The iShares Bitcoin Trust ETF, a Delaware statutory trust established to provide investors with exposure to bitcoin through the securities market, has released its Form 10-K report for the fiscal year ending December 31, 2024. The report highlights the Trust’s substantial growth in net asset value, strategic initiatives to mirror bitcoin’s price performance, and the challenges and risks associated with the volatile digital asset market.

Financial Highlights

• Net Asset Value: $51,519,566,547. The Trust’s net asset value grew significantly from $100,000 at December 31, 2023, primarily due to an increase in the number of outstanding shares and a rise in the price of bitcoin.
• Net Increase in Net Assets Resulting from Operations: $14,232,135,930. This increase was driven by an unrealized gain on investment in bitcoin and net realized gains from bitcoin sold to pay expenses and for the redemption of shares.
• Net Investment Loss: $47,498,665. The Trust incurred a net investment loss primarily due to the Sponsor’s Fee, which was 0.22% of the Trust’s average weighted assets during the period.
• Net Increase in Net Assets Per Share: $15.33. The increase in net assets per share reflects the overall growth in the Trust’s net asset value and the increase in the price of bitcoin.

Business Highlights

• Trust Formation and Purpose: The iShares Bitcoin Trust ETF was established on June 8, 2023, with the primary purpose of owning bitcoin in exchange for shares issued by the Trust. Each share represents a fractional undivided beneficial interest in the net assets of the Trust.
• Trust Growth: The Trust’s net asset value increased significantly from $100,000 at December 31, 2023, to $51,519,566,547 at December 31, 2024, with outstanding shares rising from 4,000 to 970,440,000 during the same period.
• Trust Operations: The Trust’s activities are limited to issuing blocks of 40,000 shares in exchange for cash, selling or delivering bitcoin to cover fees and expenses, and buying and selling bitcoin through designated third parties.
• Trust Objective: The Trust aims to reflect the performance of bitcoin’s price, providing investors with an alternative method of achieving investment exposure to bitcoin through the securities market.
• Custodial Arrangements: Coinbase Custody Trust Company, LLC serves as the Bitcoin Custodian, holding the Trust’s bitcoin in segregated accounts, while The Bank of New York Mellon acts as the Cash Custodian.
• Prime Execution Agent: Coinbase, Inc. acts as the Prime Execution Agent, facilitating the purchase and sale of bitcoin for the Trust, with bitcoin holdings temporarily held in a Trading Balance for certain transactions.
• Insurance Coverage: Coinbase Global maintains a commercial crime insurance policy of up to $320 million to cover potential losses of client assets, including those held by the Trust.
• Creation and Redemption Process: The Trust creates and redeems shares in Baskets of 40,000 shares, with only Authorized Participants able to place orders for Baskets in exchange for cash.
• Trading and Market Dynamics: Shares are listed and traded on NASDAQ under the ticker symbol ‘IBIT’, with trading prices subject to fluctuations based on market supply and demand, and potential premiums or discounts relative to NAV.
• Regulatory Status: The Trust is not registered as an investment company and is not subject to regulation by the SEC as such, nor does it hold or trade in commodity futures contracts.
• Trust Expenses: The Trust’s primary recurring expense is the Sponsor’s Fee, accrued daily at an annualized rate of 0.25% of the Trust’s net asset value, with the Sponsor assuming most administrative expenses.
• Future Outlook: The Trust seeks to continue reflecting the performance of bitcoin’s price, providing a familiar investment vehicle for investors seeking exposure to bitcoin through the securities market.

Strategic Initiatives

• Strategic Initiative: The Trust’s strategic initiative is to reflect the performance of bitcoin by holding bitcoin as its primary asset. It aims to provide investors with a passive investment vehicle that mirrors bitcoin’s price movements without engaging in profit-seeking activities or mitigating losses from bitcoin price changes.
• Capital Management: The Trust’s capital management activities include issuing and redeeming shares in large blocks called Baskets, each consisting of 40,000 shares. During 2024, the Trust significantly increased its number of outstanding shares from 4,000 to 970,440,000, primarily through the creation of 982,160,000 shares and the redemption of 11,724,000 shares. The Trust’s liquidity is managed through the sale of bitcoin to cover expenses, with the Sponsor assuming most expenses in exchange for a fee. The Trust did not declare any dividends during the period and has no obligation to make periodic distributions.
• Future Outlook: The Trust does not anticipate any material changes to its liquidity needs and will continue to manage its capital by issuing and redeeming shares in response to market demand. The Trust’s future outlook involves maintaining its passive investment strategy focused on reflecting bitcoin’s price performance, with no plans for active management or profit-seeking activities.

Challenges and Risks

• Market Volatility: The trading prices of digital assets, including bitcoin, have experienced extreme volatility, which may continue and adversely affect the value of the Shares. The digital asset markets may still be experiencing a bubble, and events like the 2022 bankruptcies of major digital asset platforms have undermined confidence in these markets. Increased regulatory scrutiny from entities like the SEC and CFTC adds further uncertainty.
• Fundamental Risks: The Trust faces risks related to the fundamental characteristics of digital assets, such as the potential for loss or theft of private keys, dependence on the internet, and the early-stage development of digital asset networks. Governance issues, such as the potential for forks in the Bitcoin network, could also impact the value of the Shares.
• Operational Risks: Operational risks include the potential for significant scaling challenges in digital asset networks, which may not be effectively resolved, leading to increased transaction fees and reduced demand for bitcoin. Concentrated ownership of digital assets could lead to market price volatility if large holders sell or distribute their assets.
• Regulatory Risks: Regulatory risks are heightened by the potential for new legislation or enforcement actions that could restrict the use of bitcoin or digital assets. The emergence of central bank digital currencies (CBDCs) and other digital payment initiatives could also reduce demand for bitcoin.
• Management’s Discussion and Analysis: Management acknowledges the volatility in digital asset prices and the impact of regulatory developments on the Trust’s operations. The Trust is not actively managed, meaning it will not take actions to mitigate the impacts of bitcoin price volatility. The Trust’s reliance on the Index for pricing introduces risks if the Index fails to accurately track the global bitcoin price.
• Market Risk Disclosures: The Trust is exposed to market risks due to the unregulated nature of digital asset platforms, which may experience fraud, manipulation, or operational failures. The limited performance history of the Index and potential system failures could adversely affect the Trust’s ability to track bitcoin prices accurately. Additionally, the Trust’s lack of diversification, holding only bitcoin and cash, increases its vulnerability to bitcoin price fluctuations.

SEC Filing: iShares Bitcoin Trust ETF [ IBIT ] – 10-K – Mar. 05, 2025