Fidelity Wise Origin Bitcoin Fund (FBTC) risk factors, FY2025 10-K

Other

1. 01Risk Factors Related to Digital Assets
2. 02The acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in a digital asset network, such as the Bitcoin network, could result in a “fork” in such network’s blockchain, resulting in the operation of multiple separate networks
3. 03Many digital asset networks face significant scaling challenges and are being upgraded with various features to increase the speed and throughput of digital asset transactions. These attempts to increase the volume of transactions may not be effective
4. 04Digital asset networks are developed by a diverse set of contributors and the perception that certain high-profile contributors will no longer contribute to the network could have an adverse effect on the market price of the related digital asset
5. 05Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity
6. 06These events are continuing to develop at a rapid pace and it is not possible to predict at this time all of the risks that they may pose to the Sponsor, the Trust, their affiliates and/or the Trust’s third-party service providers, or to the digital asset industry as a whole
7. 07Digital assets may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect on the market price of such digital assets
8. 08It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries
9. 09Bitcoin is a relatively new technological innovation with a limited operating history
10. 10A decline in the adoption of bitcoin could negatively impact the Trust
11. 11Irrevocable nature of blockchain-recorded transactions
12. 12The loss or destruction of a private key required to access bitcoin may be irreversible
13. 13A disruption of the internet may affect bitcoin operations, which may adversely affect the bitcoin industry and an investment in the Trust
14. 14Potential amendments to the Bitcoin network’s protocols and software could, if accepted and authorized by the Bitcoin network community, adversely affect an investment in the Trust
15. 15Decentralized governance of the Bitcoin network could have a negative impact on the performance of the Trust
16. 16In the event of a hard fork of the Bitcoin network, the Sponsor will, as permitted by the terms of the Trust Agreement, use its discretion to determine which network should be considered the appropriate network for the Trust’s purposes, and in doing so may adversely affect the value of the Shares
17. 17Digital asset networks, including the Bitcoin network, are subject to control by entities that capture a significant amount of the network’s processing power or a significant number of developers important for the operation and maintenance of such digital asset network
18. 18If miners expend less processing power on the Bitcoin network, it could increase the likelihood of a malicious actor obtaining control
19. 19Mathematical or technological advances could undermine the Bitcoin network’s consensus mechanism
20. 20The Bitcoin network faces scaling challenges and efforts to increase the volume of transactions may not be successful
21. 21New competing digital assets may pose a challenge to bitcoin’s current market position, resulting in a reduction in demand for bitcoin, which could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust
22. 22Competition from central bank digital currencies (“CBDCs”) could adversely affect the value of bitcoin and other digital assets
23. 23Prices of bitcoin may be affected by stablecoins, the activities of stablecoin issuers and their regulatory treatment
24. 24Operational cost may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin network
25. 25To the extent that any miners exclude some or all transactions, significant increases in fees and widespread delays in the recording of transactions could result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in Shares
26. 26Miners could act in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network
27. 27As technology advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust
28. 28If profit margins of bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in the price of bitcoin that could adversely affect an investment in the Trust
29. 29Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of miners and have a negative environmental impact and consequently affect the price of bitcoin
30. 30Large-Scale Sales or Distributions
31. 31Congestion or delay in the Bitcoin network may delay purchases, sales or transfers of bitcoin by the Trust
32. 32A reduction in the processing power expended by miners on the Bitcoin network could increase the likelihood of a malicious actor or botnet obtaining control
33. 33If the Bitcoin network is used to facilitate illicit activities or evade sanctions, businesses that facilitate transactions in bitcoin could be at increased risk of criminal or civil lawsuits, or of having services cut off, which could negatively affect the price of bitcoin and the value of the Shares
34. 34The Trust and the Sponsor, acting on behalf of the Trust, directly interact with (i) parties that are themselves subject to AML program requirements under the Bank Secrecy Act or similar laws (i.e., Authorized Participants and/or financial institution counterparties) and/or (ii) Authorized Participant Designees
35. 35Investment-Related Risks
36. 36The NAV may not always correspond to the market price of bitcoin
37. 37Different from directly owning bitcoin
38. 38The value of the Shares may be influenced by a variety of factors unrelated to the value of bitcoin
39. 39An Authorized Participant’s, or its Authorized Participant Designee’s, buying and selling activity associated with the creation and redemption of Baskets may adversely affect an investment in the Shares
40. 40The inability of Authorized Participants and market makers to hedge their bitcoin exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares
41. 41Arbitrage transactions intended to keep the price of Shares closely linked to the price of bitcoin may be problematic if the process for the creation and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares
42. 42The Authorized Participants serve in such capacity for several competing exchange-traded bitcoin products, which could adversely affect the Trust’s operations and the secondary market for the Shares
43. 43Security threats and cyber-attacks could result in the halting of Trust operations and a loss of Trust assets or damage to the reputation of the Trust, each of which could result in a reduction in the price of the Shares
44. 44The Trust’s risk management processes and policies may prove to not be adequate to prevent any loss of the Trust’s bitcoin
45. 45The Trust’s Custodian could become insolvent or become subject to a receivership or bankruptcy proceeding, which may result in a loss of or delay in access to Trust assets
46. 46Loss of a critical banking relationship for, or the failure of a bank used by, the Trust could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust
47. 47The Trust is subject to risks due to its concentration of investments in a single asset class
48. 48The lack of active trading markets for the Shares may result in losses on Shareholders’ investments at the time of disposition of Shares
49. 49Several factors may affect the Trust’s ability to achieve its investment objective on a consistent basis
50. 50The amount of bitcoin represented by the Shares will continue to be reduced during the life of the Trust due to the transfer of the Trust’s bitcoin to pay for the Sponsor Fee and other liabilities
51. 51Shareholders should be aware that the gradual decline in the amount of bitcoin represented by the Shares will occur regardless of whether the trading price of the Shares rises or falls in response to changes in the price of bitcoin
52. 52The Sponsor may need to find and appoint a replacement custodian quickly, which could pose a challenge to the safekeeping of the Trust’s bitcoin
53. 53The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Transfer Agent or the Custodian
54. 54Intellectual property rights claims may adversely affect the Trust and the value of the Shares
55. 55The Sponsor’s policies and procedures may not fully mitigate the risk of conflicts of interest
56. 56Risks Associated with the Index and Index Pricing

Risks related to pricing

1. 57As set forth under “Item 1. Business - Calculation of Net Asset Value”, the Trust’s portfolio will be priced, including for purposes of determining the NAV, based upon the VWMP of bitcoin used for the calculation of the Index as of the time of such valuation
2. 58Shareholders also should note that the size of the Trust in terms of total bitcoin held may change substantially over time and as Baskets are created and redeemed

Regulatory Risk

1. 59Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or commodity pools under the Commodity Exchange Act
2. 60The Trust is not registered as an investment company under the 1940 Act, and the Sponsor believes that the Trust is not permitted or required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies
3. 61Future and current regulations by a United States or foreign government or quasi-governmental agencies could have an adverse effect on an investment in the Trust
4. 62Future regulations may require the Trust or the Sponsor to become registered, which may cause the Trust to liquidate

Tax Risk

1. 63The ongoing activities of the Trust may generate tax liabilities for Shareholders
2. 64The tax treatment of bitcoin and transactions involving bitcoin for United States federal income tax purposes may change
3. 65The tax treatment of bitcoin and transactions involving bitcoin for state and local tax purposes is not settled
4. 66A hard “fork” of the Bitcoin Blockchain could result in Shareholders incurring a tax liability
5. 67The intended tax treatment of the Trust will limit the flexibility of the Trust’s investment decisions

Other Risks

1. 68The Exchange on which the Shares are listed may halt trading in the Trust’s Shares, which would adversely impact a Shareholder’s ability to sell Shares
2. 69The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares
3. 70The market infrastructure of the bitcoin spot market could result in the absence of active Authorized Participants able to support the trading activity of the Trust
4. 71Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect Shareholders’ investment in the Shares
5. 72The Sponsor relies heavily on key personnel
6. 73Shareholders have no right or power to take part in the management of the Trust. Accordingly, no investor should purchase Shares unless such investor is willing to entrust all aspects of the management of the Trust to the Trustee and the Sponsor
7. 74The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders
8. 75Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights
9. 76Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances
10. 77Shareholders may be adversely affected by an overstatement or understatement of the NAV calculation of the Trust due to the valuation methodology employed on the date of the NAV calculation
11. 78The Trust Agreement includes provisions that limit Shareholders’ voting rights and restrict Shareholders’ right to bring a derivative action