The iShares Bitcoin Trust ETF, a Delaware statutory trust created to offer investors access to bitcoin via the securities market, has published its Form 10-K report for the fiscal year that ended on December 31, 2024. This report emphasizes the Trust’s remarkable increase in net asset value, strategic efforts to align with bitcoin’s price trends, as well as the risks and challenges stemming from the fluctuating digital asset market.
Financial Highlights
- Net Asset Value: $51,519,566,547. The Trust’s net asset value saw a significant rise from $100,000 as of December 31, 2023, driven mainly by an increase in outstanding shares and a surge in bitcoin prices.
- Net Increase in Net Assets Resulting from Operations: $14,232,135,930. This growth was largely fueled by unrealized gains from bitcoin investments along with net realized gains from bitcoin sales utilized for expenses and share redemptions.
- Net Investment Loss: $47,498,665. The Trust experienced a net investment loss primarily attributed to the Sponsor’s Fee, which accounted for 0.22% of the average weighted assets during this period.
- Net Increase in Net Assets Per Share: $15.33. The growth in net assets per share illustrates the overall increase in the Trust’s net asset value along with higher bitcoin prices.
Business Highlights
- Trust Formation and Purpose: Established on June 8, 2023, the iShares Bitcoin Trust ETF primarily aims to own bitcoin in exchange for shares issued by the Trust, where each share denotes a fractional undivided beneficial interest in the Trust’s net assets.
- Trust Growth: The net asset value of the Trust rose dramatically from $100,000 on December 31, 2023, to $51,519,566,547 by December 31, 2024, with outstanding shares increasing from 4,000 to 970,440,000 in that timeframe.
- Trust Operations: The Trust is restricted to issuing blocks of 40,000 shares for cash, selling or delivering bitcoin to meet fees and expenses, and trading bitcoin through designated third parties.
- Trust Objective: Aiming to reflect bitcoin’s price performance, the Trust provides investors an alternative means to gain exposure to bitcoin through the securities market.
- Custodial Arrangements: The bitcoin for the Trust is held by Coinbase Custody Trust Company, LLC, which maintains segregated accounts, while cash custody is managed by The Bank of New York Mellon.
- Prime Execution Agent: Coinbase, Inc. operates as the Prime Execution Agent, overseeing the acquisition and sale of bitcoin for the Trust, with bitcoin holdings temporarily secured in a Trading Balance for specific transactions.
- Insurance Coverage: Coinbase Global upholds a commercial crime insurance policy, covering client asset losses up to $320 million, including those owned by the Trust.
- Creation and Redemption Process: The Trust issues and redeems shares in groups of 40,000, allowing only Authorized Participants to place orders for Baskets in return for cash.
- Trading and Market Dynamics: Shares are listed on NASDAQ under the ticker symbol ‘IBIT’, with trading prices influenced by market supply and demand along with possible premiums or discounts in relation to NAV.
- Regulatory Status: Not registered as an investment company, the Trust is exempt from SEC regulation as such and does not engage in trading commodity futures contracts.
- Trust Expenses: The primary recurring expense for the Trust is the Sponsor’s Fee, which is accrued daily at an annualized rate of 0.25% of the net asset value, with the Sponsor covering most administrative costs.
- Future Outlook: The Trust plans to consistently reflect bitcoin’s price performance, offering a familiar investment vehicle for those seeking exposure to bitcoin through the securities market.
Strategic Initiatives
- Strategic Initiative: The Trust’s strategy involves holding bitcoin as its primary asset to reflect its price performance, providing a passive investment vehicle that tracks bitcoin movements without engaging in profit-seeking or loss mitigation.
- Capital Management: Capital management includes issuing and redeeming shares in large blocks referred to as Baskets (40,000 shares each). In 2024, the Trust significantly raised its outstanding shares from 4,000 to 970,440,000, largely through creating 982,160,000 shares and redeeming 11,724,000. Liquidity is managed using bitcoin sales for covering expenses, with the Sponsor accounting for most costs in return for a fee. The Trust has not declared dividends and has no obligation for periodic distributions.
- Future Outlook: The Trust does not foresee major adjustments in its liquidity requirements and will maintain capital management through responsive share issuance and redemption. Its future strategy will remain focused on mirroring bitcoin’s price performance without plans for active management or pursuing profits.
Challenges and Risks
- Market Volatility: Digital asset trading prices, particularly bitcoin, are subject to extreme volatility that may persist, potentially impacting the value of Shares. The digital asset markets might still be experiencing a bubble, with significant events like the 2022 collapses of major platforms eroding confidence. Increased regulatory scrutiny from agencies like the SEC and CFTC adds additional uncertainty.
- Fundamental Risks: The Trust contends with risks attributed to the inherent characteristics of digital assets, which include potential losses or theft of private keys, reliance on the internet, and the nascent stage of digital asset networks. Governance challenges, including possible forks in the Bitcoin network, could also impact Share values.
- Operational Risks: Operational challenges might arise from considerable scaling issues in digital asset networks, which can lead to higher transaction fees and diminished bitcoin demand. Concentrated digital asset ownership may cause price volatility if large stakeholders liquidate or distribute their assets.
- Regulatory Risks: The potential emergence of new laws or enforcement actions might restrict bitcoin or digital asset usage, alongside the growth of central bank digital currencies (CBDCs) that could lessen bitcoin demand.
- Management’s Discussion and Analysis: Management recognizes the price volatility of digital assets and the ramifications of regulatory developments on the Trust’s operations. As the Trust does not engage in active management, it will not seek to counteract the effects of bitcoin price volatility. Dependence on the Index for pricing presents risks if it fails to properly track global bitcoin prices.
- Market Risk Disclosures: The Trust’s exposure to market risks stems from the unregulated nature of digital asset platforms, which may be susceptible to fraud, manipulation, or operational failures. Limited historical performance of the Index and potential system malfunctions might adversely impact the Trust’s capacity to accurately track bitcoin prices. Moreover, the Trust’s lack of diversification, holding solely bitcoin and cash, heightens its sensitivity to bitcoin price changes.
SEC Filing: iShares Bitcoin Trust ETF [ IBIT ] – 10-K – Mar. 05, 2025
