10-Q: Franklin Crypto Index ETF Reports Unaudited Financial Results for Quarter Ended March 31, 2025

Franklin Crypto Index ETF's first quarterly report shows a net asset value of $3,092,007 and a decrease in NAV per share due to declines in Bitcoin and Ether prices.

Summary

• Franklin Crypto Index ETF, a series of Franklin Crypto Trust, has released its unaudited financial statements for the quarter ended March 31, 2025.
• The Fund commenced operations on February 20, 2025, and this report covers its initial period of activity.
• As of March 31, 2025, the Fund's net assets totaled $3,092,007, with 150,000 shares outstanding and a net asset value (NAV) per share of $20.61.
• The Fund's investments are solely in digital assets, specifically Bitcoin and Ether, mirroring the composition of the CF Institutional Digital Asset Index.
• During the period, the Fund experienced a net realized and unrealized loss on investments in digital assets of $405,109, primarily due to price depreciation in Bitcoin and Ether.
• The Sponsor has agreed to waive the entire Sponsor's Fee on the first $10.0 billion of the Fund's assets until August 29, 2025, resulting in no Sponsor's fee being paid for the reported period.
• The Fund issues and redeems shares in Creation Units of 50,000 shares, exclusively to Authorized Participants, in exchange for cash.

Sentiment

Score: 5

Explanation: The report is neutral in tone, presenting factual financial information. While the Fund experienced losses due to market conditions, the Sponsor's fee waiver is a positive aspect.

Positives

• The Sponsor is waiving its fee on the first $10 billion of assets until August 29, 2025, reducing expenses for the Fund.
• The Fund successfully launched and commenced operations, issuing 150,000 shares by the end of the quarter.
• The Fund operates as a passive investment vehicle, tracking the CF Institutional Digital Asset Index, providing exposure to Bitcoin and Ether.

Negatives

• The Fund experienced a net realized and unrealized loss of $405,109 due to declines in the prices of Bitcoin and Ether.
• The NAV per share decreased from $25.13 to $20.61 during the period, reflecting the volatility of the underlying digital assets.
• The Fund is subject to concentration risk as it invests solely in digital assets, making it vulnerable to market fluctuations in this asset class.

Risks

• The Fund is exposed to the volatility of digital asset prices, which can significantly impact the value of the Shares.
• The Fund's performance is tied to the CF Institutional Digital Asset Index, and any issues with the index calculation or availability could affect the Fund.
• The Fund faces concentration risk due to its exclusive investment in digital assets.
• The Fund's reliance on third-party service providers, such as the Digital Asset Custodian and Prime Broker, introduces operational and security risks.

Future Outlook

The Fund aims to track the performance of the CF Institutional Digital Asset Index, and its future performance will depend on the price movements of Bitcoin and Ether.

Industry Context

The launch of the Franklin Crypto Index ETF reflects the increasing interest in digital asset investment vehicles, providing investors with a regulated and accessible way to gain exposure to cryptocurrencies.

Comparison to Industry Standards

• The Franklin Crypto Index ETF competes with other cryptocurrency ETFs, such as those offered by Grayscale, Bitwise, and ProShares.
• The 0.19% sponsor fee, although waived for a period, is relatively competitive compared to other crypto ETFs in the market.
• The Fund's investment strategy of tracking a specific index is a common approach among passive ETFs.

Related Party Transactions

• Franklin Resources, Inc., an affiliate of the Sponsor, initially purchased 4,000 shares and later redeemed them before purchasing creation units.

Stakeholder Impact

• Shareholders experienced a decrease in NAV per share due to the decline in digital asset prices.
• Authorized Participants are responsible for transaction fees related to the creation and redemption of Creation Units.
• The Sponsor bears the organizational and offering costs of the Fund.

Key Dates

Keywords

crypto ETF, bitcoin, ether, digital assets, Franklin Crypto Index ETF, financial results, ETF, blockchain