CoinShares Valkyrie Bitcoin Fund, a Delaware statutory trust organized as an exchange-traded product, has published its 2024 Form 10-K report. The Trust is designed to mirror the performance of bitcoin as indicated by the CME CF Bitcoin Reference Rate – New York Variant, after accounting for liabilities and expenses. The report emphasizes substantial financial growth, strategic initiatives oriented towards bitcoin investments, as well as the challenges and risks inherent in the volatile cryptocurrency arena.
Financial Highlights
Net Income: The Trust declared a net income of $306.96 million, bolstered by an increase in unrealized gains on the Trust’s bitcoin investment totaling $262.85 million and realized gains from the sale of bitcoin amounting to $45.22 million.
Net Income Per Share: Net income per share stood at $11.59, determined by dividing the net income by the weighted average number of shares outstanding.
Business Highlights
Trust Overview: CoinShares Valkyrie Bitcoin Fund aims to simulate the performance of bitcoin, excluding liabilities and expenses. The Trust issues shares that represent units of fractional undivided beneficial interest, collaborating with CoinShares Co. as the sponsor, CSC Delaware Trust Company as the trustee, and U.S. Bancorp Fund Services as the transfer agent and administrator.
Bitcoin Custody and Trading: The Trust secures bitcoin in custody with Coinbase Custody Trust Company, BitGo Trust Company, and Komainu, engaging in transactions with approved Bitcoin Trading Counterparties, including BitGo Prime LLC and Coinbase Inc.
Investment Strategy: The strategy of the Trust revolves around holding bitcoin and valuing its shares on a daily basis according to the CME CF Bitcoin Reference Rate – New York Variant. The Sponsor retains the discretion to implement an alternative index or methodology for bitcoin valuation.
Creation and Redemption of Shares: Shares are created and redeemed in blocks of 5,000, termed as Baskets, via authorized participants. These transactions are settled in cash, and the Trust conducts bitcoin transactions to facilitate this process.
Management Discussion and Analysis: The Trust’s net asset value saw significant growth in 2024, attributed to an increase in the number of outstanding shares alongside the appreciation of bitcoin value. The Trust’s primary operations concentrate on maintaining its bitcoin holdings and managing creation and redemption activities.
Future Outlook: The Trust looks forward to ongoing operations emphasizing the reflection of bitcoin’s performance while ensuring effective expense management through the Sponsor’s fee structure. The Trust remains attentive to regulatory developments that may influence its operations.
Strategic Initiatives
Strategic Initiatives: The Trust’s strategic initiatives focus on providing a cost-efficient and convenient investment channel for bitcoin. This is achieved by holding bitcoin and determining the value of its shares daily based on the CME CF Bitcoin Reference Rate. The Trust aims to mirror the performance of bitcoin, after accounting for liabilities and expenses, while minimizing non-bitcoin asset holdings to sustain its focus on digital assets.
Capital Management: The Trust does not maintain a cash balance except for facilitating the creation and redemption of Baskets or covering expenses not borne by the Sponsor. The only ordinary expense, the Sponsor Fee, accrues at an annual rate of 0.25% of the Trust’s Bitcoin Holdings. Capital management activities involve the creation and redemption of shares, with 36,635,000 shares created and 5,373,000 shares redeemed during the year ending December 31, 2024. The Trust’s net asset value saw substantial growth owing to bitcoin appreciation and an increase in outstanding shares.
Future Outlook: The Trust does not foresee any significant alterations to its liquidity requirements and plans to persist with its strategy of holding bitcoin while pricing shares based on the CME CF Bitcoin Reference Rate. It will remain committed to its investment objectives and strategic initiatives regarding digital asset investments. The Sponsor will also continue to cover most of the Trust’s expenses to ensure efficient capital management.
Challenges and Risks
Challenges and Risks: The Trust’s operations significantly depend on the performance and valuation of bitcoin, which experiences notable volatility and market oscillations. The investment strategy is designed to reflect bitcoin’s performance as indicated by the CME CF Bitcoin Reference Rate – New York Variant, which may be affected by fluctuations in the bitcoin market and trading platforms.
As a smaller reporting company, the Trust is not obligated to disclose comprehensive risk factors. Nonetheless, its dependence on bitcoin subjects it to market risks, such as price volatility, regulatory shifts, and potential security vulnerabilities within the bitcoin network. The decentralized nature of bitcoin and its absence of central authority render it vulnerable to various attacks, like a 51% attack, which could considerably affect the Trust’s operations and the value of its shares.
The Trust’s net asset value is intricately linked to bitcoin’s value, which saw significant appreciation in 2024. However, this also poses a risk that adverse developments in the bitcoin market could detrimentally impact the Trust’s financial status. The Trust does not maintain substantial cash reserves and depends on bitcoin sales to cover expenses, which could prove challenging in a downturn. Financial reports of the Trust are prepared in compliance with US GAAP, and any discrepancies between the Index methodology and GAAP could influence reported values.
The Trust faces market risks associated with bitcoin price fluctuations, which can affect the net asset value of the shares. Its strategy for mitigating these risks includes employing the CME CF Bitcoin Reference Rate – New York Variant for valuation, yet this does not eliminate the inherent volatility and market risks associated with bitcoin investments.
SEC Filing: CoinShares Valkyrie Bitcoin Fund [ BRRR ] – 10-K – Mar. 27, 2025
