Osprey Bitcoin Trust (OBTC) risk factors, FY2025 10-K

Other

1. 01Risk Factors Related to Digital Assets
2. 02Digital assets represent a new and rapidly evolving industry, and the value of the Shares depends on the continued acceptance of Bitcoin
3. 03Changes in the governance of a digital asset network may not receive sufficient support from users and miners, which may negatively affect that digital asset network’s ability to grow and respond to challenges
4. 04Potential 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
5. 05Digital asset networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful
6. 06Digital 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
7. 07A temporary or permanent “fork” could adversely affect the value of the Shares
8. 08In addition, many developers have previously initiated hard forks in the Blockchain to launch new digital assets, such as Bitcoin Gold and Bitcoin Diamond. To the extent such digital assets compete with Bitcoin, such competition could impact demand for Bitcoin and could adversely impact the value of the Shares
9. 09Shareholders may not receive the benefits of any forks or “airdrops.”
10. 10In the event of a hard fork of the Bitcoin network, the Sponsor will, if 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
11. 11A hard fork could change the source code to the Bitcoin network, including the 21 million Bitcoin supply cap
12. 12Any name change and any associated rebranding initiative by the core developers, users or miners of Bitcoin or the Bitcoin network may not be favorably received by the digital asset community, which could negatively impact the value of Bitcoin and the value of the Shares
13. 13The value of the Shares relates directly to the value of Bitcoin, the value of which may be highly volatile and subject to fluctuations due to a number of factors
14. 14Because the Trust holds only Bitcoin and cash, an investment in the Trust may be more volatile than an investment in a more broadly diversified portfolio
15. 15The Index has a limited performance history, the Index price could fail to track the global Bitcoin price, and a failure of the Index could adversely affect an investment in the Shares
16. 16The Index used to calculate the value of the Trust’s Bitcoin may be volatile, adversely affecting the value of the Shares
17. 17Competition from central bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adversely affect the value of Bitcoin and other digital assets
18. 18Prices of Bitcoin may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers and their regulatory treatment
19. 19Competition from the emergence or growth of other digital assets or methods of investing in Bitcoin could have a negative impact on the price of Bitcoin and adversely affect the value of the Shares
20. 20Competition from other exchange-traded Bitcoin products could adversely affect the Trust and the value of the Shares
21. 21The Trust may be negatively impacted by the effects of public health emergencies on the global economy and the markets and service providers relevant to the performance of the Trust
22. 22The amount of the Trust’s assets represented by each Share will decline over time as the Trust pays the Management Fee and additional expenses borne by the Trust, and as a result, the value of the Shares may decrease over time
23. 23The Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of Bitcoin. The Trust is not actively managed and will be affected by a general decline in the price of Bitcoin
24. 24The value of the Shares may be influenced by a variety of factors unrelated to the value of Bitcoin
25. 25In the event that one or more Authorized Participants withdraw from or cease participation in creation and redemption activity for any reason, the liquidity of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in your incurring a loss on your investment in Shares
26. 26The Trust is an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Shares less attractive to investors
27. 27The lack of an active trading market for the Shares may result in losses on your investment at the time of disposition of your Shares
28. 28As an owner of Shares, you do not have the rights normally associated with ownership of other types of shares
29. 29The Sponsor and the Trustee may agree to amend the Trust Agreement without the consent of the Shareholders
30. 30Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act or the protections afforded by the Commodity Exchange Act
31. 31The Trust is not a registered investment company under the Investment Company Act, and the Sponsor believes that the Trust is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies
32. 32Security threats to the Trust’s account at the Bitcoin Custodian 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 value of the Shares
33. 33Bitcoin transactions are irrevocable, and stolen or incorrectly transferred Bitcoin may be irretrievable. As a result, any incorrectly executed Bitcoin transactions could adversely affect the value of the Shares
34. 34The lack of full insurance and Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent and Custodian expose the Trust and its Shareholders to the risk of loss of the Trust’s Bitcoin for which no person or entity is liable
35. 35Loss of a critical banking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust
36. 36The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to Shareholders
37. 37The Trust Agreement includes provisions that limit Shareholders’ voting rights and restrict Shareholders’ right to bring a derivative action
38. 38Your right to bring derivative actions is limited and it might be difficult for minority Shareholders to locate other Shareholders to reach the ownership threshold for derivative actions
39. 39The Index price being used to determine the NAV of the Trust may not be consistent with GAAP. The net assets reported in the Trust’s periodic financial statements may differ, in some cases significantly, from the Trust’s NAV determined using the Index pricing
40. 40Extraordinary Expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares
41. 41The Trust’s delivery or sale of Bitcoin to pay expenses or other operations of the Trust could result in Shareholders incurring tax liability without an associated distribution from the Trust
42. 42The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Trust Administrator, the Bitcoin Custodian or the Cash Custodian under the Trust Documents
43. 43Intellectual property rights claims may adversely affect the Trust and the value of the Shares
44. 44If the Trust fails to maintain an effective system of internal controls, it may not be able to accurately or timely report our financial condition or results of operations or prevent fraud which may adversely affect the market for the Shares
45. 45Risk Factors Related to the Regulation of the Trust and the Shares
46. 46A determination that Bitcoin or any other digital asset is a “security” may adversely affect the value of Bitcoin and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust
47. 47Competing industries may have more influence with policymakers than the digital asset industry, which could lead to the adoption of laws and regulations that are harmful to the digital asset industry
48. 48Regulatory changes or actions in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, mining activity or the operation of their networks or the digital asset platform market in a manner that adversely affects the value of the Shares
49. 49If regulators or public utilities take actions that restrict or otherwise impact mining activities, there may be a significant decline in such activities, which could adversely affect the Bitcoin network and the value of the Shares
50. 50If regulators subject the Trust, the Trustee or the Sponsor to regulation as a money service business or money transmitter, this could result in Extraordinary Expenses to the Trust, the Trustee or the Sponsor and also result in decreased liquidity for the Shares
51. 51If the Bitcoin network is used to facilitate illicit activities, businesses that facilitate Bitcoin transactions could be at increased risk of criminal or civil liability, or of having services cut off, which could negatively affect the price of Bitcoin and the value of the Shares
52. 52Regulatory changes or interpretations could obligate the Trust, the Trustee or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust
53. 53The treatment of the Trust for U.S. federal income tax purposes is uncertain
54. 54The treatment of digital currency for U.S. federal income tax purposes is uncertain
55. 55Future developments regarding the treatment of digital currency for U.S. federal income tax purposes could adversely affect the value of the Shares
56. 56Future developments in the treatment of digital currency for tax purposes other than U.S. federal income tax purposes could adversely affect the value of the Shares
57. 57A U.S. Tax-Exempt Shareholder may recognize “unrelated business taxable income” as a consequence of an investment in Shares
58. 58Shareholders could incur a tax liability without an associated distribution of the Trust
59. 59A hard “fork” of the Bitcoin blockchain could result in Shareholders incurring a tax liability
60. 60Risk Factors Related to Potential Conflicts of Interest
61. 61Shareholders cannot be assured that the Sponsor will be willing or able to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities on behalf of the Trust and a substitute sponsor is not appointed, the Trust will terminate and liquidate its Bitcoin
62. 62Although the Bitcoin Custodian is a fiduciary with respect to the Trust’s assets, it could resign or be removed by the Sponsor, which may trigger early dissolution of the Trust
63. 63Coinbase serves as the Bitcoin custodian for several competing exchange-traded Bitcoin products, which could adversely affect the Trust’s operations and ultimately the value of the Shares
64. 64Shareholders and Authorized Participants lack the right under the Custodial Services Agreement to assert claims directly against the Bitcoin Custodian, which significantly limits their options for recourse
65. 65Risk Factors Related to ERISA