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Fidelity Wise Origin Bitcoin Fund 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Fidelity Wise Origin Bitcoin Fu

Filing date:

03/14/2025

TLDR:

ELI5:

FBTC is like a piggy bank that holds Bitcoin. In 2024, the value of the piggy bank went up a lot because Bitcoin’s price went up. But remember, Bitcoin’s price can also go down, so investing in FBTC is risky.

Accession #:

0000950170-25-039452

Published on

Analyst Summary

  • FBTC’s net assets reached $18.81 billion by the end of 2024, with a NAV per share of $81.56, reflecting substantial growth driven by Bitcoin’s price appreciation.
  • The fund operates passively, aiming to mirror the performance of Bitcoin as measured by the Fidelity Bitcoin Reference Rate (Index).
  • The net expense ratio was 0.14% after waivers, with the primary expense being the sponsor fee.
  • The fund held 201,556.08413894 Bitcoin as of December 31, 2024.
  • The fund achieved a total return of 103.90% at Net Asset Value and 103.95% at Market Value for the period January 11, 2024, to December 31, 2024.
  • Return on Assets (ROA): 36.82%
  • Return on Equity (ROE): 36.90%
  • Earnings Per Share (EPS) – Basic and Diluted: $0.0301 per share
  • Current Ratio: 462.09
  • Quick Ratio (Acid-Test Ratio): 171.23
  • Debt-to-Equity Ratio: 0.0022
  • Debt-to-Assets Ratio: 0.0022
  • Price-to-Earnings Ratio (P/E): 614.04
  • Price-to-Book Ratio (P/B): 0.91

Opportunities and Risks

  • Risk: Bitcoin Volatility – The fund’s performance is highly susceptible to Bitcoin’s price fluctuations.
  • Risk: Regulatory Uncertainty – Evolving regulations surrounding digital assets could significantly impact the fund.
  • Risk: Cybersecurity Threats – The fund relies on third-party custodians and service providers, making it vulnerable to cyberattacks.
  • Risk: Concentration Risk – The fund’s investment strategy is concentrated in a single asset, Bitcoin, maximizing exposure to market risks.
  • Opportunity: Increasing Bitcoin Adoption – Growing acceptance of Bitcoin as an investment asset could drive demand for FBTC shares.
  • Opportunity: Accessibility – FBTC provides investors with a convenient way to access the Bitcoin market through traditional brokerage accounts.
  • Opportunity: Passive Management – The fund’s passive management strategy offers a cost-effective approach to investing in Bitcoin.

Potential Implications

Company Performance

  • Continued growth in assets under management is dependent on Bitcoin’s price appreciation and investor demand.
  • The fund’s profitability is directly linked to the net change in unrealized appreciation on Bitcoin.
  • Sponsor fee waivers can significantly impact the fund’s net expenses and overall performance.

Stock Price

  • FBTC’s stock price will closely track Bitcoin’s price movements.
  • Regulatory developments and market sentiment towards Bitcoin can influence FBTC’s stock price.
  • Increased adoption of Bitcoin as an investment asset could drive demand for FBTC shares and positively impact its stock price.

SEC Filing Report: Fidelity Wise Origin Bitcoin Fund (FBTC) 10-K for FY2024

Executive Summary

This report analyzes the Fidelity Wise Origin Bitcoin Fund’s (FBTC) 10-K filing for the fiscal year ended December 31, 2024. FBTC, a passively managed exchange-traded product (ETP) seeking to track the performance of Bitcoin, commenced operations on January 11, 2024. The fund experienced significant growth in assets and share price, mirroring Bitcoin’s price appreciation. Key risks include Bitcoin’s inherent volatility, regulatory uncertainty, and cybersecurity threats. Opportunities lie in the increasing adoption of Bitcoin as an investment asset and FBTC’s accessibility through traditional brokerage accounts. Overall, the fund’s performance is directly tied to Bitcoin’s price movements, making it a high-risk, high-reward investment.

Company Overview

Fidelity Wise Origin Bitcoin Fund (FBTC) is a Delaware statutory trust launched on January 11, 2024. Its primary objective is to mirror the performance of Bitcoin, as measured by the Fidelity Bitcoin Reference Rate (Index), net of expenses. The fund operates passively, holding Bitcoin as its primary asset. Shares of FBTC are listed on the Cboe BZX Exchange. FD Funds Management LLC (a subsidiary of FMR LLC) serves as the Sponsor, while Fidelity Digital Asset Services, LLC (FDAS) acts as the Custodian.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

The MD&A highlights the fund’s substantial growth in net assets, driven by increased share issuance and Bitcoin’s price surge. Management emphasizes the passive nature of the fund and its commitment to tracking the Index. The narrative aligns with the financial data, showcasing a direct correlation between Bitcoin’s performance and FBTC’s value.

Financial Statement Analysis

Statement of Assets and Liabilities

* **Assets:** The fund’s primary asset is Bitcoin, valued at $18.82 billion as of December 31, 2024.
* **Liabilities:** Liabilities are minimal, primarily consisting of sponsor fee payables.
* **Net Assets:** Total net assets reached $18.81 billion, reflecting the fund’s growth.
* **NAV per Share:** The Net Asset Value (NAV) per share increased significantly from $40.00 on December 31, 2023, to $81.56 on December 31, 2024.

Statement of Operations

* **Expenses:** The primary expense is the sponsor fee, which was waived for a portion of the year.
* **Net Investment Income (Loss):** The fund reported a net investment loss due to the sponsor fee.
* **Net Realized and Change in Unrealized Gain (Loss):** The fund experienced a substantial net change in unrealized appreciation on Bitcoin, driving overall profitability.

Statement of Cash Flows

* **Operating Activities:** The fund’s operating cash flow is primarily influenced by Bitcoin purchases and sales related to share creation and redemption.
* **Financing Activities:** Cash flow from financing activities reflects proceeds from share issuance and cash paid for share redemptions.

Key Ratios and Metrics

* **Expense Ratio:** The net expense ratio was 0.14% after waivers.
* **Bitcoin Holdings:** The fund held 201,556.08413894 Bitcoin as of December 31, 2024.
* **NAV per Share Growth:** The NAV per share grew by 104.50% during the year.

Uncommon Metrics

The filing highlights the importance of the Fidelity Bitcoin Reference Rate (Index) in valuing the fund’s assets. The Index’s methodology, which uses a volume-weighted median price from multiple spot markets, is designed to mitigate manipulation and idiosyncratic market risk.

Risk and Opportunity Assessment

Risks

* **Bitcoin Volatility:** The fund’s performance is highly susceptible to Bitcoin’s price fluctuations.
* **Regulatory Uncertainty:** Evolving regulations surrounding digital assets could significantly impact the fund.
* **Cybersecurity Threats:** The fund relies on third-party custodians and service providers, making it vulnerable to cyberattacks.
* **Concentration Risk:** The fund’s investment strategy is concentrated in a single asset, Bitcoin, maximizing exposure to market risks.

Opportunities

* **Increasing Bitcoin Adoption:** Growing acceptance of Bitcoin as an investment asset could drive demand for FBTC shares.
* **Accessibility:** FBTC provides investors with a convenient way to access the Bitcoin market through traditional brokerage accounts.
* **Passive Management:** The fund’s passive management strategy offers a cost-effective approach to investing in Bitcoin.

Red Flags

* The fund’s reliance on a single asset (Bitcoin) creates significant concentration risk.
* The potential for regulatory changes in the digital asset space could adversely affect the fund.

Conclusion and Actionable Insights

FBTC’s performance is intrinsically linked to Bitcoin’s price movements. While the fund offers a convenient and cost-effective way to invest in Bitcoin, it also carries substantial risks due to Bitcoin’s volatility and regulatory uncertainty.

**Overall Assessment:** The fund is a high-risk, high-reward investment suitable for investors with a strong belief in Bitcoin’s long-term potential and a high-risk tolerance.

**Recommendations:**

* **Monitor Bitcoin’s Price:** Closely track Bitcoin’s price movements and understand the factors driving its volatility.
* **Stay Informed on Regulations:** Keep abreast of regulatory developments in the digital asset space.
* **Assess Risk Tolerance:** Carefully evaluate your risk tolerance before investing in FBTC.
* **Consider Diversification:** Diversify your investment portfolio to mitigate the risks associated with a concentrated investment in Bitcoin.

Fidelity Wise Origin Bitcoin Fund (FBTC) Financial Analysis – December 31, 2024

1. Commentary

Fidelity Wise Origin Bitcoin Fund (FBTC) experienced substantial growth in its first year of operations, primarily driven by significant appreciation in the value of its Bitcoin holdings. The fund’s net assets reached $18.814 billion by the end of 2024, with a corresponding NAV per share of $81.56. The fund’s expenses were relatively low, partially offset by sponsor fee waivers. The fund’s performance is directly tied to the price of Bitcoin, making it susceptible to the volatility inherent in the cryptocurrency market.

2. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin: Not applicable for this type of fund.
  • Operating Profit Margin: Not applicable for this type of fund.
  • Net Profit Margin: Not applicable for this type of fund.
  • Return on Assets (ROA):

    • Metric: $6,942,927 / $18,855,191 = 36.82%
  • Return on Equity (ROE):

    • Metric: $6,942,927 / $18,814,390 = 36.90%
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Metric: $6,942,927 / 230,678,476 = $0.0301 per share

Liquidity

  • Current Ratio:

    • Metric: $18,855,191 / $40,801 = 462.09
  • Quick Ratio (Acid-Test Ratio):

    • Metric: ($18,855,191 – $11,468,257) / $40,801 = 171.23
  • Cash Ratio:

    • Metric: $0 / $40,801 = 0

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Metric: $40,801 / $18,814,390 = 0.0022
  • Debt-to-Assets Ratio:

    • Metric: $40,801 / $18,855,191 = 0.0022
  • Interest Coverage Ratio (Times Interest Earned): Not applicable as there is no interest expense.

Activity/Efficiency

These ratios are not applicable for this type of fund.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Metric: $73.93 / $0.1204 = 614.04 (Stock price as of 2025-03-14, EPS annualised)
  • Price-to-Book Ratio (P/B):

    • Metric: $73.93 / $81.56 = 0.91
  • Price-to-Sales Ratio (P/S): Not applicable for this type of fund.
  • Enterprise Value to EBITDA (EV/EBITDA): Not applicable for this type of fund.

Growth Rates

  • Revenue Growth:

    • Metric: N/A (First year of operation)
  • Net Income Growth:

    • Metric: N/A (First year of operation)
  • EPS Growth:

    • Metric: N/A (First year of operation)

Other Relevant Metrics

  • Sponsor Fee Waiver: The fund received a sponsor fee waiver of $11,603,000. This reduced the net expenses of the fund, positively impacting the net increase in net assets.
  • Total Return: The fund achieved a total return of 103.90% at Net Asset Value and 103.95% at Market Value for the period January 11, 2024, to December 31, 2024. This highlights the significant appreciation in the value of Bitcoin during this period.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️