UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the period ended March 31, 2024.

 

or

 

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the transition period from             to            .

 

Commission File Number: 001-41910

 

 

 

ARK 21Shares Bitcoin ETF

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   87-6497023
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

21Shares US LLC

477 Madison Avenue, 6th Floor

New York, New York 10022

(646) 370-6016

(Address, including zip code, and telephone number, including area code, of registrant’s primary executive offices)

 

Title of each class:   Trading Symbol(s)   Name of each exchange on which registered:
Shares of Beneficial Interest of ARK 21Shares Bitcoin ETF   ARKB   Cboe BZX Exchange, Inc.

 

Securities registered or to be 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.  ☒ Yes ☐ No

 

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). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐
Non-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 ☒ No

 

The registrant had 41,785,000 outstanding shares as of May 3, 2024.

 

 

 

 

 

 

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This interim report on Form 10-Q includes “forward-looking statements” that generally relate to future events or future performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this report that address activities, events or developments that will or may occur in the future, including such matters as movements in the digital asset markets and indexes that track such movements, 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 upon certain assumptions and analyses the Sponsor and the Sub-Adviser have 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 and the Sub-Adviser’s expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed in this report, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently, all the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that actual results or developments the Sponsor and the Sub-Adviser anticipate to occur 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 its Shares.

 

Should one or more of these risks discussed in “Risk Factors” 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 and the Sub-Adviser’s beliefs, estimates and opinions on the date the statements are made, and neither the Trust, the Sponsor nor the Sub-Adviser 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, the Sub-Adviser, 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.

 

Emerging Growth Company

 

The Trust is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Trust is an emerging growth company, unlike other public companies, it will not be required to, among other things: (i) 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 (ii) comply with any new audit rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) after April 5, 2012, unless the SEC determines otherwise.

 

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 Common 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.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the 1933 Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Trust intends to take advantage of the benefits of the extended transition period.

 

 

 

  

ARK 21Shares Bitcoin ETF

 

Table of Contents

 

  Page
     
Part I. FINANCIAL INFORMATION    
     
Item 1. Financial Statements (Unaudited)   1
Statements of Assets and Liabilities at March 31, 2024 (Unaudited) and December 31, 2023   1
Schedule of Investment at March 31, 2024 (Unaudited)   2
Statement of Operations for the three months ended March 31, 2024 (Unaudited)   3
Statement of Changes in Net Assets for the three months ended March 31, 2024 (Unaudited)   4
Notes to Unaudited Financial Statements   5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   11
Item 3. Quantitative and Qualitative Disclosures About Market Risk   13
Item 4. Controls and Procedures   13
     
Part II. OTHER INFORMATION    
     
Item 1. Legal Proceedings   14
Item 1A. Risk Factors   14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   14
Item 3. Defaults Upon Senior Securities   14
Item 4. Mine Safety Disclosures   14
Item 5. Other Information   14
Item 6. Exhibits   15
Signatures   16

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

ARK 21SHARES BITCOIN ETF

STATEMENTS OF ASSETS AND LIABILITIES

(Amounts in thousands, except Share and per Share amounts)

 

   March 31,
2024		   December 31,
2023		 
   (Unaudited)     
Assets        
Investment in bitcoin, at fair value (cost $2,315,409)  $3,160,732   $
-
 
Cash   
-
    
-
1
Capital shares receivable   27,610    
-
 
Total assets   3,188,342    
-
1
           
Liabilities          
Bitcoin purchased payable   27,610   $
-
 
Sponsor’s fee payable   628    
-
 
Other payable   71    
-
 
Total liabilities   28,309    
-
 
Net assets  $3,160,033   $
-
1
           
Net assets consist of          
Paid-in-capital  $2,315,423   $
-
1
Accumulated earnings (loss)   844,610    
-
 
   $3,160,033   $
-
1
           
Shares issued and outstanding, no par value, unlimited amount authorized
   44,670,000    2 
Net asset value per share  $70.74   $50.00 

 

 

1Amount rounds to less than $1,000. See Note 1 to the Unaudited Notes to Financial Statements.

 

The accompanying notes are an integral part of the Financial Statements.

 

1

 

 

ARK 21SHARES BITCOIN ETF

SCHEDULE OF INVESTMENT

(Amounts in thousands, except Quantity of bitcoin and percentages)

 

March 31, 2024* (Unaudited)

 

   Quantity of
bitcoin		   Cost   Fair Value   % of Net
Assets		 
Investment in bitcoin  44,667.3165   $2,315,409   $3,160,732    100.02%
Total investments   44,667.3165   $2,315,409   $3,160,732    100.02%
Liabilities in excess of other assets             (699)   (0.02)%
Net assets            $3,160,033    100.00%

 

 

* No comparative schedule has been provided as the Trust did not hold any bitcoin as of December 31, 2023.

 

The accompanying notes are an integral part of the Financial Statements.

 

2

 

  

ARK 21SHARES BITCOIN ETF

STATEMENT OF OPERATIONS

(Amounts in thousands)

 

   For the
three months
ended
March 31,
2024*		 
   (Unaudited) 
Expenses    
Sponsor’s fee  $721 
Total expenses   721 
Less waiver and reimbursement   (93)
Net expenses   628 
Net investment loss   (628)
      
Realized and unrealized gain (loss)     
Net realized loss on investment in bitcoin   (85)
Net change in unrealized appreciation on investment in bitcoin   845,323 
Net realized and unrealized gain   845,238 
Net increase in net assets resulting from operations  $844,610 

 

 

* No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.

 

The accompanying notes are an integral part of the Financial Statements.

 

3

 

 

ARK 21SHARES BITCOIN ETF

STATEMENT OF CHANGES IN NET ASSETS

(Amounts in thousands, except change in Shares issued and redeemed)

 

   For the
three months
ended
March 31,
2024*		 
   (Unaudited) 
     
Net assets, beginning of period  $
-
1
Contributions for Shares issued   2,315,842 
Distributions for Shares redeemed   (419)
Net investment loss   (628)
Net realized loss on investment in bitcoin   (85)
Net change in unrealized appreciation on investment in bitcoin   845,323 
Net assets, end of period  $3,160,033 
      
Shares issued and redeemed     
Shares issued   44,680,000 
Shares redeemed   (10,002)
Net increase in Shares issued   44,669,998 

 

 

* No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.

1Amount rounds to less than $1,000. See Note 1 to the Unaudited Notes to Financial Statements.

 

The accompanying notes are an integral part of the Financial Statements.

 

4

 

 

ARK 21Shares Bitcoin ETF

 

Notes to Financial Statements (Unaudited)

 

1. Organization

 

The ARK 21Shares Bitcoin ETF (the “Trust”) is a Delaware statutory trust, formed on June 22, 2021, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust operates pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”). Delaware Trust Company, a Delaware trust company, is the trustee of the Trust (the “Trustee”). The Trust is managed and controlled by 21Shares US LLC (the “Sponsor”). The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is Amun Holdings Limited. Coinbase Custody Trust Company, LLC (“Coinbase Custody”) (the “Custodian”) is the custodian for the Trust and will hold all of the Trust’s bitcoin on the Trust’s behalf. The transfer agent (the “Transfer Agent”) and the administrator for the Trust (the “Administrator”) is Bank of New York Mellon.

 

The Trust is an exchange-traded fund (“ETF”) that issues units of beneficial interest (the “Shares”) representing fractional undivided beneficial interests in its net assets that trade on the Cboe BZX Exchange, Inc. (the “Exchange”). The Shares were listed for trading on the Exchange on January 11, 2024, under the ticker symbol “ARKB”.

 

The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate—New York Variant (the “Index”), adjusted for the Trust’s expenses and other liabilities. CF Benchmarks Ltd. is the administrator for the Index (the “Index Provider”). The Index is designed to reflect the performance of bitcoin in U.S. dollars. In seeking to achieve its investment objective, the Trust holds bitcoin at its Custodian and values its Shares daily based on the Index.

 

ARK Investment Management LLC (the “Sub-Adviser”) is the sub-adviser of the Trust and provides assistance in the marketing of the Shares. The Trust’s Shares are neither interests in nor obligations of the Sponsor, the Sub-Adviser, or the Trustee.

 

The Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.

 

On December 12, 2023, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the initial Seed Creation Baskets comprising 2 Shares at a per-Share price of $50.00, as described in “Seed Capital Investor.” Total proceeds to the Trust from the sale of these Seed Creation Baskets were $100. Delivery of the Seed Creation Baskets was made on December 12, 2023. These Seed Creation Baskets were redeemed for cash on or about January 5, 2024.

 

On January 9, 2024 (the “Seed Capital Purchase Date”), the Seed Capital Investor purchased Seed Creation Baskets comprising 10,000 Shares (the “Initial Seed Creation Baskets”) at a per-share price of $46.88. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $468,806.44. On January 9, 2024, the Trust purchased 10 bitcoins with the proceeds of the Seed Creation Baskets by transacting with a Bitcoin Counterparty to acquire bitcoin on behalf of the Trust in exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor. These Seed Creation Baskets were redeemed for cash on or about January 19, 2024.

 

The statement of assets and liabilities and schedule of investments on March 31, 2024, and the statements of operations and changes in net assets for the three months ended March 31, 2024, have been prepared on behalf of the Trust and are unaudited. In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position and results of operations for the three months ended March 31, 2024, and for all interim periods presented have been made. In addition, interim period results are not necessarily indicative of results for a full-year period.

 

The fiscal year of the Trust is December 31st.

 

5

 

 

2. Significant Accounting Policies

 

Basis of Accounting

 

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP” or “GAAP”).

 

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 (“ASC”) 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 uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.

 

The preparation of the financial statements in conformity with US GAAP requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from such estimates as additional information becomes available or actual amounts may become determinable. Should actual results differ from those previously recognized, the recorded estimates will be revised accordingly with the impact reflected in the operating results of the Trust in the reporting period in which they become known.

 

Cash

 

Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits.

 

Investment Valuation

 

US 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.

 

The Trust identifies and determines the bitcoin principal market (or in the absence of a principal market, the most advantageous market) for GAAP purposes consistent with the application of the fair value measurement framework in FASB ASC 820. A principal market is the market with the greatest volume and activity level for the asset or liability. The determination of the principal market will be based on the market with the greatest volume and level of activity that can be accessed. The Trust obtains relevant volume and level of activity information and based on initial analysis will select an exchange market as the Trust’s principal market. The NAV and NAV per Share will be calculated using the fair value of bitcoin based on the price provided by this exchange market, as of 4:00 p.m. ET on the measurement date for GAAP purposes. The Trust will update its principal market analysis periodically and as needed to the extent that events have occurred, or activities have changed in a manner that could change the Trust’s determination of the principal market.

 

Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

 

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

 

Level 3: Unobservable inputs, including the Trust’s assumptions used in determining the fair value of investments, where there is little or no market activity for the asset or liability at the measurement date.

 

   Amount at   Fair Value Measurement Using 
(Amounts in thousands)  Fair Value   Level 1   Level 2   Level 3 
March 31, 2024                
Assets                
Investment in bitcoin  $3,160,732   $3,160,732   $
  –
   $
   –
 

 

 

*No comparative schedule has been provided as this the Trust did not hold any bitcoin as of December 31, 2023.

 

6

 

 

The cost basis of the investment in bitcoin recorded by the Trust for financial reporting purposes is the fair value of bitcoin at the time of transfer. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.

 

Investment Transactions

 

The Trust considers investment transactions to be the receipt of bitcoin for Share creations and the delivery of bitcoin for Share redemptions or for payment of expenses in bitcoin. The Trust records its investments transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in bitcoin.

 

Calculation of Net Asset Value (NAV) and NAV per Share

 

On each business day, as soon as practicable after 4:00 p.m. (Eastern Time), the net asset value of the Trust is obtained by subtracting all accrued fees, expenses and other liabilities of the Trust from the fair value of the bitcoin and other assets held by the Trust. The Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made.

 

Federal Income Taxes

 

The Sponsor and the Trustee will treat the Trust as a “grantor trust” for U.S. federal income tax purposes. Although not free from doubt due to the lack of directly governing authority, if the Trust operates as expected, the Trust should be classified as a “grantor trust” for U.S. federal income tax purposes and the Trust itself should not be subject to U.S. federal income tax. Each beneficial owner of Shares will be treated as directly owning its pro rata Share of the Trust’s assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares. If the Trust sells bitcoin (for example, to pay fees or expenses), such a sale is a taxable event to Shareholders. Upon a Shareholder’s sale of its Shares, the Shareholder will be treated as having sold the pro rata share of the bitcoin held in the Trust at the time of the sale and may recognize gain or loss on such sale. The Sponsor has reviewed the tax positions as of March 31, 2024, and has determined that no provision for income tax is required in the Trust’s financial statements.

 

Recently Issued Accounting Pronouncement

 

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. The Trust adopted this new guidance with no material impact on its financial statements and disclosures as the Trust uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.

 

7

 

 

3. Fair Value of Bitcoin

 

The following represents the changes in quantity of bitcoin and the respective fair value on March 31, 2024*:

 

 

(Amounts in thousands, except Quantity of bitcoin)

  Quantity of bitcoin   Fair Value 
Beginning balance as of January 1, 2024   
–
   $
–
 
Bitcoin purchased   44,677.3165    2,315,842 
Bitcoin sold   (10.0000)   (419)
Net realized loss on investment in bitcoin   
–
    (14)
Change in unrealized appreciation (depreciation) on investment in bitcoin   
–
    845,323 
Ending balance as of March 31, 2024*   44,667.3165   $3,160,732 

  

 

*No comparative table has been provided as this is the first fiscal year of the Trust’s operations.

 

4. Trust Expenses

 

The Trust pays the unitary Sponsor Fee of 0.21% of the Trust’s bitcoin holdings. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever comes first.

 

The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee. Operating expenses assumed by the Sponsor include (i) fees to the Sub-Adviser; (ii) the Marketing Fee, (iii) fees to the administrator, if any, (iv) fees to the bitcoin Custodian, (v) fees to the Transfer Agent, (vi) fees to the Trustee, (vii) the fees and expenses related to any future listing, trading or quotation of the Shares on any listing exchange or quotation system (including legal, marketing and audit fees and expenses), (viii) ordinary course legal fees and expenses but not litigation-related expenses, (ix) audit fees, (x) regulatory fees, including, if applicable, any fees relating to the registration of the Shares under the 1933 Act or Exchange Act, (xi) printing and mailing costs; (xii) costs of maintaining the Trust’s website and (xiii) applicable license fees (each, a “Sponsor-paid Expense,” and together, the “Sponsor-paid Expenses”), provided that any expense that qualifies as an Additional Trust Expense (as defined below) will be deemed to be an Additional Trust Expense and not a Sponsor-paid Expense.

 

The Sponsor will not, however, assume certain extraordinary, non-recurring expenses that are not Sponsor-paid Expenses, including, but not limited to, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders, any indemnification of the bitcoin Custodian, Administrator or other agents, service providers or counter-parties of the Trust, the fees and expenses related to the listing, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively, “Additional Trust Expenses”). Of the Sponsor-paid Expenses, ordinary course legal fees and expenses shall be subject to a cap of $100,000 per annum. In the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may be re-designated as an Additional Trust Expense.

 

To the extent that the Sponsor does not voluntarily assume expenses, they will be the responsibility of the Trust. The Sponsor also pays the costs of the Trust’s organization and offering. The Trust is not obligated to repay any such costs related to the Trust’s organization and offering paid by the Sponsor.

 

5. Creation and Redemption of Shares

 

The Trust creates and redeems Shares on a continuous basis but only in Creation Units consisting of 5,000 Shares or multiples thereof. Only Authorized Participants, which are registered broker-dealers who have entered into written agreements with the Sponsor and the Administrator, can place orders. The Trust engages in bitcoin transactions for converting cash into bitcoin (in association with purchase orders) and bitcoin into cash (in association with redemption orders). The Trust conducts its bitcoin purchase and sale transactions by, in its sole discretion, choosing to trade directly with third parties (each, a “bitcoin Trading Counterparty”), who are not registered broker-dealers pursuant to written agreements between such bitcoin Trading Counterparties and the Trust, or choosing to trade through the Prime Broker acting in an agency capacity with third parties through its Coinbase Prime service pursuant to the Prime Broker Agreement. A bitcoin Trading Counterparty may be an affiliate of an Authorized Participant.

 

8

 

 

The Authorized Participants deliver only cash to create Shares and receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation or redemption process or otherwise direct the Trust or a third-party with respect to purchasing, holding, delivering, or receiving bitcoin as part of the creation or redemption process.

 

The Trust creates Shares by receiving bitcoin from a third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to deliver the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the delivery of the bitcoin to the Trust or acting at the direction of the Authorized Participant with respect to the delivery of the bitcoin to the Trust. The Trust redeems shares by delivering bitcoin to a third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to receive the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the receipt of the bitcoin from the Trust or acting at the direction of the Authorized Participant with respect to the receipt of the bitcoin from the Trust. The third-party is unaffiliated with the Trust and the Sponsor.

 

6. Related Parties

 

The Sponsor is a related party to the Trust. The Trust’s operations are supported by its Sponsor, who is in turn supported by its parent company and affiliated companies and external service providers.

 

As of March 31, 2024, the Sponsor owned zero Shares of the Trust.

 

The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares for their public offering in the United States and the listing of Shares on the Exchange.

 

7. Financial Highlights*

 

Per Share Performance (for a Share outstanding throughout the period presented)

 

   For the
three months
ended		 
   March 31,
2024*		 
Net asset value per Share, beginning of period  $50.00 
Net investment loss on investment in bitcoin1   (0.02)
Net realized and unrealized gain on investment in bitcoin   20.76
Net change in net assets from operations   20.74 
Net asset value per Share, end of period  $70.74 
      
Total return, at net asset value2   41.48%
      
Ratios to average net assets3     
Net investment loss   (0.18)%
Gross Expenses   0.21%
Net Expenses   0.18%

 

 

*No comparative financial statements have been provided as this is the first fiscal year of the Trust’s operations.
1Calculated using average Shares outstanding.
2Total return is calculated based on the change in value during the period and is not annualized. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from the Trust.
3Annualized.

 

9

 

 

8. Commitments and Contingent Liabilities

 

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. Indemnification

 

The Sponsor will not be liable to the Trust, the Trustee or any Shareholder for any action taken or for refraining from taking any action in good faith, or for errors in judgment or for depreciation or loss incurred by reason of the sale of any bitcoin or other assets of the Trust. However, the preceding liability exclusion will not protect the Sponsor against any liability resulting from its own gross negligence, bad faith, or willful misconduct.

 

The Sponsor and each of its shareholders, members, directors, officers, employees, affiliates, and subsidiaries will be indemnified by the Trust and held harmless against any losses, liabilities or expenses incurred in the performance of its duties under the Declaration of Trust without gross negligence, bad faith, or willful misconduct. The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft, or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee’s counsel or by any other person for any matters arising under the Declaration of Trust. The Sponsor shall in no event be deemed to have assumed or incurred any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for in the Declaration of Trust. Such indemnity includes payment from the Trust of the costs and expenses incurred in defending against any indemnified claim or liability under the Declaration of Trust.

 

The Trustee will not be liable or accountable to the Trust or any other person or under any agreement to which the Trust or any series of the Trust is a party, except for the Trustee’s breach of its obligations pursuant to the Declaration of Trust or its own willful misconduct, bad faith or gross negligence. The Trustee and each of the Trustee’s officers, affiliates, directors, employees, and agents will be indemnified by the Trust from and against any losses, claims, taxes, damages, reasonable expenses, and liabilities incurred with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Declaration of Trust or the transactions contemplated thereby; provided that the indemnified party acted without willful misconduct, bad faith or gross negligence.

 

10. Subsequent Events

 

The Trust has evaluated subsequent events and transactions for potential recognition or disclosure through the date the financial statements were issued and has determined that there are no material events that would require disclosure in the financial statements.

 

10

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Form 10-Q. This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements involve risks and uncertainties. All statements (other than statements of historical fact) included in this Form 10-Q that address activities, events or developments that may occur in the future, the Trust’s operations, the Sponsor’s plans and references to the Trust’s future success and other similar matters are forward-looking statements. Words such as “could,” “would,” “may,” “expect,” “intend,” “estimate,” “predict,” and variations on such words or negatives thereof, and similar expressions that reflect our current views with respect to future events and Trust performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed. Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed therein. We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that management’s estimates, expectations, beliefs, or projections will be achieved or accomplished. These forward-looking statements are based on assumptions about many important factors that could cause actual results to differ materially from those in the forward-looking statements. We do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future, except as required by the federal securities laws.

 

Organization and Trust Overview

 

The ARK 21Shares Bitcoin ETF (the “Trust”) is a Delaware statutory trust, formed on June 22, 2021, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust operates pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”). The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and is not a commodity pool for purposes of the Commodity Exchange Act (“CEA”). The Trust is managed and controlled by 21Shares US LLC (the “Sponsor”). The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is Amun Holdings Limited. The Sponsor is not subject to regulation by the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator with respect to the Trust, or a commodity trading advisor with respect to the Trust. The Trust is an exchange-traded fund (“ETF”) that issues units of beneficial interest (the “Shares”) representing fractional undivided beneficial interests in its net assets that trade on the Cboe BZX Exchange, Inc. (the “Exchange”). The Shares are listed for trading on the Exchange under a ticker symbol “ARKB”.

 

On December 12, 2023, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the initial Seed Creation Baskets comprising 2 Shares at a per-Share price of $50.00, as described in “Seed Capital Investor.” Total proceeds to the Trust from the sale of these Seed Creation Baskets were $100. Delivery of the Seed Creation Baskets was made on December 12, 2023. These Seed Creation Baskets were redeemed for cash on or about January 5, 2024.

 

On January 9, 2024 (the “Seed Capital Purchase Date”), the Seed Capital Investor purchased Seed Creation Baskets comprising 10,000 Shares (the “Initial Seed Creation Baskets”) at a per-share price of $46.88. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $468,806.44. On January 9, 2024, the Trust purchased 10 bitcoins with the proceeds of the Seed Creation Baskets by transacting with a Bitcoin Counterparty to acquire bitcoin on behalf of the Trust in exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor. These Seed Creation Baskets were redeemed for cash on or about January 19, 2024.

 

The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate—New York Variant (the “Index”), adjusted for the Trust’s expenses and other liabilities. CF Benchmarks Ltd. is the administrator for the Index (the “Index Provider”). The Index is designed to reflect the performance of bitcoin in U.S. dollars. In seeking to achieve its investment objective, the Trust holds bitcoin at its Custodian and values its Shares daily based on the Index. The Trust is a passive investment vehicle and is not a leveraged product. The Sponsor does not actively manage the bitcoin held by the Trust.

 

The Trust issues Shares only in Creation Units of 5,000 or multiples thereof. Creation Units are issued and redeemed in exchange for cash. Individual Shares will not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “ARKB.” The Trust issues Shares in Creation Units on a continuous basis at the applicable NAV per Share on the creation order date.

 

The Trust pays the unitary Sponsor Fee of 0.21% of the Trust’s bitcoin holdings. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever comes first.

 

11

 

 

The Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.

 

The NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets. The NAV is calculated on each business day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price. In determining the NAV of the Trust on any business day, the Administrator calculates the price of the bitcoin held by the Trust as of 4:00 p.m. ET on such day. The Administrator also calculates the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the number of outstanding Shares. For purposes of making these calculations, a business day means any day other than a day when the Exchange is closed for regular trading.

 

In addition to calculating NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the Principal Market NAV and Principal Market NAV per Share on each valuation date for such financial statements. The determination of the Principal Market NAV and Principal Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the value of bitcoin is determined using the fair value of bitcoin based on the price in the bitcoin market that the Trust considers its “principal market” as of 4:00 p.m. ET on the valuation date, rather than using the Index.

 

NAV and NAV per Share are not measures calculated in accordance with GAAP and are not intended as substitute for Principal Market and Principal Market NAV per Share, respectively.

 

Critical Accounting Estimates

 

The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. Below is a summary of accounting policies on cash and investment valuation. There were no material estimates involving a significant level of estimation uncertainty that had or are reasonably likely to have had a material impact on the Trust’s financial condition used in the preparation of the financial statements. In addition, please refer to Note 2 to the Financial Statements included in this report for further discussion of the Trust’s accounting policies.

 

Cash

 

Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits.

 

Investment Valuation

 

The Trust’s policy is to value investments held at fair value. The Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 determines fair value to be the price that would be received for bitcoin in a current sale, which assumes an exit price resulting from an orderly transaction between market participants on the measurement date. ASC 820-10 requires the assumption that bitcoin is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market).

 

Results of Operations

 

As of March 31, 2024*, the Trust had a net closing balance of 44,667.3165 bitcoins with a value of $3,160,731,678, based on the Index Price of $70,761.62 on March 31, 2024 (CME CF Bitcoin Reference Rate – New York Variant, non-GAAP methodology). As of March 31, 2024, the total fair value of the Trust’s bitcoin was $3,160,731,678, based on the price of a bitcoin in the principal market (Coinbase) of $70,761.62 on March 31, 2024.

 

For the three months ended March 31, 2024*

 

Net realized and unrealized gain on investment in bitcoin for the three months ended March 31, 2024, was $845,237,003 which includes a realized loss of $(85,284) on the sale of bitcoins associated with the disposition of the initial seed creation shares, a loss for the removal of bitcoin mark-to-market from the daily Sponsor’s Fee accrual, and a net change in unrealized appreciation on investment in bitcoin of $845,322,287. Net realized and unrealized gain on investment in bitcoin for the period was driven by bitcoin price appreciation from $46,666.89 per Bitcoin as of January 11, 2024, to $70,761.62 per bitcoin as of March 31, 2024. Net increase in net assets resulting from operations was $844,609,344 for the three months ended March 31, 2024, which consisted of the net realized and unrealized gain on investment in bitcoin, less the Sponsor’s Fee of $627,659.

 

 

*No comparative period has been provided as this is the first fiscal year of the Trust’s operations.

 

12

 

 

Liquidity and Capital Resources

 

The Trust is not aware of any trends, demands, commitments, events, or uncertainties that are reasonably likely to result in material changes to its liquidity needs. The Trust’s only ordinary recurring expense is the fee paid to the Sponsor at an annual rate of 0.21% of the daily net asset value of the Trust. The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever comes first. In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Trust, including but not limited to the following: fees charged by the Sub-Adviser, Administrator, the Custodians, Transfer Agent and the Trustee, the Marketing Fee, Cboe BZX Exchange listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, website fees, tax reporting fees, audit fees, license fees and expenses, up to $100,000 per annum in ordinary legal fees and expenses. The Sponsor bears expenses in connection with the Trust’s organization and initial offering costs. 

 

The Sponsor is not required to pay any extraordinary or non-routine expenses. Extraordinary expenses are fees and expenses which are unexpected or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses also include material expenses which are not currently anticipated obligations of the Trust. The Trust will be responsible for the payment of such expenses to the extent any such expenses are incurred. Routine operational, administrative, and other ordinary expenses are not deemed extraordinary expenses. The Trust will sell bitcoin on an as-needed basis to pay the Sponsor’s fee.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risks

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4. Controls and Procedures

 

The duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, have evaluated the effectiveness of the Trust’s disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in the reports that the Trust files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, as appropriate to allow timely decisions regarding required disclosure.

 

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2024, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

13

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Trust may be a party to certain legal proceedings in the ordinary course of business. As of March 31, 2024, the Trust was not subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against the Trust.

 

Item 1A. Risk Factors

 

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K filed on March 26, 2024, for the period ended December 31, 2023, which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed in our 2023 Annual Report on Form 10-K.

 

The risks described in our Annual Report on Form 10-K are not the only risks facing the Trust. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

a)None.

 

b)Not applicable.

 

c)The Trust does not purchase Shares directly from its Shareholders. In connection with its redemption of Creation Units held by Authorized Participants, the Trust redeemed 2 Creation Units (comprising 10,002 Shares) during the quarter ended March 31, 2024. The following table summarizes the redemptions by Authorized Participants during the period:

 

 

Period

  Total Shares Redeemed   Average Price Per Share   Maximum number of shares that may be purchased 
January 1, 2024 - January 31, 2024   10,002   $41.90    N/A 
February 1, 2024 – February 29, 2024   -   $-    N/A 
March 1, 2024 - March 31, 2024   -   $-    N/A 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

No officers or directors of the Sponsor have adopted, modified or terminated trading plans under either a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933) for the three-month period ended March 31, 2024.

 

14

 

 

Item 6. Exhibits.

 

Listed below are the exhibits, which are filed as part of this quarterly report on Form 10-Q (according to the number assigned to them in Item 601 of Regulation S-K):

 

Exhibit
Number		   Description of Document
31.1(1)   Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2(1)   Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(1)   Certification by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(1)   Certification by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

(1)Filed herewith.

 

15

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

ARK 21Shares Bitcoin ETF (Registrant)  
   
By: 21Shares US LLC, its Sponsor  
     
By: /s/ Hany Rashwan  
  Hany Rashwan  
  Chief Executive Officer  
  (Principal Executive Officer)  
     
Date: May 13, 2024  
   
By: /s/ Ophelia Snyder  
  Ophelia Snyder  
  Principal Financial Officer and
Principal Accounting Officer		  
     

Date: May 13, 2024 

  

 

 

16

 

 

Unlimited Unlimited false --12-31 Q1 0001869699 0001869699 2024-01-01 2024-03-31 0001869699 2024-05-03 0001869699 2024-03-31 0001869699 2023-12-31 0001869699 2024-03-31 2024-03-31 0001869699 2023-12-31 2023-12-31 0001869699 arkb:BitcoinMember 2024-01-01 2024-03-31 0001869699 arkb:BitcoinMember 2024-03-31 0001869699 us-gaap:EquityMethodInvestmentsMember 2024-01-01 2024-03-31 0001869699 us-gaap:EquityMethodInvestmentsMember 2024-03-31 0001869699 arkb:LiabilitiesInExcessOfOtherAssetsMember 2024-03-31 0001869699 2023-12-12 0001869699 2023-12-12 2023-12-12 0001869699 2024-01-09 0001869699 2024-01-09 2024-01-09 0001869699 us-gaap:FairValueInputsLevel1Member 2024-03-31 0001869699 us-gaap:FairValueInputsLevel2Member 2024-03-31 0001869699 us-gaap:FairValueInputsLevel3Member 2024-03-31 0001869699 arkb:SponsorMember 2024-01-01 2024-03-31 0001869699 arkb:SponsorMember 2024-03-31 0001869699 2024-01-10 0001869699 2024-01-11 2024-03-31 xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure

Exhibit 31.1

 

Certification by Principal Executive Officer

 

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Hany Rashwan, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of ARK 21Shares Bitcoin ETF;

 

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 condensed 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)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

 

(d)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(s) 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: May 13, 2024 By /s/ Hany Rashwan
  Name: Hany Rashwan
  Title: Chief Executive Officer
    21Shares US LLC,
    Sponsor of ARK 21Shares Bitcoin ETF

 

Exhibit 31.2

 

Certification by Principal Financial Officer

 

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Ophelia Snyder, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of ARK 21Shares Bitcoin ETF;

 

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 condensed 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)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

 

(d)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(s) 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: May 13, 2024 By /s/ Ophelia Snyder
  Name: Ophelia Snyder
  Title: Principal Financial Officer and
Principal Accounting Officer
    21Shares US LLC,
    Sponsor of ARK 21Shares Bitcoin ETF

  

Exhibit 32.1

 

Certification by Principal Executive Officer

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Report”) of ARK 21Shares Bitcoin ETF (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Hany Rashwan, the Chief Executive Officer of 21Shares US LLC, Sponsor 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: May 13, 2024 By /s/ Hany Rashwan
  Name:   Hany Rashwan
  Title: Chief Executive Officer
    21Shares US LLC,
    Sponsor of ARK 21Shares Bitcoin ETF

  

Exhibit 32.2

 

Certification by Principal Financial Officer

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Report”) of ARK 21Shares Bitcoin ETF (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Ophelia Snyder, the President of 21Shares US LLC, Sponsor 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: May 13, 2024 By /s/ Ophelia Snyder
  Name: Ophelia Snyder
  Title: Principal Financial Officer and
Principal Accounting Officer
    21Shares US LLC,
    Sponsor of ARK 21Shares Bitcoin ETF

 

 

 

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May 03, 2024
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Entity Information [Line Items]    
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Entity Central Index Key 0001869699  
Entity File Number 001-41910  
Entity Tax Identification Number 87-6497023  
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Entity Address, Address Line Two 6th Floor  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10022  
Entity Phone Fax Numbers [Line Items]    
City Area Code (646)  
Local Phone Number 370-6016  
Entity Listings [Line Items]    
Title of 12(b) Security Shares of Beneficial Interest of ARK 21Shares Bitcoin ETF  
Trading Symbol ARKB  
Security Exchange Name CboeBZX  
Entity Common Stock, Shares Outstanding   41,785,000
v3.24.1.1.u2
Statements of Assets and Liabilities - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Assets    
Investment in bitcoin, at fair value (cost $2,315,409) [1] $ 3,160,732
Cash [2]
Capital shares receivable 27,610
Total assets 3,188,342 [2]
Liabilities    
Bitcoin purchased payable 27,610
Sponsor’s fee payable 628
Other payable 71
Total liabilities 28,309
Net assets 3,160,033 [3] [2]
Net assets consist of    
Paid-in-capital 2,315,423 [2]
Accumulated earnings (loss) 844,610
Net assets [4] $ 3,160,033 [2]
Shares issued and outstanding, no par value, unlimited amount authorized (in Shares) 44,670,000 2
Net asset value per share (in Dollars per share) $ 70.74 [5] $ 50
[1] No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
[2] Amount rounds to less than $1,000. See Note 1 to the Unaudited Notes to Financial Statements.
[3] No comparative schedule has been provided as the Trust did not hold any bitcoin as of December 31, 2023.
[4] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
[5] No comparative financial statements have been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Statements of Assets and Liabilities (Parentheticals) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Investment in bitcoin, fair value cost $ 2,315,409 $ 2,315,409
Common stock par value
Common stock Shares authorized Unlimited Unlimited
v3.24.1.1.u2
Schedule of Investment
$ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
Cost $ 2,315,409
% of Net Assets 100.00% [1]
Fair Value $ 3,160,033 [1]
Investment in bitcoin  
Cost $ 2,315,409 [1]
Quantity of bitcoin 44,667.3165 [1]
% of Net Assets 100.02% [1]
Fair Value $ 3,160,732 [1]
Total investments  
Cost $ 2,315,409 [1]
Quantity of bitcoin 44,667.3165 [1]
% of Net Assets 100.02% [1]
Fair Value $ 3,160,732 [1]
Liabilities in excess of other assets  
% of Net Assets (0.02%) [1]
Fair Value $ (699) [1]
[1] No comparative schedule has been provided as the Trust did not hold any bitcoin as of December 31, 2023.
v3.24.1.1.u2
Statement of Operations (Unaudited)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
 [1]
Expenses  
Sponsor’s fee $ 721
Total expenses 721
Less waiver and reimbursement (93)
Net expenses 628
Net investment loss (628)
Realized and unrealized gain (loss)  
Net realized loss on investment in bitcoin (85)
Net change in unrealized appreciation on investment in bitcoin 845,323 [2]
Net realized and unrealized gain 845,238
Net increase in net assets resulting from operations $ 844,610
[1] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
[2] No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Statement of Changes in Net Assets (Unaudited)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
shares
Statement of Stockholders' Equity [Abstract]  
Net assets, beginning of period [1],[2]
Shares issued and redeemed  
Shares issued (in Shares) | shares 44,680,000 [1]
Shares redeemed (in Shares) | shares (10,002) [1]
Net increase in Shares issued (in Shares) | shares 44,669,998 [1]
Contributions for Shares issued $ 2,315,842 [1]
Distributions for Shares redeemed (419) [1]
Net investment loss (628) [3]
Net realized loss on investment in bitcoin (85) [3]
Net change in unrealized appreciation on investment in bitcoin 845,323 [3],[4]
Net assets, end of period $ 3,160,033 [1]
[1] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
[2] Amount rounds to less than $1,000. See Note 1 to the Unaudited Notes to Financial Statements.
[3] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
[4] No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Organization
 3 Months Ended
Mar. 31, 2024
Organization [Abstract]  
Organization

1. Organization

 

The ARK 21Shares Bitcoin ETF (the “Trust”) is a Delaware statutory trust, formed on June 22, 2021, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust operates pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”). Delaware Trust Company, a Delaware trust company, is the trustee of the Trust (the “Trustee”). The Trust is managed and controlled by 21Shares US LLC (the “Sponsor”). The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is Amun Holdings Limited. Coinbase Custody Trust Company, LLC (“Coinbase Custody”) (the “Custodian”) is the custodian for the Trust and will hold all of the Trust’s bitcoin on the Trust’s behalf. The transfer agent (the “Transfer Agent”) and the administrator for the Trust (the “Administrator”) is Bank of New York Mellon.

 

The Trust is an exchange-traded fund (“ETF”) that issues units of beneficial interest (the “Shares”) representing fractional undivided beneficial interests in its net assets that trade on the Cboe BZX Exchange, Inc. (the “Exchange”). The Shares were listed for trading on the Exchange on January 11, 2024, under the ticker symbol “ARKB”.

 

The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate—New York Variant (the “Index”), adjusted for the Trust’s expenses and other liabilities. CF Benchmarks Ltd. is the administrator for the Index (the “Index Provider”). The Index is designed to reflect the performance of bitcoin in U.S. dollars. In seeking to achieve its investment objective, the Trust holds bitcoin at its Custodian and values its Shares daily based on the Index.

 

ARK Investment Management LLC (the “Sub-Adviser”) is the sub-adviser of the Trust and provides assistance in the marketing of the Shares. The Trust’s Shares are neither interests in nor obligations of the Sponsor, the Sub-Adviser, or the Trustee.

 

The Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.

 

On December 12, 2023, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the initial Seed Creation Baskets comprising 2 Shares at a per-Share price of $50.00, as described in “Seed Capital Investor.” Total proceeds to the Trust from the sale of these Seed Creation Baskets were $100. Delivery of the Seed Creation Baskets was made on December 12, 2023. These Seed Creation Baskets were redeemed for cash on or about January 5, 2024.

 

On January 9, 2024 (the “Seed Capital Purchase Date”), the Seed Capital Investor purchased Seed Creation Baskets comprising 10,000 Shares (the “Initial Seed Creation Baskets”) at a per-share price of $46.88. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $468,806.44. On January 9, 2024, the Trust purchased 10 bitcoins with the proceeds of the Seed Creation Baskets by transacting with a Bitcoin Counterparty to acquire bitcoin on behalf of the Trust in exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor. These Seed Creation Baskets were redeemed for cash on or about January 19, 2024.

 

The statement of assets and liabilities and schedule of investments on March 31, 2024, and the statements of operations and changes in net assets for the three months ended March 31, 2024, have been prepared on behalf of the Trust and are unaudited. In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position and results of operations for the three months ended March 31, 2024, and for all interim periods presented have been made. In addition, interim period results are not necessarily indicative of results for a full-year period.

 

The fiscal year of the Trust is December 31st.
v3.24.1.1.u2
Significant Accounting Policies
 3 Months Ended
Mar. 31, 2024
Significant Accounting Policies [Abstract]  
Significant Accounting Policies

2. Significant Accounting Policies

 

Basis of Accounting

 

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP” or “GAAP”).

 

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 (“ASC”) 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 uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.

 

The preparation of the financial statements in conformity with US GAAP requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from such estimates as additional information becomes available or actual amounts may become determinable. Should actual results differ from those previously recognized, the recorded estimates will be revised accordingly with the impact reflected in the operating results of the Trust in the reporting period in which they become known.

 

Cash

 

Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits.

 

Investment Valuation

 

US 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.

 

The Trust identifies and determines the bitcoin principal market (or in the absence of a principal market, the most advantageous market) for GAAP purposes consistent with the application of the fair value measurement framework in FASB ASC 820. A principal market is the market with the greatest volume and activity level for the asset or liability. The determination of the principal market will be based on the market with the greatest volume and level of activity that can be accessed. The Trust obtains relevant volume and level of activity information and based on initial analysis will select an exchange market as the Trust’s principal market. The NAV and NAV per Share will be calculated using the fair value of bitcoin based on the price provided by this exchange market, as of 4:00 p.m. ET on the measurement date for GAAP purposes. The Trust will update its principal market analysis periodically and as needed to the extent that events have occurred, or activities have changed in a manner that could change the Trust’s determination of the principal market.

 

Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

 

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

 

Level 3: Unobservable inputs, including the Trust’s assumptions used in determining the fair value of investments, where there is little or no market activity for the asset or liability at the measurement date.

 

   Amount at   Fair Value Measurement Using 
(Amounts in thousands)  Fair Value   Level 1   Level 2   Level 3 
March 31, 2024                
Assets                
Investment in bitcoin  $3,160,732   $3,160,732   $
  –
   $
   –
 

 

*No comparative schedule has been provided as this the Trust did not hold any bitcoin as of December 31, 2023.

 

The cost basis of the investment in bitcoin recorded by the Trust for financial reporting purposes is the fair value of bitcoin at the time of transfer. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.

 

Investment Transactions

 

The Trust considers investment transactions to be the receipt of bitcoin for Share creations and the delivery of bitcoin for Share redemptions or for payment of expenses in bitcoin. The Trust records its investments transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in bitcoin.

 

Calculation of Net Asset Value (NAV) and NAV per Share

 

On each business day, as soon as practicable after 4:00 p.m. (Eastern Time), the net asset value of the Trust is obtained by subtracting all accrued fees, expenses and other liabilities of the Trust from the fair value of the bitcoin and other assets held by the Trust. The Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made.

 

Federal Income Taxes

 

The Sponsor and the Trustee will treat the Trust as a “grantor trust” for U.S. federal income tax purposes. Although not free from doubt due to the lack of directly governing authority, if the Trust operates as expected, the Trust should be classified as a “grantor trust” for U.S. federal income tax purposes and the Trust itself should not be subject to U.S. federal income tax. Each beneficial owner of Shares will be treated as directly owning its pro rata Share of the Trust’s assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares. If the Trust sells bitcoin (for example, to pay fees or expenses), such a sale is a taxable event to Shareholders. Upon a Shareholder’s sale of its Shares, the Shareholder will be treated as having sold the pro rata share of the bitcoin held in the Trust at the time of the sale and may recognize gain or loss on such sale. The Sponsor has reviewed the tax positions as of March 31, 2024, and has determined that no provision for income tax is required in the Trust’s financial statements.

 

Recently Issued Accounting Pronouncement

 

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. The Trust adopted this new guidance with no material impact on its financial statements and disclosures as the Trust uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.
v3.24.1.1.u2
Fair Value of Bitcoin
 3 Months Ended
Mar. 31, 2024
Fair Value of Bitcoin [Abstract]  
Fair Value of Bitcoin

3. Fair Value of Bitcoin

 

The following represents the changes in quantity of bitcoin and the respective fair value on March 31, 2024*:

 

 

(Amounts in thousands, except Quantity of bitcoin)

  Quantity of bitcoin   Fair Value 
Beginning balance as of January 1, 2024   
–
   $
–
 
Bitcoin purchased   44,677.3165    2,315,842 
Bitcoin sold   (10.0000)   (419)
Net realized loss on investment in bitcoin   
–
    (14)
Change in unrealized appreciation (depreciation) on investment in bitcoin   
–
    845,323 
Ending balance as of March 31, 2024*   44,667.3165   $3,160,732 

  

*No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Trust Expenses
 3 Months Ended
Mar. 31, 2024
Trust Expenses [Abstract]  
Trust Expenses

4. Trust Expenses

 

The Trust pays the unitary Sponsor Fee of 0.21% of the Trust’s bitcoin holdings. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period which commenced on January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, whichever comes first.

 

The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee. Operating expenses assumed by the Sponsor include (i) fees to the Sub-Adviser; (ii) the Marketing Fee, (iii) fees to the administrator, if any, (iv) fees to the bitcoin Custodian, (v) fees to the Transfer Agent, (vi) fees to the Trustee, (vii) the fees and expenses related to any future listing, trading or quotation of the Shares on any listing exchange or quotation system (including legal, marketing and audit fees and expenses), (viii) ordinary course legal fees and expenses but not litigation-related expenses, (ix) audit fees, (x) regulatory fees, including, if applicable, any fees relating to the registration of the Shares under the 1933 Act or Exchange Act, (xi) printing and mailing costs; (xii) costs of maintaining the Trust’s website and (xiii) applicable license fees (each, a “Sponsor-paid Expense,” and together, the “Sponsor-paid Expenses”), provided that any expense that qualifies as an Additional Trust Expense (as defined below) will be deemed to be an Additional Trust Expense and not a Sponsor-paid Expense.

 

The Sponsor will not, however, assume certain extraordinary, non-recurring expenses that are not Sponsor-paid Expenses, including, but not limited to, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders, any indemnification of the bitcoin Custodian, Administrator or other agents, service providers or counter-parties of the Trust, the fees and expenses related to the listing, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively, “Additional Trust Expenses”). Of the Sponsor-paid Expenses, ordinary course legal fees and expenses shall be subject to a cap of $100,000 per annum. In the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may be re-designated as an Additional Trust Expense.

 

To the extent that the Sponsor does not voluntarily assume expenses, they will be the responsibility of the Trust. The Sponsor also pays the costs of the Trust’s organization and offering. The Trust is not obligated to repay any such costs related to the Trust’s organization and offering paid by the Sponsor.
v3.24.1.1.u2
Creation and Redemption of Shares
 3 Months Ended
Mar. 31, 2024
Creation and Redemption of Shares [Abstract]  
Creation and Redemption of Shares

5. Creation and Redemption of Shares

 

The Trust creates and redeems Shares on a continuous basis but only in Creation Units consisting of 5,000 Shares or multiples thereof. Only Authorized Participants, which are registered broker-dealers who have entered into written agreements with the Sponsor and the Administrator, can place orders. The Trust engages in bitcoin transactions for converting cash into bitcoin (in association with purchase orders) and bitcoin into cash (in association with redemption orders). The Trust conducts its bitcoin purchase and sale transactions by, in its sole discretion, choosing to trade directly with third parties (each, a “bitcoin Trading Counterparty”), who are not registered broker-dealers pursuant to written agreements between such bitcoin Trading Counterparties and the Trust, or choosing to trade through the Prime Broker acting in an agency capacity with third parties through its Coinbase Prime service pursuant to the Prime Broker Agreement. A bitcoin Trading Counterparty may be an affiliate of an Authorized Participant.

 

The Authorized Participants deliver only cash to create Shares and receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation or redemption process or otherwise direct the Trust or a third-party with respect to purchasing, holding, delivering, or receiving bitcoin as part of the creation or redemption process.

 

The Trust creates Shares by receiving bitcoin from a third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to deliver the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the delivery of the bitcoin to the Trust or acting at the direction of the Authorized Participant with respect to the delivery of the bitcoin to the Trust. The Trust redeems shares by delivering bitcoin to a third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to receive the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the receipt of the bitcoin from the Trust or acting at the direction of the Authorized Participant with respect to the receipt of the bitcoin from the Trust. The third-party is unaffiliated with the Trust and the Sponsor.
v3.24.1.1.u2
Related Parties
 3 Months Ended
Mar. 31, 2024
Related Parties [Abstract]  
Related Parties

6. Related Parties

 

The Sponsor is a related party to the Trust. The Trust’s operations are supported by its Sponsor, who is in turn supported by its parent company and affiliated companies and external service providers.

 

As of March 31, 2024, the Sponsor owned zero Shares of the Trust.

 

The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares for their public offering in the United States and the listing of Shares on the Exchange.
v3.24.1.1.u2
Financial Highlights
 3 Months Ended
Mar. 31, 2024
Financial Highlights [Abstract]  
Financial Highlights

7. Financial Highlights*

 

Per Share Performance (for a Share outstanding throughout the period presented)

 

   For the
three months
ended		 
   March 31,
2024*		 
Net asset value per Share, beginning of period  $50.00 
Net investment loss on investment in bitcoin1   (0.02)
Net realized and unrealized gain on investment in bitcoin   20.76
Net change in net assets from operations   20.74 
Net asset value per Share, end of period  $70.74 
      
Total return, at net asset value2   41.48%
      
Ratios to average net assets3     
Net investment loss   (0.18)%
Gross Expenses   0.21%
Net Expenses   0.18%

 

*No comparative financial statements have been provided as this is the first fiscal year of the Trust’s operations.
1Calculated using average Shares outstanding.
2Total return is calculated based on the change in value during the period and is not annualized. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from the Trust.
3Annualized.
v3.24.1.1.u2
Commitments and Contingent Liabilities
 3 Months Ended
Mar. 31, 2024
Commitments and Contingent Liabilities [Abstract]  
Commitments and Contingent Liabilities

8. Commitments and Contingent Liabilities

 

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.
v3.24.1.1.u2
Indemnification
 3 Months Ended
Mar. 31, 2024
Indemnification [Abstract]  
Indemnification

9. Indemnification

 

The Sponsor will not be liable to the Trust, the Trustee or any Shareholder for any action taken or for refraining from taking any action in good faith, or for errors in judgment or for depreciation or loss incurred by reason of the sale of any bitcoin or other assets of the Trust. However, the preceding liability exclusion will not protect the Sponsor against any liability resulting from its own gross negligence, bad faith, or willful misconduct.

 

The Sponsor and each of its shareholders, members, directors, officers, employees, affiliates, and subsidiaries will be indemnified by the Trust and held harmless against any losses, liabilities or expenses incurred in the performance of its duties under the Declaration of Trust without gross negligence, bad faith, or willful misconduct. The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft, or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee’s counsel or by any other person for any matters arising under the Declaration of Trust. The Sponsor shall in no event be deemed to have assumed or incurred any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for in the Declaration of Trust. Such indemnity includes payment from the Trust of the costs and expenses incurred in defending against any indemnified claim or liability under the Declaration of Trust.

 

The Trustee will not be liable or accountable to the Trust or any other person or under any agreement to which the Trust or any series of the Trust is a party, except for the Trustee’s breach of its obligations pursuant to the Declaration of Trust or its own willful misconduct, bad faith or gross negligence. The Trustee and each of the Trustee’s officers, affiliates, directors, employees, and agents will be indemnified by the Trust from and against any losses, claims, taxes, damages, reasonable expenses, and liabilities incurred with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Declaration of Trust or the transactions contemplated thereby; provided that the indemnified party acted without willful misconduct, bad faith or gross negligence.
v3.24.1.1.u2
Subsequent Events
 3 Months Ended
Mar. 31, 2024
Subsequent Events [Abstract]  
Subsequent Events

10. Subsequent Events

 

The Trust has evaluated subsequent events and transactions for potential recognition or disclosure through the date the financial statements were issued and has determined that there are no material events that would require disclosure in the financial statements.
v3.24.1.1.u2
Pay vs Performance Disclosure
$ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
Pay vs Performance Disclosure  
Net Income (Loss) $ 844,610 [1]
[1] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Insider Trading Arrangements
 3 Months Ended
Mar. 31, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
Rule 10b5-1 Arrangement Modified false
Non-Rule 10b5-1 Arrangement Modified false
v3.24.1.1.u2
Accounting Policies, by Policy (Policies)
 3 Months Ended
Mar. 31, 2024
Significant Accounting Policies [Abstract]  
Basis of Accounting

Basis of Accounting

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP” or “GAAP”).

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 (“ASC”) 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 uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.

The preparation of the financial statements in conformity with US GAAP requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from such estimates as additional information becomes available or actual amounts may become determinable. Should actual results differ from those previously recognized, the recorded estimates will be revised accordingly with the impact reflected in the operating results of the Trust in the reporting period in which they become known.
Cash

Cash

Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits.
Investment Valuation

Investment Valuation

US 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.

The Trust identifies and determines the bitcoin principal market (or in the absence of a principal market, the most advantageous market) for GAAP purposes consistent with the application of the fair value measurement framework in FASB ASC 820. A principal market is the market with the greatest volume and activity level for the asset or liability. The determination of the principal market will be based on the market with the greatest volume and level of activity that can be accessed. The Trust obtains relevant volume and level of activity information and based on initial analysis will select an exchange market as the Trust’s principal market. The NAV and NAV per Share will be calculated using the fair value of bitcoin based on the price provided by this exchange market, as of 4:00 p.m. ET on the measurement date for GAAP purposes. The Trust will update its principal market analysis periodically and as needed to the extent that events have occurred, or activities have changed in a manner that could change the Trust’s determination of the principal market.

Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

Level 3: Unobservable inputs, including the Trust’s assumptions used in determining the fair value of investments, where there is little or no market activity for the asset or liability at the measurement date.

   Amount at   Fair Value Measurement Using 
(Amounts in thousands)  Fair Value   Level 1   Level 2   Level 3 
March 31, 2024                
Assets                
Investment in bitcoin  $3,160,732   $3,160,732   $
  –
   $
   –
 

 

*No comparative schedule has been provided as this the Trust did not hold any bitcoin as of December 31, 2023.

 

The cost basis of the investment in bitcoin recorded by the Trust for financial reporting purposes is the fair value of bitcoin at the time of transfer. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.
Investment Transactions

Investment Transactions

The Trust considers investment transactions to be the receipt of bitcoin for Share creations and the delivery of bitcoin for Share redemptions or for payment of expenses in bitcoin. The Trust records its investments transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in bitcoin.
Calculation of Net Asset Value (NAV) and NAV per Share

Calculation of Net Asset Value (NAV) and NAV per Share

On each business day, as soon as practicable after 4:00 p.m. (Eastern Time), the net asset value of the Trust is obtained by subtracting all accrued fees, expenses and other liabilities of the Trust from the fair value of the bitcoin and other assets held by the Trust. The Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made.
Federal Income Taxes

Federal Income Taxes

The Sponsor and the Trustee will treat the Trust as a “grantor trust” for U.S. federal income tax purposes. Although not free from doubt due to the lack of directly governing authority, if the Trust operates as expected, the Trust should be classified as a “grantor trust” for U.S. federal income tax purposes and the Trust itself should not be subject to U.S. federal income tax. Each beneficial owner of Shares will be treated as directly owning its pro rata Share of the Trust’s assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares. If the Trust sells bitcoin (for example, to pay fees or expenses), such a sale is a taxable event to Shareholders. Upon a Shareholder’s sale of its Shares, the Shareholder will be treated as having sold the pro rata share of the bitcoin held in the Trust at the time of the sale and may recognize gain or loss on such sale. The Sponsor has reviewed the tax positions as of March 31, 2024, and has determined that no provision for income tax is required in the Trust’s financial statements.
Recently Issued Accounting Pronouncement

Recently Issued Accounting Pronouncement

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. The Trust adopted this new guidance with no material impact on its financial statements and disclosures as the Trust uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes.
v3.24.1.1.u2
Significant Accounting Policies (Tables)
 3 Months Ended
Mar. 31, 2024
Significant Accounting Policies [Abstract]  
Schedule of Unobservable Inputs Trust’s Assumptions Fair Value of Investments Level 3: Unobservable inputs, including the Trust’s assumptions used in determining the fair value of investments, where there is little or no market activity for the asset or liability at the measurement date.
   Amount at   Fair Value Measurement Using 
(Amounts in thousands)  Fair Value   Level 1   Level 2   Level 3 
March 31, 2024                
Assets                
Investment in bitcoin  $3,160,732   $3,160,732   $
  –
   $
   –
 

 
v3.24.1.1.u2
Fair Value of Bitcoin (Tables)
 3 Months Ended
Mar. 31, 2024
Fair Value of Bitcoin [Abstract]  
Schedule of Changes in Quantity of Bitcoin The following represents the changes in quantity of bitcoin and the respective fair value on March 31, 2024*:

 

(Amounts in thousands, except Quantity of bitcoin)

  Quantity of bitcoin   Fair Value 
Beginning balance as of January 1, 2024   
–
   $
–
 
Bitcoin purchased   44,677.3165    2,315,842 
Bitcoin sold   (10.0000)   (419)
Net realized loss on investment in bitcoin   
–
    (14)
Change in unrealized appreciation (depreciation) on investment in bitcoin   
–
    845,323 
Ending balance as of March 31, 2024*   44,667.3165   $3,160,732 

  

*No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Financial Highlights (Tables)
 3 Months Ended
Mar. 31, 2024
Financial Highlights [Abstract]  
Schedule of Financial Highlights Per Share Performance Per Share Performance (for a Share outstanding throughout the period presented)
   For the
three months
ended		 
   March 31,
2024*		 
Net asset value per Share, beginning of period  $50.00 
Net investment loss on investment in bitcoin1   (0.02)
Net realized and unrealized gain on investment in bitcoin   20.76
Net change in net assets from operations   20.74 
Net asset value per Share, end of period  $70.74 
      
Total return, at net asset value2   41.48%
      
Ratios to average net assets3     
Net investment loss   (0.18)%
Gross Expenses   0.21%
Net Expenses   0.18%

 

*No comparative financial statements have been provided as this is the first fiscal year of the Trust’s operations.
1Calculated using average Shares outstanding.
2Total return is calculated based on the change in value during the period and is not annualized. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from the Trust.
3Annualized.
v3.24.1.1.u2
Organization (Details) - USD ($)
Jan. 09, 2024
Dec. 12, 2023
Organization [Line Items]    
Shares issued 10,000 2
Per share price $ 46.88 $ 50
Total proceeds $ 468,806,440 $ 100,000
v3.24.1.1.u2
Significant Accounting Policies (Details) - Schedule of Unobservable Inputs Trust’s Assumptions Fair Value of Investments - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Assets    
Investment in bitcoin [1] $ 3,160,732
Level 1 [Member]    
Assets    
Investment in bitcoin 3,160,732  
Level 2 [Member]    
Assets    
Investment in bitcoin  
Level 3 [Member]    
Assets    
Investment in bitcoin  
[1] No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Fair Value of Bitcoin (Details) - Schedule of Changes in Quantity of Bitcoin
$ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
 [1]
Schedule Of Changes In Quantity Of Bitcoin [Line Items]  
Quantity of bitcoin, beginning
Fair Value, beginning
Bitcoin purchased, Quantity of bitcoin 44,677.3165
Bitcoin purchased, Fair Value $ 2,315,842
Bitcoin sold, Quantity of bitcoin (10)
Bitcoin sold, Fair Value $ (419)
Net realized loss on investment in bitcoin, Quantity of bitcoin
Net realized loss on investment in bitcoin, Fair Value $ (14)
Change in unrealized appreciation (depreciation) on investment in bitcoin, Quantity of bitcoin
Change in unrealized appreciation (depreciation) on investment in bitcoin, Fair Value $ 845,323 [2]
Quantity of bitcoin, ending 44,667.3165
Fair Value, ending $ 3,160,732
[1] No comparative table has been provided as this is the first fiscal year of the Trust’s operations.
[2] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Trust Expenses (Details)
 3 Months Ended
Mar. 31, 2024
USD ($)
Trust Expenses (Details) [Line Items]  
Sponsor fee percentage 0.21%
Trust assets $ 1,000,000,000
Sponsor-paid Expenses 721,000 [1]
Sponsor [Member]  
Trust Expenses (Details) [Line Items]  
Sponsor-paid Expenses $ 100,000
[1] No comparative statement has been provided as this is the first fiscal year of the Trust’s operations.
v3.24.1.1.u2
Creation and Redemption of Shares (Details)
Mar. 31, 2024
shares
Creation and Redemption of Shares [Abstract]  
Creation units 5,000
v3.24.1.1.u2
Related Parties (Details)
Mar. 31, 2024
shares
Sponsor [Member]  
Related Parties [Line Items]  
Shares of the Trust, held by related parties 0
v3.24.1.1.u2
Financial Highlights (Details) - Schedule of Financial Highlights Per Share Performance
 3 Months Ended
Mar. 31, 2024
$ / shares
 [1]
Financial Highlights [Abstract]  
Net asset value per Share, beginning of period $ 50
Net investment loss on investment in bitcoin (0.02) [2]
Net realized and unrealized gain on investment in bitcoin 20.76
Net change in net assets from operations 20.74
Net asset value per Share, end of period $ 70.74
Total return, at net asset value 41.48% [3]
Net investment loss (0.18%) [4]
Gross Expenses 0.21% [4]
Net Expenses 0.18% [4]
[1] No comparative financial statements have been provided as this is the first fiscal year of the Trust’s operations.
[2] Calculated using average Shares outstanding.
[3] Total return is calculated based on the change in value during the period and is not annualized. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from the Trust.
[4] Annualized.
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