10-Q: Bitwise 10 Crypto Index ETF Reports Significant Asset Decline

The Bitwise 10 Crypto Index ETF experienced a substantial decrease in net assets and significant unrealized losses on its crypto asset holdings during the second quarter of 2026.

Summary

• The Bitwise 10 Crypto Index ETF (BITW) reported a significant decrease in net assets for the quarter ended June 30, 2026, falling from $678,236 thousand to $532,787 thousand.
• This decline was primarily driven by a substantial net realized and unrealized loss on investments in crypto assets, amounting to $97,977 thousand for the quarter.
• For the six-month period ended June 30, 2026, the net assets decreased from $1,029,869 thousand to $532,787 thousand, with a total net realized and unrealized loss of $336,578 thousand.
• The Trust's investment objective is to track the Bitwise 10 Large Cap Crypto Index, and it holds a portfolio of crypto assets including Bitcoin, Ethereum, XRP, and Solana.
• Management fees were $1,278 thousand for the three months and $2,825 thousand for the six months ended June 30, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the significant decrease in Net Assets and the substantial unrealized depreciation on investments, reflecting the high volatility inherent in crypto assets.

Positives

• The Trust continues to pursue its investment objective of tracking the Bitwise 10 Large Cap Crypto Index.
• The Trust has expanded its custody arrangements with Anchorage Digital Bank N.A. to complement existing arrangements with Coinbase Custody Trust Company, LLC, creating a multi-custodian framework to enhance institutional security.
• The Sponsor has agreed to pay normal operating expenses of the Trust, except for litigation and other extraordinary expenses.

Negatives

• Net assets decreased by $145,449 thousand in the three months ended June 30, 2026, and by $497,082 thousand in the six months ended June 30, 2026.
• The Trust experienced a net realized and change in unrealized loss on investments of $97,977 thousand for the three months ended June 30, 2026, and $336,578 thousand for the six months ended June 30, 2026.
• The value of the Trust's investments in crypto assets decreased significantly, with Bitcoin's fair value dropping from $773,549 thousand to $414,549 thousand.
• The management fee, while reduced, still represents an expense that impacts the net assets.

Risks

• The extreme volatility of trading prices of crypto assets, including Bitcoin, could materially affect the value of the Shares.
• The unregulated nature and lack of transparency surrounding blockchain technologies and crypto assets may adversely affect the value of Portfolio Crypto Assets and the Shares.
• Regulatory changes or actions by U.S. federal or state agencies could affect the value of the Shares or restrict the use of crypto assets.
• Cybersecurity threats and breaches of service providers could result in the halting of Trust operations and a loss of Trust assets.
• The value of the Shares depends on the acceptance of crypto assets and blockchain technology, a new and rapidly evolving industry.
• The possibility that the Shares may trade at a price that is at, above, or below the Trust's NAV per Share.
• Potential conflicts of interest that may arise among the Sponsor or its affiliates and the Trust.
• The Trust is not a banking institution and its assets are not subject to FDIC or SIPC protections.

Future Outlook

The Trust's principal investment objective is to invest in a portfolio of crypto assets that tracks the Bitwise 10 Large Cap Crypto Index. The Sponsor may also pursue incidental opportunities to generate returns in excess of the Index, such as from Airdrops or forks, if deemed prudent. The Trust is not aware of any trends, demands, conditions, or events that are reasonably likely to result in material changes to its liquidity needs.

Management Comments

• The Sponsor believes that the Trust has met its principal investment objective.
• The Sponsor believes that the Trusts Crypto Assets held in the Custodial Accounts at the Custodians or Trading Balance held with the Prime Execution Agent will be an appealing target to hackers or malware distributors seeking to destroy, damage, or steal the Trusts Crypto Assets and will only become more appealing as the Trusts assets grow.
• The Sponsor believes that the security procedures in place for the Trust, including but not limited to, offline storage or cold storage, HSMs with built-in logic, multiple encrypted private key shards, and other measures, are reasonably designed to safeguard the Trusts Portfolio Crypto Assets.

Industry Context

StockSavvy.ai notes that the significant decline in net assets and the substantial unrealized depreciation reflect the inherent volatility and speculative nature of the crypto asset market. The expansion of custody arrangements to a multi-custodian framework aligns with industry trends towards enhanced institutional security and risk mitigation in digital asset management.

Comparison to Industry Standards

• The management fee was reduced from 2.50% to 0.75% per annum on December 3, 2025, aligning with a trend towards lower fees in the ETF space, particularly for passive index-tracking products.
• The Trust's investment in a basket of crypto assets aims to provide diversified exposure, a common strategy for crypto-focused investment vehicles seeking to mitigate single-asset risk.
• The use of third-party valuation vendors like Lukka, Inc. for determining principal market prices is a standard practice in the crypto asset management industry to ensure objective valuation.

Legal Proceedings

• None reported.

Related Party Transactions

• The Trust pays a Management Fee of 0.75% per annum to Bitwise Investment Advisers, LLC (the Sponsor).
• Bitwise Index Services, LLC, an affiliate of the Sponsor, provides the benchmark index (Bitwise 10 Large Cap Crypto Index) at no cost to the Trust or Sponsor.

Stakeholder Impact

• Shareholders have experienced a significant decrease in the value of their investment due to the decline in net assets and crypto asset prices.
• The expansion of custody arrangements may provide increased security for assets, potentially benefiting shareholders.
• The Sponsor bears most operating expenses, which is beneficial for the Trust and indirectly for shareholders.

Next Steps

• The Trust will continue to rebalance monthly alongside the Index to stay current with changes.
• The Sponsor will continue to oversee service providers and exercise managerial control.
• The Trust will continue to monitor and mitigate cybersecurity risks through its service providers.

Key Dates

Recommendation

The filing indicates significant negative performance in the current period due to crypto asset volatility, leading to a decrease in net assets and NAV. However, the Trust's core objective of tracking a crypto index remains, and the infrastructure for custody and operations is being enhanced. Given the inherent risks and recent performance, a 'hold' recommendation is appropriate, pending stabilization or recovery in the crypto markets and the Trust's ability to navigate volatility.

Keywords

Crypto Index ETF, Digital Assets, Bitcoin, Ethereum, Quarterly Report, Investment Portfolio, Net Asset Value, Market Volatility