CoinShares Bitcoin ETF 10-K

Item 7. 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 audited financial statements and related notes included elsewhere in this Annual Report, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The following discussion may contain forward-looking statements based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Overview of the Trust The business and operations of the Trust are described above under Part I, Item I under the heading “Business”, which is incorporated into this Item by reference. 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 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 “CF Benchmarks Index”) and determines the net asset value of the Trust and the net asset value per Share (“NAV”). CF Benchmarks Index is calculated as of 4:00 p.m. ET. The CF Benchmarks 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 CF Benchmarks 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 for the Year Ended December 31, 2025 Year Ended December 31, 2025 The Trust’s net asset value decreased from $826,115,990 at December 31, 2024 to $505,380,907 at December 31, 2025. The change in the Trust’s net assets resulted from an change in outstanding Shares, which decreased from 31,260,000 at December 31, 2024, to 20,425,000 at December 31, 2025, as a result of 3,855,000 Shares (771 Baskets) being created and 14,690,000 Shares (2,938 Baskets) being redeemed during the year, and a decrease in the value of bitcoin, which depreciated 6.14% from $93,381 at December 31, 2024 to $87,650 at December 31, 2025. 65 The net asset value per Share decreased 6.38% from $26.43 at December 31, 2024 to $24.74 at December 31, 2025. The net asset value per Share of $35.50 at October 6, 2025, was the highest during the year, compared with a low of $21.70 at April 8, 2025. The decrease in net assets from operations for the year ended December 31, 2025, was $49,706,048, resulting from an decrease in unrealized gain on the Trust’s bitcoin investment of $184,888,192, realized gains on the disposition of bitcoin of $136,800,223, and Sponsor Fees incurred of $1,618,079. Year Ended December 31, 2024 The Trust’s net asset value increased from $0 at December 31, 2023, to $826,115,990 at December 31, 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 31,260,000 at December 31, 2024, as a result of 36,635,000 Shares (7,327 Baskets) being created and 5,373,000 Shares (1,075 Baskets) being redeemed during the year, and an increase in the value of bitcoin, which appreciated 103.7% from $45,853 at January 10, 2024 (the initial share purchase date) to $93,381 at December 31, 2024. The net asset value per Share increased 103.3% from $13.00 at January 10, 2024 (the initial share purchase date) to $26.43 at December 31, 2024. The net asset value per Share of $30.15 at December 17, 2024 was the highest during the year, compared with a low of $11.12 at January 23, 2024. The increase in net assets from operations for the year ended December 31, 2024 was $306,959,179, resulting from an increase in unrealized gain on the Trust’s bitcoin investment of $262,849,955, realized gains on the disposition of bitcoin of $45,222,195, and Sponsor Fees incurred of $1,112,971. 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. 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 a unified 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. 66 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. Under US 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. The Sponsor will determine at its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with US GAAP. 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 at 4:00 ET as the principal market price. Investment Company Considerations The Trust is an investment company for US 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. US 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. 67 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, the Trust is not required to provide the information required by this item. 68