CoinShares Bitcoin ETF 10-Q

Item 1. Financial Statements. INDEX TO FINANCIAL STATEMENTS Statements of Financial Condition at September 30, 2024 (unaudited) and December 31, 2023 Schedule of Investment at September 30, 2024 (unaudited) Unaudited Statements of Operations for the three and nine months ended September 30, 2024 Unaudited Statements of Changes in Net Assets for the three and nine months ended September 30, 2024 Notes to the Financial Statements (unaudited) 1 CoinShares Valkyrie Bitcoin Fund Statements of Financial Condition September 30, 2024 (unaudited) December 31, 2023 Assets Investments in bitcoin, at fair value (cost $ 550,536,777 and $ 0 at September 30, 2024 and December 31, 2023, respectively) $ 569,763,992 $ 0 Total assets $ 569,763,992 $ 0 Liabilities Sponsor fees payable $ 108,753 $ 0 Total liabilities $ 108,753 $ 0 Net assets $ 569,655,239 $ 0 Shares issued and outstanding, no par value, Unlimited shares authorized 31,720,000 0 Net asset value per Share $ 17.96 $ 0 The accompanying notes are an integral part of the financial statements. 2 CoinShares Valkyrie Bitcoin Fund Schedule of Investment September 30, 2024 (a) Bitcoin Cost Fair Value % of Net Assets (Unaudited) Investment in bitcoin 8,984 $ 550,536,777 $ 569,763,992 100.0 % Total investment $ 550,536,777 $ 569,763,992 100.0 % Other assets and liabilities, net ( 108,753 ) ( 0.0 )% (b) Net Assets $ 569,655,239 100.0 % (a) No comparative schedules of investment have been provided as the Trust did not hold bitcoin as of December 31, 2023. (b) Represents less than 0.05 % of net assets. The accompanying notes are an integral part of the financial statements. 3 CoinShares Valkyrie Bitcoin Fund Statements of Operations For the Three Months Ended September 30, 2024 (Unaudited) (a) For the Nine Months Ended September 30, 2024 (Unaudited) (a) Expenses Sponsor fee (Note 4) $ 344,255 $ 791,603 Less: Sponsor fee waiver 0 ( 156,867 ) Total expenses 344,255 634,736 Net investment income (loss) ( 344,255 ) ( 634,736 ) Net realized and change in unrealized gain (loss) on investment Net realized gain (loss) from investment 1,994,668 14,971,689 Net change in unrealized gain (loss) on investment 10,981,879 19,227,215 Net realized and change in unrealized gain (loss) on investment 12,976,547 34,198,904 Net income (loss) $ 12,632,292 $ 33,564,168 Net income (loss) per share $ 0.41 $ 1.37 Weighted average number of shares outstanding 31,007,989 24,476,212 (a) No further comparative statements of operations have been provided as the Trust had not commenced operations as of December 31, 2023. The accompanying notes are an integral part of the financial statements. 4 CoinShares Valkyrie Bitcoin Fund Statements of Changes in Net Assets Three Months Ended September 30, 2024 (Unaudited) (a) Nine Months Ended September 30, 2024 (Unaudited) (a) Net Assets – Opening Balance $ 518,313,439 $ 0 Creations 47,489,332 590,573,402 Redemptions ( 8,779,824 ) ( 54,482,331 ) Net investment income (loss) ( 344,255 ) ( 634,736 ) Net realized gain (loss) from investment 1,994,668 14,971,689 Net change in unrealized gain (loss) on investment 10,981,879 19,227,215 Net Assets – Ending Balance $ 569,655,239 $ 569,655,239 (a) No further comparative statements of changes in net assets have been provided as the Trust had not commenced operations as of December 31, 2023. The accompanying notes are an integral part of the financial statements. 5 CoinShares Valkyrie Bitcoin Fund Notes to the Financial Statements (Unaudited) September 30, 2024 1. Organization CoinShares Valkyrie Bitcoin Fund, formerly known as Valkyrie Bitcoin Fund (the “Trust”), was organized as a Delaware statutory trust on January 20, 2021. The fiscal year for the Trust is December 31 st . The trustee is Delaware Trust Company (the “Trustee”). On June 14, 2024, CoinShares Co., a Delaware corporation (the “Sponsor”), succeeded Valkyrie Digital Assets LLC, a Delaware limited liability company (the “Initial Sponsor”), as the sponsor of the Trust. The Sponsor is responsible for the day-to-day administration of the Trust. The Trust is governed by the provisions of the Trust Agreement, as amended (the “Trust Agreement”), executed by the Initial Sponsor and the Trustee. The Trust is an exchange-traded fund that issues common shares of beneficial interest (“Shares”) representing units of fractional undivided beneficial interests in its net assets. There are an unlimited number of authorized shares. The investment objective of the Trust is for the Shares to reflect the performance of the value of a bitcoin as represented by the CME CF Bitcoin Reference Rate - New York Variant (the “Index”), less the Trust’s liabilities and expenses. In seeking to achieve its investment objective, the Trust holds bitcoin and values its Shares daily based on the value of bitcoin as reflected by the Index, which is an independently calculated value based on an aggregation of executed trade flow of major bitcoin spot exchanges. The offering of the Trust’s Shares is registered with the Securities and Exchange Commission (“SEC”) in accordance with the Securities Act of 1933. 2. Basis of Presentation and Summary of Significant Accounting Policies The Trust qualifies as an investment company solely for accounting purposes and not for any other purpose and follows the accounting and reporting guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies, but is not registered, and is not required to be registered, as an investment company under the Investment Company Act of 1940, as amended. The Trust is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The Trust will cease to be an “emerging growth company” upon the earliest of (i) it having $1.235 billion or more in annual revenues, (ii) at least $700 million in market value of Shares being held by non-affiliates, (iii) it issuing more than $1.0 billion of non-convertible debt over a three-year period or (iv) the last day of the fiscal year following the fifth anniversary of its initial public offering. For as long as the Trust is an emerging growth company, unlike other public companies, it will not be required to provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002; or comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of financial statements. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). (a) Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. (b) Investment Transactions The Trust purchases bitcoin upon the net creation of Shares and sells bitcoin upon the net redemption of Shares. Transactions are recorded on a trade-date basis. Realized gains (losses) and changes in unrealized gains (losses) on open positions are determined on a specific identification basis and are recognized in the statement of operations in the period in which the sale occurred or the changes in unrealized occurred. 6 The Trust utilizes an exchange traded price from the principal market for bitcoin as of 4:00 p.m. ET on the Trust’s financial statement measurement date to value the bitcoin held by the Trust. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with U.S. GAAP. The Trust engages a third-party vendor to obtain a price from a principal market for bitcoin, which is determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including the volume and frequency of trades. (c) Indemnifications The Sponsor and its affiliates (each a “Covered Person”) will be indemnified by the Trust and held harmless against any loss, judgment, liability, expense incurred or amount paid in settlement of any claim sustained by it in connection with the Covered Person’s activities for the Trust, without fraud, gross negligence, bad faith, willful misconduct or a material breach of the Trust Agreement on the part of such indemnified party arising out of or in connection with the performance of its obligations under the Trust Agreement and under each other agreement entered into by the Sponsor in furtherance of the administration of the Trust (including, without limiting the scope of the foregoing, any Participant Agreement) or any actions taken in accordance with the provisions of the Trust Agreement. The Trustee and any of the officers, directors, employees and agents of the Trustee shall be indemnified by the Trust as primary obligor and held harmless against any loss, damage, liability, claim, action, suit, cost, expense, disbursement (including the reasonable fees and expenses of counsel), tax or penalty of any kind and nature whatsoever, arising out of, imposed upon or asserted at any time against such indemnified person in connection with the performance of its obligations under the Trust Agreement, the creation, operation or termination of the Trust or the transactions contemplated therein; provided, however, that neither the Trust nor the Sponsor shall be required to indemnify any such indemnified person for any such expenses which are a result of the willful misconduct, bad faith or gross negligence of such indemnified person. The Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Trust, which cannot be predicted with any certainty. (d) Federal Income Taxes The Sponsor intends to take the position that the Trust will be treated as a grantor trust under the Internal Revenue Code of 1986, as amended. If so qualified, the Trust will not be subject to U.S. federal income tax to the extent it distributes substantially all of its investment income and capital gains to shareholders. Therefore, no federal income tax provision is required. Rather, a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares. 3. Investment Valuation and Calculation of Net Asset Value (“NAV”) GAAP defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trust’s policy is to value investments held at fair value. Fair Valuation Measurement: FASB established a framework for measuring fair value in accordance with GAAP. Under FASB ASC Topic 820, Fair Value Measurement, various inputs are used in determining the value of investments. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. The three levels of inputs of the fair value hierarchy are defined as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Trust’s own assumptions about the assumptions a market participant would use in valuing the asset or liability and would be based on the best information available. 7 The following table presents information about the Trust’s assets and liabilities measured at fair value as of September 30, 2024: Level 1 Level 2 Level 3 Total Bitcoin $ 569,763,992 – – $ 569,763,992 Total Investments $ 569,763,992 – – $ 569,763,992 There were no transfers between Level 1 and other Levels for the nine months ended September 30, 2024. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The Trust fair values investments for financial statement purposes, categorizing those investments using the hierarchy as described above. The fair value of bitcoin held by the Trust is determined based on a GAAP-consistent pricing source. The Trust’s NAV is calculated by subtracting all accrued fees, expenses and other liabilities from the fair value of its bitcoin and other assets. The Trust’s NAV per share is calculated by taking the Trust’s NAV divided by the total amount of Shares outstanding. 4. Trust Expenses The Trust pays to the Sponsor a Sponsor fee (the “Sponsor Fee”) in accordance with the Trust Agreement. The Sponsor Fee accrues daily by applying an annual rate of 0.25 % to the Trust’s bitcoin holdings. The Sponsor Fee will be payable in bitcoins at such times as determined in the Sponsor’s sole discretion. The Trust is not responsible for paying any fees or costs associated with the transfer of bitcoin to the Sponsor or the sale of bitcoin for costs not included in the Sponsor Fee. The Sponsor is obligated to assume and pay the following fees and expenses of the Trust: the Marketing Agent fee, the Administrator fee, the Custodian fee, the Cash Custodian fee, the Transfer Agent fee, the Trustee fee, applicable license fees, including the licensing fees related to the Index License Agreement, fees and expenses related to trading of Shares on Nasdaq (including marketing, legal and audit fees and expenses), legal expenses, audit fees, regulatory fees, including any fees relating to the registration of the Shares with the SEC, printing and mailing costs and costs of maintaining the Trust’s website. U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”), an indirect subsidiary of U.S. Bancorp, serves as the Trust’s fund accountant, fund administrator and the transfer agent of the Trust, pursuant to certain fund accounting servicing, fund administration servicing and transfer agent servicing agreements. U.S. Bank N.A., a subsidiary of U.S. Bancorp and parent company of Fund Services, serves as the Trust’s cash custodian pursuant to a custody agreement. Paralel Distributors LLC (the “Marketing Agent”) serves as the Trust’s marketing agent pursuant to a marketing agent agreement. Coinbase Custody Trust Company, LLC, BitGo Trust Company, Inc. and Komainu (Jersey) Limited (the “Custodians”) are custodians of the Trust. 5. Creation and Redemption of Creation Units The Trust issues Shares on an ongoing basis, but only in one or more blocks of 5,000 Shares (a “Basket”). The Trust issues Baskets of Shares to certain authorized participants on an ongoing basis and redeems Shares in Baskets on an ongoing basis from Authorized Participants. Authorized participants are the only persons that may place orders to create and redeem Baskets. Authorized participants must be (1) registered broker-dealers or other securities market participants, such as banks or other financial institutions, that are not required to register as broker-dealers to engage in securities transactions as described below, and (2) Depository Trust Company participants. 8 Authorized participants pay the transfer agent a fee for each order they place to create or redeem one or more Baskets. In addition, an authorized participant is required to reimburse the Trust or the Sponsor, as applicable, for any operational processing and brokerage costs, transfers fees, network fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the bitcoin being purchased or sold in connection with such order (the “Execution Charges”, and collectively with the Transfer Agent Fee, the “Transaction Fees”). The Transaction Fees may be reduced, increased or otherwise changed by the Sponsor. Activity in the number and value of Shares created and redeemed for the nine months ended September 30, 2024 are as follows: Number of Shares Value of Shares Creations 34,770,000 $ 590,573,402 Redemptions ( 3,050,000 ) $ ( 54,482,331 ) Net change in Shares created and redeemed 31,720,000 $ 536,091,071 6. Investment Transactions For the nine months ended September 30, 2024, the cost of purchases and proceeds from sales of bitcoin by the Trust, were as follows: Purchases Sales $ 590,496,202 $ $ 54,931,114 7. Related Party Transactions Certain officers of the Trust are affiliated with the Sponsor and are not paid any fees by the Trust for serving in such capacities. The Initial Sponsor agreed to waive Sponsor fees for the first three months of the Trust’s operations, through April 10, 2024. For the nine months ended September 30, 2024, the Trust incurred $ 791,603 in Sponsor Fees, of which, $ 156,867 was waived by the Initial Sponsor. On January 10, 2024, Valkyrie Funds LLC, at such time an affiliate of the Initial Sponsor, purchased 40,000 Shares at a per-Share price of $ 13.00 . Delivery of these Shares was made on January 11, 2024. Total proceeds to the Trust from the sale of these Shares was $ 520,000 . On March 15, 2024, the Trust entered into an agreement with CoinShares Co., a Delaware corporation, to act as Co-Sponsor of the Trust in an advisory capacity. Effective June 14, 2024 (the “Effective Date”), the Initial Sponsor withdrew as Co-Sponsor to the Trust. Pursuant to Section 6.9 of the Trust Agreement, on the Effective Date of the Initial Sponsor’s withdrawal as Co-Sponsor to the Trust, CoinShares Co. automatically and without further action by the Co-Sponsor, Trustee or the Shareholders (as defined in the Trust Agreement) became the successor Sponsor and has all the powers, rights, duties and obligations of the Sponsor under the Trust Agreement. As of September 30, 2024, affiliates of the Sponsor own 18,140,000 Shares of the Trust. 8. Commitments and Contingencies In the normal course of business, the Trust may enter into contracts that contain a variety of general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust which have not yet occurred and cannot be predicted with any certainty. However, the Sponsor believes the risk of loss under these arrangements to be remote. 9. Financial Highlights The Trust is presenting the following financial highlights related to investment performance and operations of a Share outstanding for the three months ended September 30, 2024 and the period from January 10, 2024 (the initial share purchase date) through September 30, 2024. The total return at NAV is based on the change in NAV of a Share during the period and the total return at market value is based on the change in market value of a Share on the Nasdaq Stock Market, LLC during the period. An individual investor’s return and ratios may vary based on the timing of capital transactions. 9 Financial Highlights (Unaudited) For the three months ended September 30, 2024 and the period January 10, 2024 through September 30, 2024 Three Months Ended September 30, 2024 Period Ended September 30, 2024 Net Asset Value Net Asset Value per Share, beginning of period $ 17.54 $ 13.00 Net investment income (loss) ( 0.01 ) ( 0.03 ) Net realized and change in unrealized gain (loss) 0.43 4.99 Net income (loss) 0.42 4.96 Net asset value per Share, end of period $ 17.96 $ 17.96 Market Value per Share, beginning of period $ 16.99 $ 13.00 Market Value per Share, end of period $ 17.98 $ 17.98 Ratio to average net assets Net investment income (loss) (1) ( 0.25 )% ( 0.20 )% Gross expenses (1) 0.25 % 0.25 % Net expenses (1)(3) 0.25 % 0.20 % Total return, at net asset value (2) 2.39 % 38.15 % Total return, at market value (2) 5.83 % 38.31 % (1) Annualized (2) Not annualized (3) Includes voluntary reimbursement of sponsor fees of 0.00 % and 0.05 % 10. Subsequent Events The Sponsor has evaluated all subsequent events through the issuance of the financial statements and has noted no events requiring adjustment or additional disclosure in the financial statements. 10