018 to December 31, 2021. Since
the beginning of the Trust's operations, the Old Index Price has ranged from
$22.81 to $391.06, with the straight average being $99.90. The Sponsor has not
observed a material difference between the Old Index Price and average prices
from the constituent Digital Asset Exchanges individually or as a group.
High Low
Last
Old Index Old Index End of business
Period Average Price Date Price Date period day
March 1, 2018 (the first
Creation Basket of the Trust) to
December 31, 2018 $ 87.16 $ 212.04 3/5/2018
$ 22.81 12/14/2018 $ 30.69 $ 30.69
Twelve months ended December 31,
2019
$ 68.88 $ 138.93 6/12/2019
$ 30.64 1/29/2019 $ 41.77 $ 41.77
Twelve months ended December 31,
2020
$ 56.01 $ 132.00 12/27/2020
$ 32.75 3/13/2020 $ 126.00 $ 126.00
Twelve months ended December 31,
2021
$ 185.60 $ 391.06 5/11/2021 $ 108.07 7/20/2021 $ 148.49 $ 148.49 March 1, 2018 (the first Creation Basket of the Trust) to December 31, 2021 $ 99.90 $ 391.06 5/10/2021
$ 22.81 12/14/2018 $ 148.49 $ 148.49
The following table illustrates the movements in the Index Price from the
beginning of the Trust's operations on March 1, 2018 to December 31, 2021. Since
the beginning of the Trust's operations, the Index Price has ranged from $22.48
to $371.71, with the straight average being $100.04. The Sponsor has not
observed a material difference between the Index Price and average prices from
the constituent Digital Asset Exchanges individually or as a group.
High Low
Last
Index Index End of business
Period Average Price Date Price Date period day
March 1, 2018 (the first
Creation Basket of the Trust)
to December 31, 2018 $ 87.05 $ 213.58 3/1/2018 $ 22.48 12/14/2018 $ 29.87 $ 29.87
Twelve months ended
December 31, 2019 $ 69.24 $ 142.00 6/22/2019 $ 29.96 1/13/2019 $ 40.99 $ 40.99
Twelve months ended
December 31, 2020 $ 56.14 $ 133.63 12/26/2020 $ 32.16 3/16/2020 $ 124.33 $ 124.33
Twelve months ended
December 31, 2021 $ 185.76 $ 371.71 5/11/2021 $ 108.80 7/20/2021 $ 144.08 $ 144.08
March 1, 2018 (the first
Creation Basket of the Trust)
to December 31, 2021 $ 100.04 $ 371.71 5/11/2021 $
22.48 12/14/2018 $ 144.08 $ 144.08
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Secondary Market Trading
The following table sets out the range of high and low closing prices for the
Shares as reported by OTCQX, the Trust's net asset value per share calculated in
accordance with GAAP and the Trust's Digital Asset Holdings per Share using both
the Old Index Price and the Index Price for each of the quarters since
August 18, 2020.
High Low
Digital Digital
Asset Asset
Digital Holdings Holdings
Asset per Share Digital per Share
Holdings using Old Asset using Old
NAV per per Index NAV per Holdings Index
OTCQX Share (1) Share(2) Price(2) OTCQX Share(1) per Share(2) Price(2)
Calendar Year 2020
Third quarter $ 72.00 $ 6.25 $ 6.26 $ 6.26 $ 23.00 $ 4.06 $ 4.05 $ 4.10
Fourth quarter $ 500.00 $ 12.45 $ 12.45 $ 12.30 $ 29.50 $ 4.19 $ 4.20 $ 4.24
Calendar Year 2021
First quarter $ 396.00 $ 22.23 $ 22.23 $ 22.14 $ 112.00 $ 11.83 $ 11.82 $ 11.72
Second quarter $ 445.99 $ 34.34 $ 34.32 $ 36.10 $ 82.72 $ 11.00 $ 11.02 $ 10.92
Third quarter $ 87.52 $ 20.46 $ 20.46 $ 20.56 $ 13.13 $ 10.00 $ 10.00 $ 9.93
Fourth quarter $ 24.35 $ 25.16 $ 25.12 $ 25.18 $ 8.96 $ 13.09 $ 13.09 $ 13.36
(1) The NAV is calculated using the fair value of LTC based on the price provided
by the Digital Asset Market that the Trust considers its principal market,
which is Coinbase Pro.
(2) The Trust’s Digital Asset Holdings per Share is derived from the Index Price
as represented by the Index as of 4:00 p.m., New York time, on the valuation
date. See “Determination of NAV” in the Trust’s Information Statement. Prior
to February 1, 2022, the Trust’s Digital Asset Holdings per Share was derived
from the Old Index Price. The Index Price is calculated using non-GAAP
methodology and is not used in the Trust’s financial statements.
The following chart sets out the historical closing prices for the Shares as
reported by OTCQX and the Trust's Digital Asset Holdings per Share based on the
Index Price and the Old Index Price.
LTCN Premium/(Discount): LTCN Share Price vs. Digital Asset Holdings per Share
($)
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The following chart sets out the historical premium and discount for the Shares
as reported by OTCQX and the Trust's Digital Asset Holdings per Share based on
the Index Price and the Old Index Price.
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LTCN Premium/(Discount): LTCN Share Price vs. Digital Asset Holdings per Share
(%)
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Determination of the Index Price When Index Price is Unavailable
The Sponsor will continue to use the same cascading set of rules to determine
the appropriate LTC reference rate in the event that the Index Price is
unavailable, which are set forth below for reference:
1. Index Price = The price set by the Index as of 4:00 p.m., New York time, on the valuation date. If the Index becomes unavailable, or if the Sponsor determines in good faith that the Index does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Index Provider to obtain the Index Price directly from the Index Provider. If after such contact the Index remains unavailable or the Sponsor continues to believe in good faith that the Index does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. 2. Index Price = The price set by Coin Metrics Real-Time Rate (the "Secondary Index") as of 4:00 p.m., New York time, on the valuation date (the "Secondary Index Price"). The Secondary Index Price is a real-time reference rate price, calculated using trade data from constituent markets selected by Coin Metrics (the "Secondary Index Provider"). The Secondary Index Price is calculated by applying weighted-median techniques to such trade data where half the weight is derived from the trading volume on each constituent market and half is derived from inverse price variance, where a constituent market with high price variance as a result of outliers or market anomalies compared to other constituent markets is assigned a smaller weight. If the Secondary Index becomes unavailable, or if the Sponsor determines in good faith that the Secondary Index does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Secondary Index Provider to obtain the Secondary Index Price directly from the Secondary Index Provider. If after such contact the Secondary Index remains unavailable or the Sponsor continues to believe in good faith that the Secondary Index does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. 3. Index Price = The price set by the Trust's principal market (the "Tertiary Pricing Option") as of 4:00 p.m., New York time, on the valuation date. The Tertiary Pricing Option is a spot price derived from the principal market's public data feed that is believed to be consistently publishing pricing information as of 4:00 p.m., New York time, and is provided to the Sponsor via an application programming interface. If the Tertiary Pricing Option becomes unavailable, or if the Sponsor determines in good faith that the Tertiary Pricing Option does not reflect an accurate price, then the Sponsor will, on a best efforts basis, contact the Tertiary Pricing Provider to obtain the Tertiary Pricing Option directly from the Tertiary Pricing Provider. If after such contact the Tertiary Pricing Option remains unavailable after such contact or the Sponsor continues to believe in good faith that the Tertiary Pricing Option does not reflect an accurate price, then the Sponsor will employ the next rule to determine the Index Price. There are no predefined criteria to make a good faith assessment and it will be made by the Sponsor in its sole discretion. . . .
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit
No. Description
10.1† Index License Agreement, dated February 1, 2022, between Grayscale
Investments, LLC, as sponsor of Grayscale Litecoin Trust (LTC), and
CoinDesk Indices, Inc., formerly known as TradeBlock, Inc., as Index
Provider.
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded
within the inline XBRL document)
† Portions of this exhibit (indicated by asterisks) have been omitted as the
Registrant has determined that (i) the omitted information is not material and
(ii) the omitted information would likely cause competitive harm to the
Registrant if publicly disclosed.
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