Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Trust's financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, the Trust's audited financial statements and related notes included elsewhere in this Annual Report, which have been prepared in accordance with generally accepted accounting principles in the U.S. ("U.S. GAAP"). The following discussion may contain forward-looking statements based on assumptions the Trust believes to be reasonable. The Trust's actual results could differ materially from those discussed in these forward-looking statements. See "Statement Regarding Forward-Looking Statements" above.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Trust and the Sponsor undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Annual Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Annual Report.

Trust Overview

The Trust's registration statement on Form S-1 relating to its continuous public offering of Shares was declared effective by the U.S. Securities and Exchange Commission on January 10, 2024 and the Shares of the Trust were listed on the Exchange on January 11, 2024.

The business and operations of the Trust are described above under Part I, Item I under the heading "Business", which is incorporated into this Item by reference.

Results of Operations

Financial Information for the year ended December 31, 2025 and the Period from January 10, 2024 (Commencement of Operations) to December 31, 2024

The following table sets forth statements of operations data for the year ended December 31, 2025 and the period from January 10, 2024 (commencement of operations) to December 31, 2024.

Statements of Operations

(Amounts in thousands)

Financial Information for the Year ended December 31, 2025 and the period from January 10, 2024 (commencement of operations) through December 31, 2024

The following provides a discussion of the material items that impacted the Trust's financial condition during the applicable period:

Sponsor Fee^

The Trust pays a unitary Sponsor Fee of 0.20% per annum of the Trust's bitcoin holdings. The Sponsor contractually waived the Sponsor Fee on the first $1 billion of the Trust assets through July 10, 2024, and has been accruing at an annual rate of 0.20% of the Trust's net assets since then. The Sponsor Fee for the year ended December 31, 2025 was approximately $8,132, compared to the Sponsor Fee for the period from January 10, 2024 (commencement of operations) through December 31, 2024 of approximately $4,577, of which $906 was contractually waived, resulting in a net Sponsor Fee of approximately $3,671. The increase in Sponsor Fee was primarily related to an increase in the Trust's NAV due to an increase in the fair value of bitcoin held by the Trust and the expiration of the Sponsor Fee waiver as of July 11, 2024.

Net Realized Gain (Loss) from Bitcoin^

Net realized gain on the sale of bitcoin to pay the Sponsor Fee for the year ended December 31, 2025 was approximately $5,019, compared to net realized gain on the sale of bitcoin to pay the Sponsor Fee for the period from January 10, 2024 (commencement of operations) to December 31, 2024 of approximately $1,288. This change was primarily due to the expiration of the Sponsor Fee waiver as of July 11, 2024 and an increase in the fair value of bitcoin held by the Trust.

Net realized loss on investment in bitcoin sold for redemptions for the year ended December 31, 2025 was approximately $42,062, compared to net realized loss on investment in bitcoin sold for redemptions for the period from January 10, 2024 (commencement of operations) to December 31, 2024 of approximately $50,869. This change was primarily due to the decrease in the fair value of bitcoin held by the Trust.

Net Change in Unrealized Appreciation (Depreciation) from Bitcoin^

Net change in unrealized depreciation on investment in bitcoin for the year ended December 31, 2025 was approximately $299,207, compared to net change in unrealized appreciation on investment in bitcoin for the period from January 10, 2024 (commencement of operations) to December 31, 2024 of approximately $1,639,849. This change was primarily due to a decrease in the fair value of bitcoin held by the Trust.

Net Increase (Decrease) in Net Assets resulting from Operations^

Net decrease in net assets resulting from operations for the year ended December 31, 2025 was approximately $344,382, compared to net increase in net assets resulting from operations for the period from January 10, 2024 (commencement of operations) to December 31, 2024 of approximately $1,586,597. This change was primarily due to an increase in net realized loss and a decrease in unrealized appreciation on investments in bitcoin, with a net realized and unrealized loss on investment in bitcoin of approximately $336,250, less the Sponsor Fee of $8,132, for the year ended December 31, 2025, compared to a net realized and unrealized gain on investment in bitcoin of approximately $1,590,268 less the Sponsor Fee of $3,671, for the period from January 10, 2024 (commencement of operations) to December 31, 2024.

The change in net realized and unrealized gain (loss) was primarily due to fluctuations in the bitcoin price during the respective period. For the year ended December 31, 2025, the net realized and unrealized loss on investment in bitcoin was driven by bitcoin BRRNY price depreciation from $93,730.35 per bitcoin as of December 31, 2024 to $87,315.53 per bitcoin as of December 31, 2025. For the period from January 10, 2024 (commencement of operations) to December 31, 2024, the net realized and unrealized gain on investment in bitcoin was driven by bitcoin BRRNY price appreciation from $45,852.66 per bitcoin as of January 10, 2024 (commencement of operations) to $93,730.35 per bitcoin as of December 31, 2024.

Net Assets^

As of December 31, 2025, the Trust held a net closing balance of 38,468.0468 bitcoin with a total market value of $3,358,858 based on the BRRNY price of $87,315.53 used to determine the Trust's NAV. The total market value of the Trust's bitcoin held was $3,367,647 based on the price of a bitcoin (Lukka Prime Rate) in the principal market (Crypto.com) of $87,544.00, used to determine the Trust's principal market NAV ("Principal Market NAV").

Net assets decreased to approximately $3,367,050 at December 31, 2025, with a 6.45% decrease in Principal Market NAV per Share for the year ended December 31, 2025. The decrease in net assets primarily resulted from the aforementioned bitcoin price depreciation, the net decrease resulting from capital share transactions of approximately $50,607, and a net decrease resulting from operations of $344,382.

As of December 31, 2024, the Trust held a net closing balance of 40,289.1335 bitcoin with a total market value of $3,776,314,581 based on the BRRNY price of $93,730.35, used to determine the Trust's NAV. The total market value of the Trust's bitcoin held was $3,762,723,445 based on the price of bitcoin (Lukka Prime Rate) in the principal market (Crypto.com) of $93,393.01, used to determine the Trust's Principal Market NAV.

Net assets increased to approximately $3,762,039 at December 31, 2024, with a 103.4% increase in Principal Market NAV per Share for the period from January 10, 2024 (commencement of operations) to December 31, 2024. The increase in net assets primarily resulted from the aforementioned bitcoin price appreciation, the net increase resulting from capital share transactions of approximately $2,175,442, and a net increase resulting from operations of $1,586,597.

^ Amounts displayed are in the '000s, except for per-Share/coin references

Liquidity and Capital Resources

The Trust agreed to pay the unitary Sponsor Fee of 0.20% per annum of the Trust's bitcoin holdings. The Sponsor contractually waived the Sponsor Fee on the first $1 billion of Trust assets through July 10, 2024, and has been accruing at an annual rate of 0.20% of the Trust's net assets since then. As a result, the only ordinary expense of the Trust is expected to be the Sponsor Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee's monthly fee and out-of-pocket expenses, the fees of the Trust's regular service providers (Cash Custodian, Bitcoin Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor also agreed to pay the costs of the Trust's organization.

The Trust may incur certain extraordinary, non-recurring expenses that are not assumed by the Sponsor, including but not limited to, taxes and governmental charges, any applicable brokerage commissions, financing fees, Bitcoin network fees and similar transaction fees, 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 Shareholders (including, for example, in connection with any fork of the Bitcoin blockchain, any Incidental Rights and any IR Asset), any indemnification of the Cash Custodian, Bitcoin Custodian, Prime Execution Agent, Transfer Agent, Administrator or other agents, service providers or counterparties of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.

The Trust does not hold a cash balance except in connection with the creation and redemption of Baskets (blocks of 10,000 Shares) or to pay expenses not assumed by the Sponsor. To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust's bitcoin as necessary to pay such expenses. The cash proceeds of the sale are sent to the Sponsor to pay the expenses. Any remaining cash is distributed back to the Cash Custodian. The Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust's only sources of cash are proceeds from the sale of Baskets and bitcoin. The Trust will not borrow to meet liquidity needs. See Part I, Item I under the heading "Business - Fees and Expenses" for an additional discussion of the Trust's fees and expenses.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs.

As of December 31, 2025, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Trust. While the Trust's exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Trust's financial position.

Sponsor Fee payments made to the Sponsor are calculated as a fixed percentage of the Trust's NAV. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods as NAVs are not known until a future date.

No material changes have occurred during the year ended December 31, 2025 or for the period from January 10, 2024 (commencement of operations) to December 31, 2024.

Critical Accounting Policies

Principal Market and Fair Value Determination

The Trust's periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurements and Disclosures" ("ASC Topic 820") and utilize an exchange-traded price from the Trust's principal market for bitcoin on the Trust's financial statement measurement date. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust's financial statements in accordance with U.S. GAAP. The Trust has engaged a third-party vendor to obtain a price from a principal market for bitcoin, which will be either the market the Trust normally transacts in for bitcoin or, if the Trust does not normally transact in any market or such market suffers an operational interruption and is unavailable, determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. Under U.S. GAAP, such a price is expected to be deemed a Level 1 input in accordance with ASC Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.

Investment Company Considerations

The Trust is an investment company for U.S. GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC Topic 946, Financial Services - Investment Companies. The Trust uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment company under the Investment Company Act of 1940. U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.

Please refer to Note 2 to the financial statements included in this Annual Report for further discussion of the Trust's accounting policies.