Item 2. Management’s Discussion and Analysis
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified
in its entirety by reference to, our financial statements and related notes included elsewhere in this Quarterly Report, which
have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
This
Quarterly Report contains “forward-looking statements” with respect to the Trust’s financial conditions, results
of operations, plans, objectives, future performance and business. Statements preceded by, followed by or that include words such
as “may,” “might,” “will,” “should,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,”
the negative of these terms and other similar expressions are intended to identify some of the forward-looking statements. All
statements (other than statements of historical fact) included in this Quarterly Report that address activities, events or developments
that will or may occur in the future, including such matters as changes in market prices and conditions (for bitcoin and the Shares),
the Trust’s operations, the Sponsor’s plans and references to the Trust’s future success and other similar matters
are forward-looking statements. These statements are only predictions. Actual events or results may differ materially. These statements
are based on certain assumptions and analyses the Sponsor made based on its perception of historical trends, current conditions
and expected future developments, as well as other factors appropriate in the circumstances. Whether or not actual results and
developments will conform to the Sponsor’s expectations and predictions, however, is subject to a number of risks and uncertainties,
including:
● the
special considerations discussed in this Quarterly Report;
● general
economic, market and business conditions;
● the
use of technology by us and our vendors, including the Custodians, in conducting our
business, including disruptions in our computer systems and data centers and our transition
to, and quality of, new technology platforms;
● changes
in laws or regulations, including those concerning taxes, made by governmental authorities
or regulatory bodies;
● the
costs and effects of any litigation or regulatory investigations;
● our
ability to maintain a positive reputation; and
● other
world economic and political developments.
Consequently,
all the forward-looking statements made in this Quarterly Report are qualified by these cautionary statements, and there can be
no assurance that the actual results or developments the Sponsor anticipates will be realized or, even if substantially realized,
that they will result in the expected consequences to, or have the expected effects on, the Trust’s operations or the value
of the Shares. Should one or more of these risks discussed in the Quarterly Report or other uncertainties materialize, or should
underlying assumptions prove incorrect, actual outcomes may vary materially from those described in forward-looking statements.
Forward-looking statements are made based on the Sponsor’s beliefs, estimates and opinions on the date the statements are
made and neither the Trust nor the Sponsor is under a duty or undertakes an obligation to update forward-looking statements if
these beliefs, estimates and opinions or other circumstances should change, other than as required by applicable laws. Moreover,
neither the Trust, the Sponsor, nor any other person assumes responsibility for the accuracy and completeness of any of these
forward-looking statements. Investors are therefore cautioned against placing undue reliance on forward-looking statements.
Overview
of the Trust
CoinShares
Bitcoin ETF, formerly CoinShares Valkyrie Bitcoin Fund (the “Trust”), is a Delaware statutory trust formed on January
20, 2021. On July 25, 2025, the Trust filed a Certificate of Amendment to its Certificate of Trust to change its name from CoinShares
Valkyrie Bitcoin Fund to CoinShares Bitcoin ETF. The Trust issues common units of beneficial interest (“Shares”),
which represent units of fractional undivided beneficial interest in and ownership of the Trust. The Shares of the Trust are listed
on The Nasdaq Stock Market, LLC (“Nasdaq” or the “Exchange”). CoinShares Co., a Delaware corporation,
is the sponsor of the Trust (the “Sponsor”), and CSC Delaware Trust Company is the trustee of the Trust (the “Trustee”).
The operations of the Trust are governed by the Amended and Restated Trust Agreement of the Trust, among the Trustee, the Sponsor,
and the shareholders from time to time thereunder (the “Shareholders”), as may be amended from time to time (the “Trust
Agreement”). The Trust is an exchange-traded product. When the Trust sells or redeems its Shares, it will do so in blocks
of 5,000 Shares (a “Basket”) based on the quantity of bitcoin attributable to each Share of the Trust (net of accrued
but unpaid expenses and liabilities). Only registered broker-dealers that have previously
entered into an agreement with the Sponsor governing the terms and conditions of such issuance (such broker-dealers, the “Authorized
Participants”), can place orders to receive Baskets in exchange for cash. Baskets may be redeemed by the Trust in exchange
for the cash proceeds from selling the amount of bitcoin corresponding to their redemption value.
10
Shares
of the Trust trade on Nasdaq under the ticker symbol BRRR.
The
Sponsor maintains a website (coinshares.com/us/etf/brrr/), through which the Trust’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon
as reasonably practicable after such material is electronically file with, or furnished to, the U.S. Securities and Exchange Commission
(the “SEC”). Additional information regarding the Trust may also be found on the SEC’s EDGAR database at www.sec.gov .
Investment
Objectives and Principal Investment Strategies
Investment
Objectives
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.
Principal
Investment Strategies
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 Index currently uses substantially the same methodology as the CME CF Bitcoin Reference Rate (“BRR”),
including utilizing the same bitcoin exchanges, which is the underlying rate to determine settlement of CME bitcoin futures contracts,
except that the Index is calculated as of 4:00 p.m. ET, whereas the BRR is calculated as of 4:00 p.m. London time. There can be
no assurance that the Trust will achieve its investment objective. The Sponsor is authorized under the Trust Agreement to substitute
an alternative index, reference rate, or other methodology for valuing bitcoin for the Index for purposes of the Trust’s
investment objective and valuation policies at its sole discretion and without Shareholder approval. The Shares are designed to
provide investors with a cost-effective and convenient way to invest in bitcoin.
Valuation
of Bitcoin; Use of the CME CF Bitcoin Reference Rate – New York Variant
On
each day other than a Saturday or a Sunday, or a day on which Nasdaq is closed for regular trading (a “Business Day”),
as soon as practicable after 4:00 p.m. ET, the Trust evaluates the bitcoin held by the Trust as reflected by the CME CF Bitcoin
Reference Rate – New York Variant for the Bitcoin – U.S. Dollar trading pair (the “Index”) and determines
the net asset value of the Trust and the net asset value per Share (“NAV”).
The
Index is calculated as of 4:00 p.m. ET. The Index is designed based on the IOSCO Principles for Financial Benchmarks and is a
Registered Benchmark under UK Benchmark Regulations (“BMR”). The administrator of the Index is CF Benchmarks Ltd.
(the “Index Administrator”) a UK incorporated company, authorized and regulated by the Financial Conduct Authority
(“FCA”) of the UK as a Benchmark Administrator, under UK BMR.
Results
of Operations
The
Three Months Ended September 30, 2025 and 2024
The
Trust’s net asset value increased from $625,905,470 at June 30, 2025, to $682,460,646 at September 30, 2025. The change
in the Trust’s net assets resulted from an increase in outstanding Shares, which rose from 20,705,000 at June, 2025, to
21,120,000 at September 30, 2025, as a result of 1,160,000 Shares being created and 745,000 Shares being redeemed during the quarter,
and an increase in the value of bitcoin, which appreciated 7.0% from $106,930 at June 30, 2025, to $114,394 at September 30, 2025.
The net asset value per Share increased 6.9% from $30.22 at June 30, 2025, to $32.31 at September 30, 2025.
11
The
net asset value per Share of $34.56 at August 13, 2025 was the highest during the quarter, compared with a low of $29.85 at July
1, 2025.
The
Trust’s net asset value increased from $518,313,439 at June 30, 2024, to $569,655,239 at September 30, 2024. The change
in the Trust’s net assets resulted from an increase in outstanding Shares, which grew from 29,545,000 at June 30, 2024,
to 31,720,000 at September 30, 2024, as a result of 2,730,000 Shares being created and 555,000 Shares being redeemed during the
quarter, and an increase in the value of bitcoin, which appreciated 2.4% from $61,910 at June 30, 2024, to $63,418 at September
30, 2024.
The
net asset value per Share increased 2.4% from $17.54 at June 30, 2024 to $17.96 at September 30, 2024.
The
net asset value per Share of $19.22 at July 22, 2024 was the highest during the quarter, compared with a low of $15.05 at August
5, 2024.
The
increase in net assets from operations for the quarter ended September 30, 2024 was $12,632,292, resulting from an increase in
unrealized gain on the Trust’s bitcoin investment of $10,981,879, realized gains on the disposition of bitcoin of $1,994,668,
and Sponsor Fees incurred of $344,255.
The
Nine Months Ended September 30, 2025 and 2024
The
Trust’s net asset value decreased from $826,115,990 at December 31, 2024, to $682,460,646 at September 30, 2025. The change
in the Trust’s net assets resulted from a decrease in outstanding Shares, which fell from 31,260,000 at December 31, 2024,
to 21,120,000 at September 30, 2025, and an increase in the value of bitcoin, which appreciated 22.5% from $93,381 at December
31, 2024, to $114,394 at September 30, 2025. The net asset value per Share increased 22.2% from $26.43 at December 31, 2024, to
$32.31 at September 30, 2025.
The
increase in net assets from operations for the nine months ended September 30, 2025 was $107,856,285, resulting from a decrease
in unrealized gain on the Trust’s bitcoin investment of $16,289,482, realized gains on the disposition of bitcoin of $125,395,088,
and Sponsor Fees incurred of $1,249,321.
The
Trust’s net asset value increased from $0 at December 31, 2023, to $ 569,655,239 at September
30, 2024. The change in the Trust’s net assets resulted from an increase in outstanding Shares, which grew from 0 at December
31, 2023, to 31,720,000 at September 30, 2024, and an increase in the value of bitcoin, which
appreciated 38.3% from $ 45,853 at January 10, 2024 (the initial share purchase
date) , to $63,418 at September 30, 2024. The net asset value per Share increased 38.2% from $13.00 at January
10, 2024 (the initial share purchase date), to $17.96 at September 30, 2024.
The
increase in net assets from operations for the nine months ended September 30, 2024 was $33,564,168, resulting from an increase
in unrealized gain on the Trust’s bitcoin investment of $19,227,215, realized gains on the disposition of bitcoin of $14,971,689,
and net Sponsor Fees incurred of $634,736.
Cash
Resources and Liquidity
The
Trust does not hold a cash balance except in connection with the creation and redemption of Baskets or to pay expenses not assumed
by the Sponsor. To the extent the Trust does not have available cash to facilitate redemptions or pay expenses not assumed by
the Sponsor, the Trust will sell bitcoin. When selling bitcoin on behalf of the Trust, the Sponsor endeavors to minimize the Trust’s
holdings of assets other than bitcoin. As a consequence, the Sponsor expects that the Trust will have an immaterial amount of
cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s
only sources of cash are proceeds from the sale of Baskets and bitcoin. The Trust will not borrow to meet liquidity needs.
In
exchange for the Sponsor Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. The Sponsor Fee accrues
at an annual rate of 0.25% of the Trust’s Bitcoin Holdings. As a result, the only ordinary expense of the Trust is the Sponsor
Fee. The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes
to its liquidity needs.
Off
Balance Sheet Arrangements and Contractual Obligations
The
Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off balance sheet financing
arrangements and have no loan guarantee arrangements or off balance sheet arrangements of any kind other than agreements entered
into in the normal course of business, which may include indemnification provisions related to certain risks service providers
undertake in performing services for the Trust. While the Trust’s exposure under such indemnification provisions cannot
be estimated, these general business indemnifications are not expected to have a material impact on a Trust’s financial
position.
12
Sponsor
Fee payments made to the Sponsor are calculated as a fixed percentage of the Trust’s Bitcoin Holdings. As such, the Sponsor
cannot anticipate the payment amounts that will be required under these arrangements for future periods as the Trust’s net
assets are not known until a future date.
Critical
Accounting Policies
Principal
Market and Fair Value Determination
The
Trust’s periodic financial statements may not utilize the net asset value of the Trust determined by reference to the Index
to the extent the methodology used to calculate the Index is deemed not to be consistent with GAAP. The Trust’s periodic
financial statements will be prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) and utilize
an exchange-traded price from the Trust’s principal market for bitcoin on the Trust’s financial statement measurement
date. The Sponsor will determine at its sole discretion the valuation sources and policies used to prepare the Trust’s financial
statements in accordance with GAAP. Under GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC
Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.
To
determine which market is the Trust’s principal market (or in the absence of a principal market, the most advantageous market)
for purposes of calculating the Trust’s financial statements, the Trust follows ASC 820-10, which outlines the application
of fair value accounting. ASC 820-10 determines fair value to be the price that would be received for bitcoin in a current sale,
which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume
that bitcoin is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous
market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent,
knowledgeable, and willing and able to transact. The Trust may transact through digital asset brokers or dealers, in multiple
markets, and its application of ASC 820-10 reflects this fact. The Trust anticipates that, while multiple venues and types of
markets will be available to the digital asset brokers or dealers from whom the Sponsor acquires or disposes of the Trust’s
bitcoin, the principal market in each scenario is determined by looking at the market-based level of volume and bitcoin trading
activity. Digital asset brokers or dealers may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets
and Exchange Markets (each as defined in the FASB ASC Master Glossary). Based on information reasonably available to the Trust,
Exchange Markets have the greatest volume and level of activity for the asset. The Trust therefore looks to accessible Exchange
Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets to determine its principal market.
As a result of the aforementioned analysis, an Exchange Market has been selected as the Trust’s principal market. The Trust
determines its principal market (or in the absence of a principal market the most advantageous market) on a quarterly basis to
determine which market is its Principal Market for the purpose of calculating fair value for the creation of quarterly and annual
financial statements.
The
Sponsor has developed a process for identifying a principal market, as prescribed in ASC 820-10, which outlines the
application of fair value accounting. The process begins by identifying publicly available, well-established and reputable
bitcoin trading venues (Exchange Markets, as defined in the FASB ASC Master Glossary), which are selected by the Sponsor and
its affiliates at their sole discretion. The Sponsor then identifies the principal market for bitcoin during that period and
uses the price for bitcoin from that venue as of 4:00 p.m. ET as the principal market price.
Investment
Company Considerations
The
Trust is an investment company for GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC
Topic 946, Financial Services – Investment Companies. The Trust uses fair value as its method of accounting for Bitcoin
in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment
company under the Investment Company Act of 1940. GAAP requires management to make estimates and assumptions that affect the reported
amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences
could be material.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
Not
applicable to Smaller Reporting Companies.
13
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.