Bitwise Solana Staking ETF Annual Report - How They Did This Year

What is the Bitwise Solana Staking ETF (BSOL)?

Alright, let's start with the basics! The Bitwise Solana Staking ETF, or "BSOL," trades on NYSE Arca. This major U.S. exchange offers a regulated and easy way to trade ETFs. BSOL lets regular investors like us get into Solana.

Think of it this way: Buying Solana directly can be tricky. You deal with digital wallets, exchanges, and private keys. It can feel daunting. Instead, you can buy BSOL shares through your brokerage account. It's just like buying shares of Apple or Google.

What it aims to do:

1. Primary Goal: Its main job is to follow Solana's price. It tracks the value of Solana it holds, after subtracting its operating costs. These costs include the ETF's annual fee. This fee affects how closely the ETF matches Solana's price.
2. Secondary Goal: It also tries to earn more Solana by "staking" it. This sets BSOL apart. Staking can boost your returns beyond just price increases.

What is Solana? Solana is a digital asset, or cryptocurrency, like Bitcoin or Ethereum. It's known for fast transactions and low costs. Solana also supports smart contracts and decentralized apps. But owning Solana differs greatly from owning a stock or bond.

• Not a company: You don't own a piece of a company with Solana. There are no company profits or regular payments like stock dividends. Its value comes from network use, developer interest, and market demand.
• Decentralized: A public, shared digital record tracks Solana ownership. No central bank or brokerage controls it.

The ETF makes investing in Solana easier and potentially safer. You avoid the complex steps of buying and storing the digital asset yourself. This structure adds regulatory oversight and simplifies operations. It avoids risky financial tools like derivatives. It also doesn't borrow money to boost returns (leverage). This choice reduces extra risks and market swings. It gives you a simpler way to invest in Solana's price.

How Does BSOL Work?

Bitwise Investment Advisers, LLC, or the "Sponsor," manages the Bitwise Solana Staking ETF. The Sponsor oversees the ETF's operations, strategy, and rules. Here's how it works:

• Tracking Solana's Price: The ETF values its Solana and shares daily. It uses a standard U.S. dollar price for Solana. This is called the "CME CF Solana – Dollar Reference Rate." This rate is a reliable, clear benchmark. It comes from many Solana trades across major exchanges. This ensures the ETF's value truly reflects Solana's market price.
• Safely Holding Your Solana: Coinbase Custody Trust Company, LLC, the "Solana Custodian," holds the ETF's Solana securely. They act like a super-secure digital vault. Coinbase Custody uses top-tier security. This includes offline storage and special multi-signature wallets. These protect digital assets from cyber threats. While they are a regulated trust company, FDIC insurance does not cover their holdings. However, they do carry private insurance. As a New York State-chartered trust company, they face strict oversight and regular checks. FDIC insurance protects bank deposits up to $250,000. This does not apply to digital assets. Still, Coinbase Custody has private insurance. This covers certain losses like theft or cyberattacks. These policies have specific limits and exclusions.
• Earning More Solana Through Staking: This is why "Staking" is in the ETF's name!
  • The ETF stakes almost all its Solana. It aims for 100%, keeping a small amount for daily needs. This small reserve (under 1%) covers daily share trades and ETF costs. It prevents disrupting the staking process.
  • What is Staking? Imagine Solana as a digital network. Staking helps secure and run this network. The ETF stakes its Solana to support network security. It also helps validate transactions. Special Staking Agents run "validators." These validators propose and confirm new transaction blocks. In return, the network rewards you with more Solana. This differs from traditional interest. It involves active network participation and security. It also carries risks like 'slashing.' Slashing means a validator's staked Solana can be penalized. This happens for bad behavior or network downtime. It's a bit like earning interest on savings, but with digital assets.
  • The ETF uses "Staking Agents" for this process. These agents manage the technical systems, or "validators," needed for staking. Using professional Staking Agents helps reduce operational and slashing risks. The extra Solana earned from staking boosts the ETF's total assets. This benefits shareholders like you! This extra Solana is always reinvested. It grows the amount of Solana held. This increases the value of each share for investors.
• Creating and Redeeming Shares:
  • The ETF has a special way to create or remove shares. This happens in large groups of 10,000 shares, called "Baskets." These Baskets are the standard for large transactions. They let big investors and market makers deal directly with the ETF.
  • Only special financial firms, "Authorized Participants," can do this. Authorized Participants are key for the ETF's easy trading and fair pricing. They create or redeem Baskets. This helps them profit from small price differences. It keeps the ETF's share price close to its actual Solana value.
  • They can trade actual Solana for shares ("In-Kind"). Or they can trade cash for shares ("Cash Creations/Redemptions"). Trading Solana for shares is often better. It avoids taxes for the ETF and has little market impact. If cash is used, the ETF buys or sells Solana to match. Cash trades happen when Solana-for-shares trades aren't possible. This requires the ETF to buy or sell Solana on the open market.
  • This process keeps the ETF's share price near the value of its Solana. This balancing act ensures market fairness. It means investors pay a price that truly reflects the Solana value. It prevents big price gaps.
• Passive Management: The Sponsor does not actively buy or sell Solana. It simply holds and stakes Solana as planned. This means it avoids trying to predict market moves. It also avoids complex trading strategies. This hands-off approach ties the ETF's performance directly to Solana's price and staking rewards. It avoids extra manager-specific risk. It also typically leads to lower management fees than actively managed funds.

A Look at the Past Year (Fiscal Year Ended December 31, 2025)

This report covers the fiscal year ending December 31, 2025. As of March 16, 2026, 51,120,000 BSOL shares were outstanding. This number shows the total shares investors hold. It reflects demand for the ETF since it started. It also includes shares created or redeemed.

What's Next? (Future Outlook & Risks)

This document also includes "forward-looking statements." These are basically predictions about the future. They are a standard legal warning. They tell investors that future results are uncertain. Actual outcomes might differ greatly from forecasts. This can happen due to market changes, new rules, or tech shifts. It reminds us these are just predictions. Actual results could vary for many reasons.

Potential risks include:

• Solana Price Volatility Risk: BSOL's value is directly tied to Solana's highly unstable price. Solana's price can change quickly and significantly.
• Regulatory Risk: Crypto rules are always changing and uncertain worldwide. This could hurt Solana's use, market price, or the ETF's operations.
• Staking Risks: These include 'slashing' (penalties for validator mistakes or downtime). Also, smart contract flaws in staking. And staked assets might be hard to sell during waiting periods.
• Custody Risk: Even with a regulated custodian, loss risks remain. These include security breaches, operational failures, or the custodian going out of business. Digital assets lack traditional bank insurance.
• Technological and Network Risks: Solana's network uses complex technology. Risks include software bugs, network outages, or successful attacks on the blockchain.
• Concentration Risk: The ETF invests only in Solana. Its performance depends entirely on Solana's success and stability.
• Market and Trading Risk: During tough market times, creating or selling shares might be hard. Selling Solana holdings could also be difficult. This might cause the ETF's market price to stray from its actual value.
• Tax Implications: Tax rules for digital assets and staking rewards are complex. They can change, affecting your returns.

This guide offers a clear look into how the Bitwise Solana Staking ETF works and the key risks involved. Use this information to help decide if BSOL fits your investment strategy and comfort with digital asset volatility.