10-Q: Bitwise 10 Crypto Fund Reports Strong Q3 2025 Performance

Bitwise 10 Crypto Index Fund reported a significant increase in net assets and strong investment gains for the three and nine months ended September 30, 2025, driven by appreciation in its crypto asset portfolio.

Summary

• Net Assets increased to $1,630,685,631 as of September 30, 2025, from $1,365,739,802 at December 31, 2024, representing a 19.39% increase.
• Principal Market NAV per share rose to $80.56 at September 30, 2025, from $67.47 at December 31, 2024, an increase of 19.40%.
• The net increase in Net Assets resulting from operations for the nine months ended September 30, 2025, was $264,945,829, up from $232,926,331 for the same period in 2024.
• Total return for the nine months ended September 30, 2025, was 19.40%, which is lower than the 33.20% for the same period in 2024.
• Management fees for the nine months ended September 30, 2025, were $26,439,820, up from $17,877,678 in 2024, due to an increase in the Trust's net asset value.
• The Trust maintains a 99.99% correlation between its Portfolio Crypto Assets and the Bitwise 10 Large Cap Crypto Index.
• Bitcoin and Ethereum constitute the majority of the portfolio, at 72.41% and 15.97% respectively, as of September 30, 2025.
• The Trust's shares traded at an average discount of 15.65% to NAV from December 9, 2020, to September 30, 2025, with no arbitrage mechanism to keep the shares closely linked to NAV.

Sentiment

Score: 7

Explanation: The Trust demonstrated strong financial performance with significant increases in net assets and investment gains, reflecting a positive crypto market environment. However, the persistent discount of market price to NAV, high management fees relative to newer products, and the ongoing delay in NYSE Arca listing temper the overall sentiment. The inherent volatility and regulatory risks of crypto assets also contribute to a cautious outlook despite strong recent performance.

Positives

• Net Assets increased to $1,630,685,631 as of September 30, 2025, from $1,365,739,802 at December 31, 2024, representing a 19.39% increase.
• Principal Market NAV per share rose to $80.56 at September 30, 2025, from $67.47 at December 31, 2024, an increase of 19.40%.
• Net increase in Net Assets resulting from operations for the nine months ended September 30, 2025, was $264,945,829, an increase from $232,926,331 for the same period in 2024.
• Net realized gain from Crypto Assets for the nine months ended September 30, 2025, was $21,554,881, significantly higher than $3,649,449 for the same period in 2024.
• Net change in unrealized appreciation from Crypto Assets for the nine months ended September 30, 2025, was $269,830,768, an increase from $247,154,609 for the same period in 2024.
• The Trust achieved a high correlation of 99.99% between its Portfolio Crypto Assets and the Bitwise 10 Large Cap Crypto Index, indicating effective tracking.

Negatives

• Total return for the nine months ended September 30, 2025, was 19.40%, which is lower than the 33.20% reported for the same period in 2024.
• Shares traded at a significant average discount of 15.65% to NAV from December 9, 2020, to September 30, 2025, with no arbitrage mechanism to correct this due to the lack of an ongoing redemption program and Rule 144 holding period.
• Management fees increased to $26,439,820 for the nine months ended September 30, 2025, from $17,877,678 in 2024, representing a 2.5% per annum fee on net assets, which is relatively high.
• The Trust has closed the acceptance of all subscriptions to the fund as of November 18, 2021, limiting new capital inflow.
• The registration statement on Form S-3 for NYSE Arca listing has not yet been declared effective, indicating a delay in a potentially significant market access improvement.

Risks

• Extreme volatility of trading prices for Crypto Assets, including Bitcoin, which could materially adversely affect the value of Shares.
• Uncertain medium-to-long term value of Shares due to the recent development of Crypto Assets and Blockchain technologies.
• The value of Shares depends on the acceptance of Crypto Assets and Blockchain technology, a new and rapidly evolving industry.
• The unregulated nature and lack of transparency surrounding Blockchain technologies and crypto assets may adversely affect the value of Portfolio Crypto Assets and the Shares.
• The possibility that Shares may trade at a price that is at, above, or below the Trust's NAV Per Share, with no arbitrage mechanism to keep them closely linked.
• Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies that may affect the value of the Shares or restrict the use of one or more Crypto Assets, Mining activity, or the operation of their networks or markets.
• Changes in the policies of the SEC that could adversely impact the value of the Shares.
• The possibility that the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses and decreased liquidity for the Shares.
• Potential conflicts of interest that may arise among the Sponsor or its affiliates and the Trust, as the Sponsor has significant discretion and limited fiduciary duties.
• The Trust relies heavily on the expertise of the Sponsor's executive officers and key personnel; the loss of any of these individuals could adversely impact management and operations.
• The potential discontinuance of the Sponsor's continued services, which could be detrimental to the Trust and potentially lead to its termination and liquidation.
• Custody risks, where Crypto Assets residing on an exchange that closes due to fraud, failure, or security breaches may be lost. As of September 30, 2025, approximately $3,250,484 in Crypto Assets resided on exchanges.
• Over-the-counter (OTC) market transactions expose the Trust to counterparty risk, as participants are typically not subject to credit evaluation and regulatory oversight.
• The Trust is not a banking institution and its deposits or assets are not subject to FDIC or SIPC protection.
• Technological risks, including the inability to identify and mitigate new security threats, which could lead to theft, loss, or destruction of the Trust's Crypto Assets.
• Risks associated with a Crypto Asset majority control (51% attack) on underlying distributed networks, which could adversely alter governance and affect ownership or value.
• Transaction authentication depends on miners or validators; a shortage could adversely affect the fair value or realization of Crypto Assets.
• Geopolitical events (e.g., military conflict, terrorism, sanctions), adverse economic developments (e.g., rising energy costs, inflation, interest rates), and catastrophic events could have a negative effect on the financial performance and operations of the Trust.

Future Outlook

The Trust expects to terminate quotation on the OTCQX U.S. Marketplace on or about the date of the commencement of the offering of shares pursuant to its Form S-3 registration statement, which has not yet been declared effective. The Sponsor has no plans to reopen subscriptions to the Bitwise 10 Crypto Index Fund after closing them on November 18, 2021. The Trust does not expect its assessment related to unrecognized tax benefits to materially change over the next 12 months.

Management Comments

• "The Trust believes that it has met its principal investment objective."
• "The Trust is aware that the market price of the Trusts shares may deviate from the net asset value (NAV) of the shares, and the market price may at times be significantly above or below the shares NAV."
• "The Trust believes that any such deviation does not affect the Trusts principal investment objective, as the Trust does not maintain or promote any business objectives related to the market trading price of its shares."
• "Under Regulation M, the Trust, as issuer of the Shares, is not permitted to take any actions that would seek to reconcile the NAV of the Shares and the market price of the Shares, and the Trust would not undertake business objectives that it was legally restricted from achieving."
• "The Sponsor expects the Trust will typically have a very small cash balance at each reporting period."
• "Management continues to evaluate the impact of current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions; and other geopolitical events; as well as adverse developments in the economy, the capital markets and the Blockchain markets, including rising energy costs, inflation and interest rates, in the United States and globally; and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, and global health epidemics."
• "Management has concluded that while it is reasonably possible that these events could have a negative effect on the financial performance and operations of the Trust, the specific impact is not readily determinable as of the date of the financial statements."

Industry Context

The filing highlights the extreme volatility inherent in the crypto asset market, noting significant price fluctuations in Bitcoin and other digital assets throughout 2017-2025, including a recent flash crash in October 2025. It also touches on the evolving regulatory landscape for crypto assets, which could impact demand and prices. The Trust's objective to track a broad-based crypto index reflects a common investment strategy in the digital asset space, aiming to provide diversified exposure without direct asset management. The discussion of NAV premiums/discounts and the lack of an arbitrage mechanism is a known issue for many closed-end crypto funds or trusts compared to spot ETFs.

Comparison to Industry Standards

• The Trust achieved a 99.99% correlation with the Bitwise 10 Large Cap Crypto Index, indicating excellent tracking performance, which is a key metric for index funds.
• The average discount of 15.65% to NAV for BITW shares on OTCQX is a significant deviation compared to actively managed ETFs or spot ETFs (like proposed Bitcoin ETFs) which typically aim for minimal tracking error and NAV deviation through creation/redemption mechanisms.
• The 2.5% per annum management fee is relatively high compared to many traditional index funds or even newer spot crypto ETFs, which often have fees below 1%. For example, some Bitcoin spot ETFs have launched with fees as low as 0.20% to 0.25%.

Corporate Governance

Related Party Transactions

• Bitwise Investment Advisers, LLC (Sponsor) receives a management fee of 2.5% per annum of all Crypto Assets owned by the Trust.
• Bitwise Index Services, LLC (Index Provider), an affiliate of the Sponsor, administers the Bitwise 10 Large Cap Crypto Index, which the Trust tracks, under a limited, non-exclusive, revocable license agreement at no cost to the Trust.
• The Sponsor and its affiliates may engage in proprietary trading or maintain positions in Crypto Assets held by the Trust, potentially influencing prices or availability.

Stakeholder Impact

• Shareholders: Experienced significant appreciation in NAV per share but also a persistent discount of market price to NAV. Subject to high management fees and risks associated with crypto volatility and regulatory changes. The lack of a redemption program limits arbitrage opportunities.
• Sponsor (Bitwise Investment Advisers, LLC): Benefits from increased management fees due to the growth in the Trust's net assets. Bears responsibility for most ordinary operating expenses.
• Custodian (Coinbase Custody Trust Company, LLC): Holds the majority of the Trust's crypto assets, indicating continued business relationship.
• Regulators (SEC): The Trust is subject to SEC filing requirements and is seeking to list on NYSE Arca, indicating ongoing engagement with regulatory bodies.

Next Steps

• The Sponsor expects to terminate quotation on the OTCQX U.S. Marketplace on or about the date of the commencement of the offering of shares pursuant to the Form S-3 registration statement.
• The Trust will continue to rebalance its portfolio monthly alongside the Bitwise 10 Large Cap Crypto Index.
• The Sponsor will continue to evaluate the impact of geopolitical events, economic conditions, and catastrophic events on the Trust's financial performance.

Key Dates

Recommendation

The Trust has demonstrated strong performance in a rising crypto market, effectively tracking its index and generating substantial unrealized gains. However, the significant and persistent discount of the share price to NAV, coupled with a relatively high management fee and the absence of a redemption mechanism, makes it less attractive for new investment compared to potential spot ETFs with lower fees and better arbitrage. Existing shareholders should hold to benefit from continued market appreciation, but new capital might find better entry points or structures elsewhere. The pending NYSE Arca listing could be a positive catalyst if it introduces a redemption mechanism or improves market efficiency, but its effectiveness is uncertain.

Keywords

Crypto Index Fund, Bitcoin, Ethereum, Crypto Assets, Blockchain, SEC Filing, 10-Q, Investment Fund, Digital Assets, Bitwise, NAV, Market Volatility, Regulation, Custody, Financial Performance