CoinShares Bitcoin ETF 10-Q for FY2024 Q3
CoinShares Bitcoin ETF (BRRR)
About this 10-Q
CoinShares Bitcoin ETF filed this 10-Q on November 12, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $12.63M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________
Commission File Number
(Exact name of Registrant as specified in its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area
code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
CoinShares Valkyrie Bitcoin Fund |
The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
Indicate by check mark whether the Registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in
Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES ☐
As of October 29, 2024, the Registrant had Shares outstanding.
Table of Contents
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
| Item 4. | Controls and Procedures | 14 |
| PART II. OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 15 |
| Item 1A. | Risk Factors | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
| Item 3. | Defaults Upon Senior Securities | 15 |
| Item 4. | Mine Safety Disclosure | 15 |
| Item 5. | Other Information | 15 |
| Item 6. | Exhibits | 16 |
PART I.
FINANCIAL INFORMATION
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 $ September 30, 2024 and December 31, 2023, respectively) |
$ | $ | |||
| Total assets | $ | $ | |||
| Liabilities | |||||
| Sponsor fees payable | $ | $ | |||
| Total liabilities | $ | $ | |||
| Net assets | $ | $ | |||
| Shares issued and outstanding, |
|||||
| Net asset value per Share | $ | $ | |||
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 | $ | $ | % | ||||||||
| Total investment | $ | $ | % | ||||||||
| Other assets and liabilities, net | ( |
( |
)%(b) | ||||||||
| Net Assets | $ | % | |||||||||
| (a) |
| (b) |
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) | $ | $ | |||
| Less: Sponsor fee waiver | ( | ||||
| Total expenses | |||||
| Net investment income (loss) | ( |
( | |||
| Net realized and change in unrealized gain (loss) on investment | |||||
| Net realized gain (loss) from investment | |||||
| Net change in unrealized gain (loss) on investment | |||||
| Net realized and change in unrealized gain (loss) on investment | |||||
| Net income (loss) | $ | $ | |||
| Net income (loss) per share | $ | $ | |||
| Weighted average number of shares outstanding | |||||
| (a) |
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 | $ | $ | |||
| Creations | |||||
| Redemptions | ( |
( | |||
| Net investment income (loss) | ( |
( | |||
| Net realized gain (loss) from investment | |||||
| Net change in unrealized gain (loss) on investment | |||||
| Net Assets – Ending Balance | $ | $ | |||
| (a) |
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 31st. 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 | $ |
$ | |||||
| Total Investments | $ |
$ |
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
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 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 | $ | |||
| Redemptions | $ | ( | ||
| Net change in Shares created and redeemed | $ | |||
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 | ||||||
| $ | $ | $ |
|||||
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 $
On January 10, 2024, Valkyrie
Funds LLC, at such time an affiliate of the Initial Sponsor, purchased Shares at a per-Share price of $. Delivery
of these Shares was made on January 11, 2024. Total proceeds to the Trust from the sale of these Shares was $
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 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 | $ | $ | |||||
| Net investment income (loss) | ( |
) | ( |
) | |||
| Net realized and change in unrealized gain (loss) | |||||||
| Net income (loss) | |||||||
| Net asset value per Share, end of period | $ | $ | |||||
| Market Value per Share, beginning of period | $ | $ | |||||
| Market Value per Share, end of period | $ | $ | |||||
| Ratio to average net assets | |||||||
| Net investment income (loss)(1) | ( |
)% | ( |
)% | |||
| Gross expenses(1) | % | % | |||||
| Net expenses(1)(3) | % | % | |||||
| Total return, at net asset value(2) | % | % | |||||
| Total return, at market value(2) | % | % | |||||
| (1) |
| (2) |
| (3) |
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 |
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 Valkyrie Bitcoin Fund, formerly Valkyrie Bitcoin Fund (the “Trust”), is a Delaware statutory trust formed on January 20, 2021. 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”). 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. As of September 30, 2024, CoinShares Co. is the sponsor of the Trust, and 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.
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Shares of the Trust trade on Nasdaq under the ticker symbol BRRR.
The Sponsor maintains a website (www.valkyrieinvest.com/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 “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 Three Months Ended September 30, 2024
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 (546 Baskets) being created and 555,000 Shares (111 Baskets) 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.
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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.
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. The Trust intends to engage a third-party vendor to obtain a price from a principal market for bitcoin, which will be determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. 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.
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The process that the Sponsor has developed 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. Those markets include Binance, Bitstamp, Coinbase, itBit, Kraken, Gemini, and LMAX. The Sponsor then, through a service provider, calculates on each valuation period, the highest volume venue during the 60-minute period prior to 4:00 ET for bitcoin. The Sponsor then identifies that market as 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 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.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its 1934 Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Principal Executive Officer and Chief Financial Officer of the Sponsor to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of the Principal Executive Officer and the Chief Financial Officer of the Sponsor, the Sponsor conducted an evaluation of the Trust’s disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Principal Executive Officer and the Chief Financial Officer of the Sponsor concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Trust’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in the Trust’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable to Smaller Reporting Companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
| (a) | On January 10, 2024, Valkyrie Funds LLC, an affiliate of the Sponsor, purchased 40,000 Shares at a per-Share price of $13.00 (the “Seed Shares”) in a transaction exempt from registration under Section 4(a)(2) of the 1933 Act. Delivery of the Seed Shares was made on January 11, 2024. Total proceeds to the Trust from the sale of the Seed Shares was $520,000. |
| (b) | Not applicable. |
| (c) | In connection with redemptions of baskets held by an Authorized Participant, BRRR redeemed 111 baskets (comprising 555,000 Shares) during the three months ended September 30, 2024, at an average price per Share of $15.82. The following table provides information about BRRR’s redemptions by Authorized Participants during the three months ended September 30, 2024: |
| Calendar Month | Number of Shares Redeemed |
Average Price Paid per Share | |||||
| July 2024 | – | $ | – | ||||
| August 2024 | 100,000 | 16.81 | |||||
| September 2024 | 455,000 | 15.60 | |||||
| Total | 555,000 | $ | 15.82 | ||||
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
| (a) | All information required to be reported in a report on Form 8-K during the period covered by this Form 10-Q has been reported. |
| (b) | Not Applicable. |
| (c) |
| 15 |
Item 6. Exhibits.
The following exhibits are filed as part of this Quarterly Report as required under Item 601 of Regulation S-K:
| (1) | Filed Herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned*, thereunto duly authorized.
| COINSHARES VALKYRIE BITCOIN FUND | |||
| Date: November 12, 2024 | By: | /s/ Jean-Marie Mognetti | |
| Name: | Jean-Marie Mognetti | ||
| Title: | Principal Executive Officer | ||
| COINSHARES VALKYRIE BITCOIN FUND | |||
| Date: November 12, 2024 | By: | /s/ Charles Butler | |
| Name: | Charles Butler | ||
| Title: | Principal Financial Officer and Principal Accounting Officer | ||
| * | The Registrant is a trust and the persons are signing in their capacities as officers of CoinShares Co., the Sponsor of the Registrant. |
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CoinShares Valkyrie Bitcoin Fund 10-Q
Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jean-Marie Mognetti, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of CoinShares Valkyrie Bitcoin Fund; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2024 | By: | /s/ Jean-Marie Mognetti | |
| Name: | Jean-Marie Mognetti | ||
| Title: | Principal Executive Officer CoinShares Valkyrie Bitcoin Fund | ||
CoinShares Valkyrie Bitcoin Fund 10-Q
Exhibit 31.2
Certification of Principal Financial and Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles Butler, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of CoinShares Valkyrie Bitcoin Fund; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 12, 2024 | By: | /s/ Charles Butler | |
| Name: | Charles Butler | ||
| Title: | Principal Financial and Accounting Officer CoinShares Valkyrie Bitcoin Fund | ||
CoinShares Valkyrie Bitcoin Fund 10-Q
Exhibit 32.1
Certification of Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Report”) of CoinShares Valkyrie Bitcoin Fund (the “Registrant”) and each of its series, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Jean-Marie Mognetti, the Principal Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: November 12, 2024 | By: | /s/ Jean-Marie Mognetti | |
| Name: | Jean-Marie Mognetti | ||
| Title: | Principal Executive Officer CoinShares Valkyrie Bitcoin Fund | ||
CoinShares Valkyrie Bitcoin Fund 10-Q
Exhibit 32.2
Certification of Principal Financial and Accounting Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Report”) of CoinShares Valkyrie Bitcoin Fund (the “Registrant”) and each of its series, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Charles Butler, the Principal Financial and Accounting Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: November 12, 2024 | By: | /s/ Charles Butler | |
| Name: | Charles Butler | ||
| Title: | Principal Financial and Accounting Officer CoinShares Valkyrie Bitcoin Fund | ||