Grayscale's Covered Call Strategy Yields Annualized Returns of Approximately 22%

Grayscale's research director, Zach Pandl, stated that if Bitcoin prices have formed a solid bottom but are consolidating before recovery, a covered call strategy can generate income through Bitcoin volatility while managing exposure to spot prices. Grayscale assumes a Bitcoin spot price of $65,000 and an implied volatility of 40%, projecting this through the end of 2026. Under this assumption, the annualized return of the covered call strategy is approximately 22%, remaining profitable above a breakeven price of about $58,500, and outperforming simply holding spot Bitcoin if Bitcoin reaches around $72,500 at expiration. Pandl noted that the option premiums provide income and downside protection, at the cost of giving up some upside potential when Bitcoin rises significantly. If the Bitcoin spot price falls below the breakeven price, the strategy will still incur losses, but the losses will be less than directly going long on spot Bitcoin, with the difference equivalent to the call option premium. Grayscale's Grayscale Bitcoin Covered Call ETF, with the ticker BTCC, aims to maximize income generation potential through writing covered call options. The fund does not directly invest in digital assets or initial coin offerings but gains indirect exposure to digital assets through derivatives related to exchange-traded products that hold digital assets.

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