8-K: Valkyrie Bitcoin Fund Enters Custodial Agreement with BitGo, Diversifying Bitcoin Storage

Valkyrie Bitcoin Fund has entered into a custodial services agreement with BitGo to diversify its bitcoin storage, while maintaining its existing arrangement with Coinbase.

Summary

• Valkyrie Bitcoin Fund has signed a Custodial Services Agreement with BitGo Trust Company, effective January 17, 2024.
• BitGo will provide custody and safekeeping services for a portion of the Fund's bitcoin holdings.
• The agreement requires BitGo to maintain insurance covering theft of private keys, insider theft, and loss of keys.
• The initial term of the agreement is one year, with automatic renewals unless either party provides notice of non-renewal.
• The Fund will continue its existing custody arrangement with Coinbase, and plans to use both Coinbase and BitGo for bitcoin custody.
• The Fund's policy on allocating bitcoin between custodians is detailed in its Prospectus dated January 10, 2024, as amended February 1, 2024.

Sentiment

Score: 7

Explanation: The document reflects a positive development for the fund by diversifying its custodial arrangements and adding an additional layer of security. The agreement is a standard business practice and does not indicate any major positive or negative sentiment.

Positives

• The agreement diversifies the Fund's custodial arrangements, reducing reliance on a single provider.
• BitGo's insurance policy provides additional security for the Fund's bitcoin holdings.
• The agreement includes automatic renewal terms, providing long-term stability.

Negatives

• The agreement includes an early termination fee for the Sponsor, which could be a cost if the agreement is terminated early.
• BitGo can terminate the agreement with 30 days notice for any reason, or immediately if they perceive a risk of legal or regulatory non-compliance.

Risks

• BitGo may terminate the agreement with 30 days' notice for any reason, or immediately if they perceive a risk of legal or regulatory non-compliance.
• The agreement requires the Trust to indemnify BitGo against certain losses, which could expose the Trust to financial risk.
• The Sponsor may incur an early termination fee if they choose to terminate the agreement before the end of the term.

Future Outlook

The Sponsor expects to begin using BitGo's services to custody a portion of the Trust's bitcoin around the date of this report, while continuing to use Coinbase.

Management Comments

• The Sponsor anticipates utilizing the custodial services of both Coinbase and BitGo to custody the Trust's bitcoin.

Industry Context

The move to diversify custody providers is a growing trend in the cryptocurrency industry as funds seek to mitigate risks associated with relying on a single custodian. This agreement reflects a move towards more robust and secure storage solutions for digital assets.

Comparison to Industry Standards

• The use of multiple custodians is becoming a standard practice for large cryptocurrency funds, similar to how traditional financial institutions diversify their banking relationships.
• Coinbase and BitGo are both well-established and reputable custodians in the digital asset space, comparable to companies like Fidelity Digital Assets and Gemini Custody.
• The insurance requirements in the agreement are in line with industry best practices, ensuring that the fund's assets are protected against theft and loss, similar to the policies held by other major custodians.

Stakeholder Impact

• Shareholders benefit from the increased security and diversification of custodial arrangements.
• The agreement provides additional security for the Fund's bitcoin holdings, which is a positive for investors.

Next Steps

• The Sponsor will begin utilizing BitGo's services to custody a portion of the Trust's bitcoin.
• The Sponsor will continue to use Coinbase for custody of the Trust's bitcoin.

Key Dates

Keywords

Bitcoin, Custody, BitGo, Valkyrie Bitcoin Fund, Custodial Services Agreement, Coinbase, Digital Assets, Insurance, Cryptocurrency