10-Q: Franklin Crypto ETF Sees Strong Q3 Growth Amidst Crypto Rally

Franklin Crypto Index ETF reported significant net asset growth and positive returns for the quarter ended September 30, 2025, driven by appreciation in Bitcoin and Ether prices.

Summary

• Net assets increased to $7,586,042 as of September 30, 2025.
• Net asset value (NAV) per share rose from $27.11 at June 30, 2025, to $30.34 at September 30, 2025, an 11.91% increase for the quarter.
• For the period from commencement of operations (February 20, 2025) to September 30, 2025, the NAV per share increased by 20.73% from $25.13 to $30.34.
• The increase in NAV was primarily driven by Bitcoin price appreciation from $108,560.00 to $114,223.01 and Ether price appreciation from $2,500.31 to $4,130.84 during the quarter.
• The Fund issued 100,000 shares during the quarter ended September 30, 2025, and 150,000 shares since inception, with no redemptions.
• Total investments in Digital Assets at fair value were $7,587,051, comprising 83.44% Bitcoin and 16.57% Ether.
• The Sponsor waived a significant portion of its fees, resulting in a net investment loss of only $1,009 for both the quarter and the period since inception.

Sentiment

Score: 8

Explanation: The filing reports strong positive financial performance with significant asset appreciation and net asset growth. The Sponsor's fee waiver also contributed to favorable net returns. While inherent risks of digital assets are noted, the operational results are clearly positive for the period.

Positives

• Strong total return at NAV of 11.91% for the quarter ended September 30, 2025.
• Significant total return at NAV of 20.73% since the commencement of operations on February 20, 2025, through September 30, 2025.
• Substantial appreciation in underlying digital assets: Bitcoin price increased from $108,560.00 to $114,223.01 (Q3) and Ether price increased from $2,500.31 to $4,130.84 (Q3).
• Net assets grew to $7,586,042, reflecting both asset appreciation and capital contributions.
• The Sponsor waived a substantial portion of its fees, reducing the net investment loss to a minimal $1,009 for the period.
• No shares were redeemed during the reported periods, indicating investor retention.
• Disclosure controls and procedures were evaluated as effective at reasonable assurance levels.

Negatives

• The Fund experienced a net investment loss of $1,009 for both the three months and the period ended September 30, 2025, primarily due to the Sponsor's fee, despite waivers.
• The Fund's liquidity is entirely dependent on the ability to sell Digital Assets, which are subject to extreme price volatility.
• The Fund is exposed to concentration risk by holding only Digital Assets.

Risks

• Prices of Digital Assets may be affected by stablecoins (including Tether and USDC), their issuers' activities, and regulatory treatment, potentially leading to volatility or reduced demand for Bitcoin and Ether.
• Disruptions or problems in the supply chain for Bitcoin mining hardware, including reliance on foreign imports, tariffs, and shortages of components like ASIC chips, could harm the Bitcoin network and adversely affect Bitcoin's value.
• Regulatory actions or public utility restrictions on mining activities due to energy consumption concerns could decrease the security of digital asset networks (including Bitcoin and Ethereum) and negatively impact the value of the Shares.
• The trading prices of Digital Assets have experienced and may continue to experience extreme volatility, which could lead to a material adverse effect on the value of the Shares, potentially resulting in a loss of all or substantially all of their value.
• Factors such as an increase in global Digital Assets supply, decrease in demand, market conditions, trading platform manipulation, and network forks could adversely impact Digital Asset values.
• The Fund is subject to general indemnification clauses with service providers, with maximum exposure unknown.

Future Outlook

The Sponsor expresses good faith in its estimates, expectations, beliefs, and projections regarding future events and Fund performance, but acknowledges that actual results may differ materially due to various risks and uncertainties, including changes in commodity prices, market conditions, laws, and regulations. There is no intention to update forward-looking statements unless required by federal securities laws.

Management Comments

• We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that management's estimates, expectations, beliefs, or projections will be achieved or accomplished.
• We do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future, except as required by the federal securities laws.
• The disclosure controls and procedures of the Trust operated effectively at reasonable assurance levels.
• There were no changes in the Trust's and the Fund's internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Trust's and/or the Fund's internal control over financial reporting.

Industry Context

The Franklin Crypto Index ETF operates within the rapidly evolving digital asset market, which is characterized by extreme price volatility and increasing regulatory scrutiny. The fund's performance is directly tied to the prices of Bitcoin and Ether, which are influenced by global supply and demand, market sentiment, and the integrity of digital asset trading platforms. The ongoing development of stablecoin regulations, such as the GENIUS Act, and potential disruptions in the Bitcoin mining hardware supply chain, highlight the unique and significant external factors impacting the broader cryptocurrency industry and, consequently, the fund's value.

Comparison to Industry Standards

• The fund's investment objective is to closely correspond to the performance of the CF Institutional Digital Asset Index US Settlement Price, which is a standard benchmark for institutional digital asset exposure.
• The fund's expense ratio of 0.19% gross (0.07% net after waivers for the period) is competitive within the nascent spot crypto ETF market, aiming to attract investors by minimizing tracking error and costs.
• The fund's reliance on Coinbase Custody Trust Company, LLC as Digital Asset Custodian and Coinbase Inc. as Prime Broker aligns with common practices among institutional crypto products, leveraging established infrastructure for security and trading.

Legal Proceedings

• As of November 13, 2025, the Trust and the Fund are not subject to any material legal proceedings, nor are any material legal proceedings threatened against them.

Related Party Transactions

• The Sponsor (Franklin Holdings, LLC), Marketing Agent (Franklin Distributors, LLC), and ultimate parent company (Franklin Resources, Inc.) are considered related parties.
• The Fund pays the Sponsor a unitary fee for services, with expenses payable to the Marketing Agent covered by this fee.
• Franklin Resources, Inc. acted as the Seed Capital Investor, purchasing initial shares and creation units.
• No shares of the Fund were held by a related party as of September 30, 2025.

Stakeholder Impact

• Shareholders benefited from significant NAV per share appreciation (11.91% for the quarter, 20.73% since inception) due to rising digital asset prices and low net expenses.
• The Sponsor (Franklin Holdings, LLC) continues to receive fees (partially waived) for managing the Fund and benefits from the growth in assets under management.
• Authorized Participants engaged in continuous creation of Creation Units, indicating demand for the ETF.
• Digital Asset Custodian (Coinbase Custody Trust Company, LLC) and Prime Broker (Coinbase Inc.) continue to provide essential services, benefiting from the Fund's operations.
• Regulators: The Trust is an emerging growth company, taking advantage of reduced reporting requirements, and is subject to ongoing SEC oversight. The GENIUS Act highlights future regulatory impacts on the broader digital asset market.

Next Steps

• The Sponsor may decide to waive all or a portion of the Sponsor's Fee in the future, with shareholders to be notified via prospectus supplement, periodic reports, or the Fund's website.
• The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (GENIUS Act) will become effective on July 18, 2028, establishing a federal regulatory framework for payment stablecoins.

Key Dates

Recommendation

The Franklin Crypto Index ETF has demonstrated strong performance since its inception, with significant NAV per share appreciation driven by the underlying digital assets (Bitcoin and Ether). The Sponsor's fee waiver has kept net expenses low, enhancing shareholder returns. While the inherent volatility and regulatory risks of digital assets are present, the fund's passive indexing approach and robust operational framework make it an attractive option for investors seeking diversified exposure to the leading cryptocurrencies. The positive returns and continued capital inflows suggest a favorable outlook, warranting a 'buy' recommendation for investors comfortable with crypto market volatility.

Keywords

Franklin Crypto Index ETF, EZPZ, Bitcoin, Ether, Digital Assets, Cryptocurrency, ETF, SEC Filing, 10-Q, Financial Report, Investment, Blockchain, Crypto Index, Asset Management, Franklin Holdings