10-K: Bitwise Bitcoin ETF Reports Strong Growth in First Year, Eyes Continued Expansion

Bitwise Bitcoin ETF (BITB) reports its first annual results, highlighting significant asset growth and operational details for the year ended December 31, 2024.

Summary

• Bitwise Bitcoin ETF (BITB) is a Delaware statutory trust that commenced operations on January 10, 2024, and trading on January 11, 2024, under the ticker symbol BITB on NYSE Arca.
• The Trust's investment objective is to provide shareholders with exposure to the value of bitcoin held by the Trust, reflective of the actual bitcoin market, less expenses.
• The Trust holds bitcoin and establishes its net asset value (NAV) by reference to the CME CF Bitcoin Reference Rate New York Variant (BRRNY).
• As of December 31, 2024, the Trust held 40,289.1335 bitcoin with a market value of $3,776,314,581, with the BRRNY at $93,730.35.
• The Trust's net realized and unrealized gain on investment in bitcoin for the period was approximately $1,590,268.
• The Sponsor Fee is 0.20% per annum of the Trust's bitcoin holdings, with a waiver in place for the first $1 billion of Trust assets until July 10, 2024.
• The Trust only creates and redeems shares in blocks of 10,000 (Baskets) with authorized participants.
• The Trust utilizes the Trust-Directed Trade Model for all purchases and sales of bitcoin and only utilize the Agent Execution Model in the event that no Bitcoin Trading Counterparty is willing or able to effectuate the Trusts purchase or sale of bitcoin.
• The Trust has explicitly disclaimed all Incidental Rights and IR Assets.
• The Trust is an emerging growth company and has chosen not to opt out of the extended transition period for complying with new or revised accounting standards.

Sentiment

Score: 7

Explanation: The document is neutral to positive. It reports strong asset growth and operational details, but also acknowledges the risks associated with bitcoin and the Trust's operations.

Positives

• The Trust provides investors with exposure to bitcoin through a traditional brokerage account.
• The Trust is passively managed, reducing active management risks.
• The Sponsor Fee was waived on the first $1 billion of Trust assets for the initial six months.
• The Trust has implemented security measures for custody of its bitcoin holdings, including cold storage and whitelisting.

Negatives

• The Trust is subject to the volatility of bitcoin prices, which could lead to significant losses.
• Shareholders do not have statutory shareholder rights.
• The Trust relies heavily on the Sponsor, whose limited staffing and potential conflicts of interest could adversely impact the Trust.
• The Trust is exposed to security threats and cyber-attacks, which could result in the loss of Trust assets.
• The Trust is subject to regulatory risks, including potential changes in the classification of bitcoin.

Risks

• Extreme volatility in bitcoin prices could have a material adverse effect on the value of the Shares.
• The value of the Shares depends on the acceptance of bitcoin and blockchain technologies, a new and rapidly evolving industry.
• The unregulated nature and lack of transparency surrounding blockchain technologies and crypto assets may adversely affect the value of bitcoin and the Shares.
• Changes in laws or regulations may affect the value of the Shares or restrict the use of bitcoin.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust.
• The Trust relies on the security, stability, and performance of its service providers, which may be subject to operational failures, conflicts of interest, and regulatory actions.
• General economic, market, and business conditions, and political developments could negatively impact the value of the Trust's holdings in bitcoin and significantly disrupt its operations.

Future Outlook

The Trust will continue to operate with the objective of providing shareholders with exposure to the value of bitcoin, less expenses. The Sponsor may make changes to the Trust's operations or investment strategy in the future.

Industry Context

The announcement comes amid increasing interest in bitcoin ETFs as a way for investors to gain exposure to bitcoin without directly holding the cryptocurrency. The approval of spot bitcoin ETFs by the SEC in January 2024 has opened the door for more institutional and retail investors to participate in the bitcoin market.

Comparison to Industry Standards

• The Bitwise Bitcoin ETF competes with other bitcoin ETFs such as Grayscale Bitcoin Trust (GBTC), iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin Fund (FBTC), and ARK 21Shares Bitcoin ETF (ARKB).
• The Trust's expense ratio of 0.20% is competitive with other bitcoin ETFs in the market.
• The Trust's performance will be compared to the performance of bitcoin and other bitcoin ETFs.
• The Trust's security measures for custody of its bitcoin holdings are similar to those used by other bitcoin ETFs.

Related Party Transactions

• The Trust pays the Sponsor Fee of 0.20% per annum of the Trust's bitcoin holdings.
• The Sponsor has agreed to assume and pay the normal operating expenses of the Trust in exchange for the Sponsor Fee.

Stakeholder Impact

• Shareholders are exposed to the volatility of bitcoin prices, which could lead to significant gains or losses.
• Authorized Participants are responsible for the creation and redemption of Shares.
• Service providers are responsible for providing services to the Trust, such as custody, administration, and transfer agency.

Next Steps

• The Trust will continue to operate with the objective of providing shareholders with exposure to the value of bitcoin, less expenses.
• The Sponsor will continue to monitor the Trust's operations and make changes as necessary.

Key Dates

Keywords

Bitcoin ETF, Bitwise, Bitcoin, Cryptocurrency, ETF, Investment, Shares, Trust, BRRNY