UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL ~~Annual~~REPORT ~~report~~PURSUANT ~~pursuant~~TO toSECTION ~~Section~~ 13 orOR 15(d) ~~of the~~ ~~Securities~~OF ~~Exchange~~THE ~~Act~~SECURITIES ofEXCHANGE ACT OF 1934

~~for~~ For the fiscal year ended December 31, ~~2023.~~2024

☐ TRANSITION ~~Transition~~REPORT ~~report~~PURSUANT ~~pursuant~~TO toSECTION ~~Section~~ 13 orOR 15(d) ~~of the~~ ~~Securities~~OF ~~Exchange~~THE ~~Act~~SECURITIES ofEXCHANGE ACT OF 1934

For ~~for~~ the transition period from ___ to .

Commission File Number: 001-41910

ARK 21Shares Bitcoin ETF

(Exact ~~name~~Name of ~~registrant~~Registrant as Specified ~~specified~~ in ~~its~~Its ~~charter~~Charter)

Delaware		87-6497023
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

477 Madison Avenue, 6th Floor

New York, New York, 10022

(646) 370-6016

(Address, including zip code, and telephone number, including area code, of registrant’s primary executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Shares of Beneficial Interests of ARK 21Shares Bitcoin ETF		ARKB		Cboe BZX Exchange, Inc.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). ☐ Yes ☒ No

The ~~registrant was not a public company as of June 30, 2023, the last business day of its most recently completed second fiscal quarter, and therefore, cannot calculate the~~ aggregate market value of ~~its~~the ~~voting~~registrant’s ~~and~~shares ~~non-voting common equity~~ held by non-affiliates as of ~~such~~the ~~date. The~~ registrant’s ~~shares~~as ~~began~~of ~~trading~~June ~~on the Cboe BZX Exchange~~30, ~~Inc.~~2024 onwas ~~January 11~~$2, ~~2024~~849,574,000.

The registrant had 3948,~~790~~475,000 outstanding shares as of March 1819, ~~2024~~2025.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K includes “forward-looking statements” that generally relate to future events or future performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this report that address activities, events or developments that will or may occur in the future, including such matters as movements in the digital asset markets and indexes that track such movements, the ~~Trust’s~~ operations of ARK 21Shares Bitcoin ETF (the “Trust”), the plans of 21Shares US LLC (the “Sponsor’s”), ~~plans~~ as the sponsor of the Trust, and references to the Trust’s future success and other similar matters, are forward-looking statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses the Sponsor and the Sub-Adviser have made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances.

Whether or not actual results and developments will conform to the Sponsor and the Sub-Adviser’s expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed in this report, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently, all the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that actual results or developments the Sponsor and the Sub-Adviser anticipate to occur will be realized or, even if substantially realized, that they will result in the expected consequences to, or have the expected effects on, the Trust’s operations or the value of its Shares.

Should one or more of these risks discussed in “Risk Factors” or other uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those described in forward-looking statements. Forward-looking statements are made based on the Sponsor’s and the Sub-Adviser’s beliefs, estimates and opinions on the date the statements are made, and neither the Trust, the Sponsor nor the Sub-Adviser is under a duty or undertakes an obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, other than as required by applicable laws. Moreover, neither the Trust, the Sponsor, the Sub-Adviser, nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Investors are therefore cautioned against placing undue reliance on forward-looking statements.

Emerging Growth Company

The Trust is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Trust is an emerging growth company, unlike other public companies, it will not be required to, among other things: (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002; or (ii) comply with any new audit rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) after April 5, 2012, unless the Securities and Exchange Commission (“SEC”) determines otherwise.

The Trust will cease to be an “emerging growth company” upon the earliest of: (i) it having $1.235 billion or more in annual gross revenues, (ii) ~~at least~~the ~~$700 million~~date inon ~~market~~which ~~value~~the ofTrust ~~Common~~is ~~Shares~~deemed ~~being~~to ~~held~~be ~~by non-affiliates~~a “large accelerated filer, ” (iii) it issuing more than $1.0 billion of non-convertible debt over a three-year period;, or (iv) the last day of the fiscal year following the fifth anniversary of its initial public offering.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Trust intends to take advantage of the benefits of the extended transition period.

ark 21shares Bitcoin ETF

Table of Contents

Page PART I 1 Item 1. Business 1 Item 1A. Risk Factors 1110 Item 1B. Unresolved Staff Comments 51 Item 1C. Cybersecurity 51 Item 2. Properties 52 Item 3. Legal Proceedings 52 Item 4. Mine Safety Disclosures 52 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 Item 6. [Reserved] 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7A. Quantitative and Qualitative Disclosures About Market ~~Risk~~Risks 5655 Item 8. Financial Statements and Supplementary Data 5655 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 5655 Item 9A. Controls and Procedures 56 Item 9B. Other Information 56 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 56 PART III 57 Item 10. Directors, Executive Officers and Corporate Governance 57 Item 11. Executive Compensation 57 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 57 Item 13. Certain Relationships and Related Transactions, and Director Independence 58 Item 14. Principal Accountant Fees and Services 58 PART IV 59 Item 15. Exhibits and Financial Statement Schedules 59 Item 16. Form 10-K Summary 59 Glossary 60 Signatures 6263

PART I

Item 1. Business

DESCRIPTION OF THE TRUST

The ~~ARK 21Shares Bitcoin ETF (the “~~Trust”) is an exchange-traded fund that issues common shares of beneficial interest (the “Shares”) that trade on the Cboe BZX Exchange, Inc. (the “Exchange”) under the symbol “ARKB.” The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate - New York Variant (the “Index”), adjusted for the Trust’s expenses and other liabilities. In seeking to achieve its investment objective, the Trust holds bitcoin and values its Shares daily based on the Index. ~~21Shares~~The ~~US LLC (the “~~Sponsor”) is the sponsor of the Trust and Delaware Trust Company (the “Trustee”) is the trustee of the Trust. The Bank of New York Mellon (“BNYM”) serves as the Trust’s Administrator, Transfer Agent, and the Cash Custodian. Coinbase Custody Trust Company, LLC (“Coinbase ~~Custody~~ Custodian”), BitGo New York Trust Company, LLC (“BitGo”), and Anchorage Digital Bank N.A (“Anchorage”, and, together with Coinbase Custodian and BitGo, as the context may require, the “Bitcoin Custodians” and each a “Bitcoin Custodian”), isare the ~~bitcoin~~Bitcoin ~~custodian~~Custodians for the Trust and ~~holds~~hold all the Trust’s bitcoin on the Trust’s behalf. ARK Investment Management LLC (the “Sub-Adviser”) is the sub-adviser of the Trust and aids in the marketing of the Shares.

The Trust is an exchange-traded fund. The Trust does not purchase or sell bitcoin other than in connection with the creation and redemption of Shares or to pay certain expenses, which are facilitated by Coinbase, Inc. (the “Prime Broker”), or any other prime brokers with whom the Trust contracts.

The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors, or employees. The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and is not required to register under such act. The Trust does not and will not hold or trade in commodity futures contracts regulated under the Commodity Exchange Act, as amended (“CEA”). The Trust is not a commodity pool for purposes of the CEA and none of the Sponsor, Trustee or the Marketing Agent is subject to regulation by the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator or a commodity trading advisor under the CEA in connection with the shares. The Sponsor is not registered with the SEC as an investment adviser and is not subject to regulation by the SEC as such in connection with its activities with respect to the Trust.

The Sponsor maintains a website at www.21shares.com/en-us, through which the Trust’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are made available free of charge after they have been filed or furnished to the SEC. The information on the Sponsor’s website is not, and shall not be deemed to be, part of this report or incorporated into any other filings we make with the SEC. Additional information regarding the Trust may also be found on the SEC’s EDGAR database at www.sec.gov.

organization

The Trust is a Delaware statutory trust, formed on June 22, 2021, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust continuously issues Shares that may be purchased and sold on the Exchange. The Trust operates pursuant to the Trust Agreement. Delaware Trust Company, a Delaware trust company, is the Delaware trustee of the Trust. The Trust is managed and controlled by the Sponsor. The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021.

Shares are issued and redeemed by the Trust in blocks of 5,000 Shares (each a “Basket” or “Creation Basket”). The number of outstanding ~~Shares~~ Shares is expected to increase and decrease from time to time because of the creation and redemption of Baskets. The creation and redemption of Baskets requires the delivery to the Trust or the distribution by the Trust of the amount of cash equivalent to the amount of bitcoin represented by the NAV of the Baskets being created or redeemed. The total amount of bitcoin required for the creation of Baskets is based on the combined net assets represented by the number of Baskets being created or redeemed.

The Trust and the Sponsor face competition with respect to the creation of competing products, such as exchange-traded products offering exposure to the spot bitcoin market or other digital assets. There can be no assurance that the Trust will grow to or maintain an economically viable size. There is no guarantee that the Sponsor will maintain a commercial advantage relative to competitors offering similar products. Whether or not the Trust is successful in achieving its intended scale may be impacted by a range of factors, such as the Trust’s timing in entering the market and its fee structure relative to those of competitive products.

The Trust has no fixed termination date.

DESCRIPTION OF THE SHARES

Each Share represents a fractional undivided beneficial interest in the net assets of the Trust. Upon redemption of the Shares, the applicable Authorized Participant is paid solely out of the funds and property of the Trust. The assets of the Trust consist primarily of bitcoin held by the Bitcoin ~~Custodian~~Custodians on behalf of the Trust and cash. Creation ~~Units~~Baskets are redeemed by the Trust in exchange for an amount of ~~bitcoin or~~ cash equal to the amount of bitcoin represented by the aggregate number of Shares redeemed.

The Trust is a passive investment vehicle and is not a leveraged product. The Sponsor does not actively manage the bitcoin held by the Trust. The bitcoin held by the Trust will only be sold (1) on an as-needed basis to pay the Trust’s expenses and to meet redemption requests, (2) in the event the Trust terminates and liquidates its assets, or (3) as otherwise required by law or regulation. The sale of bitcoin by the Trust is a taxable event to its shareholders (the “Shareholders”).

Under the ~~Declaration~~Trust’s ofAmended and Restated Trust Agreement (the “Trust Agreement”), Shareholders have no voting rights except as the Sponsor may consider desirable and so authorize in its sole discretion.

The Sponsor may terminate the Trust in its sole discretion. The Sponsor will give written notice of the termination of the Trust, specifying the date of termination, to Shareholders of the Trust, at least 30 days prior to the termination of the Trust. The Sponsor will, within a reasonable time after such termination, sell all the Trust’s bitcoin not already distributed to Authorized Participants redeeming Creation ~~Units~~Baskets, if any, in such a manner to effectuate orderly sales. The Sponsor shall not be liable for or responsible in any way for depreciation or loss ~~incurred~~ incurred by reason of any sale or sales made in accordance with the provisions of the ~~Declaration of~~ Trust Agreement. The Sponsor may suspend its sales of of the Trust’s bitcoin upon the occurrence of unusual or unforeseen circumstances.

Investment Objective

The Trust’s investment objective is to seek to track the performance of bitcoin, as measured by the Index, adjusted for the Trust’s expenses and other liabilities. In seeking to achieve its investment objective, the Trust holds bitcoin and values its Shares daily as of 4:00 p.m. ET based on the Index.

Principal Market and Fair Value Determination of bitcoin

The NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets. The NAV is calculated on each ~~business~~ day other than a day when the Exchange is closed for regular trading (a “Business Day”) and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price. In determining the NAV of the Trust on any ~~business~~Business ~~day~~Day, the Administrator will calculate the price of the bitcoin held by the Trust as of 4:00 p.m. ET on such day. The Administrator will also calculate the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the number of outstanding Shares. ~~For purposes of making these calculations, a business day means any day other than a day when the Exchange is closed for regular trading.~~

In addition to calculating NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the Principal Market NAV and Principal Market NAV per Share on each valuation date for such financial statements. The determination of the Principal Market NAV and Principal Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the value of bitcoin is determined using the fair value of bitcoin based on the price in the bitcoin market that the Trust considers its “principal market” as of 4:00 p.m. ET on the valuation date, rather than using the Index.

NAV and NAV per Share are not measures calculated in accordance with ~~GAAP~~accounting principles generally accepted in the United States of America (“GAAP”) and are not intended as substitute for Principal Market and Principal Market NAV per Share, respectively.

The Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 determines fair value to be the price that would be received for bitcoin in a current sale, which assumes an exit price resulting from an orderly transaction between market participants on the measurement date. ASC 820-10 requires the assumption that bitcoin is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market).

The cost basis of the investment in bitcoin recorded by the Trust for financial reporting purposes is the fair value of bitcoin at the time of transfer. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.

Fees, Expenses and Realized Gain (Loss)

The Trust pays the unitary Sponsor Fee of 0.21% of the Trust’s bitcoin holdings. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor isagreed ~~waiving~~to waive the entire Sponsor Fee for (i) a ~~six~~nine-month period which commenced on ~~January~~ January 11, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $1 billion of Trust assets, ~~whichever~~ ~~comes~~whichever came first. The Trust assets exceeded $1 billion in April 2024, at which time the waiver period ended.

Except for during periods during which the Sponsor Fee ishas ~~being~~been waived, the Sponsor Fee accrues daily and is payable in bitcoin weekly in arrears. The ~~Administrator~~aggregate Sponsor Fee paid to the Sponsor for the fiscal year ended December 31, 2024 was $5,732,049. The Administrator calculates the Sponsor Fee on a daily basis by applying a 0.21% annualized rate to the Trust’s total bitcoin holdings, and the amount of bitcoin payable in respect of each daily accrual is determined by reference to the Index. The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee.

As partial consideration for receipt of the Sponsor Fee, the Sponsor assumes and pays all fees and other expenses incurred by the Trust in the ordinary course of its affairs, excluding taxes, but including (i) fees to the Sub-Adviser; (ii) the Marketing Fee, (iii) fees to the Administrator, if any, (iv) fees to the Bitcoin ~~Custodian~~Custodians, (v) fees to the Transfer Agent, (vi) fees to the Trustee, (vii) the fees and expenses related to ~~any~~ any future listing, trading or quotation of the Shares on any listing exchange or quotation system (including legal, marketing and audit ~~fees~~ fees and expenses), (viii) ordinary course legal fees and expenses but not litigation-related expenses, (ix) audit fees, (x) regulatory fees, including if applicable any fees relating to the registration of the Shares under the Securities Act or the Exchange Act, (xi) printing ~~and~~ and mailing costs; (xii) costs of maintaining the ~~Trust~~Sponsor’s website and (xiii) applicable license fees (each, a “Sponsor-paid Expense” and together, the “Sponsor-paid Expenses”), provided that any expense that qualifies as an Additional Trust Expense (as defined below) will be deemed to be an Additional Trust Expense and not a Sponsor-paid Expense.

The Sponsor does not, however, assume certain extraordinary, non-recurring expenses that are not Sponsor-paid Expenses (as defined below), including, but not limited to, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders, any indemnification of the Bitcoin ~~Custodian~~Custodians, Administrator or other agents, service providers or counterparties of the Trust, the fees and expenses related to the listing, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters (collectively, “Additional Trust Expenses”). Of the Sponsor-paid Expenses, ordinary course legal fees and expenses are subject to a cap of not more than $100,000 per annum. In the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may be redesignated as an Additional Trust Expense.

After the payment of the Sponsor Fee to the Sponsor, the Sponsor may elect to convert some or all of the Sponsor Fee into cash by selling this bitcoin at market prices, in the Sponsor’s sole discretion. Due to the variance in market prices for bitcoin, the rate at which the Sponsor converts bitcoin to cash may differ from the rate at which the Sponsor Fee was initially paid in bitcoin.

The Bitcoin ~~Custodian~~Custodians ~~assumes~~assume the transfer fees associated with the transfer of bitcoin to the Sponsor with respect to the Sponsor Fee, and any further expenses associated with such transfer are assumed by the Sponsor. The Trust is not responsible for any fees and expenses incurred by the Sponsor to convert bitcoin received in payment of the Sponsor Fee into cash.

Pursuant to the Trust Agreement, the Sponsor or its delegates ~~directs~~direct the Bitcoin ~~Custodian~~Custodians to transfer bitcoin from the Trust’s “cold storage” or similarly secure technology (the “Cold Vault Balance”) as needed to pay the Sponsor’s Fee and Additional Trust Expenses, if any. The Sponsor or its delegates endeavors to transfer the smallest amount of bitcoin needed to pay applicable expenses. The Sponsor, in arranging for payment of Additional Trust Expenses, may in its discretion direct that the Trust’s bitcoin be exchanged for U.S. Dollars. Under such circumstances, the Trust will not utilize the Bitcoin ~~Custodian~~ Custodians to arrange for the sale of the Trust’s bitcoin to pay the Trust’s expenses and liabilities. Rather, the Sponsor will arrange for the Prime Broker, an affiliate of one of the Bitcoin ~~Custodian~~Custodians, or another third-party digital asset trading platform to exchange the Trust’s bitcoin for U.S. dollars in such a situation.

Creation and Redemption of Shares

The Trust creates and redeems Shares from time to time, but only in one or more Baskets (other than in the case of the Seed Creation Baskets) consisting of 5,000 Shares or multiples thereof. Baskets are only made in exchange for delivery to the Trust or the distribution by the Trust of the amount of cash equivalent to the amount of bitcoin represented by the Baskets being created or redeemed, the amount of which is based on the quantity of bitcoin attributable to each Share of the Trust (net of accrued but unpaid Sponsor Fees and any accrued but unpaid extraordinary expenses or liabilities) being created or redeemed determined as of 4:00 p.m. ET on the day the order to create or redeem Baskets is properly received.

Authorized Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered broker-dealers or other securities market participants, such as banks and other financial institutions, which are not required to register as broker-dealers to engage in securities transactions described below, and (2) DTC Participants. To become an Authorized Participant, a person must enter into an Authorized Participant Agreement with the Sponsor. The Authorized Participant Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of the bitcoin required for such creation and redemptions. The Authorized Participant Agreement and the related procedures attached thereto may be amended by the Trust, without the consent of any Shareholder or Authorized Participant. Authorized Participants pay the Transfer Agent a fee for each order they place to create or redeem one or more Baskets. The transaction fee may be reduced, increased, or otherwise changed by the Sponsor.

Authorized Participants will deliver only cash to create shares and will receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation or redemption process or otherwise direct the Trust or a Bitcoin Counterparty (defined below) with respect to purchasing, holding, delivering, or receiving bitcoin as part of the creation or redemption process. A “Bitcoin Counterparty” is a designated third party, who is not an Authorized Participant but who may be an affiliate of an Authorized Participant, or the Prime Broker or Lender, as applicable, with whom the Sponsor has entered into an agreement on behalf of the Trust, that will, acting as a counterparty, deliver, receive or convert to U.S. dollars the bitcoin related to the Authorized Participant’s creation or redemption order.

The Trust creates Shares by receiving bitcoin from a Bitcoin Counterparty that is not the Authorized Participant, and the Trust—not the Authorized Participant—is responsible for selecting the Bitcoin Counterparty to deliver the bitcoin. Further, the Bitcoin Counterparty does not act as an agent of the Authorized Participant with respect to the delivery of the bitcoin to the Trust or act at the direction of the Authorized Participant with respect to the delivery of the bitcoin to the Trust.

The Trust redeems Shares by delivering bitcoin to a Bitcoin Counterparty that is not the Authorized Participant and the Trust—not the Authorized Participant —is responsible for selecting the Bitcoin Counterparty to receive the bitcoin. Further, the Bitcoin Counterparty does not act as an agent of the Authorized Participant with respect to the receipt of the bitcoin from the Trust or act at the direction of the Authorized Participant with respect to the receipt of the bitcoin from the Trust.

Bitcoin Counterparties deliver bitcoin related to the Authorized Participant’s purchase order to the ~~Trust’s~~ Cold ~~Balance~~ Vault ~~Account~~Balance. Authorized Participants and Bitcoin Counterparties are not required to maintain an account with any of the Bitcoin ~~Custodian~~Custodians.

Creations and redemptions of Shares may result in certain slippage being incurred as a result of, for example, trading fees, spreads, or commissions. Any slippage so incurred will be the responsibility of the Authorized Participant, as a cash liability, and not of the Trust or Sponsor.

Each Authorized Participant is required to be registered as a broker-dealer under the Exchange Act and a member in good standing with FINRA or exempt from being or otherwise not required to be licensed as a broker-dealer or a member of FINRA and be qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants may also be regulated under federal and state banking laws and regulations. Each Authorized Participant has its own set of rules and procedures, internal controls, and information barriers as it determines is appropriate considering its own regulatory regime.

Service Providers of the Trust

The sponsor

The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares for their public offering in the United States and the listing of Shares on the Exchange. The Sponsor does not exercise day-to-day oversight over the Trustee, the Bitcoin ~~Custodian~~Custodians, or the Index Provider. The Sponsor develops a marketing plan for the Trust, prepares marketing materials regarding the Shares of the Trust, and exercises the marketing plan of the Trust on an ongoing basis. The Sponsor engaged the Sub-Adviser pursuant to the Support Services Agreement to serve as the Trust’s sub-adviser and provide marketing support to the Sponsor with respect to the Trust. The Sponsor is responsible for supervising the Sub-Adviser. The Sponsor agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor’s unified fee.

The Sponsor is a wholly owned subsidiary of 21co Holdings Limited (formerly known as Amun Holdings ~~Ltd~~Limited). At present, the primary business activities of ~~Amun~~21co Holdings Limited ~~Ltd.~~ are providing exchange traded products and tokenization services in the crypto space through its subsidiaries.

21Shares AG, an affiliate of the Sponsor, has considerable experience issuing and operating exchange-traded products that provide exposure to digital assets, operating such exchange-traded products since 2018. As of December 31, ~~2023~~2024, 21Shares AG oversees approximately $2.4.9 billion in assets under management and nearly 4047 digital asset-related exchange-traded products across various jurisdictions. Although the Sponsor is a relatively new entity within the broader structure of 21Shares AG and its affiliates (collectively, the “21Shares Group”), the Sponsor utilizes a similar management team that the 21Shares Group has used in issuing and operating these exchange-traded products. Additionally, as of December 31, ~~2023~~2024, the Sponsor serves as sub-adviser to five investment companies registered under the ~~Investment Company Act of~~ 1940 ~~Act,~~ ~~as amended~~Act.

The Sponsor is not under any liability to the Trust, the Trustee or any Shareholder for any action taken or for refraining from the taking of any action in good faith pursuant to the Trust Agreement, or for errors in judgment or for depreciation or loss incurred by reason of the sale of any bitcoin or other assets held in trust hereunder; provided, however, that this provision will not protect the Sponsor against any liability to which it would otherwise be subject by reason of its own gross negligence, bad faith, or ~~wilful~~willful misconduct. The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft, or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee’s counsel or by any other Person for any matters arising hereunder. The Sponsor will in no event be deemed to have assumed or incurred any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for herein. The Trust will not incur the cost of that portion of any insurance which insures any party against any liability, the indemnification of which is herein prohibited.

The Sponsor and its shareholders, members, directors, officers, employees, affiliates and subsidiaries (each a “Sponsor Indemnified Party”) are indemnified by the Trust against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims arising out of or in connection with the performance of its obligations under the Trust Agreement or any actions taken in accordance with the provisions of the Trust Agreement, provided that (i) the Sponsor was acting on behalf of, or performing services for, the Trust and has determined, in good faith, that such course of conduct was in the best interests of the Trust and such liability or loss was not the result of fraud, gross negligence, bad faith, ~~wilful~~willful misconduct, or a material breach of this Trust Agreement on the part of the Sponsor and (ii) any such indemnification will be recoverable only from the Trust Estate. Any amounts payable to a Sponsor Indemnified Party under the Trust Agreement may be payable in advance or will be secured by a lien on the Trust. The Sponsor will not be under any obligation to appear in, prosecute or defend any legal action that in its opinion may involve it in any expense or liability; provided, however, that the Sponsor may, in its discretion, undertake any action that it may deem necessary or desirable in respect of the Trust Agreement and the rights and duties of the parties hereto and the interests of the Shareholders and, in such event, the legal expenses and costs of any such action will be expenses and costs of the Trust and the Sponsor will be entitled to be reimbursed therefor by the Trust. The obligations of the Trust to indemnify the Sponsor Indemnified Parties will survive the termination of the Trust Agreement.

The sub-adviser

~~The Sub-Adviser,~~ ARK Investment ~~Management~~ Management LLC, serves as the Trust’s sub-adviser. The Sub-Adviser provides data, research, and, as needed, operational support to the Trust. As of December 31, ~~2023~~2024, the Sub-Adviser had approximately $29.36 billion in assets under management. The Trust is passively managed and does not pursue active management investment strategies, and the Sponsor and the Sub-Adviser do not actively manage the bitcoin held by the Trust. This means that the Sponsor and the Sub-Adviser do not sell bitcoin at times when its price is high or acquire bitcoin at low prices in the expectation of future price increases. It also means that the Sponsor and the Sub-Adviser do not make use of any of the hedging techniques available to professional bitcoin investors to attempt to reduce the risks of losses resulting from price decreases. The Sponsor entered into the Support Services Agreement with the Sub-Adviser and pays the Sub-Adviser out of the unitary fee it receives from the Trust.

The Trust does not directly pay the Sub-Adviser.

the trustee

Delaware Trust Company, a Delaware trust company, acts as the trustee of the Trust for the purpose of creating a Delaware statutory trust in accordance with the DSTA. The Trustee is appointed to serve as the trustee of the Trust in the State of Delaware for the sole purpose of satisfying the requirement of Section 3807(a) of the DSTA that the Trust have at least one trustee with a principal place of business in the State of Delaware.

As further discussed in the Trust Agreement, the Trustee is not liable for the acts or omissions of the Sponsor, nor is the Trustee liable for supervising or monitoring the performance and the duties and obligations of the Sponsor or the Trust under the Trust Agreement. The Trustee is not personally liable under any circumstances, except for its own ~~wilful~~willful misconduct, bad faith, or gross negligence.

The Trustee or any officer, affiliate, director, employee, or agent of the Trustee (each, an “Indemnified Person”) is entitled to indemnification from the Sponsor or the Trust, to the fullest extent permitted by law, from and against any and all losses, claims, taxes, damages, reasonable expenses, and liabilities (including liabilities under State or federal securities laws) of any kind and nature whatsoever (collectively, “Expenses”), to the extent that such Expenses arise out of or are imposed upon or asserted against such Indemnified Persons with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Trust Agreement or the transactions contemplated in the Trust Agreement; provided, however, that the Sponsor and the Trust are not required to indemnify any Indemnified Person for any Expenses that are a result of the wilful misconduct, bad faith or gross negligence of such Indemnified Person.5

The Trustee or any officer, affiliate, director, employee, or agent of the Trustee (each, an “Indemnified Person”) is entitled to indemnification from the Sponsor or the Trust, to the fullest extent permitted by law, from and against any and all losses, claims, taxes, damages, reasonable expenses, and liabilities (including liabilities under State or federal securities laws) of any kind and nature whatsoever (collectively, “Expenses”), to the extent that such Expenses arise out of or are imposed upon or asserted against such Indemnified Persons with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Trust Agreement or the transactions contemplated in the Trust Agreement; provided, however, that the Sponsor and the Trust are not required to indemnify any Indemnified Person for any Expenses that are a result of the willful misconduct, bad faith or gross negligence of such Indemnified Person.

the administrator

The Sponsor entered into a Fund Administration and Accounting Agreement with BNY Mellon Asset Servicing, a division of The Bank of New York Mellon, to provide administration and accounting services to the Trust. Pursuant to the terms of the Agreement and under the supervision and direction of the Sponsor and the Trust, BNY Mellon Asset Servicing keeps the operational records of the Trust and prepares and files certain regulatory filings on behalf of the Trust. BNY Mellon Asset Servicing may also perform other services for the Trust pursuant to the Agreement as mutually agreed upon by the Sponsor, the Trust and BNY Mellon Asset Servicing from time to time. The Administrator’s fees are paid on behalf of the Trust by the Sponsor.

THE Transfer AGENT

The Bank of New York Mellon serves as the Transfer Agent of the Trust pursuant to the terms and provisions of the Transfer Agency and Service Agreement (the “Transfer Agency and Service Agreement”). The Transfer Agent: (1) facilitates the issuance and redemption of Shares of the Trust; (2) responds to correspondence by Trust shareholders and others relating to its duties; (3) maintains shareholder accounts; and (4) makes periodic reports to the Trust.

the bitcoin ~~custodian~~custodianS

Coinbase, ~~Custody~~BitGo ~~Trust~~and ~~Company,~~Anchorage ~~LLC~~are is the ~~bitcoin~~Bitcoin ~~custodian~~Custodians for the Trust and ~~holds~~hold all of the Trust’s bitcoin on the Trust’s behalf.

The Bitcoin ~~Custodian~~Custodians ~~keeps~~keep custody of all the Trust’s bitcoin, other than which is maintained in the Trading Balance with the Prime Broker, in the ~~Vault~~Cold Vault Balance. The Bitcoin ~~Custodian~~Custodians keeps a substantial portion of the private keys associated with the Trust’s bitcoin in “cold storage” or similarly secure technology. Cold storage is a safeguarding method with multiple layers of protections and protocols, by which the private key(s) corresponding to the Trust’s bitcoin is (are) generated and stored in an offline manner. Private keys are generated in offline computers that are not connected to the internet so that they are resistant to being hacked. By contrast, in hot storage, the private keys are held online, where they are more accessible, leading to more efficient transfers, though they are potentially more vulnerable to being hacked. While the Bitcoin ~~Custodian~~Custodians will generally keep a substantial portion of the Trust’s bitcoin in cold storage on an ongoing basis, it is possible that, from time to time, portions of the Trust’s bitcoin will be held outside of cold storage temporarily in the Trading Balance maintained by the Prime Broker as part of trade facilitation in connection with creations and redemptions of Baskets, to sell bitcoin including to pay Trust expenses, or to pay the Sponsor Fee, as necessary. The Trust’s bitcoin held in the Cold Vault Balance by the Bitcoin ~~Custodian~~Custodians are held in segregated wallets and therefore are not commingled with the Bitcoin ~~Custodian~~Custodians’s or other customer assets.

Cold storage of private keys may involve keeping such keys on a non-networked computer or electronic device or storing the public key and private keys on a storage device or printed medium and deleting the keys from all computers. The Bitcoin Custodians may receive deposits of bitcoin but may not send bitcoin without use of the corresponding private keys. To send bitcoin when the private keys are kept in cold storage, unsigned transactions must be physically transferred to the offline cold storage facility and signed using a software/hardware utility with the corresponding offline keys. At that point, the Bitcoin Custodians can upload the fully signed transaction to an online network and transfer the bitcoin. Such private keys are stored in cold storage facilities within the United States and Europe, exact locations of which are not disclosed for security reasons. A limited number of employees at the Bitcoin Custodians are involved in private key management operations, and the Bitcoin Custodians have each represented that no single individual has access to full private keys.

The Bitcoin Custodians’ internal audit team performs periodic internal audits over custody operations, and the Bitcoin Custodians have represented that Systems and Organizational Control (“SOC”) attestations covering private key management controls are also performed on the Bitcoin Custodians by an external provider.

The Bitcoin Custodians maintain a commercial crime insurance policy, which is intended to cover the loss of client assets held in cold storage, including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by the Bitcoin Custodian is shared among all the Bitcoin Custodian’s customers, is not specific to the Trust or to customers holding bitcoin with the Bitcoin Custodian and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.

~~Cold~~Bitcoin ~~storage~~held ofin ~~private keys may involve keeping such keys on a non-networked computer or electronic device or storing~~ the ~~public key and private keys on a storage~~Trust’s ~~device~~account orwith ~~printed medium and deleting~~ the ~~keys from all computers. The~~ Bitcoin ~~Custodian~~Custodians ~~may~~is ~~receive~~the ~~deposits~~property of ~~bitcoin but may not send bitcoin without use of~~ the ~~corresponding private keys~~Trust. ToThe ~~send bitcoin when the private keys are kept in cold storage~~Trust, ~~unsigned transactions must be physically transferred to~~ the ~~offline~~Sponsor ~~cold storage facility~~ and ~~signed~~the ~~using~~service aproviders ~~software/hardware~~will ~~utility~~not ~~with~~loan ~~the~~or ~~corresponding~~pledge ~~offline keys. At that point,~~ the ~~Bitcoin~~Trust’s ~~Custodian~~assets ~~can~~nor ~~upload~~will the ~~fully~~Trust’s ~~signed~~assets ~~transaction~~serve toas ancollateral ~~online~~for ~~network~~any ~~and~~loan ~~transfer~~or ~~the~~similar ~~bitcoin~~arrangement. ~~Such~~ ~~private~~The ~~keys~~Trust ~~are~~will ~~stored in cold storage facilities within the United States and Europe, exact locations of which are~~ not ~~disclosed~~ ~~for~~utilize ~~security~~leverage, ~~reasons.~~derivatives, Aor ~~limited~~any ~~number~~similar ofarrangements ~~employees at the Bitcoin Custodian are involved~~ in ~~private~~seeking ~~key management operations, and the Bitcoin Custodian has represented that no single individual has access~~ to ~~full~~meet ~~private~~its ~~keys~~investment objective.

~~The~~In ~~Bitcoin~~the ~~Custodian’s~~event of a fork, the ~~internal~~Custodial ~~audit~~Services ~~team~~Agreement ~~performs~~provides ~~periodic~~that ~~internal~~the ~~audits~~Bitcoin ~~over~~Custodians ~~custody~~may ~~operations~~temporarily suspend services, and may, in their sole discretion, determine whether or not to support (or cease supporting) either branch of the forked protocol entirely, provided that the Bitcoin ~~Custodian~~Custodians shall ~~has~~use ~~represented~~commercially reasonable efforts to avoid ceasing to support both branches of such forked protocol and will support, at a minimum, the original digital asset. The Custodial Services Agreement provides that, ~~Systems~~other than as set forth therein, and provided that the Bitcoin Custodians shall make commercially reasonable efforts to assist the Trust to retrieve and/or ~~Organizational~~obtain ~~Control~~any ~~(“SOC”)~~assets ~~attestations~~related ~~covering~~to ~~private~~a ~~key~~fork, ~~management~~airdrop or ~~controls~~similar ~~are~~event ~~also~~the ~~performed~~Bitcoin onCustodians shall have no liability, obligation or responsibility whatsoever arising out of or relating to the operation of the underlying software protocols relating to the Bitcoin network or an unsupported branch of a forked protocol and, ~~Custodian~~accordingly, the Trust acknowledges and assumes the risk of the same. The Custodial Services Agreement further provides that, unless specifically communicated by anthe ~~external~~relevant ~~provider~~Bitcoin Custodian and its affiliates through a written public statement on their website, such Bitcoin Custodian does not support airdrops, metacoins, colored coins, side chains, or other derivative, enhanced or forked protocols, tokens or coins, which supplement or interact with bitcoin.

The Bitcoin Custodian maintains a commercial crime insurance policy, which is intended to cover the loss of client assets held in cold storage, including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by the Bitcoin Custodian is shared among all the Bitcoin Custodian’s customers, is not specific to the Trust or to customers holding bitcoin with the Bitcoin Custodian and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.

Bitcoin held in the Trust’s account with the Bitcoin Custodian is the property of the Trust. The Trust, the Sponsor and the service providers will not loan or pledge the Trust’s assets nor will the Trust’s assets serve as collateral for any loan or similar arrangement. The Trust will not utilize leverage, derivatives, or any similar arrangements in seeking to meet its investment objective.

In the event of a fork, the Custodial Services Agreement provides that the Bitcoin Custodian may temporarily suspend services, and may, in their sole discretion, determine whether or not to support (or cease supporting) either branch of the forked protocol entirely, provided that the Bitcoin Custodian shall use commercially reasonable efforts to avoid ceasing to support both branches of such forked protocol and will support, at a minimum, the original digital asset. The Custodial Services Agreement provides that, other than as set forth therein, and provided that the Bitcoin Custodian shall make commercially reasonable efforts to assist the Trust to retrieve and/or obtain any assets related to a fork, airdrop or similar event the Bitcoin Custodian shall have no liability, obligation or responsibility whatsoever arising out of or relating to the operation of the underlying software protocols relating to the Bitcoin network or an unsupported branch of a forked protocol and, accordingly, Client acknowledges and assumes the risk of the same. The Custodian Agreement further provides that, unless specifically communicated by the Bitcoin Custodian and its affiliates through a written public statement on the Coinbase website, the Bitcoin Custodian does not support airdrops, metacoins, colored coins, side chains, or other derivative, enhanced or forked protocols, tokens or coins, which supplement or interact with bitcoin.

Under the Trust Agreement, the Sponsor has the right, in its sole discretion, to determine what action to take in connection with the Trust’s entitlement to or ownership of Incidental Rights or any IR Virtual Currency, and Trust may take any lawful action necessary or desirable in connection with the Trust’s ownership of Incidental Rights, including the acquisition of IR Virtual Currency, as determined by the Sponsor in the Sponsor’s sole discretion, unless such action would adversely affect the status of the Trust as a grantor trust for U.S. federal income tax purposes or otherwise be prohibited by this Trust Agreement.

With respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the Incidental Rights or IR Virtual Currency. In the event the Trust seeks to change this position, an application would need to be filed with the SEC by the Exchange seeking approval to amend its listing rules.

Under the Custodial Services Agreement, the Bitcoin Custodians’ liability is limited as follows, among others: (i) other than with respect to claims and losses arising from spot trading of bitcoin, or fraud or willful misconduct, among others, the Bitcoin Custodians’ aggregate liability under the Custodial Services Agreement shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Bitcoin Custodians in the 12 months prior to the event giving rise to the Bitcoin Custodians’ liability, and (B) the value of the affected bitcoin or cash giving rise to the Bitcoin Custodians’ liability; (ii) the Bitcoin Custodians’ aggregate liability in respect of each cold storage address shall not exceed $100 million; (iii) in respect of the Bitcoin Custodians’ obligations to indemnify the Trust and its affiliates against third party claims and losses to the extent arising out of or relating to, among others, the Bitcoin Custodians’ violation of any law, rule or regulation with respect to the provision of its services, the Bitcoin Custodians’ liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Bitcoin Custodians in the 12 months prior to the event giving rise to the Bitcoin Custodians’ liability; and (iv) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin Custodians are not liable, even if the Bitcoin Custodians have been advised of or knew or should have known of the possibility thereof. The Bitcoin Custodians are not liable for delays, suspension of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Bitcoin Custodians. Under the Custodial Services Agreement, except in the case of its negligence, fraud, material violation of applicable law or willful misconduct, the Bitcoin Custodians shall not have any liability, obligation, or responsibility for any damage or interruptions caused by any computer viruses, spyware, scareware, Trojan horses, worms or other malware that may affect the Trust’s computer or other equipment, or any phishing, spoofing or other attack, unless the Bitcoin Custodians fail to have commercially reasonable policies, procedures and technical controls in place to prevent such damages or interruptions.

The Bitcoin Custodians may terminate the Custodial Services Agreement for any reason upon providing the applicable notice to the Trust, or immediately for Cause (as defined in the Custodial Services Agreement), including, among others, if the Trust materially breaches the Prime Broker Agreement and such breach remains uncured, or undergoes a bankruptcy event.

The Sponsor may, in its sole discretion, add or terminate custodians at any time. The Sponsor may, in its sole discretion, change the custodians for the Trust’s bitcoin holdings, but it will have no obligation whatsoever to do so or to seek any terms for the Trust from other such custodians.

Under the Custodial Services Agreement, the Bitcoin Custodian’s liability is limited as follows, among others: (i) other than with respect to claims and losses arising from spot trading of bitcoin, or fraud or wilful misconduct, among others, the Bitcoin Custodian’s aggregate liability under the Custodial Services Agreement shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Bitcoin Custodian in the 12 months prior to the event giving rise to the Bitcoin Custodian’s liability, and (B) the value of the affected bitcoin or cash giving rise to the Bitcoin Custodian’s liability; (ii) the Bitcoin Custodian’s aggregate liability in respect of each cold storage address shall not exceed $100 million; (iii) in respect of the Bitcoin Custodian’s obligations to indemnify the Trust and its affiliates against third party claims and losses to the extent arising out of or relating to, among others, the Bitcoin Custodian’s violation of any law, rule or regulation with respect to the provision of its services, the Bitcoin Custodian’s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Bitcoin Custodian in the 12 months prior to the event giving rise to the Bitcoin Custodian’s liability; and (iv) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin Custodian is not liable, even if the Bitcoin Custodian has been advised of or knew or should have known of the possibility thereof. The Bitcoin Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Bitcoin Custodian. Under the Custodial Services Agreement, except in the case of its negligence, fraud, material violation of applicable law or wilful misconduct, the Bitcoin Custodian shall not have any liability, obligation, or responsibility for any damage or interruptions caused by any computer viruses, spyware, scareware, Trojan horses, worms or other malware that may affect the Trust’s computer or other equipment, or any phishing, spoofing or other attack, unless the Bitcoin Custodian fails to have commercially reasonable policies, procedures and technical controls in place to prevent such damages or interruptions.

The Bitcoin Custodian may terminate the Custodial Services Agreement for any reason upon providing the applicable notice to the Trust, or immediately for Cause (as defined in the Custodial Services Agreement), including, among others, if the Trust materially breaches the Prime Broker Agreement and such breach remains uncured, or undergoes a bankruptcy event.

The Sponsor may, in its sole discretion, add or terminate custodians at any time. The Sponsor may, in its sole discretion, change the custodian for the Trust’s bitcoin holdings, but it will have no obligation whatsoever to do so or to seek any terms for the Trust from other such custodians.

the prime broker

Pursuant to the Prime Broker Agreement, a portion of the Trust’s bitcoin holdings and cash holdings from time to time may be held with the Prime Broker, an affiliate of one of the Bitcoin ~~Custodian~~Custodians, in the Trading Balance, in connection with the creation and redemption of Shares via cash transactions or to pay for Trust Expenses not assumed by the Sponsor in consideration for the Sponsor Fee. The amount of bitcoin that may be held in ~~the~~ the Trading Balance will be limited to the amount necessary to process a given creation or redemption transaction, as applicable, or to ~~pay~~ pay for Trust Expenses not assumed by the Sponsor in consideration for the Sponsor Fee.

The Sponsor may, in its sole discretion, add or terminate prime brokers at any time. The Sponsor may, in its sole discretion, change the prime broker for the Trust, but it will have no obligation whatsoever to do so or to seek any terms for the Trust from other such prime brokers.

These periodic holdings held in the Trading Balance with the Prime Broker represent an omnibus claim on the Prime Broker’s bitcoin held on behalf of clients; these holdings exist across a combination of omnibus hot wallets, omnibus cold wallets or in accounts in the Prime Broker’s name on a trading venue (including third-party venues and the Prime Broker’s own execution venue) where the Prime Broker executes orders to buy and sell bitcoin on behalf of clients (each such venue, a “Connected Trading Venue”). The Prime Broker is not required to hold any of the bitcoin in the Trust’s Trading Balance in cold storage or to hold any such bitcoin in segregation, and neither the Trust nor the Sponsor can control the method by which the Prime Broker holds the bitcoin credited to the Trust’s Trading Balance. Within the Trust’s Trading Balance, the Prime Broker Agreement provides that the Trust does not have an identifiable claim to any particular bitcoin (and cash). Instead, the Trust’s Trading Balance represents an entitlement to a pro rata share of the bitcoin (and cash) the Prime Broker holds on to behalf of customers who hold similar entitlements against the Prime Broker. In this way, the Trust’s Trading Balance represents an omnibus claim on the Prime Broker’s bitcoin (and cash) held on behalf of the Prime Broker’s customers.

Within such omnibus hot and cold wallets and accounts, the Prime Broker has represented to the Sponsor that it keeps the majority of assets in cold wallets, to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals. However, the Sponsor has no control over, and for security reasons the Prime Broker does not disclose to the Sponsor, the percentage of bitcoin that the Prime Broker holds for customers holding similar entitlements as the Trust which are kept in omnibus cold wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Broker’s name on a trading venue. The Prime Broker has represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing risk analysis and market dynamics, in which the Prime Broker attempts to balance anticipated liquidity needs for its customers as a class against the anticipated greater security of cold storage.

The Prime Broker is not required by the Prime Broker Agreement to hold any of the bitcoin in the Trust’s Trading Balance in cold storage or to hold any such bitcoin in segregation, and neither the Trust nor the Sponsor can control the method by which the Prime Broker holds the bitcoin credited to the Trust’s Trading Balance.

To the extent the Trust sells bitcoin through the Prime Broker, the Trust’s orders will be executed at Connected Trading Venues that have been approved in accordance with the Prime Broker’s due diligence and risk assessment process. The Prime Broker has represented that its due diligence on Connected Trading Venues include reviews conducted by the legal, compliance, security, privacy and finance and credit-risk teams. The Connected Trading Venues, which are subject to change from time to time, currently include Bitstamp, LMAX, Kraken, the exchange operated by the Prime Broker, as well as four additional non-bank market makers (“NBMMs”). The Prime Broker has represented to the Trust that it is unable to name the NBMMs due to confidentiality restriction.

Pursuant to the Prime Broker Agreement, the Trust may engage in purchases or sales of bitcoin by placing orders with the Prime Broker. The Prime Broker will route orders placed by the Sponsor through the Prime Broker’s execution platform (the “Trading Platform”) to a Connected Trading Venue where the order will be executed. Each order placed by the Sponsor will be sent, processed, and settled at each Connected Trading Venue to which it is routed. The Prime Broker Agreement provides that the Prime Broker is subject to certain conflicts of interest, including: (i) the Trust’s orders may be routed to the Prime Broker’s own execution venue where the Trust’s orders may be executed against other customers of the Prime Broker or with the Coinbase acting as principal, (ii) the beneficial identity of the counterparty purchaser or seller with respect to the Trust’s orders may be unknown and therefore may inadvertently be another client of the Prime Broker, (iii) the Prime Broker does not engage in front-running, but is aware of the Trust’s orders or imminent orders and may execute a trade for its own inventory (or the account of an affiliate) while in possession of that knowledge and (iv) the Prime Broker may act in a principal capacity with respect to certain orders. As a result of these and other conflicts, when acting as principal, the Prime Broker may have an incentive to favor its own interests and the interests of its affiliates over the Trust’s interests.

Subject to the foregoing, and to certain policies and procedures that the Prime Broker Agreement requires the Prime Broker to have in place to mitigate conflicts of interest when executing the Trust’s orders, the Prime Broker Agreement provides that the Prime Broker shall have no liability, obligation, or responsibility whatsoever for the selection or performance of any Connected Trading Venue, and that other Connected Trading Venues and/or trading venues not used by Coinbase may offer better prices and/or lower costs than the Connected Trading Venue used to execute the Trust’s orders.

Once the Sponsor, on behalf of the Trust, places an order to purchase or sell bitcoin on the Trading Platform in connection with the creation or redemption of Shares via a cash transaction, the associated bitcoin or cash used to fund or fill the order, if any, will be placed on hold and will generally not be eligible for other use or withdrawal from the Trust’s Trading Balance. The Trust’s Vault Balance may be used directly to fund orders. With each Connected Trading Venue, the Prime Broker shall establish an account in the Prime Broker’s name, or in its name for the benefit of clients, to trade on behalf of its clients, including the Trust, and the Trust will not, by virtue of the Trading Balance the Trust maintains with the Prime Broker, have a direct legal relationship, or account with, any Connected Trading Venue.8

Once the Sponsor, on behalf of the Trust, places an order to purchase or sell bitcoin on the Trading Platform in connection with the creation or redemption of Shares via a cash transaction, the associated bitcoin or cash used to fund or fill the order, if any, will be placed on hold and will generally not be eligible for other use or withdrawal from the Trust’s Trading Balance. The Cold Vault Balance may be used directly to fund orders. With each Connected Trading Venue, the Prime Broker shall establish an account in the Prime Broker’s name, or in its name for the benefit of clients, to trade on behalf of its clients, including the Trust, and the Trust will not, by virtue of the Trading Balance the Trust maintains with the Prime Broker, have a direct legal relationship, or account with, any Connected Trading Venue.

The Prime Broker may terminate the Prime Broker Agreement in its entirety for any reason and without Cause (as defined below) by providing at least ninety (90) days’ prior written notice to the Trust. The Trust may terminate the Prime Broker Agreement in its entirety for any reason and without Cause by providing at least 30 (thirty) days’ prior written notice to the Prime Broker; provided, however, the Trust’s termination of the Prime Broker Agreement shall not be effective until the Trust has fully satisfied its obligations the Prime Broker Agreement.

The Prime Broker and the Bitcoin ~~Custodian~~Custodians may, in their sole discretion, suspend, restrict or terminate the Trust’s prime broker services, including by suspending, restricting or closing any account of the Trust covered under the Prime Broker Agreement for Cause, at any time and with prior notice to the Trust.

the cash custodian

The Cash Custodian is The Bank of New York Mellon. The Cash Custodian’s services are governed under the Custody Agreement between The Bank of New York Mellon and the Trust. In performing its duties under the Custody Agreement, BNY Mellon is required to exercise the standard of care and diligence that a professional custodian for exchange-traded funds would observe in these affairs considering the prevailing rules, practices, procedures, and circumstances in the relevant market and to perform its duties without negligence, fraud, bad faith, ~~wilful~~willful misconduct, or reckless disregard of its duties under the Custody Agreement. Under the Custody Agreement, BNY Mellon is not liable for any ~~all~~ losses, damages, costs, charges, expenses, or liabilities (including reasonable counsel fees and expenses) (collectively, “Losses”) except to the extent caused by BNY Mellon’s own bad faith, negligence, ~~wilful~~willful misconduct, or reckless disregard of its duties under the Custody Agreement. The Trust will indemnify and hold harmless BNY Mellon from and against all Losses, incurred by BNY Mellon arising out of or relating to BNY Mellon’s performance under the Custody Agreement, except to the extent resulting from BNY Mellon’s failure to perform its obligations under the Custody Agreement in accordance with the agreement’s standard of care. The Sponsor may, in its sole discretion, add or terminate cash custodians at any time.

the marketing agent

Foreside Global Services, LLC (the “Marketing Agent”) is responsible for reviewing and approving the marketing materials prepared by the Sponsor for compliance with applicable SEC and Financial Industry Regulatory Authority (“FINRA”) advertising laws, rules, and regulations.

authorized participants

Creation ~~Units~~Baskets are created or redeemed only by Authorized Participants. Each Authorized Participant must be a registered broker-dealer, a participant in DTC, and have entered into an agreement with the Sponsor and Administrator (the “Authorized Participant Agreement”). The Authorized Participant Agreement provides the procedures for the creation and redemption of Creation ~~Units~~Baskets and for the delivery of cash in connection with such creations or redemptions. Additional Authorized Participants may be added at any time, subject to the discretion of the Sponsor.

Taxation of the trust

The Sponsor intends to take the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a grantor trust, the Trust will not be subject to U.S. federal income tax. Rather, if the Trust is a grantor trust, each beneficial owner of Shares is treated as directly owning its pro rata share of the Trust’s assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “~~flow~~pass through” to each beneficial owner of Shares. If the Trust sells bitcoin (for example, to pay fees or expenses), such a sale is a taxable event to Shareholders. Upon a Shareholder’s sale of its Shares, the Shareholder will be treated as having sold the pro rata share of the bitcoin held in the Trust at the time of the sale and may recognize gain or loss on such sale.

109

Item 1A. Risk Factors

Summary of Risk Factors

Below is a summary of the principal factors that make an investment in the Shares speculative or risky. This summary does not address all the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, and should be read in conjunction with the other information included in this Annual Report on Form 10-K, including the Trust’s financial statements and related notes thereto, and our other filings with the SEC, before making an investment decision regarding the Shares. See “Glossary of Defined Terms” for the definition of certain capitalized terms used in this Annual Report. All other capitalized terms used, but not defined, herein have the meanings given to them in the Trust Agreement.

Risks Associated with Bitcoin and the Bitcoin Network

● Digital assets such as bitcoin were only introduced within the past decade, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets that are uncertain and difficult to evaluate. ● The 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. ● The value of the Shares depends on the development and acceptance of the Bitcoin network. The slowing or stopping of the development or acceptance of the Bitcoin network may adversely affect an investment in the Trust. ● Due to the nature of private keys, bitcoin transactions are irrevocable, and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Trust. ● Security threats to the Trust’s account with the Bitcoin ~~Custodian~~Custodians 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. ● Potential 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. ● A temporary or permanent “fork” of the Bitcoin blockchain could adversely affect an investment in the Trust. ● Blockchain technologies are based on the theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly. These premises may be incorrect or may become incorrect due to technological advances and could negatively impact the future usefulness of bitcoin and adversely affect an investment in the Trust. ● The price of bitcoin on the bitcoin market has exhibited periods of extreme volatility, which could have a negative impact on the performance of the Trust. For example, between November 2021 and November 2022, the price of bitcoin fell from an all-time high of $68,789 to $15,460. As of December 31, ~~2023~~2024, the price of bitcoin was $4293,~~288~~390.~~58.~~22 (source: Coinbase). ● Bitcoin exchanges on which bitcoin trades are relatively new and, in some cases, unregulated, and, therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments, which could have a negative impact on the performance of the Trust. ● New 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.

11Risks Associated with Investing in the Trust

~~Risks~~● ~~Associated~~The ~~with~~value ~~Investing~~of inthe Shares may be influenced by a variety of factors unrelated to the ~~Trust~~value of bitcoin. ● The NAV or Principal Market NAV may not always correspond to the market price of bitcoin and, as a result, Creation Baskets may be created or redeemed at a value that is different from the market price of the Shares.

● The value of the Shares may be influenced by a variety of factors unrelated to the value of bitcoin. ● The NAV or Principal Market NAV may not always correspond to the market price of bitcoin and, as a result, Creation Baskets may be created or redeemed at a value that is different from the market price of the Shares. ● The 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. ● The Trust is subject to risks due to its concentration of investments in a single asset. ● Possible illiquid markets may exacerbate losses or increase the variability between the Trust’s NAV or the Principal Market NAV and its market price. ● The amount of bitcoin represented by the Shares will decline over time. ● The Administrator is solely responsible for determining the value of the bitcoin holdings and bitcoin holdings per Share, and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares.10

~~Risks~~● ~~Associated~~The ~~with~~inability of Authorized Participants and market makers to hedge their bitcoin exposure may adversely affect the ~~Regulatory~~liquidity ~~Environment~~ of ~~Bitcoin~~Shares and the value of an investment in the Shares. ● The Trust is subject to risks due to its concentration of investments in a single asset. ● Possible illiquid markets may exacerbate losses or increase the variability between the Trust’s NAV or the Principal Market NAV and its market price. ● The amount of bitcoin represented by the Shares will decline over time. ● The Administrator is solely responsible for determining the value of the bitcoin holdings and bitcoin holdings per Share, and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares.

●Risks ~~Future~~Associated and current regulations by a United States or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust. ● Shareholders do not have the protections associated with ~~ownership of Shares in an investment company registered under~~ the ~~Investment~~Regulatory ~~Company Act~~ Environment of 1940 (“1940 Act”) or the protections afforded by the Commodity Exchange Act (the “CEA”). ● Future legal or regulatory developments may negatively affect the value of bitcoin or require the Trust or the Sponsor to become registered with the Securities and Exchange Commission (“SEC”) or Commodity Futures Trading Commission (“CFTC”), which may cause the Trust to incur unforeseen expenses or liquidate. ● If regulatory changes or interpretations of an Authorized Participant’s, the Trust’s or the Sponsor’s activities require the regulation of an Authorized Participant, the Trust or the Sponsor as a money service business under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”), an Authorized Participant, the Trust or the Sponsor may be required to register and comply with such regulations, which could result in extraordinary, recurring and/or nonrecurring expenses.Bitcoin

~~Risks~~● ~~Associated~~Future and current regulations by a United States or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust. ● Shareholders do not have the protections associated with ownership of Shares in an investment company registered under the ~~Tax~~1940 ~~Treatment~~Act or the protections afforded by the CEA. ● Future legal or regulatory developments may negatively affect the value of bitcoin or require the Trust or the Sponsor to become registered with the SEC or CFTC, which may cause the Trust to incur unforeseen expenses or liquidate. ● If regulatory changes or interpretations of an Authorized Participant’s, the Trust’s or the Sponsor’s activities require the regulation of an Authorized Participant, the Trust or the Sponsor as a money service business under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”), an Authorized Participant, the Trust or the Sponsor may be required to register and ~~Bitcoin~~comply with such regulations, which could result in extraordinary, recurring and/or nonrecurring expenses.

●Risks ~~Shareholders~~Associated ~~could~~with ~~incur~~the aTax ~~tax~~Treatment ~~liability without an associated distribution~~ of the Trust. ~~● The tax treatment of bitcoin~~ and ~~transactions involving bitcoin for state and local tax purposes is not settled. ● A hard “fork” of the~~ Bitcoin ~~blockchain could result in Shareholders incurring a tax liability.~~

12● Shareholders could incur a tax liability without an associated distribution of the Trust. ● The tax treatment of bitcoin and transactions involving bitcoin for state and local tax purposes is not settled. ● A hard “fork” of the Bitcoin blockchain could result in Shareholders incurring a tax liability.

Other Risks

● The 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. ● The 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, which would affect the liquidity of the Shares in the secondary market and make it difficult to dispose of Shares. ● Shareholders 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. ● The Sponsor and Sub-Adviser are leanly staffed and rely heavily on key personnel. The departure of any such key personnel could negatively impact the Trust’s operations and adversely impact an investment in the Trust. ● Shareholders 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. ●In ~~The~~certain ~~liability~~circumstances, ofShareholders ~~the~~may ~~Sponsor,~~vote ~~Sub-Adviser~~to ~~and~~appoint ~~the~~a ~~Trustee~~successor isSponsor ~~limited,~~following ~~and~~ the ~~value~~Voluntary Withdrawal of the ~~Shares~~Sponsor, ~~will~~or beto ~~adversely~~continue ~~affected if~~ the Trust isin ~~required~~certain toinstances ~~indemnify~~of ~~the~~dissolution ~~Trustee,~~of the ~~Sponsor or the Sub-Adviser~~Trust. ●Shareholders ~~Due~~shall tootherwise ~~the~~have ~~increased~~no ~~use~~voting ofrights ~~technologies,~~with ~~intentional~~respect ~~and~~to ~~unintentional cyber-attacks pose operational and information security risks,~~ the ~~occurrence of which can negatively impact an investment in the~~ Trust.

The following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business or financial performance, which in turn can affect the price of the Shares. These are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but may become material in the future.11

~~Risks~~● ~~Associated~~The ~~with~~liability ~~Bitcoin~~of the Sponsor, Sub-Adviser and the ~~Bitcoin Network~~Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required to indemnify the Trustee, the Sponsor or the Sub-Adviser. ● Due to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks, the occurrence of which can negatively impact an investment in the Trust.

~~Bitcoin~~The isfollowing arisks, ~~relatively~~some ~~new~~of ~~technological~~which ~~innovation~~have ~~with~~occurred and any of which may occur in the future, can have a ~~limited~~material ~~operating~~adverse ~~history~~effect on our business or financial performance, which in turn can affect the price of the Shares. These are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but may become material in the future.

~~Bitcoin~~Risks ~~has a relatively limited~~Associated ~~history~~with ofBitcoin ~~existence~~ and ~~operations compared to traditional commodities. There is a limited established performance record for~~ the ~~price of~~Bitcoin bitcoin and, in turn, a limited basis for evaluating an investment in bitcoin. Although past performance is not necessarily indicative of future result, if bitcoin had a more established history, such history might (or might not) provide investors with more information on which to evaluate an investment in the Trust.Network

Bitcoin ~~generally~~is a relatively new technological innovation with a limited operating history.

~~The~~Bitcoin ~~market~~has ~~value~~a ofrelatively ~~bitcoin~~limited ishistory ~~not~~of ~~related~~existence toand ~~any~~operations ~~specific~~compared ~~company,~~to ~~government,~~traditional ~~or asset~~commodities. ~~The~~There ~~valuation~~is ofa ~~bitcoin~~limited ~~depends~~established onperformance ~~future~~record ~~expectations~~ for the ~~value of~~price ~~the Bitcoin network, the number~~ of bitcoin ~~transactions~~and, ~~and~~in ~~the~~turn, ~~overall~~a ~~usage~~limited ofbasis ~~bitcoin~~for asevaluating an ~~asset~~investment in bitcoin. ~~This~~Although ~~means~~past ~~that~~performance ais ~~significant~~not ~~amount~~necessarily indicative of ~~the~~future ~~value~~result, ofif bitcoin ishad ~~speculative,~~a ~~which~~more ~~could~~established ~~lead~~history, tosuch ~~increased~~history ~~volatility.~~might ~~Investors~~(or ~~could~~might ~~experience~~not) ~~significant~~provide ~~gains,~~investors ~~losses and/or~~with ~~volatility~~more ininformation on ~~the~~which ~~Trust’s~~to ~~holdings,~~evaluate ~~depending~~an oninvestment in the ~~valuation of bitcoin~~Trust.

~~Several~~Bitcoin factors may affect the price of bitcoin, including, but not limited to, supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of bitcoin or the use of bitcoin as a form of paymentgenerally. The issuance of bitcoin is determined by a computer code, not by a central bank, and prices can be extremely volatile. For instance, during the period from December 17, 2017, to December 14, 2018, bitcoin experienced a decline of roughly 84%, and experienced a similar decline in value from November 2021 to June 2022. There is no assurance that bitcoin will maintain its long-term value in terms of purchasing power in the future, or that acceptance of bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.

13The market value of bitcoin is not related to any specific company, government, or asset. The valuation of bitcoin depends on future expectations for the value of the Bitcoin network, the number of bitcoin transactions, and the overall usage of bitcoin as an asset. This means that a significant amount of the value of bitcoin is speculative, which could lead to increased volatility. Investors could experience significant gains, losses and/or volatility in the Trust’s holdings, depending on the valuation of bitcoin.

~~Limits~~Several onfactors may affect the price of bitcoin, including, but not limited to, supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of bitcoin or the use of bitcoin as a form of payment. The issuance of bitcoin is determined by a computer code, not by a central bank, and prices can be extremely volatile. For instance, during the period from December 17, 2017, to December 14, 2018, bitcoin experienced a decline of roughly 84% and experienced a similar decline in value from November 2021 to June 2022. There is no assurance that bitcoin will maintain its long-term value in terms of purchasing power in the future, or that acceptance of bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow. The value of the Trust’s investments in bitcoin could decline rapidly, including to zero.

~~Under~~Limits ~~the~~on ~~source code that governs the Bitcoin network, the supply of new~~ bitcoin is mathematically controlled so that the number of bitcoin grows at a limited rate pursuant to a pre-set schedule. The number of bitcoin awarded for solving a new block is automatically halved after every 210,000 blocks are added to the Bitcoin blockchain, approximately every 4 years. Currently, the fixed reward for solving a new block is 6.25 bitcoin per block and this is expected to decrease by half to become 3.125 bitcoin in in or around April 2024. This deliberately controlled rate of bitcoin creation means that the number of bitcoin in existence will increase at a controlled rate until the number of bitcoin in existence reaches the pre-determined 21 million bitcoin. However, the 21 million supply ~~cap could be changed in a hard fork~~. ~~It is currently estimated that the 21 million Bitcoin limitation will be reached in the year 2140.~~

~~The~~Under ~~trading~~the ~~prices~~source ofcode that ~~many~~governs ~~digital~~the ~~assets~~Bitcoin network, ~~including~~the supply of new bitcoin, ~~have~~is ~~experienced~~mathematically ~~extreme~~controlled ~~volatility~~so inthat ~~recent~~the ~~periods~~number ~~and~~of ~~may~~bitcoin ~~continue~~grows at a limited rate pursuant to doa sopre-set schedule. ~~Extreme~~The ~~volatility~~number of bitcoin awarded for solving a new block is automatically halved after every 210,000 blocks inare added to the ~~future~~Bitcoin blockchain, ~~including~~approximately ~~further~~every ~~declines~~4 inyears. Currently, the ~~trading~~fixed ~~prices~~reward for solving a new block is 3.125 bitcoin per block and this is expected to halve once roughly every four years. This deliberately controlled rate of bitcoin, ~~could~~creation ~~have~~means athat the ~~material~~number ~~adverse~~of ~~effect~~bitcoin onin existence will increase at a controlled rate until the ~~value~~number of bitcoin in existence reaches the ~~Shares~~pre-determined ~~and~~21 million bitcoin. However, the ~~Shares~~21 million supply cap could ~~lose~~be ~~all~~changed orin ~~substantially~~a ~~all~~hard offork. ~~their~~It ~~value~~is currently estimated that the 21 million Bitcoin limitation will be reached in the year 2140.

The trading prices of ~~many~~ many digital assets, including bitcoin, have experienced extreme volatility in recent periods and may continue to do so. ~~For~~Extreme ~~instance, there~~volatility ~~were steep increases~~ in the ~~value of certain digital assets~~future, including ~~bitcoin,~~further ~~over~~declines ~~the course of 2021, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022~~ in ~~digital~~the ~~asset~~ trading prices, ~~including for bitcoin. These episodes~~ of ~~rapid price appreciation followed by steep drawdowns have occurred multiple times throughout~~ bitcoin~~’s history~~, ~~including~~could inhave ~~2011,~~a ~~2013-2014,~~material ~~and~~adverse ~~2017-2018,~~effect ~~before~~on ~~repeating again in 2021-2022. Over~~ the ~~course~~value of ~~2023~~the Shares and ~~2024,~~the ~~bitcoin~~Shares ~~prices~~could ~~have~~lose ~~continued~~all toor ~~exhibit~~substantially ~~extreme~~all ~~volatility~~of their value.

~~Extreme volatility may persist, and the value of the Shares may significantly decline in the future without recovery.~~ The ~~digital~~trading ~~asset~~prices ~~markets may still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half~~ of ~~2022, each of Celsius Network, Voyager Digital~~many ~~Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the~~ digital ~~asset ecosystem and negative publicity surrounding digital~~ assets ~~more broadly. In November 2022~~, ~~FTX~~including ~~Trading Ltd. (“FTX”)~~bitcoin, ~~one~~have ofexperienced ~~the~~extreme ~~largest digital~~volatility ~~asset~~in ~~exchanges~~recent byperiods ~~volume at the time, halted customer withdrawals amid rumours of the company’s liquidity issues~~ and ~~likely insolvency,~~may ~~which~~continue ~~were~~to ~~subsequently~~do ~~corroborated by its CEO~~so. ~~Shortly~~For ~~thereafter~~instance, ~~FTX’s CEO resigned, and FTX and many of its affiliates~~there ~~filed~~were ~~for~~steep ~~bankruptcy~~increases in the ~~United~~value ~~States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department~~ of ~~Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against~~ certain ofdigital ~~FTX’s and its affiliates’ senior executives~~assets, including ~~its former CEO~~bitcoin, ~~who~~over ~~was~~the ~~found~~course ~~guilty~~ of ~~these criminal charges in November 2023. In addition~~2021, ~~several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc.~~ and ~~Genesis~~multiple ~~Global~~market ~~Capital, LLC (“Genesis”).~~observers Inasserted ~~response~~that todigital ~~these~~assets ~~events~~were ~~(collectively,~~experiencing ~~the~~a “~~2022 Events~~bubble.”), ~~the~~These ~~digital~~increases ~~asset~~were ~~markets~~followed ~~have~~by ~~experienced~~steep ~~extreme~~drawdowns ~~price~~throughout ~~volatility~~2022 ~~and other entities~~ in ~~the~~ digital asset ~~industry~~trading ~~have been~~prices, ~~and~~including ~~may~~for ~~continue to be, negatively affected, further undermining confidence in the digital asset markets~~bitcoin. These ~~events~~episodes ~~have also negatively impacted the liquidity~~ of ~~the~~rapid ~~digital~~price ~~asset~~appreciation ~~markets~~followed asby ~~certain~~steep ~~entities affiliated~~drawdowns ~~with~~have ~~FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively~~occurred ~~impacted~~multiple bytimes ~~these~~throughout ~~events,~~bitcoin’s ~~digital asset prices~~history, including ~~bitcoin, may continue to experience significant volatility or price declines, and confidence~~ in ~~the digital asset markets may be further undermined. In addition~~2011, ~~regulatory and enforcement scrutiny has increased~~2013-2014, ~~including~~ ~~from, among others, the U.S. Department of Justice, the SEC, the CFTC, the White House~~ and ~~Congress~~2017-2018, asbefore ~~well~~repeating asagain ~~state~~in ~~regulators and authorities~~2021-2022. ~~These events are continuing to develop, and~~ Over the ~~full~~course ~~facts are continuing to emerge. It is not possible to predict at this time all~~ of ~~the risks that they may pose to the Trust~~2024, ~~its~~bitcoin ~~service~~prices ~~providers~~have orcontinued to ~~the~~exhibit ~~digital~~extreme ~~asset industry as a whole~~volatility.

Extreme volatility in the future, including further declines in the trading prices of bitcoin, could have a material adverse effect on the value of the Shares, and the Shares could lose all or substantially all of their value. The Trust is not actively managed and will not take any actions to take advantage, or mitigate the impacts, of volatility in the price of bitcoin.12

~~Spot~~Extreme volatility may persist, and the value of the Shares may significantly decline in the future without recovery. The digital asset markets onmay still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, FTX Trading Ltd. (“FTX”), one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned, and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO, who was found guilty of these criminal charges in November 2023. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis”). In response to these events (collectively, the “2022 Events”), the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices, including bitcoin, ~~trades~~may continue to experience significant volatility or price declines, and confidence in the digital asset markets may be further undermined. In addition, regulatory and enforcement scrutiny may increase, including from, among others, the U.S. Department of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. These events are ~~relatively~~continuing ~~new~~to develop, and ~~largely~~the ~~unregulated~~full facts are continuing to emerge. It is not possible to predict at this time all of the risks that they may pose to the Trust, its service providers or to the digital asset industry as a whole.

~~Digital~~Extreme ~~asset~~volatility ~~markets,~~in ~~including~~the ~~spot markets for bitcoin~~future, ~~are~~including ~~growing~~further ~~rapidly.~~declines ~~The~~in ~~spot~~the ~~markets~~trading ~~through~~prices ~~which~~of bitcoin, ~~and~~could ~~other~~have ~~digital~~a ~~assets~~material ~~trade~~adverse ~~are~~effect ~~new~~on ~~and~~the ~~largely unregulated.~~value ~~These~~of ~~markets~~the ~~are local~~Shares, and ~~national~~the ~~and~~Shares ~~international~~could ~~and~~lose ~~include~~all aor ~~broadening~~substantially ~~range~~all of ~~digital~~their ~~assets and participants~~value. ~~Significant trading~~The ~~may~~Trust ~~occur~~is onnot ~~systems~~actively managed and ~~platforms~~will ~~with~~not ~~minimum~~take ~~predictability.~~any ~~Spot~~actions ~~markets~~to take ~~may impose daily~~advantage, ~~weekly, monthly~~ or ~~customer-specific transaction~~mitigate orthe ~~withdrawal limits or suspend withdrawals entirely~~impacts, ~~rendering the exchange~~ of ~~bitcoin~~volatility ~~for fiat currency difficult or impossible. Participation~~ in ~~spot~~the ~~markets~~price ~~requires~~of ~~users to take on credit risk by transferring~~ bitcoin ~~from a personal account to a third party’s account~~.

14Spot markets on which bitcoin trades are relatively new and largely unregulated.

Digital asset ~~exchanges~~markets, doincluding ~~not~~spot ~~appear~~markets tofor ~~be subject to~~bitcoin, orare ~~may~~growing ~~not~~rapidly. ~~comply~~The ~~with,~~spot ~~regulation~~markets inthrough awhich ~~similar~~bitcoin ~~manner~~and as other ~~regulated~~digital ~~trading~~assets ~~platforms,~~trade ~~such~~are asnew ~~national~~and largely ~~securities~~unregulated. ~~exchanges~~These ormarkets ~~designated~~are ~~contract~~local, ~~markets.~~national ~~Many~~and ~~digital~~international ~~asset~~and ~~exchanges~~include ~~are~~a ~~unlicensed,~~broadening ~~unregulated,~~range ~~operate~~of ~~without~~digital ~~extensive supervision~~assets byand ~~governmental~~participants. ~~authorities,~~Significant trading ~~and~~may dooccur ~~not~~on ~~provide~~systems ~~the~~and ~~public~~platforms with ~~significant~~minimum ~~information~~predictability. ~~regarding~~Spot ~~their~~markets ~~ownership~~may ~~structure~~impose daily, ~~management~~ ~~team~~weekly, ~~corporate~~monthly ~~practices,~~or ~~cybersecurity,~~customer-specific transaction ~~and~~or ~~regulatory~~withdrawal ~~compliance.~~limits Inor ~~particular,~~suspend ~~those~~withdrawals ~~located~~entirely, ~~outside~~rendering the ~~United~~exchange ~~States~~of bitcoin for fiat currency difficult or impossible. ~~may~~Participation bein ~~subject~~spot markets requires users to ~~significantly~~take ~~less~~on ~~stringent~~credit ~~regulatory~~risk ~~and~~by ~~compliance~~transferring ~~requirements~~bitcoin infrom ~~their~~a ~~local~~personal ~~jurisdictions~~account to a third party’s account.

AsDigital ~~a result, trading activity on or reported by these digital~~ asset exchanges ~~is generally significantly less regulated than trading in regulated U.S. securities and~~do ~~commodities~~not ~~markets~~appear ~~and~~to ~~may reflect behaviour that would~~ be ~~prohibited~~subject into, ~~regulated~~or ~~U.S.~~may ~~trading~~not ~~venues.~~comply ~~Furthermore~~with, ~~many~~regulation ~~spot markets lack certain safeguards put~~ in ~~place~~a bysimilar ~~more~~manner ~~traditional~~as ~~exchanges~~other toregulated ~~enhance the stability of~~ trading ~~on the exchange and prevent flash crashes~~platforms, such as ~~limit-down~~national securities ~~circuit~~exchanges ~~breakers.~~or Asdesignated acontract ~~result,~~markets. ~~the~~Many ~~prices of~~ digital ~~assets~~asset ~~such~~exchanges asare ~~bitcoin~~unlicensed, onunregulated, ~~digital~~operate ~~asset~~without ~~exchanges may~~extensive besupervision ~~subject~~by togovernmental ~~larger~~authorities, and~~/or~~ ~~more~~do ~~frequent~~not ~~sudden~~provide ~~declines~~the ~~than~~public ~~assets~~with ~~traded~~significant oninformation ~~more~~regarding ~~traditional~~their ~~exchanges.~~ownership ~~Tools to detect and deter~~structure, ~~fraudulent~~management orteam, ~~manipulative~~corporate ~~trading activities (such as market manipulation~~practices, ~~front-running of trades~~cybersecurity, and ~~wash-trading)~~regulatory ~~may~~compliance. ~~not~~In beparticular, ~~available to~~those orlocated ~~employed~~outside bythe ~~digital~~United ~~asset exchanges or~~ States may ~~not~~be ~~exist~~subject atto ~~all.~~significantly Asless astringent ~~result,~~regulatory ~~the~~and ~~marketplace~~compliance ~~may~~requirements ~~lose confidence~~ in, ortheir ~~may~~local ~~experience problems relating to, these venues~~jurisdictions.

NoAs ~~bitcoin~~a ~~exchange~~result, istrading ~~immune~~activity ~~from~~on or reported by these ~~risks~~digital asset exchanges is generally significantly less regulated than trading in regulated U.S. ~~While~~securities ~~the~~and commodities ~~Trust~~markets ~~itself~~and ~~does~~may ~~not~~reflect ~~buy~~behavior orthat ~~sell~~would ~~bitcoin~~be onprohibited ~~bitcoin~~in regulated U.S. trading venues. Furthermore, many spot markets, lack ~~the~~certain ~~closure~~safeguards orput ~~temporary~~in ~~shutdown~~place ofby ~~bitcoin exchanges~~more ~~due~~traditional exchanges to ~~fraud,~~enhance ~~business~~the ~~failure,~~stability ~~hackers~~of ortrading ~~malware~~on the exchange and prevent flash crashes, orsuch ~~government~~as limit-~~mandated~~down ~~regulation~~circuit ~~may~~breakers. ~~reduce~~As ~~confidence~~a inresult, the ~~Bitcoin~~prices ~~network~~of digital assets such as bitcoin on digital asset exchanges may be subject to larger and/or ~~can~~more ~~slow~~frequent ~~down~~sudden ~~the~~declines ~~mass~~than ~~adoption~~assets oftraded ~~bitcoin~~on more traditional exchanges. ~~Further,~~Tools ~~spot~~to ~~market~~detect ~~failures~~and deter fraudulent or ~~that~~manipulative oftrading ~~any~~activities ~~other~~(such ~~major~~as ~~component~~market manipulation, front-running of ~~the~~trades, ~~overall~~and ~~bitcoin ecosystem~~wash-trading) ~~can~~may ~~have~~not anbe ~~adverse~~available to ~~effect~~or onemployed ~~bitcoin~~by ~~markets~~digital ~~and~~asset ~~the~~exchanges ~~price~~or ofmay ~~bitcoin~~not ~~and~~exist ~~could~~at ~~therefore~~all. ~~have~~As a ~~negative~~result, ~~impact~~the onmarketplace ~~the~~may ~~performance~~lose confidence in, or may experience ofproblems ~~the~~relating ~~Trust~~to, these venues.

~~Negative~~No ~~perception,~~bitcoin aexchange ~~lack~~is immune offrom ~~stability~~these inrisks. While the ~~bitcoin~~Trust ~~spot~~itself ~~markets,~~does ~~manipulation~~not ofbuy ~~bitcoin~~or ~~spot~~sell ~~markets~~bitcoin byon ~~customers~~bitcoin ~~and/or~~spot markets, the closure or temporary shutdown of ~~such~~ bitcoin exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in ~~bitcoin generally~~the Bitcoin network and ~~result~~can inslow ~~greater~~down ~~volatility in~~ the ~~market~~mass ~~price~~adoption of bitcoin. ~~and~~Further, ~~the~~spot ~~Shares~~market offailures ~~the~~or ~~Trust.~~that ~~Furthermore,~~of ~~the~~any ~~closure~~other ormajor ~~temporary shutdown~~component of athe ~~bitcoin~~overall ~~spot~~Bitcoin ecosystem ~~market~~can ~~may~~have ~~impact~~an ~~the~~adverse ~~Trust’s~~effect ~~ability~~on tobitcoin ~~determine~~markets and the ~~value~~price of ~~its~~ bitcoin ~~holdings~~and orcould ~~for~~therefore ~~the~~have ~~Trust’s Authorized~~a ~~Participants~~negative toimpact ~~effectively~~on ~~arbitrage~~the performance of the Trust~~’s Shares~~.

~~The~~Negative ~~use~~perception, a lack of ~~cash~~stability ~~creations and~~in ~~redemptions~~the bitcoin spot markets, asmanipulation ~~opposed~~of tobitcoin ~~in-kind~~spot ~~creations~~markets by customers and/or ~~redemptions~~the closure or temporary shutdown of such exchanges due to fraud, ~~may~~business ~~adversely~~failure, ~~affect~~hackers ~~the~~or ~~arbitrage~~malware, ~~transactions~~or bygovernment-mandated ~~Authorized~~regulation ~~Participants~~may reduce confidence in bitcoin ~~intended~~generally toand ~~keep~~result in greater volatility in the market price of bitcoin and the Shares ~~closely~~of ~~linked~~the toTrust. Furthermore, the ~~price~~closure or temporary shutdown of a bitcoin ~~and,~~spot asmarket amay ~~result,~~impact the ~~price~~Trust’s ofability to determine the ~~Shares~~value ~~may~~of ~~fall~~its bitcoin holdings or for the Trust’s ~~otherwise~~Authorized ~~diverge~~Participants ~~from~~to ~~NAV~~effectively arbitrage the Trust’s Shares.

The Trust’s inability to facilitate in-kind creations and redemptions could result in the exchange-traded product arbitrage mechanism failing to function as efficiently as it otherwise would, leading to the potential for the Shares to trade at premiums or discounts to the NAV per Share, and such premiums or discounts could be substantial. Furthermore, if cash creations or redemptions are unavailable, either due to the Sponsor’s decision to reject or suspend such orders or otherwise, it will not be possible for Authorized Participants to redeem or create Shares, in which case the arbitrage mechanism would be unavailable. This could result in impaired liquidity for the Shares, wider bid/ask spreads in secondary trading of the Shares and greater costs to investors and other market participants. In addition, the Trust’s inability to facilitate in-kind creations and redemptions, and resulting reliance on cash creations and redemptions, could cause the Sponsor to halt or suspend the creation or redemption of Shares during times of market volatility or turmoil, among other consequences.13

The use of cash creations and redemptions, as opposed to in-kind creations and redemptions, ~~could~~may ~~cause~~adversely ~~delays~~affect ~~in trade execution due to potential operational issues arising from implementing a cash creation and redemption model, which involves greater operational steps (and therefore execution risk) than~~ the ~~originally~~arbitrage ~~contemplated~~transactions ~~in-kind~~by creation and redemption model, or the potential unavailability or exhaustion of the Trade Credits, which the Trust would not be able to use in connection with in-kind creations and redemptions. Such delays could cause the execution price associated with such trades to materially deviate from the Index price used to determine the NAV. Even though the Authorized ~~Participant is responsible for the dollar cost of such difference in prices, Authorized~~ Participants ~~could default on their obligations to the Trust,~~ or such potential risks and costs could lead to Authorized Participants, who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying bitcoin, to elect to not participate in the Trust’s Share creation and redemption processes. This may adversely affect the arbitrage mechanism intended to keep the price of the Shares closely linked to the price of bitcoin, and, as a result, the price of the Shares may fall or otherwise diverge from NAV. If the arbitrage mechanism is not effective, purchases or sales of Shares on the secondary market could occur at a premium or discount to NAV, which could harm Shareholders by causing them buy Shares at a price higher than the value of the underlying bitcoin held by the Trust or sell Shares at a price lower than the value of the underlying bitcoin held by the Trust, causing Shareholders to suffer losses.

15The Trust’s inability to facilitate in-kind creations and redemptions could result in the exchange-traded product arbitrage mechanism failing to function as efficiently as it otherwise would, leading to the potential for the Shares to trade at premiums or discounts to the NAV per Share, and such premiums or discounts could be substantial. Furthermore, if cash creations or redemptions are unavailable, either due to the Sponsor’s decision to reject or suspend such orders or otherwise, it will not be possible for Authorized Participants to redeem or create Shares, in which case the arbitrage mechanism would be unavailable. This could result in impaired liquidity for the Shares, wider bid/ask spreads in secondary trading of the Shares and greater costs to investors and other market participants. In addition, the Trust’s inability to facilitate in-kind creations and redemptions, and resulting reliance on cash creations and redemptions, could cause the Sponsor to halt or suspend the creation or redemption of Shares during times of market volatility or turmoil, among other consequences.

ToThe ~~the~~use ~~knowledge~~ of ~~the~~cash ~~Sponsor,~~creations ~~exchange-traded~~and ~~products~~redemptions, ~~for~~as ~~spot~~opposed to in-~~market~~kind ~~commodities~~creations ~~other~~and redemptions, could cause delays in trade execution due to potential operational issues arising from implementing a cash creation and redemption model, which involves greater operational steps (and therefore execution risk) than ~~bitcoin~~the originally contemplated in-kind creation and redemption model, ~~such~~or the potential unavailability or exhaustion of the Trust’s ability to borrow bitcoin or cash as ~~gold~~trade ~~and~~credit ~~silver~~(the “Trade Credits”), ~~generally~~which ~~employ~~the Trust would not be able to use in connection with in-kind creations and redemptions. Such delays could cause the execution price associated with such trades to materially deviate from the ~~underlying~~Index ~~asset~~price used to determine the NAV. ~~The~~Even ~~Sponsor~~though ~~believes~~the ~~that~~Authorized itParticipant is ~~generally~~responsible ~~more~~for ~~efficient~~the dollar cost of such difference in prices, ~~and~~Authorized ~~therefore~~Participants ~~less~~could ~~costly~~default on their obligations to the Trust, ~~for~~or ~~spot~~such ~~commodity~~potential risks and costs could lead to Authorized ~~exchange-traded~~Participants, ~~products~~who would otherwise be willing to ~~utilize~~purchase ~~in-kind~~or ~~orders~~redeem ~~rather~~Baskets ~~than~~to ~~cash~~take ~~orders,~~advantage ~~because~~of ~~there~~any ~~are~~arbitrage ~~fewer~~opportunity ~~steps~~arising infrom discrepancies between the ~~process~~price of the Shares and ~~therefore there~~the isprice ~~less~~of ~~operational~~the ~~risk~~underlying ~~involved~~bitcoin, ~~when~~to anelect ~~authorized~~to ~~participant~~not ~~can~~participate ~~manage~~in the ~~buying~~Trust’s Share creation and ~~selling~~redemption processes. This may adversely affect the arbitrage mechanism intended to keep the price of the ~~underlying~~Shares ~~asset~~closely linked ~~itself~~to the price of bitcoin, ~~rather~~ ~~than~~and ~~depend~~as ona anresult, ~~unaffiliated~~the ~~party~~price ~~such~~of asthe Shares may fall or otherwise diverge from NAV. If the ~~issuer~~arbitrage mechanism is not effective, purchases or ~~sponsor~~sales of Shares on the ~~exchange-traded~~secondary ~~product.~~market Ascould ~~such,~~occur at a ~~spot~~premium ~~commodity~~or ~~exchange-traded~~discount to NAV, which could harm Shareholders ~~product~~by ~~that~~causing ~~only~~them ~~employs~~buy ~~cash~~Shares ~~creations~~at ~~and~~a ~~redemptions~~price ~~and~~higher ~~does~~than ~~not~~the ~~permit~~value ~~in-kind~~of ~~creations~~the ~~and~~underlying ~~redemptions~~bitcoin isheld aby ~~novel~~the ~~product~~Trust ~~that~~or sell Shares at a price lower ~~has~~than ~~not~~the ~~been~~value ~~tested,~~of ~~and~~the ~~could~~underlying bebitcoin ~~impacted~~held by ~~any~~the ~~resulting~~Trust, ~~operational~~causing ~~inefficiencies~~Shareholders to suffer losses.

IfTo the ~~process~~knowledge of ~~creation~~the Sponsor, ~~and~~exchange-traded ~~redemption~~products offor ~~Baskets~~spot-market ~~encounters~~commodities ~~any~~other ~~unanticipated~~than ~~difficulties~~bitcoin, such as gold and silver, generally employ in-kind creations and redemptions with the ~~possibility~~underlying ~~for~~asset. ~~arbitrage~~The ~~transactions~~Sponsor bybelieves ~~Authorized~~that ~~Participants~~it is generally more efficient, and therefore less costly, for spot commodity ~~intended~~exchange-traded products to ~~keep~~utilize in-kind orders rather than cash orders, because there are fewer steps in the ~~price~~process and therefore there is less operational risk involved when an authorized participant can manage the buying and selling of the ~~Shares~~underlying ~~closely~~asset ~~linked~~itself, rather tothan depend on an unaffiliated party such as the ~~price~~issuer or sponsor of ~~bitcoin~~the ~~may~~exchange-traded product. As such, a spot commodity exchange-traded product that only employs cash creations and redemptions and does not ~~exist~~permit in-kind creations and, asredemptions is a ~~result,~~novel ~~the~~product ~~price~~that has ofnot ~~the~~been ~~Shares may~~tested, ~~fall~~and orcould ~~otherwise~~be ~~diverge~~impacted ~~from~~by ~~NAV~~any resulting operational inefficiencies.

If the processes of creation and redemption of Shares (which depend on timely transfers of bitcoin to and by the Bitcoin Custodian) encounter any unanticipated difficulties due to, for example, the price volatility of bitcoin, the insolvency, business failure or interruption, default, failure to perform, security breach, or other problems affecting the Bitcoin Custodian, any operational issues that may arise from creating and redeeming Shares via cash transactions, the closing of bitcoin trading platforms due to fraud, failures, security breaches or otherwise, or network outages or congestion, spikes in transaction fees demanded by miners, or other problems or disruptions affecting the Bitcoin network, then potential market participants, such as the Authorized Participants ~~and their customers, who would otherwise be willing to purchase or redeem Baskets~~ ~~to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying bitcoin~~ may ~~not~~act take the risk that, as a result of those difficulties, they may not be able to realize the profit they expect. In certain such cases, the Sponsor may suspend the process of creation and redemption of Baskets. During such times, trading spreads, and the resulting premium or discount, on Shares may widen. Alternatively, in the ~~case~~same ~~of a network outage~~ or ~~other~~similar ~~problems~~capacity affecting the Bitcoin network, the processing of transactions on the Bitcoin network may be disrupted, which in turn could affect the creation or redemption of Baskets. If this is the case, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the price of bitcoin and may fall or otherwise diverge from NAV. Furthermore, in the event that the market for ~~bitcoin~~other ~~should~~competing ~~become relatively illiquid and thereby materially restrict opportunities for arbitraging by delivering bitcoin in return for Baskets, the price of Shares may diverge from the value of bitcoin~~products.

Authorized Participants play a critical role in supporting the U.S. spot bitcoin exchange-traded product ecosystem. Currently, the number of potential Authorized Participants willing and capable of serving as Authorized Participants to the Trust or other competing products is limited. Authorized Participants may act in the same or similar capacity for other competing products, including exchange-traded products offering exposure to the spot bitcoin market or other digital assets. The Trust is therefore subject to risks associated with these competing products utilizing the same Authorized Participants to support the trading activity of the Trust and liquidity in the Trust’s Shares.

To the extent Authorized ~~participants~~Participants exit ~~play~~the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, Shares may trade at a ~~critical~~material ~~role~~discount into ~~supporting~~NAV ~~the~~and Upossibly face delisting.S. ~~spot~~To ~~bitcoin~~the extent that exchange-traded products ~~product~~offering ~~ecosystem.~~exposure ~~Currently,~~to the ~~number~~spot ofbitcoin ~~potential~~market or other digital assets utilize substantially the same Authorized Participants, ~~willing~~this ~~and~~industry ~~capable~~concentration may have the effect of ~~serving~~magnifying asthe ~~Authorized~~risks ~~Participants~~associated towith the ~~Trust~~Authorized orParticipants, ~~other~~as ~~competing~~operational ~~products~~disruptions or isadverse ~~limited.~~developments impacting the Authorized Participants may ~~act~~be felt on an industry-wide basis, which, in turn, may adversely affect not only the ~~same~~Trust orand ~~similar~~the ~~capacity~~value ~~for~~of ~~other~~an investment in the Shares, but also these competing products utilizing the same Authorized Participants and, ~~including~~more generally, exchange-traded products offering exposure to the spot bitcoin market or other digital assets. ~~The~~These ~~Trust~~industry-wide adverse iseffects ~~therefore~~could ~~subject~~result toin ~~risks~~a ~~associated~~broader ~~with~~loss ~~these~~of ~~competing~~confidence in exchange-traded products ~~utilizing~~offering exposure to the ~~same~~ ~~Authorized~~spot ~~Participants~~bitcoin tomarket or ~~support~~other ~~the~~digital ~~trading~~assets, ~~activity~~which ofcould further impact the Trust and ~~liquidity~~the value of an investment in the ~~Trust’s~~ Shares.

To the extent Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, Shares may trade at a material discount to NAV and possibly face delisting. To the extent that exchange-traded products offering exposure to the spot bitcoin market or other digital assets utilize substantially the same Authorized Participants, this industry concentration may have the effect of magnifying the risks associated with the Authorized Participants, as operational disruptions or adverse developments impacting the Authorized Participants may be felt on an industry-wide basis, which, in turn, may adversely affect not only the Trust and the value of an investment in the Shares, but also these competing products utilizing the same Authorized Participants and, more generally, exchange-traded products offering exposure to the spot bitcoin market or other digital assets. These industry-wide adverse effects could result in a broader loss of confidence in exchange-traded products offering exposure to the spot bitcoin market or other digital assets, which could further impact the Trust and the value of an investment in the Shares.14

16Spot markets may be exposed to security breaches.

~~Spot~~The nature of the assets held at bitcoin spot markets ~~may~~makes bethem appealing targets for hackers and a number of bitcoin spot markets have been victims of cybercrimes. ~~exposed~~Over the past several years, some digital asset exchanges have been closed due to security breaches. In many of these instances, the customers of such digital asset exchanges were not compensated or made whole for the partial or complete losses of their account balances in such digital asset exchanges. While, generally speaking, smaller digital asset exchanges are less likely to have the infrastructure and capitalization that make larger digital asset exchanges more stable, larger digital asset exchanges are more likely to be appealing targets for hackers and malware.

~~The~~For ~~nature~~example, the collapse of Mt. Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the ~~assets~~largest ~~held~~digital asset exchanges atcould ~~bitcoin~~be ~~spot~~subject ~~markets~~to ~~makes~~abrupt ~~them~~failure ~~appealing~~with ~~targets~~consequences for ~~hackers~~both users of digital asset exchanges and the digital asset industry as a ~~number~~whole. In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin ~~spot~~withdrawals ~~markets~~from ~~have~~Mt. ~~been~~Gox, ~~victims~~the value of ~~cybercrimes~~one bitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in January 2015, Bitstamp announced ~~Over~~that approximately 19,000 bitcoin had been stolen from its operational or “hot” wallets. Further, in August 2016, it was reported that almost 120,000 bitcoin worth around $78 million were stolen from Bitfinex, a large digital asset exchange. The value of bitcoin and other digital assets immediately decreased over 10% following reports of the ~~past~~theft ~~several~~at ~~years~~Bitfinex. In July 2017, ~~some~~FinCEN assessed a $110 million fine against BTC-E, a now defunct digital asset ~~exchanges~~exchange, ~~have~~for ~~been~~facilitating ~~closed~~crimes ~~due~~such toas ~~security~~drug ~~breaches~~sales and ransomware attacks. In ~~many~~addition, in ofDecember ~~these~~2017, ~~instances~~Yapian, the ~~customers~~ operator of ~~such~~Seoul-based cryptocurrency exchange Youbit, suspended digital asset ~~exchanges~~trading ~~were~~and ~~not~~filed ~~compensated~~for orbankruptcy following ~~made~~a ~~whole~~hack ~~for~~that ~~the~~resulted ~~partial~~in ora ~~complete~~loss ~~losses~~of 17% of ~~their~~Yapian’s ~~account~~assets. ~~balances~~Following inthe ~~such~~hack, Youbit users were allowed to withdraw approximately 75% of the digital ~~asset~~assets ~~exchanges~~in their exchange accounts, with any potential further distributions to be made following Yapian’s pending bankruptcy proceedings. ~~While~~In addition, ~~generally~~in ~~speaking~~January 2018, ~~smaller~~the Japanese digital asset ~~exchanges~~exchange, ~~are~~Coincheck, ~~less~~was ~~likely~~hacked, toresulting ~~have~~in ~~the~~losses of ~~infrastructure~~approximately $535 million, and ~~capitalization that~~in ~~make~~February ~~larger~~2018, the Italian digital asset ~~exchanges~~exchange, ~~more~~Bitgrail, ~~stable~~was hacked, ~~larger~~resulting in approximately $170 million in losses. In May 2019, one of the world’s largest digital asset exchanges, ~~are~~Binance, ~~more~~was ~~likely~~hacked, toresulting bein ~~appealing~~losses of ~~targets~~approximately ~~for~~$40 ~~hackers~~million. On February 21, 2025, Bybit, a digital asset exchange, experienced a significant security breach resulting ~~and~~in ~~malware~~the loss of nearly $1.5 billion worth of ether.

~~For~~Spot ~~example,~~markets ~~the~~may ~~collapse of Mt. Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset exchanges could~~ be ~~subject to abrupt failure with consequences for both users of digital asset exchanges and the digital asset industry as a whole.~~ Inexposed ~~particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the value of one bitcoin fell on other exchanges from around $795 on February 6, 2014,~~ to ~~$578~~fraud on February 20, 2014. Additionally, in January 2015, Bitstamp announced that approximately 19,000 bitcoin had been stolen from its operational or “hot” wallets. Further, in August 2016, it was reported that almost 120,000 bitcoin worth around $78 million were stolen from Bitfinex, a large digital asset exchange. The value of bitcoin and ~~other~~ ~~digital~~market ~~assets immediately decreased over 10% following reports of the theft at Bitfinex~~manipulation. In July 2017, FinCEN assessed a $110 million fine against BTC-E, a now defunct digital asset exchange, for facilitating crimes such as drug sales and ransomware attacks. In addition, in December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filed for bankruptcy following a hack that resulted in a loss of 17% of Yapian’s assets. Following the hack, Youbit users were allowed to withdraw approximately 75% of the digital assets in their exchange accounts, with any potential further distributions to be made following Yapian’s pending bankruptcy proceedings. In addition, in January 2018, the Japanese digital asset exchange, Coincheck, was hacked, resulting in losses of approximately $535 million, and in February 2018, the Italian digital asset exchange, Bitgrail, was hacked, resulting in approximately $170 million in losses. In May 2019, one of the world’s largest digital asset exchanges, Binance, was hacked, resulting in losses of approximately $40 million.

~~Spot~~The ~~markets~~blockchain ~~may~~infrastructure could be ~~exposed~~ used by certain market participants to ~~fraud~~exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dump and fraud across different systems, platforms or geographic locations. As a result of reduced oversight, these schemes may be more prevalent in digital asset markets than in the general market ~~manipulation~~for financial products.

The ~~blockchain~~SEC ~~infrastructure~~has identified possible ~~could~~sources beof ~~used~~fraud byand ~~certain~~manipulation in the bitcoin market ~~participants~~generally, toincluding, ~~exploit~~among ~~arbitrage~~others: ~~opportunities~~(1) ~~through~~“wash ~~schemes~~trading”; ~~such~~(2) aspersons with ~~front-running,~~a ~~spoofing,~~dominant ~~pump-~~position in bitcoin manipulating bitcoin pricing; (3) hacking of the Bitcoin network and~~-dump~~ trading platforms; (4) malicious ~~and~~control ~~fraud~~of ~~across~~the ~~different~~Bitcoin ~~systems~~network; (5) trading based on material, ~~platforms~~non-public information (for example, plans of market participants to significantly increase or ~~geographic~~decrease ~~locations.~~their Asholdings ain ~~result~~bitcoin, new sources of ~~reduced~~demand ~~oversight~~for bitcoin, ~~these~~etc.) ~~schemes~~or ~~may~~based beon ~~more~~the ~~prevalent~~dissemination of false and misleading ininformation; ~~digital~~(6) ~~asset~~manipulative ~~markets~~activity ~~than~~involving inpurported ~~the~~“stablecoins,” ~~general~~including ~~market~~Tether; ~~for~~and ~~financial~~(7) ~~products~~fraud and manipulation at bitcoin trading platforms.

~~The~~Over ~~SEC has identified possible sources of fraud and manipulation in~~ the ~~bitcoin~~past ~~market~~several ~~generally~~years, ~~including, among others (1) “wash trading”; (2) persons~~ ~~with~~ a ~~dominant~~number ~~position~~of in bitcoin ~~manipulating~~spot ~~bitcoin~~markets ~~pricing;~~have ~~(3)~~been ~~hacking~~closed ofor ~~the~~faced ~~Bitcoin~~issues ~~network~~due ~~and~~to ~~trading~~fraud. ~~platforms;~~In ~~(4)~~many ~~malicious control~~ of ~~the~~these ~~Bitcoin network; (5) trading based on material~~instances, ~~non-public~~the ~~information~~customers ~~(for example, plans~~ of ~~market~~such ~~participants to significantly~~bitcoin ~~increase~~spot ormarkets ~~decrease~~were ~~their~~not ~~holdings~~compensated inor ~~bitcoin,~~made ~~new~~whole ~~sources of demand~~ for ~~bitcoin,~~the ~~etc.)~~partial or ~~based~~complete onlosses ~~the dissemination~~ of ~~false~~their ~~and~~account ~~misleading information;~~balances ~~(6)~~in ~~manipulative~~such ~~activity involving purported “stablecoins,” including Tether; and (7) fraud and manipulation at~~ bitcoin ~~trading platforms~~exchanges.

~~Over~~In ~~the~~2019, ~~past~~there ~~several~~were ~~years,~~reports aclaiming ~~number~~that 80.95% of bitcoin ~~spot~~trading ~~markets~~volume on digital asset exchanges was false or noneconomic in nature, with specific focus on unregulated exchanges located outside of the United States. Such reports alleged that certain overseas exchanges have ~~been~~displayed ~~closed~~suspicious trading activity suggestive of a variety of manipulative or ~~faced~~fraudulent ~~issues~~practices. ~~due~~Other academics and market observers have put forth evidence to ~~fraud~~support claims that manipulative trading activity has occurred on certain bitcoin exchanges. InFor ~~many~~example, in a 2017 paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary Cyber Research Center at Tel Aviv University, a group of ~~these~~researchers ~~instances~~used publicly available trading data, as well as leaked transaction data from a 2014 Mt. Gox security breach, to identify and analyze the ~~customers~~impact of ~~such~~“suspicious trading activity” on Mt. Gox between February and November 2013, which, according to the authors, caused the price of bitcoin to increase from around $150 to more than $1,000 over a two-month period. In August 2017, it ~~spot~~was ~~markets~~reported ~~were~~that ~~not~~a ~~compensated~~trader or ~~made~~group ~~whole~~of ~~for~~traders ~~the~~nicknamed ~~partial~~“Spoofy” was placing large orders on Bitfinex without actually executing them, presumably in order to influence other investors into buying or ~~complete~~selling ~~losses~~by ofcreating ~~their~~a ~~account~~false ~~balances~~appearance that greater demand existed in ~~such~~the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex’d) cited publicly available trading data to support his or her claim that a trading bot nicknamed “Picasso” was pursuing a paint-the-tape-style manipulation strategy by buying and selling bitcoin ~~exchanges~~and bitcoin cash between affiliated accounts in order to create the appearance of substantial trading activity and thereby influence the price of such assets.

1715

In ~~2019~~November 2022, ~~there~~FTX, ~~were reports~~one ~~claiming that 80.95%~~ of ~~bitcoin~~the ~~trading~~largest ~~volume on~~ digital asset exchanges ~~was~~by ~~false~~volume orat ~~noneconomic~~the ~~in nature~~time, ~~with~~halted ~~specific~~customer ~~focus~~withdrawals onamid ~~unregulated exchanges~~rumors ~~located outside~~ of the ~~United~~company’s ~~States. Such reports alleged that certain overseas exchanges have displayed suspicious trading~~liquidity ~~activity~~issues ~~suggestive of a variety of manipulative or fraudulent practices. Other academics~~ and ~~market~~likely ~~observers~~insolvency, ~~have~~which ~~put~~were ~~forth~~subsequently ~~evidence to~~corroborated ~~support~~by ~~claims~~its ~~that manipulative trading activity has occurred on certain bitcoin exchanges~~CEO. ~~For~~Shortly ~~example~~thereafter, inFTX’s aCEO ~~2017~~resigned ~~paper~~and ~~titled~~FTX ~~“Price~~and ~~Manipulation~~many inof ~~the~~its ~~Bitcoin~~affiliates ~~Ecosystem”~~filed ~~sponsored~~for bybankruptcy in the ~~Interdisciplinary~~United ~~Cyber Research Center at Tel Aviv University~~States, awhile ~~group of~~other ~~researchers~~affiliates ~~used~~have ~~publicly~~entered ~~available trading data~~insolvency, ~~as well as leaked transaction data from a 2014 Mt. Gox security breach~~liquidation, toor ~~identify~~similar ~~and~~proceedings ~~analyse~~around the ~~impact~~globe, offollowing ~~“suspicious~~which ~~trading~~the ~~activity” on Mt~~U.S. ~~Gox~~Department ~~between~~of ~~February~~Justice ~~and~~brought ~~November~~criminal ~~2013,~~fraud ~~which,~~and ~~according~~other ~~to the authors~~charges, ~~caused~~and the ~~price~~SEC ofand CFTC ~~bitcoin~~brought tocivil ~~increase~~securities ~~from~~and ~~around~~commodities ~~$150~~fraud ~~to more than $1~~charges,~~000~~ ~~over~~against acertain ~~two-month period. In August 2017, it was reported that a trader or group~~ of ~~traders~~FTX’s ~~nicknamed~~and ~~“Spoofy”~~its ~~was~~affiliates’ ~~placing~~senior ~~large orders on Bitfinex without actually executing them~~executives, including ~~presumably~~its informer ~~order~~CEO. toAround ~~influence other investors into buying or selling by creating a false appearance that greater demand existed in~~ the ~~market.~~same ~~In December 2017~~time, anthere ~~anonymous~~were ~~blogger~~reports ~~(publishing under the pseudonym Bitfinex’d) cited publicly available trading data to support his or her claim~~ that aapproximately ~~trading~~$300-600 ~~bot~~million ~~nicknamed~~of ~~“Picasso”~~digital ~~was~~assets ~~pursuing~~were ~~a paint-the-tape-style manipulation strategy~~removed byfrom ~~buying~~FTX, and ~~selling~~the ~~bitcoin~~full ~~and~~facts ~~bitcoin~~remain ~~cash~~unknown, ~~between~~including ~~affiliated~~whether ~~accounts~~such inremoval ~~order~~was ~~to create~~ the ~~appearance~~result of ~~substantial~~a ~~trading~~hack, ~~activity and~~theft, ~~thereby~~insider ~~influence~~activity, ~~the~~or ~~price~~other improper ~~of such assets~~behavior.

InThe ~~November~~potential ~~2022, FTX, one~~consequences of ~~the~~a ~~largest~~spot ~~digital~~market’s ~~asset~~failure ~~exchanges~~or byfailure ~~volume~~to atprevent ~~the~~market ~~time,~~manipulation ~~halted~~could ~~customer~~adversely ~~withdrawals~~affect ~~amid~~the ~~rumours~~value of the ~~company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO~~Shares. ~~Shortly~~Any ~~thereafter~~market abuse, ~~FTX’s CEO resigned~~ and ~~FTX~~a ~~and many~~loss of ~~its~~investor ~~affiliates~~confidence ~~filed for bankruptcy~~ in ~~the United States~~bitcoin, ~~while~~may ~~other~~adversely ~~affiliates~~impact ~~have~~pricing ~~entered~~trends ~~insolvency,~~in ~~liquidation,~~bitcoin ormarkets ~~similar proceedings around the globe~~broadly, ~~following~~as ~~which~~well ~~the~~as ~~U.S.~~an ~~Department of Justice brought criminal fraud and other charges, and the SEC and~~investment ~~CFTC~~in ~~brought~~Shares ~~civil securities and commodities fraud charges, against certain~~ of ~~FTX’s and its affiliates’ senior executives, including its former CEO. Around~~ the same time, there were reports that approximately $300-600 million of digital assets were removed from FTX, and the full facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, or other improper behaviourTrust.

~~The~~Spot ~~potential~~markets ~~consequences of a spot market’s failure or failure to prevent market manipulation could adversely affect the value of the Shares. Any market abuse, and a loss of investor confidence in bitcoin,~~ may ~~adversely impact pricing trends in bitcoin markets broadly, as well as an investment~~be inexposed ~~Shares~~to ofwash ~~the Trust~~trading.

Spot markets on which bitcoin trades may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for other than bona fide reasons, ~~exposed~~such as the desire to inflate reported trading volumes. Wash trading may be motivated by non-economic reasons, such as a desire for increased visibility on popular websites that monitor markets for digital assets so as to improve their attractiveness to investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek the most liquid and high-volume exchanges on which to list their coins. Results of wash trading may include unexpected obstacles to trade and erroneous investment decisions based on false information.

~~Spot~~Even ~~markets~~in onthe ~~which~~United ~~bitcoin~~States, ~~trades~~there ~~may~~have bebeen ~~susceptible~~allegations toof wash trading. ~~Wash~~even ~~trading~~on ~~occurs~~regulated ~~when~~venues. ~~offsetting~~Any ~~trades~~actual ~~are~~or ~~entered~~perceived ~~into~~false ~~for~~trading ~~other~~in ~~than bona fide reasons, such as~~ the ~~desire to inflate reported trading volumes. Wash trading may be motivated by non-economic reasons, such as a desire for increased visibility on popular websites that monitor markets for~~ digital ~~assets~~asset ~~so as to improve their attractiveness to investors who look for~~exchange ~~maximum liquidity~~market, orand itany ~~may~~other befraudulent ~~motivated~~or bymanipulative ~~the~~acts ~~ability~~and topractices, ~~attract~~could ~~listing~~adversely ~~fees~~affect ~~from token issuers who seek~~ the ~~most~~value ~~liquid and high-volume exchanges on which to list their coins. Results~~ of ~~wash~~bitcoin ~~trading may include unexpected obstacles to trade~~ and/or ~~erroneous~~negatively ~~investment decisions~~affect ~~based~~the onmarket ~~false~~perception ~~information~~of bitcoin.

~~Even~~To in the ~~United~~extent ~~States,~~that wash trading ~~there~~either ~~have~~occurs ~~been~~or ~~allegations~~appears ofto ~~wash~~occur ~~trading~~in ~~even~~spot markets on ~~regulated~~which ~~venues.~~bitcoin ~~Any~~trades, ~~actual~~investors ormay ~~perceived~~develop ~~false~~negative ~~trading~~perceptions inabout bitcoin and the digital ~~asset~~assets ~~exchange market~~industry more broadly, ~~and~~which ~~any~~could ~~other~~adversely ~~fraudulent~~impact orthe ~~manipulative~~price ~~acts~~bitcoin and, ~~practices~~therefore, ~~could~~the ~~adversely~~price ~~affect~~of ~~the~~Shares. ~~value~~Wash oftrading also ~~bitcoin~~may ~~and/or~~place ~~negatively~~more ~~affect the~~legitimate ~~market~~digital ~~perception~~asset ofexchanges ~~bitcoin~~at a relative competitive disadvantage.

ToSpot ~~the extent that wash trading either occurs or appears to occur in spot~~ markets ~~on which bitcoin trades, investors~~ may ~~develop negative perceptions about bitcoin and~~be ~~the~~exposed ~~digital~~to ~~assets industry more broadly, which could adversely impact the price bitcoin and, therefore, the price of Shares~~front-running. ~~Wash trading also may place more legitimate digital asset exchanges at a relative competitive disadvantage.~~

Spot markets on which bitcoin trades may be susceptible to “front-running,” which refers to the process when someone uses technology or market advantage ~~exposed~~to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralized exchanges. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of a front runner is to buy a chunk of tokens at a low price and later sell them at a higher price while simultaneously exiting the position. Front-running happens via manipulations of gas prices or timestamps, also known as slow matching. To extent that front-running occurs, it may result in investor frustrations and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

~~Spot~~Momentum ~~markets on which bitcoin trades may be susceptible to “front-running,” which refers to the process when someone uses technology or market advantage to get prior knowledge of upcoming transactions~~pricing. Front-running is a frequent activity on centralized as well as decentralized exchanges. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of a front runner is to buy a chunk of tokens at a low price and later sell them at a higher price while simultaneously exiting the position. Front-running happens via manipulations of gas prices or timestamps, also known as slow matching. To extent that front-running occurs, it may result in investor frustrations and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

18The market value of bitcoin is not based on any kind of claim, nor backed by any physical asset. Instead, the market value depends on the expectation of being usable in future transactions and continued interest from investors. This strong correlation between an expectation and market value is the basis for the current (and probable future) volatility of the market value of bitcoin and may increase the likelihood of momentum pricing.

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation in value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices and leads to increased volatility. As a result, bitcoin may be more likely to fluctuate in value due to changing investor confidence in future appreciation or depreciation in prices, which could adversely affect the price of bitcoin, and, in turn, an investment in the Trust.

The ~~market~~ value of a bitcoin as isrepresented ~~not~~by ~~based~~the onIndex ~~any~~may ~~kind~~also ofbe ~~claim,~~subject ~~nor~~to ~~backed~~momentum bypricing ~~any~~due ~~physical~~to ~~asset.~~speculation ~~Instead,~~regarding ~~the~~future ~~market~~appreciation in value, ~~depends~~leading onto greater volatility that could adversely affect the ~~expectation~~value of ~~being~~the ~~usable in~~Shares. ~~future~~Momentum ~~transactions~~pricing ~~and~~of ~~continued~~bitcoin ~~interest~~has ~~from~~previously ~~investors.~~resulted, ~~This~~and ~~strong~~may ~~correlation~~continue to ~~between~~result, anin ~~expectation~~speculation ~~and~~regarding ~~market~~future ~~value~~appreciation isor ~~the~~depreciation ~~basis for~~in the ~~current~~value ~~(and~~of ~~probable~~bitcoin, ~~future)~~further contributing to volatility ofand potentially ~~the~~inflating ~~market~~prices ~~value~~at ofany ~~bitcoin~~given ~~and~~time. These dynamics may ~~increase~~impact the ~~likelihood~~value of ~~momentum~~an ~~pricing~~investment in Trust.

~~The~~Some ~~value~~market ofobservers ahave asserted ~~bitcoin~~that ~~as represented~~in bytime, the ~~Index~~value ~~may~~of ~~also~~bitcoin bewill ~~subject~~fall to ~~momentum~~a ~~pricing~~fraction ~~due~~of toits ~~speculation~~current ~~regarding future appreciation in~~ value, ~~leading~~or even to ~~greater~~ ~~volatility that could adversely affect the value of the Shares~~zero. ~~Momentum~~Bitcoin ~~pricing of bitcoin~~ has ~~previously~~not ~~resulted,~~been ~~and~~in ~~may continue~~existence tolong ~~result,~~enough infor ~~speculation~~market ~~regarding~~participants ~~future~~to ~~appreciation~~assess orthese ~~depreciation~~predictions inwith ~~the~~any ~~value of bitcoin~~precision, ~~further~~but ~~contributing~~if tothese ~~volatility~~observers ~~and potentially~~are ~~inflating~~even ~~prices~~partially atcorrect, an ~~any~~investment ~~given~~in ~~time.~~the ~~These~~Shares ~~dynamics~~ may ~~impact~~turn ~~the~~out ~~value~~to ofbe ansubstantially ~~investment in Trust~~worthless.

~~Some~~A ~~market~~decline ~~observers have asserted that~~ in ~~time,~~ the ~~value~~ adoption of bitcoin ~~will~~could ~~fall~~negatively toimpact a fraction of its current value, or even to zero. Bitcoin has not been in existence long enough for market participants to assess these predictions with any precision, but if these observers are even partially correct, an investment in the ~~Shares may turn out to be substantially worthless~~Trust.

AThe ~~decline~~Sponsor inwill ~~the~~not ~~adoption~~have any strategy relating to the development of bitcoin ~~could~~and ~~negatively~~the ~~impact~~Bitcoin network. However, a lack of expansion in usage of bitcoin and the Bitcoin ~~Trust~~network could adversely affect an investment in Shares.

The ~~Sponsor~~further ~~will~~development ~~not have~~and ~~any~~acceptance ~~strategy~~of ~~relating~~the toBitcoin ~~the~~network, ~~development~~which is part of ~~bitcoin~~a new and rapidly changing industry, is subject to a variety of factors that are difficult to evaluate. For example, the Bitcoin network. ~~However,~~faces asignificant ~~lack~~obstacles ofto ~~expansion~~increasing inthe usage of bitcoin without resulting in higher fees or slower transaction settlement times, and attempts to increase the volume of transactions may not be effective. The slowing, stopping or reversing of the development or acceptance or usage of the Bitcoin network ~~could~~may adversely affect the price of bitcoin and therefore an investment in the Shares. The further adoption of bitcoin will require growth in its usage and in the Bitcoin network. Adoption of bitcoin will also require an accommodating regulatory environment.

The ~~further~~use ~~development~~of ~~and~~bitcoin to, among ~~acceptance~~other ofthings, ~~the~~buy ~~Bitcoin~~and ~~network,~~sell ~~which~~goods and services is part of a new and rapidly ~~changing~~evolving industry, isthat ~~subject~~employs todigital assets based upon computer-generated mathematical and/or cryptographic protocols. Bitcoin is a ~~variety~~prominent, but not unique, part of ~~factors~~this ~~that~~industry. ~~are~~The ~~difficult~~growth of this industry is subject to ~~evaluate.~~a ~~For~~high ~~example~~degree of uncertainty, ~~the~~as ~~Bitcoin~~new ~~network~~assets ~~faces~~and ~~significant~~technological ~~obstacles~~innovations continue to ~~increasing~~develop ~~the~~and ~~usage~~evolve. Currently, there is relatively limited use of bitcoin ~~without~~in ~~resulting~~the retail and commercial marketplace in ~~higher fees~~comparison orto ~~slower~~relatively ~~transaction~~extensive ~~settlement~~use ~~times~~as a store of value, ~~and~~thus ~~attempts~~contributing to ~~increase~~price ~~the~~volatility ~~volume~~that ofcould ~~transactions~~adversely ~~may~~affect ~~not~~an beinvestment ~~effective.~~in ~~The~~the ~~slowing~~Shares. However, ~~stopping~~bitcoin may not be suited orfor ~~reversing~~a number of ~~the~~commercial ~~development~~uses, orincluding ~~acceptance~~those ofrequiring ~~the~~real ~~Bitcoin~~time ~~network~~payments, ~~may~~partially ~~adversely~~due ~~affect~~to the ~~price~~amount of time that bitcoin ~~and~~transactions may ~~therefore~~potentially anrequire ~~investment~~ in ~~the~~order ~~Shares~~to clear. ~~The~~This ~~further~~could ~~adoption~~result ofin ~~bitcoin~~decreasing ~~will~~usage ~~require~~of ~~growth~~the innetwork, ~~its~~to ~~usage~~the ~~and~~extent inthat ~~the~~bitcoin ~~Bitcoin~~does ~~network.~~not ~~Adoption~~otherwise become a store of ~~bitcoin~~asset ~~will~~value ~~also require~~or anmeet ~~accommodating~~the ~~regulatory~~needs ~~environment~~of another commercial use.

~~The use of bitcoin to~~Today, ~~among other~~there ~~things, buy and sell goods and services~~ is ~~part~~limited use of abitcoin ~~new~~in ~~and~~the ~~rapidly~~retail, ~~evolving~~commercial, ~~industry~~or ~~that~~payments ~~employs~~spaces, ~~digital assets based upon computer-generated mathematical~~ and~~/or~~, ~~cryptographic~~on ~~protocols. Bitcoin is~~ a ~~prominent,~~relative ~~but not unique~~basis, ~~part~~speculators ofmake ~~this~~up ~~industry.~~a ~~The~~significant ~~growth~~portion of ~~this industry~~users. isCertain ~~subject~~merchants ~~to a high degree of uncertainty, as new assets~~ and ~~technological~~major ~~innovations~~retail ~~continue to develop~~ and ~~evolve.~~commercial ~~Currently,~~businesses ~~there is~~have ~~relatively~~only ~~limited~~recently ~~use~~begun ofaccepting bitcoin inand the ~~retail~~Bitcoin ~~and~~network ~~commercial~~as ~~marketplace~~a inmeans of ~~comparison~~payment tofor ~~relatively~~goods ~~extensive~~and ~~use~~services. asThis apattern ~~store~~may ~~of value,~~contribute ~~thus contributing~~ to outsized price volatility, ~~that~~which ~~could adversely affect an investment~~ in ~~the~~turn ~~Shares.~~can ~~However,~~make bitcoin ~~may~~less ~~not be suited~~attractive ~~for~~to amerchants ~~number~~and of commercial ~~uses,~~parties ~~including~~as ~~those~~a ~~requiring~~means ~~real~~of ~~time~~payment. ~~payments,~~A ~~partially~~lack ~~due to the amount~~ of ~~time~~expansion ~~that~~by bitcoin ~~transactions may~~into ~~potentially~~retail ~~require~~and incommercial ~~order~~markets toor ~~clear.~~a ~~This~~contraction of ~~could~~such use may result in ~~decreasing~~a ~~usage~~reduction ofin the ~~network,~~price toof ~~the extent that~~ bitcoin, ~~does~~which ~~not~~could ~~otherwise become~~adversely aaffect ~~store~~an ofinvestment ~~value~~in ~~asset or meet~~ the ~~needs of another commercial use~~Trust.

19In addition, there is no assurance that bitcoin will maintain its value over the long-term. The value of bitcoin is subject to risks related to its usage. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term. A contraction in use of bitcoin may result in increased volatility or a reduction in the price of bitcoin, which would adversely impact the value of Shares.

~~Today,~~Irrevocable ~~there~~nature ~~is limited use~~ of ~~bitcoin in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant portion of users.~~ ~~Certain~~blockchain-recorded ~~merchants and major retail and commercial businesses have only recently begun accepting bitcoin and the Bitcoin network as a means of payment for goods and services~~transactions. This pattern may contribute to outsized price volatility, which in turn can make bitcoin less attractive to merchants and commercial parties as a means of payment. A lack of expansion by bitcoin into retail and commercial markets or a contraction of such use may result in a reduction in the price of bitcoin, which could adversely affect an investment in the Trust.

InBitcoin ~~addition~~transactions recorded on the Bitcoin network are not, ~~there~~from isan noadministrative ~~assurance that~~perspective, ~~bitcoin~~reversible ~~will~~without ~~maintain~~the ~~its~~consent ~~value~~and ~~over~~active participation of the ~~long-term.~~recipient of ~~The~~the ~~value~~transaction or, in theory, control or consent of ~~bitcoin~~a ismajority ~~subject~~of tothe ~~risks~~Bitcoin ~~related~~network’s toaggregate ~~its~~hash ~~usage~~rate. ~~Even~~Once ifa ~~growth~~transaction inhas ~~bitcoin~~been ~~adoption~~verified ~~occurs~~and recorded in ~~the~~a ~~near~~block orthat ~~medium-term~~is added to the blockchain, ~~there~~an isincorrect notransfer ~~assurance~~of ~~that~~a bitcoin ~~usage~~or a theft of bitcoin generally will ~~continue~~not tobe ~~grow~~reversible, ~~over~~and the ~~long-term~~Trust may not be capable of seeking compensation for any such transfer or theft. It is possible that, Athrough ~~contraction~~computer inor ~~use~~human oferror, or through theft or criminal action, the Trust’s bitcoin ~~may~~could ~~result~~be transferred from custody accounts in ~~increased~~incorrect ~~volatility~~quantities or ato ~~reduction~~unauthorized inthird parties. To the ~~price~~extent that the Trust is unable to seek a corrective transaction with such third party or is incapable of identifying the third party that has received the Trust’s bitcoin through error or theft, ~~which~~the Trust ~~would~~will ~~adversely~~be ~~impact~~unable to revert or otherwise recover incorrectly transferred bitcoin. To the extent that the Trust is unable to seek redress for such error or theft, such loss could adversely affect the value of the Shares.

~~Irrevocable~~The ~~nature~~loss ofor destruction ~~blockchain-recorded~~of ~~transactions~~a private key required to access bitcoin may be irreversible.

~~Bitcoin~~Digital ~~transactions~~assets, ~~recorded~~including onbitcoin, ~~the Bitcoin network~~ are ~~not,~~controllable ~~from~~only anby ~~administrative~~the ~~perspective,~~possessor ~~reversible~~of ~~without~~both the ~~consent~~unique ~~and~~public ~~active~~key ~~participation~~and ofprivate ~~the~~key ~~recipient of the transaction~~ or, inkeys ~~theory,~~relating ~~control~~to orthe ~~consent~~“digital ofwallet” in awhich ~~majority of~~ the ~~Bitcoin~~digital ~~network’s~~asset ~~aggregate~~is ~~hash rate~~held. ~~Once~~Private akeys ~~transaction has~~must ~~been~~be ~~verified~~safeguarded and ~~recorded~~kept private in aorder ~~block~~to ~~that~~prevent isa ~~added~~third toparty from accessing the ~~blockchain,~~digital anasset ~~incorrect~~held ~~transfer~~in ofsuch awallet. ~~bitcoin~~To orthe extent a ~~theft~~private ofkey ~~bitcoin~~is ~~generally will not be reversible~~lost, ~~and~~destroyed ~~the~~or ~~Trust~~otherwise ~~may~~compromised ~~not~~and beno ~~capable~~backup of ~~seeking~~the ~~compensation~~private key ~~for~~is ~~any~~accessible, ~~such~~the ~~transfer~~Trust orwill ~~theft.~~be Itunable isto ~~possible that~~access, ~~through~~ ~~computer~~and orwill ~~human~~effectively ~~error~~lose, ~~or through theft or criminal action,~~ the ~~Trust’s~~ bitcoin ~~could~~held ~~be transferred from custody accounts~~ in ~~incorrect~~the ~~quantities~~related ordigital ~~to unauthorized third parties~~wallet. ToIn ~~the~~addition, if ~~extent that~~ the Trust’s isprivate ~~unable~~keys toare ~~seek~~misappropriated aand ~~corrective~~the ~~transaction~~Trust’s ~~with such~~bitcoin ~~third~~holdings ~~party~~are orstolen, isincluding ~~incapable~~from ofor ~~identifying~~by the ~~third~~Bitcoin Custodians, ~~party that has received~~ the Trust’s ~~bitcoin~~could ~~through~~lose ~~error~~some or ~~theft,~~all ~~the Trust~~of ~~will~~its bebitcoin ~~unable~~holdings, towhich ~~revert~~would oradversely ~~otherwise~~impact ~~recover~~an ~~incorrectly~~investment ~~transferred~~in ~~bitcoin.~~Shares Toof the ~~extent~~Trust. Any ~~that~~loss ~~the~~of ~~Trust~~private iskeys ~~unable~~relating to ~~seek~~digital ~~redress for~~wallets ~~such~~used ~~error~~to orstore ~~theft,~~the ~~such~~Trust’s ~~loss~~Bitcoin ~~could~~would adversely affect the value of the Shares.

~~The loss or destruction of a private key required to access bitcoin may be irreversible.~~17

~~Digital~~An ~~assets,~~investment ~~including bitcoin,~~in ~~are controllable only by~~ the ~~possessor of both the unique public key and private key or keys relating to the “digital wallet”~~ inTrust ~~which the digital asset~~ is ~~held.~~not ~~Private~~a ~~keys~~deposit ~~must be safeguarded~~ and ~~kept~~is ~~private~~not ~~in order to prevent a third party from accessing the digital asset held in such wallet~~FDIC-insured. ToShareholders’ ~~the~~limited ~~extent~~rights ~~a private key is lost, destroyed or otherwise compromised and no backup~~ of ~~the~~legal ~~private key~~recourse isagainst ~~accessible,~~ the Trust ~~will be unable to access~~, ~~and will effectively lose~~Trustee, ~~the bitcoin held in the related digital wallet. In addition~~Sponsor, ifAdministrator, ~~the~~Prime ~~Trust’s~~Broker ~~private keys are misappropriated~~ and ~~the~~Bitcoin ~~Trust’s~~Custodians ~~bitcoin~~expose ~~holdings are stolen, including from or by~~ the ~~Bitcoin Custodian, the~~ Trust ~~could~~and ~~lose some or all of~~ its ~~bitcoin~~Shareholders ~~holdings,~~to ~~which would adversely impact an investment in~~ the ~~Shares~~risk of ~~the Trust. Any~~ loss of ~~private keys relating to digital wallets used to store~~ the Trust’s ~~Bitcoin~~bitcoin for ~~would~~which ~~adversely~~no ~~affect~~person ~~the~~or ~~value~~entity ofis ~~the Shares~~liable.

AnThe ~~investment in the~~ Trust is not a ~~deposit~~banking institution ~~and~~or isotherwise ~~not~~a ~~FDIC-insured.~~member ~~Shareholders’~~of ~~limited~~the ~~rights~~Federal ofDeposit ~~legal~~Insurance ~~recourse~~Corporation ~~against~~(“FDIC”) ~~the~~or ~~Trust,~~Securities ~~Trustee,~~Investor ~~Sponsor,~~Protection ~~Administrator~~Corporation (“SIPC”) and, ~~Prime~~therefore, ~~Broker~~deposits ~~and~~held ~~Bitcoin~~with ~~Custodian~~or ~~expose~~assets held by the Trust ~~and~~are ~~its~~not ~~Shareholders~~subject to the ~~risk~~protections ofenjoyed by ~~loss~~depositors ofwith FDIC or SIPC member institutions. In addition, neither the Trust’s ~~bitcoin for~~nor ~~which~~the noSponsor ~~person~~insures orthe ~~entity~~Trust’s ~~is liable~~bitcoin.

~~The~~On September 11, 2024, the Trust isentered ~~not~~into separate custodial services agreements (each, a ~~banking~~“Custodial Services Agreement” and, collectively, including ~~institution~~the oragreement ~~otherwise~~with aCoinbase ~~member~~Custodian ofentered into between the ~~Federal~~Trust ~~Deposit~~and ~~Insurance~~Coinbase ~~Corporation~~Custodian on May 8, 2024 (the “~~FDIC~~Coinbase Custody Agreement”), orthe ~~Securities~~“Custodial ~~Investor~~Services ~~Protection~~Agreements”) with each of (i) BitGo (the “BitGo Custody Agreement”) ~~Corporation~~and (ii) Anchorage (the “~~SIPC~~Anchorage Custody Agreement”). ~~and~~While the Bitcoin Custodians have advised the Sponsor that they have insurance coverage that covers certain losses of the digital assets it custodies on behalf of its clients, ~~therefore~~including the Trust’s bitcoin, ~~deposits~~resulting ~~held~~from theft, Shareholders cannot be assured that the Bitcoin Custodians will maintain adequate insurance, that such coverage will cover losses with respect to the Trust’s bitcoin, or ~~assets~~that ~~held~~sufficient byinsurance proceeds will be available to cover the Trust’s ~~are~~losses in full. The Bitcoin Custodians’ insurance may not ~~subject~~cover tothe type of losses experienced by the ~~protections~~Trust. ~~enjoyed~~Alternatively, bythe ~~depositors~~Trust may be forced to share such insurance proceeds with ~~FDIC~~other clients or ~~SIPC~~customers ~~member~~of ~~institutions~~the Bitcoin Custodians, which could reduce the amount of such proceeds that are available to the Trust. In addition, ~~neither~~the bitcoin insurance market is limited, and the level of insurance maintained by the Bitcoin Custodians may be substantially lower than the assets of the Trust. ~~nor~~While the ~~Sponsor~~Bitcoin ~~insure~~Custodians maintain certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to cover client asset losses, the Trust cannot be assured that the Bitcoin Custodians will maintain capital reserves sufficient to cover actual or potential losses with respect to the Trust’s ~~bitcoin~~digital assets. The insurance maintained by the Bitcoin Custodians is shared among all of the Bitcoin Custodians’ customers, is not specific to the Trust or to customers holding ether with the Bitcoin Custodians, and may not be available or sufficient to protect the Trust from all possible losses or sources of losses.

20Furthermore, under each of the Custodial Services Agreements, the respective Bitcoin Custodian’s liability is limited. With respect to the Coinbase Custody Agreement, Coinbase Custody’s liability is as follows, among others: (i) other than with respect to claims and losses arising from spot trading of bitcoin, fraud or willful misconduct, or the Mutually Capped Liabilities (defined below), the Coinbase Custodian’s aggregate liability under the Custodial Services Agreement shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Coinbase Custodian in the 12 months prior to the event giving rise to the Coinbase Custodian’s liability, and (B) the value of the affected bitcoin or cash giving rise to the Coinbase Custodian’s liability; (ii) the Coinbase Custodian’s aggregate liability in respect of each cold storage address shall not exceed $100 million; (iii) in respect of the Coinbase Custodian’s obligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent arising out of or relating to, among others, the Coinbase Custodian’s gross negligence, violation of its confidentiality, data protection and/or information security obligations, or violation of any law, rule or regulation with respect to the provision of its services (the “Mutually Capped Liabilities”), the Coinbase Custodian’s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Coinbase Custodian in the 12 months prior to the event giving rise to the Coinbase Custodian’s liability; and (iv) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Coinbase Custodian is not liable, even if the Coinbase Custodian has been advised of or knew or should have known of the possibility thereof. In general, the Coinbase Custodian is not liable under the Custodial Services Agreement unless in the event of its negligence, fraud, material violation of applicable law or willful misconduct. The Coinbase Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Coinbase Custodian. In the event of potential losses incurred by the Trust as a result of the Coinbase Custodian losing control of the Trust’s bitcoin or failing to properly execute instructions on behalf of the Trust, the Coinbase Custodian’s liability with respect to the Trust will be subject to certain limitations which may allow it to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Coinbase Custodian directly caused such losses. Furthermore, the insurance maintained by the Coinbase Custodian may be insufficient to cover its liabilities to the Trust.

~~While~~With ~~the~~respect ~~Bitcoin Custodian has advised the Sponsor that it has insurance coverage of up~~ to ~~$320 million that covers losses of~~ the ~~digital~~BitGo Custody ~~assets~~Agreement, itBitGo ~~custodies~~and ~~on behalf of~~ its ~~clients~~affiliates, including ~~the~~their ~~Trust’s~~officers, ~~bitcoin~~directors, ~~resulting~~agents, ~~from~~and ~~theft~~employees, ~~Shareholders~~are ~~cannot~~not beliable ~~assured~~for ~~that~~any ~~the~~lost ~~Bitcoin Custodian~~profits, ~~will~~special, ~~maintain~~incidental, ~~adequate~~indirect, ~~insurance~~intangible, ~~that~~or ~~such~~consequential ~~coverage~~damages ~~will~~resulting ~~cover~~from ~~losses~~authorized ~~with~~or ~~respect~~unauthorized touse of the Trust’s ~~bitcoin,~~ or ~~that sufficient insurance~~Sponsor’s ~~proceeds~~site ~~will~~or beservices. ~~available~~This toincludes ~~cover~~damages ~~the~~arising ~~Trust’s~~from ~~losses~~any incontract, ~~full.~~tort, ~~The~~negligence, ~~Bitcoin~~strict ~~Custodian’s~~liability, ~~insurance~~or ~~may~~other ~~not~~legal ~~cover~~grounds, ~~the~~even ~~type of~~if ~~losses~~BitGo ~~experienced~~was bypreviously ~~the~~advised ~~Trust.~~of, ~~Alternatively~~knew, ~~the~~or ~~Trust~~should ~~may~~have beknown ~~forced~~about tothe ~~share~~possibility of such ~~insurance~~damages. ~~proceeds~~However, ~~with~~this ~~other~~exclusion ~~clients~~of ~~or customers~~liability ofdoes ~~the~~not ~~Bitcoin~~extend ~~Custodian,~~to ~~which~~cases ~~could reduce the amount~~ of ~~such~~BitGo’s ~~proceeds~~fraud, ~~that~~willful ~~are~~misconduct, ~~available~~or togross ~~the Trust~~negligence. In ~~addition,~~situations ~~the~~of ~~bitcoin~~gross ~~insurance~~negligence, BitGo’s ~~market~~liability is specifically limited, ~~and~~to the ~~level~~value of ~~insurance maintained by~~ the ~~Bitcoin~~digital ~~Custodian~~assets ~~may~~or befiat ~~substantially~~currency ~~lower~~that ~~than~~were ~~the~~affected ~~assets~~by of the ~~Trust~~negligence. ~~While~~ Additionally, the ~~Bitcoin~~total ~~Custodian~~liability ~~maintains~~of ~~certain~~BitGo ~~capital~~for ~~reserve~~direct ~~requirements~~damages ~~depending~~is oncapped at the ~~assets~~fees ~~under~~paid ~~custody,~~or ~~and~~payable ~~such capital reserves may provide additional means~~ to ~~cover~~them ~~client~~under ~~asset losses,~~ the ~~Trust~~relevant ~~cannot~~agreement beduring ~~assured that~~ the ~~Bitcoin Custodian will maintain capital~~ ~~reserves~~twelve-month ~~sufficient~~period toimmediately ~~cover~~preceding ~~actual~~the orfirst ~~potential~~incident ~~losses~~that ~~with~~caused ~~respect to~~ the ~~Trust’s digital assets~~liability.

Furthermore, under the Custodial Services Agreement, the Bitcoin Custodian’s liability is limited as follows, among others: (i) other than with respect to claims and losses arising from spot trading of bitcoin, or fraud or wilful misconduct, the Mutually Capped Liabilities (defined below), the Bitcoin Custodian’s aggregate liability under the Custodial Services Agreement shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Bitcoin Custodian in the 12 months prior to the event giving rise to the Bitcoin Custodian’s liability, and (B) the value of the affected bitcoin or cash giving rise to the Bitcoin Custodian’s liability; (ii) the Bitcoin Custodian’s aggregate liability in respect of each cold storage address shall not exceed $100 million; (iii) in respect of the Bitcoin Custodian’s obligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent arising out of or relating to, among others, the Bitcoin Custodian’s gross negligence, violation of its confidentiality, data protection and/or information security obligations, or violation of any law, rule or regulation with respect to the provision of its services (the “Mutually Capped Liabilities”), the Bitcoin Custodian’s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Bitcoin Custodian in the 12 months prior to the event giving rise to the Bitcoin Custodian’s liability; and (iv) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin Custodian is not liable, even if the Bitcoin Custodian has been advised of or knew or should have known of the possibility thereof. In general, the Bitcoin Custodian is not liable under the Custodial Services Agreement unless in the event of its negligence, fraud, material violation of applicable law or wilful misconduct. The Bitcoin Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Bitcoin Custodian. In the event of potential losses incurred by the Trust as a result of the Bitcoin Custodian losing control of the Trust’s bitcoin or failing to properly execute instructions on behalf of the Trust, the Bitcoin Custodian’s liability with respect to the Trust will be subject to certain limitations which may allow it to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Bitcoin Custodian directly caused such losses. Furthermore, the insurance maintained by the Bitcoin Custodian may be insufficient to cover its liabilities to the Trust.18

~~Similarly,~~With ~~under~~respect to the ~~Prime~~Anchorage ~~Broker~~Custody Agreement, ~~the~~except ~~Prime~~for ~~Broker~~Anchorage’s ~~liability~~bad ~~is limited as follows~~acts, ~~among~~confidentiality ~~others:~~obligations ~~(i)~~under ~~other~~the ~~than~~Anchorage ~~with~~Custody ~~respect~~Agreement, ~~to claims and losses~~indemnification ~~arising~~obligations ~~from~~under ~~spot~~Anchorage ~~trading~~Custody ~~of bitcoin~~Agreement, or ~~fraud~~obligations orwith ~~wilful~~respect ~~misconduct,~~to orrights ~~the~~to PBor ~~Mutually~~limits ~~Capped~~on ~~Liabilities~~use ~~(defined~~under ~~below),~~ the ~~Prime Broker’s~~Anchorage ~~aggregate~~Custody ~~liability~~Agreement, Anchorage ~~shall~~is not ~~exceed~~liable ~~the~~for ~~greater~~any oflosses, ~~(A)~~whether ~~the~~in ~~greater~~contract, oftort ~~(x)~~or $5otherwise, ~~million~~for ~~and~~any ~~(y)~~amount ~~the~~in ~~aggregate~~excess of fees paid by the Trust ~~to the Prime Broker~~ in the twelve (12) months prior to ~~the~~when ~~event giving rise to~~ the ~~Prime~~liability ~~Broker’s~~arises. ~~liability~~Moreover, ~~and~~Anchorage ~~(B)~~is ~~the~~not ~~value of~~liable ~~the~~for ~~cash or affected bitcoin giving rise to the Prime Broker’s liability;~~ (iii) ~~in respect of the Prime Broker’s obligations to indemnify the Trust and its affiliates against third-party claims and~~ losses towhich ~~the~~arise ~~extent~~from ~~arising out of or relating to, among others, the Prime Broker’s gross negligence, violation of~~ its ~~confidentiality, data protection and/or information security obligations,~~compliance ~~violation of any law, rule or regulation~~ with ~~respect~~applicable ~~to the provision of its services~~laws, orincluding ~~the~~sanctions ~~full~~laws ~~amount~~administered ofby the ~~Trust’s~~Office ~~assets lost due to the insolvency~~ of orForeign ~~security~~Assets ~~event~~Control ~~at a Connected Trading Venue~~ (~~as defined below) (the~~ “~~PB Mutually Capped Liabilities~~OFAC”)~~, the~~ ~~Prime Broker’s liability shall not exceed the greater~~ of ~~(A) $5 million and (B)~~ the ~~aggregate~~U.S. ~~fees paid by the Trust to the~~Department ~~Prime~~of ~~Broker in~~ the 12Treasury ~~months prior to~~ (the ~~event~~“U.S. ~~giving~~Treasury ~~rise to the Prime Broker’s liability~~Department”); ~~and~~or (~~iii~~ii) ~~in respect of any incidental, indirect,~~ special, ~~punitive,~~indirect ~~consequential~~ or ~~similar~~consequential ~~losses~~damages, ~~the~~or ~~Prime~~lost ~~Broker~~profits isor ~~not liable, even if the Prime Broker has been advised~~loss of orbusiness ~~knew~~arising orin ~~should~~connection ~~have known of the possibility thereof. In general,~~ with ~~limited exceptions (such as for failing to execute an order),~~ the ~~Prime~~Anchorage ~~Broker~~Custody ~~is not liable under the Prime Broker~~ Agreement. ~~unless~~In ~~in the event of its gross negligence~~addition, ~~fraud,~~Anchorage ~~material violation of applicable law or wilful misconduct. The Prime Broker~~ is not liable for ~~delays,~~any ~~suspension~~losses ofwhich ~~operations, failure in performance, or~~arise ~~interruption~~as ~~of service to the extent it is directly due to~~ a ~~cause~~result orof ~~condition beyond~~ the ~~reasonable~~non-return ~~control~~ of ~~the~~digital ~~Prime~~assets ~~Broker.~~that ~~These and~~ the ~~other~~Trust ~~limitations~~has ondelegated ~~the Prime Broker’s liability may allow it~~ to ~~avoid~~Anchorage ~~liability for potential losses~~ or ~~may~~a bethird ~~insufficient to~~party ~~cover~~for ~~the~~on-chain ~~value~~services, of such as ~~potential~~staking, ~~losses~~voting, ~~even~~vesting, ifand ~~the~~signaling, ~~Prime~~unless ~~Broker directly caused~~ such losses. ~~Both~~occur ~~the~~as ~~Trust~~a ~~and~~result ~~the~~of ~~Prime~~Anchorage’s ~~Broker and~~fraud ~~its~~or ~~affiliates~~intentional ~~(including the Bitcoin Custodian) are required to indemnify each other under certain circumstances~~misconduct.

21Similarly, under the Prime Broker Agreement, the Prime Broker’s liability is limited as follows, among others: (i) other than with respect to claims and losses arising from spot trading of bitcoin, fraud or willful misconduct, or the PB Mutually Capped Liabilities (defined below), the Prime Broker’s aggregate liability shall not exceed the greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Prime Broker in the 12 months prior to the event giving rise to the Prime Broker’s liability, and (B) the value of the cash or affected bitcoin giving rise to the Prime Broker’s liability; (ii) in respect of the Prime Broker’s obligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent arising out of or relating to, among others, the Prime Broker’s gross negligence, violation of its confidentiality, data protection and/or information security obligations, violation of any law, rule or regulation with respect to the provision of its services, or the full amount of the Trust’s assets lost due to the insolvency of or security event at a Connected Trading Venue (the “PB Mutually Capped Liabilities”), the Prime Broker’s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Prime Broker in the 12 months prior to the event giving rise to the Prime Broker’s liability; and (iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Prime Broker is not liable, even if the Prime Broker has been advised of or knew or should have known of the possibility thereof. In general, with limited exceptions (such as for failing to execute an order), the Prime Broker is not liable under the Prime Broker Agreement unless in the event of its gross negligence, fraud, material violation of applicable law or willful misconduct. The Prime Broker is not liable for delays, suspension of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the Prime Broker. These and the other limitations on the Prime Broker’s liability may allow it to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Prime Broker directly caused such losses. Both the Trust and the Prime Broker and its affiliates (including the Bitcoin Custodians) are required to indemnify each other under certain circumstances.

Moreover, in the event of an insolvency or bankruptcy of the Prime Broker (in the case of the Trading Balance) or the Bitcoin ~~Custodian~~Custodians (in the case of the ~~Vault~~Cold Vault Balance) in the future, given that the contractual protections and legal rights of customers with respect to digital assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Bitcoin ~~Custodian~~Custodians or Prime Broker in the virtual currency industry, there is a risk that customers’ assets – including the Trust’s assets – may be considered the property of the bankruptcy estate of the Prime Broker (in the case of the Trading Balance) or the Bitcoin ~~Custodian~~Custodians (in the case of the Cold Vault Balance), and customers – including the Trust – may be at risk of being treated as general unsecured creditors of such entities and subject to the risk of total loss or markdowns on value of such assets.

The ~~Custodial~~Coinbase ~~Services~~Custody Agreement contains an agreement by the parties to treat the bitcoin credited to the ~~Trust’s~~Cold Vault Balance as financial assets under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition to stating that the Bitcoin ~~Custodian~~Custodians will serve as ~~fiduciary~~fiduciaries and ~~custodian~~custodians on the Trust’s behalf. ~~The~~One of the Bitcoin Custodian’s parent, Coinbase Global Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisions relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event the Bitcoin Custodian were to experience insolvency. However, due to the novelty of digital asset custodial arrangements courts have not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how they would rule in such a scenario. If ~~the~~a Bitcoin Custodian became subject to insolvency proceedings and a court were to rule that the custodied bitcoin were part of ~~the~~such Bitcoin Custodian’s general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor in the Bitcoin Custodian’s ~~insolvency~~ insolvency proceedings and the Trust could be subject to the loss of all or a significant portion of its assets. Moreover, in the event of the bankruptcy of ~~the~~a Bitcoin Custodian, an automatic stay could go into effect and protracted litigation could be required in order to recover the assets held with ~~the~~such Bitcoin Custodian, all of which could significantly and negatively impact the Trust’s operations and the value of the Shares.

With respect to the Prime Broker Agreement, there is a risk that the Trading Balance, in which the Trust’s bitcoin and cash is held in omnibus accounts by the Prime Broker, could be considered part of the Prime Broker’s bankruptcy estate in the event of the Prime Broker’s bankruptcy. The Prime Broker Agreement contains an Article 8 opt-in clause with respect to the Trust’s assets held in the Trading Balance.

The amount of bitcoin that may be held in the Trading Balance will be limited to the amount necessary to process a given creation or redemption transaction, as applicable, or to pay for Trust Expenses not assumed by the Sponsor in consideration for the Sponsor Fee.19

The ~~Prime~~amount ~~Broker is not required to hold any~~ of ~~the~~ bitcoin orthat may ~~cash~~be inheld ~~the Trust’s Trading Balance~~ in ~~segregation. Within~~ the Trading Balance, ~~the~~will ~~Prime~~be ~~Broker~~limited ~~Agreement provides that the Trust does not have an identifiable claim~~ to ~~any particular bitcoin (and cash). Instead,~~ the ~~Trust’s~~amount ~~Trading~~necessary ~~Balance represents an entitlement~~ to process a ~~pro~~given ~~rata~~creation ~~share~~or ofredemption ~~the bitcoin (and cash) the Prime Broker has allocated to the omnibus wallets the Prime Broker holds~~transaction, as ~~well as the accounts in the Prime Broker’s name that the Prime Broker maintains at Connected Trading Venues (the “Connected Trading Venue”) (which are typically held on an omnibus~~applicable, ~~rather than segregated, basis). If the Prime Broker suffers~~ anor ~~insolvency~~to ~~event,~~pay ~~there~~for ~~is a risk that the~~ Trust’s ~~assets~~Expenses ~~held~~not inassumed ~~the~~by ~~Trading Balance could be considered part of~~ the ~~Prime~~Sponsor ~~Broker’s bankruptcy estate and the Trust could be treated as a general unsecured creditor of the Prime Broker, which could result~~ in ~~losses~~consideration for ~~the~~ ~~Trust and Shareholders. Moreover, in~~ the ~~event~~Sponsor of the bankruptcy of the Prime Broker, an automatic stay could go into effect and protracted litigation could be required in order to recover the assets held with the Prime Broker, all of which could significantly and negatively impact the Trust’s operations and the value of the SharesFee.

~~Under~~The Prime Broker is not required to hold any of the bitcoin or cash in the Trust’s ~~Agreement~~Trading Balance in segregation. Within the Trading Balance, the ~~Trustee~~Prime ~~and~~Broker Agreement provides that the ~~Sponsor~~Trust ~~will~~does not behave ~~liable~~an ~~for~~identifiable claim to any ~~liability~~particular orbitcoin ~~expense~~(and ~~incurred,~~cash). ~~including~~Instead, ~~without~~the ~~limitation,~~Trust’s asTrading Balance represents an entitlement to a ~~result~~pro ofrata ~~any loss~~share of the bitcoin by(and cash) the ~~Bitcoin~~Prime ~~Custodian~~Broker orhas ~~Prime~~allocated to the omnibus wallets the Prime Broker holds, ~~absent~~as ~~wilful~~well ~~misconduct,~~as ~~gross~~the ~~negligence,~~accounts ~~reckless~~in ~~disregard~~the orPrime ~~bad~~Broker’s ~~faith~~name that the Prime Broker maintains at Connected Trading Venues (which are typically held on ~~the~~an ~~part~~omnibus, ofrather ~~the~~than ~~Trustee~~segregated, orbasis). If the ~~Sponsor~~Prime orBroker ~~breach~~suffers byan ~~the~~insolvency ~~Sponsor~~event, ofthere is a risk that the Trust’s ~~Agreement,~~assets asheld in the ~~case~~Trading ~~may~~Balance could be. Asconsidered apart ~~result,~~of the ~~recourse of~~Prime Broker’s bankruptcy estate and the Trust could orbe ~~the~~treated ~~Shareholders~~as toa ~~the~~general ~~Trustee~~unsecured orcreditor of the ~~Sponsor~~Prime Broker, ~~including~~which could result in losses for the Trust and Shareholders. Moreover, in the event of athe ~~loss~~bankruptcy of ~~bitcoin~~the byPrime ~~the~~Broker, ~~Bitcoin~~an ~~Custodian~~automatic orstay could go into effect and protracted litigation could be required in order to recover the assets held with the Prime Broker, isall ~~limited~~of which could significantly and negatively impact the Trust’s operations and the value of the Shares.

22Under the Trust Agreement, the Trustee and the Sponsor will not be liable for any liability or expense incurred, including, without limitation, as a result of any loss of bitcoin by the Bitcoin Custodians or Prime Broker, absent willful misconduct, gross negligence, reckless disregard or bad faith on the part of the Trustee or the Sponsor or breach by the Sponsor of the Trust Agreement, as the case may be. As a result, the recourse of the Trust or the Shareholders to the Trustee or the Sponsor, including in the event of a loss of bitcoin by the Bitcoin Custodians or Prime Broker, is limited.

The Shareholders’ recourse against the Sponsor, the Trustee, and the Trust’s other service providers for the services they provide to the Trust, including, without limitation, those relating to the holding of bitcoin or the provision of instructions relating to the movement of bitcoin, is limited. For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates, nor any other party has guaranteed the assets or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities of any service provider to the Trust, including, without limitation, the Bitcoin ~~Custodian~~Custodians and Prime Broker. The Prime Broker Agreement and Custodial Services ~~Agreement~~Agreements provide that neither the Sponsor, the Trustee, nor their affiliates shall have any obligation of any kind or nature whatsoever, by guaranty, enforcement or otherwise, with respect to the performance of any the Trust’s obligations, agreements, representations or warranties under the Prime Broker Agreement or Custodial Services ~~Agreement~~Agreements or any transaction thereunder. Consequently, a loss may be suffered with respect to the Trust’s bitcoin that is not covered by the Bitcoin ~~Custodian~~Custodians’s insurance and for which no person is liable in damages. As a result, the recourse of the Trust or the Shareholders, under applicable law, is limited.

Loss of a critical banking relationship for, or the failure of a bank used by, the Trust or the Prime Broker could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust.

To the extent that the Trust or Prime Broker faces difficulty establishing or maintaining banking relationships, the loss of the Trust or Prime Broker’s banking partners, the imposition of operational restrictions by these banking partners and the inability for the Trust or the Prime Broker to utilize other financial institutions may result in a disruption of creation and redemption activity of the Trust or the Prime Broker, or cause other operational disruptions or adverse effects for the Trust or the Prime Broker. In the future, it is possible that the Trust or the Prime Broker could be unable to establish accounts at new banking partners or establish new banking relationships, or that the banks with which the Trust or the Prime Broker is able to establish relationships may not be as large or well-capitalized or subject to the same degree of prudential supervision as the existing providers.

The Trust could also suffer losses in the event that a bank in which the Trust holds assets fails, becomes insolvent, enters receivership, is taken over by regulators, enters financial distress, or otherwise suffers adverse effects to its financial condition or operational status. Recently, some banks have experienced financial distress. For example, on March 8, 2023, the California Department of Financial Protection and Innovation (“DFPI”) announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023, Silicon Valley Bank, (“SVB”), was closed by the DFPI, which appointed the FDIC, as receiver. Similarly, on March 12, 2023, the New York Department of Financial Services took possession of Signature Bank and appointed the FDIC as receiver. A joint statement by the ~~Department~~U.S. ~~of the~~ Treasury Department, the Federal ~~Reserve~~ Reserve and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will have access to all of their funds, including funds held in deposit accounts, in excess of the insured amount. On May 1, 2023, First Republic Bank was closed by the ~~California Department of Financial Protection and Innovation, which appointed the FDIC as receiver~~DFPI. Following a bidding process, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, to acquire the substantial majority of the assets and assume certain liabilities of First Republic Bank from the FDIC.

The Prime Broker has historically maintained banking relationships with Silvergate Bank and Signature Bank. While the Sponsor does not believe there is a direct risk to the Trust’s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances and market conditions, some of which may be beyond the Trust’s or the Sponsor’s control, could impair the Trust’s ability to access the Trust’s cash held with the Prime Broker. If the Prime Broker were to experience financial distress or its financial condition is otherwise affected by the failure of its banking partners, the Prime Broker’s ability to provide services to the Trust could be affected. Moreover, the future failure of a bank at which the Prime Broker maintains customer cash could result in losses to the Trust, to the extent the balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Broker is subject or other potential protections.20

The ~~Bitcoin~~Prime ~~Custodian~~Broker has historically maintained banking relationships with Silvergate Bank and Signature Bank. While the Sponsor does not believe there is a direct risk to the Trust’s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances and market conditions, some of which may be beyond the Trust’s or the Sponsor’s control, could impair the Trust’s ability to access the Trust’s cash held with the Prime Broker. ~~may~~If ~~act~~the Prime Broker were to experience financial distress or its financial condition is otherwise affected by the failure of its banking partners, the Prime Broker’s ability to provide services to the Trust could be affected. Moreover, the future failure of a bank at which the Prime Broker maintains customer cash could result in losses to the ~~same~~Trust, orto ~~similar~~the ~~capacity~~extent ~~for~~the balances ~~other~~are ~~competing~~not ~~products~~subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Broker is subject or other potential protections.

~~Currently,~~If ~~the~~any ~~number~~ of ~~digital~~the Custodial ~~assets~~Services ~~intermediaries~~Agreements ~~with~~or ~~the~~Prime ~~reputation~~Broker ~~and~~Agreement ~~operational~~is ~~capability~~terminated toor ~~serve~~any asof the Bitcoin ~~Custodian~~Custodians ~~and/~~or Prime Broker fails to ~~the~~provide ~~Trust or~~services ~~other~~as ~~competing~~required, ~~products~~the isTrustee ~~limited.~~may ~~The~~need ~~Bitcoin~~to ~~Custodian~~find and ~~Prime~~appoint ~~Broker~~a ~~may~~replacement ~~act~~Bitcoin inCustodian ~~the same~~ or ~~similar~~Prime ~~capacity for other competing products~~Broker, ~~including~~which ~~exchange-traded~~could ~~products~~pose ~~offering~~a ~~exposure~~challenge to the ~~spot~~safekeeping ~~bitcoin~~of ~~market~~the orTrust’s ~~other~~bitcoin, ~~digital~~and ~~assets.~~the ~~The~~ Trust’s isability ~~therefore subject~~ to ~~risks~~continue ~~associated~~to ~~with~~operate ~~these~~may ~~competing~~be ~~products~~adversely ~~utilizing the same service providers for bitcoin custodial and prime brokerage services~~affected.

23The Trust is dependent on the Bitcoin Custodians and the Prime Broker to operate. The Bitcoin Custodians perform essential functions in terms of safekeeping the Trust’s bitcoin in the Cold Vault Balance, and the Prime Broker facilitates the selling of bitcoin by the Trust to pay the Sponsor’s Fee and, to the extent applicable, other Trust expenses, and in extraordinary circumstances, to liquidate the Trust. If any of the Bitcoin Custodians or Coinbase Inc. fails to perform the functions they perform for the Trust, the Trust may be unable to operate or create or redeem Baskets, which could force the Trust to liquidate or adversely affect the price of the Shares.

ToOn March 22, 2023, the ~~extent~~Prime Broker and its parent, Coinbase Global, Inc. (such parent, “Coinbase Global” and together with Coinbase Inc., the “Relevant Coinbase Entities”) received a “Wells Notice” from the SEC staff stating that ~~exchange-traded~~the SEC staff made a “preliminary ~~products~~determination” ~~offering~~to ~~exposure~~recommend that the SEC file an enforcement action against the Relevant Coinbase Entities alleging violations of the federal securities laws, including the Exchange Act and the Securities Act. According to Coinbase Global’s public reporting company disclosure, based on discussions with the ~~spot~~SEC ~~bitcoin~~staff, ~~market~~the orRelevant ~~other~~Coinbase ~~digital~~Entities ~~assets~~believe ~~utilize~~these ~~substantially~~potential enforcement actions would relate to aspects of the ~~same~~Relevant Coinbase Entities’ Coinbase Prime service, ~~providers~~spot ~~for~~market, ~~bitcoin~~staking service Coinbase Earn, and ~~custodial~~Coinbase Wallet, and ~~prime~~the ~~brokerage~~potential ~~services~~civil action may seek injunctive relief, ~~this~~disgorgement, ~~industry~~and ~~concentration~~civil ~~may~~penalties. ~~result~~On June 6, 2023, the SEC filed a complaint against the Relevant Coinbase Entities in federal district court in the ~~development~~Southern District of ~~fewer~~New ~~other~~York, alleging, inter alia: (i) that Coinbase Inc. has violated the Exchange Act by failing to register with the SEC as a national securities exchange, broker-dealer, and clearing agency, in connection with activities involving certain identified digital assets ~~intermediaries~~that the SEC’s complaint alleges are securities, (ii) that Coinbase Inc. has violated the Securities Act by failing to register with the ~~reputation~~SEC the offer and ~~operational~~sale ~~capability~~of its staking program, and (iii) that Coinbase Global is jointly and severally liable as a control person under the Exchange Act for Coinbase Inc.’s violations of the Exchange Act to ~~provide~~the ~~bitcoin~~same ~~custodial~~extent as Coinbase Inc. On February 27, 2025, the SEC announced that it had filed a joint stipulation with Coinbase Inc. and ~~prime~~Coinbase ~~brokerage~~Global ~~services~~Inc. to dismiss the ~~Trust~~ongoing civil enforcement action against the two entities. The SEC’s complaint against the Relevant Coinbase Entities does not allege that bitcoin is a security nor does it allege that Coinbase Inc’s activities involving bitcoin caused the alleged registration violations, and Coinbase Custodian was not named as a defendant. In the event of any future SEC or other ~~competing products~~governmental, regulatory or other enforcement action or litigation, Coinbase Inc., ~~This~~as Prime Broker, could inbe ~~turn~~required, as a result of a judicial determination, or could ~~make~~choose, to restrict or curtail the services it ~~difficult~~offers, ~~for~~or its financial condition and ability to provide services to the Trust could be affected. If the Prime Broker were to ~~find~~be ~~and~~required ~~appoint~~or choose, as a ~~replacement~~result of ~~bitcoin~~a ~~custodian~~regulatory action or ~~prime~~litigation, ~~broker~~to restrict or curtail the services it offers, it could negatively affect the Trust’s ability to operate or process creations or redemptions of Baskets, which could force the Trust to liquidate or adversely affect the price of the Shares. While Coinbase Custodian was not named in the ~~extent~~complaint, if Coinbase Global, as the ~~Sponsor~~parent ~~deems~~of ~~such~~Coinbase ~~action~~Custody, ~~necessary~~is required, as a result of a judicial determination, or could choose, to restrict or curtail the services its subsidiaries provide to the Trust, or its financial condition is negatively affected, it could negatively affect the Trust’s ability to operate.

~~This~~Alternatively, ~~industry~~the ~~concentration~~Trust could ~~also~~replace ~~may~~Coinbase ~~have~~Custodian ~~the~~as ~~effect~~a ofcustodian ~~magnifying~~with custody of the ~~risks~~Trust’s ~~associated~~bitcoin, ~~with~~pursuant to the ~~Bitcoin~~Coinbase Custody Agreement. Similarly, Coinbase Custodian ~~and~~or Coinbase Inc. could terminate services under the Prime Broker Agreement respectively upon providing the applicable notice to the Trust for any reason, or immediately for Cause (as ~~operational~~defined ~~disruptions~~below). ~~or adverse~~Transferring ~~developments~~maintenance ~~impacting~~responsibilities of the ~~Bitcoin~~Trust’s account at Coinbase Custodian orto ~~the~~another ~~Prime~~custodian ~~Broker~~will ~~may~~likely be ~~felt~~complex onand ancould ~~industry-wide~~subject ~~basis.~~the ATrust’s bitcoin to the risk of loss during the transfer, which could have a negative impact on the performance of ~~confidence~~the Shares or ~~breach~~ result in loss of the ~~Bitcoin~~Trust’s ~~Custodian~~assets. As or Prime Broker, ~~may~~Coinbase ~~adversely~~Inc. ~~affect~~does not ~~only~~guarantee uninterrupted access to the Trading Platform or the services it provides to the Trust as ~~and~~Prime Broker. Under certain circumstances, Coinbase Inc. is permitted to halt or suspend trading on its trading platform, or impose limits on the ~~value~~amount or size of, anor ~~investment~~reject, the Trust’s orders, including in the ~~Shares~~event of, among others, (a) delays, suspension ~~but~~of ~~also~~operations, ~~these~~failure ~~competing~~in ~~products~~performance, ~~utilizing~~or ~~the~~interruption ~~same~~of service ~~providers~~that ~~for~~are ~~bitcoin~~directly ~~custodial~~due ~~and~~to ~~prime~~a ~~brokerage~~cause ~~services~~or ~~and~~condition beyond the reasonable control of Coinbase Inc, ~~more~~(b) ~~generally~~the Trust has engaged in unlawful or abusive activities or fraud, (c) the acceptance of the Trust’s ~~exchange-traded~~order ~~products~~would ~~offering~~cause ~~exposure~~the amount of Trade Credits extended to exceed the ~~spot~~maximum ~~bitcoin~~amount ~~market~~of Trade Credit that the Trust’s agreement with the Trade Credit Lender permits to be outstanding at any one time, or ~~other~~(d) ~~digital~~a ~~assets.~~security ~~These~~or ~~industry-wide~~technology ~~adverse~~issue ~~effects~~occurred ~~could~~and is continuing that ~~result~~results in aCoinbase ~~broader~~Inc. ~~loss~~being ofunable ~~confidence~~to inprovide ~~exchange-traded~~trading ~~products~~services ~~offering~~or ~~exposure~~accept the Trust’s order, in each case, subject to certain protections for the ~~spot~~Trust. ~~bitcoin~~Also, ~~market~~if Coinbase Custodian or ~~other~~Coinbase ~~digital~~Inc. ~~assets~~become insolvent, suffer business failure, cease business operations, ~~which~~default ~~could~~on ~~further~~or ~~impact~~fail to perform their obligations under their contractual agreements with the Trust, ~~and~~or abruptly discontinue the ~~value~~services they ofprovide anto ~~investment~~the inTrust for any reason, the ~~Shares~~Trust’s operations would be adversely affected.

The Prime Broker routes orders through Connected Trading Venues in connection with trading services under the Prime Broker Agreement. The loss or failure of any such Connected Trading Venues may adversely affect the Prime Broker’s business and cause losses for the Trust.21

InThe ~~connection~~Trustee ~~with~~may ~~trading services~~not ~~under~~be ~~the Prime Broker Agreement, the Prime Broker routinely routes customer orders~~ able to ~~Connected~~find ~~Trading~~a ~~Venues, which are third-~~party ~~exchanges~~ orwilling ~~other~~to ~~trading~~serve ~~venues~~as ~~(including~~a ~~the~~bitcoin ~~trading~~custodian ~~venue~~of ~~operated by~~ the ~~Prime~~Trust’s ~~Broker). In connection with these activities, the Prime Broker may hold~~ bitcoin ~~with~~or ~~such~~as ~~Connected Trading Venues in order to effect customer orders, including~~ the Trust’s ~~orders. However,~~prime ~~the~~broker ~~Prime~~under ~~Broker~~the ~~has~~same terms ~~represented~~as to the ~~Sponsor~~current ~~that~~Custodial noService ~~customer~~Agreements ~~cash~~or isPrime ~~held~~Broker atAgreement ~~Connected~~or ~~Trading~~at ~~Venues~~all. IfTo the ~~Prime~~extent ~~Broker were~~that toTrustee ~~experience~~is anot ~~disruption~~able into ~~the~~find a ~~Prime~~suitable ~~Broker’s~~party ~~access~~willing to ~~these~~serve ~~Connected~~as ~~Trading Venues,~~ the ~~Prime~~custodian ~~Broker’s~~or ~~trading services~~prime ~~under~~broker, the ~~Prime~~Trustee ~~Broker~~may ~~Agreement could~~ be ~~adversely~~required ~~affected~~ to ~~the~~terminate ~~extent that~~ the ~~Prime~~Trust ~~Broker~~and isliquidate ~~limited in its ability to execute order flow for its customers, including~~ the Trust’s bitcoin. In addition, ~~while~~to the ~~Prime~~extent ~~Broker~~that ~~has policies and procedures to help mitigate~~ the ~~Prime~~Trustee ~~Broker’s~~finds ~~risks~~a ~~related~~suitable ~~to routing orders through third-~~party ~~trading~~but ~~venues,~~must ifenter ~~any~~into ofa ~~these~~new ~~third-party~~custodian ~~trading venues~~agreement ~~experience any technical, legal, regulatory,~~ or ~~other~~prime ~~adverse~~broker ~~events,~~agreement ~~such~~that asis ~~shutdowns,~~less ~~delays,~~favorable ~~system~~for ~~failures,~~the ~~suspension~~Trust ~~of withdrawals, illiquidity, insolvency,~~ or ~~loss of customer assets~~Trustee, the ~~Prime~~value ~~Broker~~of ~~might not be able to fully recover~~ the ~~customer’s~~Shares ~~bitcoin that the Prime Broker has deposited with these third parties. As a result, the Prime Broker’s business, operating results and financial condition~~ could be adversely affected,. ~~potentially~~If ~~resulting in its failure to provide services to~~ the ~~Trust or perform its obligations~~ ~~under the Prime Broker Agreement, and the~~ Trust ~~could~~is ~~suffer~~unable ~~resulting losses or disruptions~~ to ~~its~~find ~~operations. The failure of~~ a ~~Connected Trading~~replacement ~~Venue~~prime ~~at which the Prime Broker maintains customer bitcoin~~broker, ~~including~~its ~~bitcoin~~operations ~~associated with the Trust,~~ could ~~result~~be inadversely ~~losses to the Trust, notwithstanding the regulatory requirements to which the Prime Broker is subject or other potential protections~~affected.

AThe ~~disruption~~Bitcoin ~~of the~~Custodians ~~Internet~~and ~~may~~Prime ~~affect~~Broker ~~bitcoin operations, which~~ may ~~adversely~~act ~~affect~~in the ~~bitcoin~~same ~~industry~~or ~~and~~similar ancapacity ~~investment~~for inother ~~the~~competing ~~Trust~~products.

~~The~~Currently, ~~functionality~~the number of ~~the Bitcoin~~digital ~~network~~assets ~~relies~~intermediaries onwith the ~~Internet.~~reputation Aand ~~significant~~operational ~~disruption~~capability ofto ~~Internet~~serve ~~connectivity~~as ~~(i.e.,~~custodian ~~affecting large numbers of users~~ and/or ~~geographic regions)~~prime ~~could~~broker ~~disrupt~~to the ~~Bitcoin~~Trust ~~network’s~~or ~~functionality~~other ~~and~~competing products ~~operations until the disruption in the Internet~~ is ~~resolved~~limited. AThe ~~disruption in~~Bitcoin ~~the~~Custodians ~~Internet~~and ~~could~~Prime ~~adversely~~Broker ~~affect~~may anact ~~investment~~ in the ~~Trust~~same or ~~the~~similar ~~ability~~capacity offor ~~the~~other ~~Trust~~competing ~~to operate. In particular~~products, ~~some variants~~including ~~of digital assets have experienced a number of denial~~exchange-~~of-service~~traded ~~attacks,~~products ~~which~~offering ~~have~~exposure ~~led~~ to ~~temporary~~the ~~delays~~spot inbitcoin ~~block~~market ~~creation~~or ~~and~~other digital ~~asset~~ ~~transfers~~assets. ~~While~~The inTrust ~~certain~~is ~~cases~~therefore insubject ~~response~~ to ~~an attack, an additional “hard fork” (discussed below) has been introduced~~risks toassociated ~~increase~~with ~~the~~these ~~cost~~competing ofproducts ~~certain~~utilizing ~~network functions,~~ the ~~relevant~~same ~~network~~service ~~has~~providers ~~continued~~for ~~to be the subject of additional attacks. Moreover, it is possible that as~~ bitcoin ~~increases~~custodial ~~in value, it may become a bigger target for hackers~~ and ~~subject~~prime tobrokerage ~~more frequent hacking and denial-of-service attacks~~services.

24To the extent that exchange-traded products offering exposure to the spot bitcoin market or other digital assets utilize substantially the same service providers for bitcoin custodial and prime brokerage services, this industry concentration may result in the development of fewer other digital assets intermediaries with the reputation and operational capability to provide bitcoin custodial and prime brokerage services to the Trust or other competing products. This, in turn, could make it difficult for the Trust to find and appoint a replacement custodian or prime broker, to the extent the Sponsor deems such action necessary.

~~Potential~~This ~~changes~~industry toconcentration also may have the ~~Bitcoin~~effect ~~network’s~~of ~~protocols~~magnifying the risks associated with the Bitcoin Custodians and ~~software~~Prime ~~could~~Broker, ifas ~~accepted~~operational ~~and~~disruptions ~~authorized~~or adverse bydevelopments impacting the Bitcoin ~~network~~Custodians ~~community,~~or the Prime Broker may be felt on an industry-wide basis. A loss of confidence or breach of the Bitcoin Custodians or Prime Broker may adversely affect not only the Trust and the value of an investment in the Shares, but also these competing products utilizing the same service providers for bitcoin custodial and prime brokerage services and, more generally, exchange-traded products offering exposure to the spot bitcoin market or other digital assets. These industry-wide adverse effects could result in a broader loss of confidence in exchange-traded products offering exposure to the spot bitcoin market or other digital assets, which could further impact the Trust and the value of an investment in the Shares.

The ~~Bitcoin~~Prime ~~network~~Broker ~~uses a~~routes ~~cryptographic~~orders ~~protocol~~through toConnected ~~govern~~Trading ~~the~~Venues ~~interactions within the Bitcoin network. A loose community of core developers has evolved to informally manage the source code for the protocol. Membership~~ in ~~the~~connection ~~community~~with oftrading ~~core~~services ~~developers~~under ~~evolves over time, largely based on self-determined participation in~~ the ~~resource~~Prime ~~section~~Broker ~~dedicated to the Bitcoin network on Github~~Agreement.~~com.~~ The ~~core~~loss ~~developers~~or ~~can~~failure ~~propose amendments to the Bitcoin network’s source code that, if accepted by miners and users, could alter the protocols and software~~ of ~~the Bitcoin network~~any ~~and~~such ~~the~~Connected ~~properties~~Trading ofVenues ~~bitcoin.~~may These alterations occur through software upgrades and could potentially include changes to the irreversibility of transactions and limitations on the mining of new bitcoin, which could undermine the appeal and market value of bitcoin. Alternatively, software upgrades and other changes to the protocols of the Bitcoin network could fail to work as intended or could introduce bugs, security risks, or otherwise adversely affect, the ~~Bitcoin~~Prime ~~network.~~Broker’s Asbusiness ~~a result, the Bitcoin network could be subject to new protocols~~ and ~~software in~~cause ~~the~~losses ~~future~~for ~~that may adversely affect an investment in~~ the Trust.

~~The~~In ~~open~~connection with trading services under the Prime Broker Agreement, the Prime Broker routinely routes customer orders to Connected Trading Venues, which are third-~~source~~party exchanges ~~structure~~or other trading venues (including the trading venue operated by the Prime Broker). In connection with these activities, the ofPrime Broker may hold bitcoin with such Connected Trading Venues in order to effect customer orders, including the ~~Bitcoin~~Trust’s ~~network~~orders. However, ~~protocol~~the ~~means~~Prime Broker has represented to the Sponsor that no customer cash is held at Connected Trading Venues. If the ~~core~~Prime ~~developers~~Broker were ~~and~~to ~~other~~experience ~~contributors~~a ~~are~~disruption ~~generally~~in ~~not~~the ~~directly~~Prime ~~compensated~~Broker’s ~~for~~access ~~their~~to these Connected Trading Venues, the Prime Broker’s trading ~~contributions~~services under the Prime Broker Agreement could be adversely affected to the extent that the Prime Broker is limited in ~~maintaining~~its ability to execute order flow for its customers, including the Trust. In addition, while the Prime Broker has policies and ~~developing~~procedures to help mitigate the ~~Bitcoin~~Prime ~~network~~Broker’s ~~protocol.~~risks Arelated ~~failure~~to routing orders through third-party trading venues, if any of these third-party trading venues experience any technical, legal, regulatory, or other adverse events, such as shutdowns, delays, system failures, suspension of withdrawals, illiquidity, insolvency, or loss of customer assets, the Prime Broker might not be able to ~~properly~~fully ~~monitor~~recover ~~and~~the ~~upgrade~~customer’s bitcoin that the ~~Bitcoin~~Prime ~~network~~Broker has deposited with these third parties. As a result, the Prime Broker’s business, operating results and financial ~~protocol~~condition could ~~damage~~be adversely affected, potentially resulting in its failure to provide services to the ~~Bitcoin~~Trust ~~network~~or perform its obligations under the Prime Broker Agreement, and anthe ~~investment~~Trust could suffer resulting losses or disruptions to its operations. The failure of a Connected Trading Venue at which the Prime Broker maintains customer bitcoin, including bitcoin associated with the Trust, could result in losses to the Trust, notwithstanding the regulatory requirements to which the Prime Broker is subject or other potential protections.

The Bitcoin network operates based on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource section dedicated to development of the Bitcoin network. As the Bitcoin network protocol is not sold or made available subject to licensing or subscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating the source code for the Bitcoin network protocol. Consequently, there is a lack of financial incentive for developers to maintain or develop the Bitcoin network and the core developers may lack the resources to adequately address emerging issues with the Bitcoin network protocol. Although the Bitcoin network is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. Alternatively, entities whose interests are at odds with other participants in the Bitcoin network may seek to obtain control over the Bitcoin network by influencing core developers. For example, malicious actors could attempt to bribe a core developer or group of core developers to propose certain changes to the network core developers. In addition, a bad actor could also attempt to interfere with the operation of the Bitcoin network by attempting to exercise a malign influence over a core developer. To the extent that material issues arise with the Bitcoin network protocol and the core developers and open-source contributors are unable to address the issues adequately or in a timely manner, the Bitcoin network and an investment in the Trust may be adversely affected.22

~~Decentralized~~A ~~governance~~ disruption of the Internet ~~Bitcoin~~may ~~network~~affect ~~could~~Bitcoin ~~have~~operations, awhich ~~negative~~may ~~impact~~adversely onaffect the ~~performance~~bitcoin ofindustry and an investment in the Trust.

~~Governance~~The functionality of ~~decentralized~~the Bitcoin ~~networks,~~network ~~such~~relies ason the ~~Bitcoin~~Internet. ~~network,~~A issignificant ~~achieved~~disruption ~~through~~of ~~voluntary~~Internet ~~consensus~~connectivity ~~and~~(i.e., ~~open~~affecting ~~competition.~~large Innumbers ~~other~~of ~~words,~~users or geographic regions) could disrupt the Bitcoin network ~~has~~’s nofunctionality ~~central~~and ~~decision-making~~operations ~~body~~until orthe ~~clear~~disruption ~~manner~~in the Internet is resolved. A disruption in ~~which~~the ~~participants~~Internet ~~can~~could ~~come~~adversely toaffect an ~~agreement~~investment ~~other~~in ~~than~~the ~~through~~Trust ~~overwhelming~~or ~~consensus. The~~the ~~lack~~ability of ~~clarity~~the onTrust ~~governance~~to ~~may~~operate. ~~adversely~~In ~~affect~~particular, ~~bitcoin’s~~some ~~utility~~variants of ~~and~~digital ~~ability~~assets tohave ~~grow~~experienced ~~and~~a ~~face~~number ~~challenges,~~of ~~both~~ denial-of-service attacks, which ~~may~~ ~~require~~have ~~solutions~~led ~~and~~to ~~directed~~temporary ~~effort~~delays toin ~~overcome~~block ~~problems,~~creation ~~especially~~and ~~long-term~~digital asset ~~problems~~transfers. ~~For~~While ~~example,~~in acertain ~~seemingly~~cases ~~simple~~in ~~technical issue~~response ~~once~~to ~~divided~~an ~~the~~attack, ~~Bitcoin~~an ~~network~~additional ~~community:~~“hard ~~namely,~~fork” ~~whether~~(discussed below) has been introduced to increase the ~~block~~cost ~~size~~ of certain network functions, the ~~blockchain~~relevant ornetwork ~~implement~~has ~~another~~continued ~~change~~ to ~~increase~~be the ~~scalability~~subject of ~~bitcoin,~~additional ~~known~~attacks. asMoreover, it ~~“segregated~~is ~~witness,”~~possible ~~and~~that ~~help~~as itbitcoin ~~continue~~increases toin ~~grow.~~value, ~~See~~it ~~“Risk~~may ~~Factors—The Bitcoin~~become ~~network~~a ~~faces~~bigger ~~scaling~~target ~~challenges~~for hackers and ~~efforts~~subject to ~~increase~~more ~~the~~frequent ~~volume~~hacking and denial-of-service ~~transactions may not be successful~~attacks.”

ToPotential ~~the~~changes ~~extent lack of clarity~~to ~~in corporate governance of~~ the Bitcoin network’s ~~leads~~protocols toand ~~ineffective~~software ~~decision-making~~could, ~~that~~if ~~slows~~accepted ~~development~~ and ~~growth,~~authorized by the ~~value~~Bitcoin ofnetwork ~~the~~community, adversely affect ~~Shares~~an ~~may~~investment bein ~~adversely~~the ~~affected~~Trust.

~~Anonymity~~The Bitcoin network uses a cryptographic protocol to govern the interactions within the Bitcoin network. A loose community of core developers has evolved to informally manage the source code for the protocol. Membership in the community of core developers evolves over time, largely based on self-determined participation in the resource section dedicated to the Bitcoin network on Github.com. The core developers can propose amendments to the Bitcoin network’s source code that, if accepted by miners and ~~illicit~~users, could alter the protocols and software of the Bitcoin network ~~financing~~and ~~risk~~the properties of bitcoin. These alterations occur through software upgrades and could potentially include changes to the irreversibility of transactions and limitations on the mining of new bitcoin, which could undermine the appeal and market value of bitcoin. Alternatively, software upgrades and other changes to the protocols of the Bitcoin network could fail to work as intended or could introduce bugs, security risks, or otherwise adversely affect, the Bitcoin network. As a result, the Bitcoin network could be subject to new protocols and software in the future that may adversely affect an investment in the Trust.

~~Although~~The ~~transaction~~open-source ~~details~~structure of ~~peer-to-peer transactions are recorded on~~ the Bitcoin ~~blockchain, a buyer or seller of digital assets on a peer-to-peer basis directly on the Bitcoin~~ network ~~may~~protocol ~~never~~means ~~know~~that ~~to whom~~ the ~~public~~core ~~key~~developers ~~belongs~~and orother ~~the~~contributors ~~true identity of the party with whom it is transacting. Public key addresses~~ are ~~randomized~~generally ~~sequences of alphanumeric characters that, standing alone, do~~ not ~~provide~~directly ~~sufficient~~compensated ~~information to identify users. In addition, certain technologies may obscure the origin or chain of custody of digital assets. The opaque nature of the market poses asset verification challenges~~ for ~~market participants, regulators and auditors and gives rise to an increased risk of manipulation~~their ~~and~~contributions ~~fraud,~~in ~~including~~maintaining ~~the potential for Ponzi schemes, bucket shops~~ and ~~pump~~developing ~~and dump schemes. Digital assets have in~~ the ~~past~~Bitcoin ~~been~~network ~~used to facilitate illicit activities~~protocol. IfA afailure ~~digital asset was used~~ to ~~facilitate~~properly ~~illicit~~monitor ~~activities, businesses that facilitate transactions in such digital assets could be at increased risk of potential criminal or civil lawsuits, or of having banking or other services cut off,~~ and ~~such~~upgrade ~~digital asset could be removed from digital asset exchanges. Any of~~ the ~~aforementioned~~Bitcoin ~~occurrences~~network protocol could ~~adversely~~damage ~~affect~~ the ~~price~~Bitcoin ~~of the relevant digital asset, the attractiveness of the respective blockchain~~ network and an investment in the ~~Shares. If the~~ Trust~~, the Sponsor or the Trustee were to transact with a sanctioned entity, the Trust, the Sponsor or the Trustee would be at risk of potential criminal or civil lawsuits or liability~~.

25The Bitcoin network operates based on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource section dedicated to development of the Bitcoin network. As the Bitcoin network protocol is not sold or made available subject to licensing or subscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated for maintaining and updating the source code for the Bitcoin network protocol. Consequently, there is a lack of financial incentive for developers to maintain or develop the Bitcoin network and the core developers may lack the resources to adequately address emerging issues with the Bitcoin network protocol. Although the Bitcoin network is currently supported by the core developers, there can be no guarantee that such support will continue or be sufficient in the future. Alternatively, entities whose interests are at odds with other participants in the Bitcoin network may seek to obtain control over the Bitcoin network by influencing core developers. For example, malicious actors could attempt to bribe a core developer or group of core developers to propose certain changes to the network core developers. In addition, a bad actor could also attempt to interfere with the operation of the Bitcoin network by attempting to exercise a malign influence over a core developer. To the extent that material issues arise with the Bitcoin network protocol and the core developers and open-source contributors are unable to address the issues adequately or in a timely manner, the Bitcoin network and an investment in the Trust may be adversely affected.

~~The~~Decentralized ~~Trust takes measures with~~governance ~~the objective~~ of ~~reducing illicit financing risks in connection with~~ the ~~Trust’s~~Bitcoin ~~activities.~~network However, illicit financing risks are present in the digital asset markets, including markets for bitcoin. There can be no assurance that the measures employed by the Trust will prove successful in reducing illicit financing risks, and the Trust is subject to the complex illicit financing risks and vulnerabilities present in the digital asset markets. If such risks eventuate, the Trust, the Sponsor or the Trustee or their affiliates could ~~face civil or criminal liability, fines, penalties, or other punishments, be subject to investigation,~~ have ~~their~~a ~~assets~~negative ~~frozen,~~impact ~~lose~~on ~~access to banking services or services provided by other service providers, or suffer disruptions to their operations, any of which could negatively affect~~ the ~~Trust’s~~performance ~~ability to operate or cause losses in value~~ of the ~~Shares~~Trust.

~~The~~Governance ~~Sponsor~~of ~~and the Trust~~decentralized ~~have~~networks, ~~adopted~~such ~~and~~as ~~implemented~~the ~~policies~~Bitcoin ~~and~~network, ~~procedures~~is ~~that~~achieved ~~are~~through ~~designed~~voluntary toconsensus ~~ensure~~and ~~that~~open ~~they~~competition. doIn ~~not~~other ~~violate~~words, ~~applicable~~the ~~AML~~Bitcoin ~~and sanctions~~network ~~laws~~has ~~and~~no ~~regulations~~central ~~and~~decision-making tobody ~~comply~~or ~~with~~clear ~~any~~manner ~~applicable~~in ~~KYC~~which ~~laws~~participants ~~and~~can ~~regulations.~~come ~~The~~to ~~Sponsor~~an ~~and~~agreement ~~the~~other ~~Trust~~than ~~will~~through ~~only~~overwhelming ~~interact with known~~consensus. ~~third~~The ~~party~~lack ~~service~~of ~~providers~~clarity ~~with~~on ~~respect~~governance tomay ~~whom~~adversely itaffect ~~has~~bitcoin’s ~~engaged~~utility inand aability ~~due diligence process~~ to ~~ensure~~grow aand ~~thorough~~face ~~KYC process~~challenges, ~~such~~both asof which ~~the~~may ~~Authorized~~require ~~Participants~~solutions and ~~the~~directed ~~Bitcoin~~effort ~~Custodian.~~to ~~Authorized~~overcome ~~Participants~~problems, asespecially ~~broker~~long-~~dealers,~~term ~~and~~problems. ~~the~~For ~~Bitcoin Custodian~~example, as a ~~limited purpose~~seemingly ~~trust~~simple ~~company~~technical issue ~~subject~~once todivided ~~New~~the ~~York~~Bitcoin ~~Banking~~network ~~Law~~community: namely, ~~are~~whether ~~subject~~ to increase the ~~U.S.~~block ~~Bank~~size ~~Secrecy~~of ~~Act~~the ~~(as~~blockchain ~~amended)~~or ~~(“BSA”)~~implement ~~and~~another ~~U.S.~~change ~~economic~~to ~~sanctions~~increase ~~laws. In addition,~~ the ~~Trust~~scalability ~~will~~of ~~only~~bitcoin, ~~accept~~known ~~creations~~as ~~and~~“segregated ~~redemption~~witness,” ~~requests from regulated Authorized Participants who themselves are subject to applicable sanctions~~ and ~~anti-money~~help ~~laundering~~it ~~laws~~continue ~~and have compliance programs that are designed~~ to ~~ensure compliance with those laws~~grow. InSee ~~addition,~~“Risk Factors—The Bitcoin ~~Counterparties~~network ~~will~~faces bescaling ~~contractually~~challenges ~~obligated~~and ~~that~~efforts ~~all bitcoin they deliver~~ to increase the ~~Trust will~~volume beof ~~from~~transactions ~~lawful~~may ~~sources. The Trust will~~ not ~~hold~~be ~~any bitcoin except those that have been delivered by a Bitcoin Counterparty in connection with creation requests~~successful.”

~~The~~To ~~Bitcoin~~the ~~Custodian~~extent ~~has adopted~~lack ~~and~~of ~~implemented an anti-money laundering and sanctions compliance program, which provides additional protections to ensure that~~clarity ~~the~~in ~~Sponsor~~corporate ~~and~~governance ~~the~~of ~~Trust do not transact with a sanctioned party. Notably,~~ the Bitcoin ~~Custodian~~network ~~performs~~leads ~~Know-Your-Transaction~~to ~~(“KYT”) screening~~ineffective ~~using~~decision-making ~~blockchain~~that ~~analytics~~slows todevelopment ~~identify,~~and ~~detect~~growth, ~~and mitigate~~ the ~~risk~~value of ~~transacting with a sanctioned or other unlawful actor. Pursuant to~~ the ~~Bitcoin Custodian’s KYT program, any bitcoin that is delivered to the Trust’s custody account will undergo~~ ~~screening~~Shares tomay ~~ensure~~be ~~that~~adversely ~~the origins of that bitcoin are not illicit~~affected.

There is no guarantee that such procedures will always be effective. If the Authorized Participants or Bitcoin Counterparties have inadequate policies, procedures and controls for complying with applicable anti-money laundering and applicable sanctions laws or the Trust’s diligence is ineffective, violations of such laws could result, which could result in regulatory liability for the Trust, the Sponsor, the Trustee or their affiliates under such laws, including governmental fines, penalties, and other punishments, as well as potential liability to or cessation of services by the Prime Broker and its affiliates, including the Bitcoin Custodian. Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust’s ability to operate.23

~~The~~Anonymity ~~actual or perceived use of bitcoin~~ and ~~other digital assets in~~ illicit ~~transactions, which may adversely affect the bitcoin industry and an investment in~~ ~~the~~financing ~~Trust~~risk.

~~Recent~~Although ~~years~~transaction ~~have~~details of ~~seen~~peer-to-peer transactions are recorded on the Bitcoin blockchain, a buyer or seller of digital assets ~~used~~on ata ~~times~~peer-to-peer asbasis ~~part~~directly on the Bitcoin network may never know to whom the public key belongs or the true identity of ~~criminal~~the ~~activities~~party ~~and~~with whom it is transacting. Public key addresses are randomized sequences of alphanumeric characters that, standing alone, do not provide sufficient information to ~~launder~~identify users. ~~criminal~~In ~~proceeds~~addition, ascertain ~~means~~technologies may obscure the origin or chain of ~~payment~~custody of digital assets. The opaque nature of the market poses asset verification challenges for market participants, regulators and auditors and gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump and dump schemes. Digital assets have in the past been used to facilitate illicit activities. If a digital asset was used to facilitate illicit activities, businesses that facilitate transactions in such digital assets could be at increased risk of potential criminal or ascivil lawsuits, or of having banking or other services cut anoff, ~~investment~~and ~~fraud~~such ~~currency~~digital asset could be removed from digital asset exchanges. ~~Although~~Any of the ~~number~~aforementioned occurrences could adversely affect the price of ~~cases~~the ~~involving~~relevant ~~cryptocurrencies~~digital ~~for~~asset, the ~~financing~~attractiveness of ~~terrorism~~the ~~remains~~respective ~~limited,~~blockchain network and an investment in the Shares. If the ~~criminals~~Trust, ~~have~~the ~~nonetheless~~Sponsor ~~become~~or ~~more~~the ~~sophisticated~~Trustee inwere ~~their~~to ~~use~~transact with a sanctioned entity, the Trust, the Sponsor or the Trustee would be at risk of potential ~~digital~~criminal ~~assets~~or civil lawsuits or liability.

~~Although~~The ~~Bitcoin~~Trust ~~transaction~~takes measures with ~~details~~the ~~are~~objective ~~logged~~of onreducing illicit financing risks in connection with the ~~blockchain~~Trust’s activities. However, aillicit ~~buyer~~financing orrisks ~~seller~~are present ofin ~~Bitcoin~~the ~~may~~digital ~~never~~asset ~~know~~markets, toincluding ~~whom~~markets ~~the~~for ~~public~~bitcoin. ~~key~~There ~~belongs~~can orbe no assurance that the ~~true~~measures ~~identity of~~employed by the ~~party~~Trust will ~~with~~prove ~~whom~~successful itin isreducing ~~transacting~~illicit financing risks, asand ~~public~~the ~~key~~Trust ~~addresses~~is ~~are~~subject ~~randomized~~to ~~sequences~~the ofcomplex ~~alphanumeric~~illicit ~~characters~~financing ~~that~~risks and vulnerabilities present in the digital asset markets. If such risks eventuate, ~~standing~~the ~~alone~~Trust, do ~~not~~the ~~provide~~Sponsor ~~sufficient~~or ~~information~~the toTrustee ~~identify~~or ~~users.~~their ~~Further~~affiliates could face civil or criminal liability, ~~identifying~~fines, ~~users~~penalties, ~~can~~or other punishments, be ~~made~~subject ~~even~~to ~~more~~investigation, ~~difficult~~have ~~where~~their aassets ~~user~~frozen, ~~utilizes~~lose access to banking aservices ~~tumbling~~or services provided by other service providers, or ~~mixing~~suffer ~~services~~disruptions ~~(e.g.~~to their operations, ~~Tornado~~any ~~Cash)~~of which could negatively affect the Trust’s ability to ~~further~~operate ~~obfuscate~~or ~~transaction~~cause ~~details~~losses in value of the Shares.

26The Sponsor and the Trust have adopted and implemented policies and procedures that are designed to ensure that they do not violate applicable AML and sanctions laws and regulations and to comply with any applicable KYC laws and regulations. The Sponsor and the Trust will only interact with known third party service providers with respect to whom it has engaged in a due diligence process to ensure a thorough KYC process, such as the Authorized Participants and the Bitcoin Custodians. Authorized Participants, as broker-dealers, and the Bitcoin Custodians, as a limited purpose trust company subject to New York Banking Law, are subject to the U.S. Bank Secrecy Act (as amended) (“BSA”) and U.S. economic sanctions laws. In addition, the Trust will only accept creations and redemption requests from regulated Authorized Participants who themselves are subject to applicable sanctions and anti-money laundering laws and have compliance programs that are designed to ensure compliance with those laws. In addition, Bitcoin Counterparties will be contractually obligated that all bitcoin they deliver to the Trust will be from lawful sources. The Trust will not hold any bitcoin except those that have been delivered by a Bitcoin Counterparty in connection with creation requests.

The ~~bitcoin~~Bitcoin ~~industry~~Custodians have adopted and animplemented anti-money laundering and sanctions compliance programs, which provide additional protections to ensure that the ~~investment~~Sponsor inand the Trust ~~may~~do benot ~~adversely~~transact ~~affected~~with toa sanctioned party. Notably, the ~~extent~~Bitcoin ~~that~~Custodians ~~digital~~performs ~~assets~~Know-Your-Transaction ~~are~~(“KYT”) screening ~~increasingly~~using ~~used~~blockchain inanalytics ~~connection~~to identify, detect, and mitigate the risk of transacting with ~~illicit~~a ~~transactions~~ sanctioned or ~~are~~other ~~perceived~~unlawful asactor. Pursuant ~~being~~to ~~used~~the inBitcoin ~~connection~~Custodians’ ~~with~~KYT ~~illicit~~program, ~~transactions~~any bitcoin that is delivered to the Trust’s custody account will undergo screening to ensure that the origins of that bitcoin are not illicit.

~~The~~There ~~inability~~is tono ~~recognize~~guarantee that such procedures will always be effective. If the ~~economic~~Authorized ~~benefit~~Participants ofor aBitcoin ~~“fork”~~Counterparties have inadequate policies, procedures and controls for complying with applicable anti-money laundering and applicable sanctions laws or anthe ~~“airdrop”~~Trust’s diligence is ineffective, violations of such laws could ~~adversely~~result, ~~impact~~which ancould ~~investment~~result in regulatory liability for the Trust, the Sponsor, the Trustee or their affiliates under such laws, including governmental fines, penalties, and other punishments, as well as potential liability to or cessation of services by the Prime Broker and its affiliates, including the Bitcoin Custodians. Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust’s ability to operate.

The ~~only~~actual or perceived use of bitcoin and other digital ~~asset~~assets ~~to be~~in ~~held~~illicit bytransactions, ~~the~~which ~~Trust~~may ~~will~~adversely beaffect the bitcoin industry and an investment in the Trust.

~~From~~Recent ~~time~~years tohave ~~time,~~seen ~~the Trust~~digital ~~may~~assets beused ~~entitled~~at totimes oras ~~come~~part ~~into possession~~ of ~~rights~~criminal toactivities ~~acquire, or otherwise establish dominion~~ and ~~control over, any virtual currency or other asset or right, which rights are incident~~ to ~~the~~launder ~~Trust’s~~criminal ~~ownership of bitcoin and arise without any action of the Trust~~proceeds, or ofas ~~the~~means ~~Sponsor or Sub-Adviser on behalf~~ of ~~the~~payment ~~Trust~~for ~~(“Incidental~~illicit ~~Rights”) and/or virtual currency tokens~~activities, or ~~other asset~~as or right, acquired by the Trust through the exercise (subject to the applicable provisions of the Trust Agreement) of any Incidental Right (“IR Virtual Currency”) by virtue of its ownership of bitcoin, generally through a fork in the Bitcoin blockchain, an ~~airdrop offered~~investment tofraud ~~holders of bitcoin or other similar event~~currency. ~~Pursuant~~Although to the ~~Trust~~number ~~Agreement, the Sponsor has the right, in their discretion, to determine what action to take in connection with the Trust’s entitlement to or ownership~~ of ~~Incidental~~cases ~~Rights~~involving orcryptocurrencies ~~any~~for ~~IR Virtual Currency. Under~~ the ~~terms~~financing of ~~the~~terrorism ~~Trust~~remains ~~Agreement~~limited, ~~the Trust may take any lawful action necessary or desirable in connection with the Trust’s~~ ~~ownership~~criminals ofhave ~~Incidental~~nonetheless ~~Rights,~~become ~~including~~more ~~the~~sophisticated ~~acquisition of IR Virtual Currency, as determined by the Sponsor~~ in ~~the~~their ~~Sponsor’s sole~~use ~~discretion, unless such action would adversely affect the status~~ of ~~the~~digital ~~Trust as a grantor trust for U~~assets.~~S. federal income tax purposes or otherwise be prohibited by the Trust Agreement.~~

~~With~~Although ~~respect~~Bitcoin totransaction details ~~any~~are ~~fork~~logged on the blockchain, ~~airdrop~~ a buyer or ~~similar~~seller ~~event,~~of ~~the~~Bitcoin ~~Sponsor~~may ~~will~~never ~~cause~~know to whom the ~~Trust~~public tokey ~~irrevocably~~belongs ~~abandon~~or the ~~Incidental~~true ~~Rights~~identity of orthe IRparty ~~Virtual~~with ~~Currency.~~whom Init ~~the event~~is ~~the~~transacting, ~~Trust~~as ~~seeks~~public tokey ~~change~~addresses ~~this~~are ~~position~~randomized sequences of alphanumeric characters that, anstanding ~~application~~alone, do ~~would~~not ~~need~~provide sufficient information to identify users. Further, identifying users can be ~~filed~~made ~~with~~even ~~the~~more ~~SEC~~difficult bywhere ~~the~~a ~~Exchange~~user ~~seeking~~utilizes a ~~approval~~tumbling or mixing services (e.g., Tornado Cash) to ~~amend~~ ~~its~~further ~~listing~~obfuscate ~~rules~~transaction details.

~~Investors~~The ~~should~~bitcoin beindustry ~~aware~~and an ~~that~~investment ~~investing~~ in ~~Shares of~~ the Trust ismay ~~not~~be ~~equivalent~~adversely affected to ~~investing~~the ~~directly~~extent inthat ~~bitcoin.~~digital Anassets ~~investor~~are ~~does~~increasingly ~~not~~used ~~have~~in aconnection ~~claim~~with toillicit ~~any “forked”~~transactions ~~assets.~~or ~~Unless~~are ~~otherwise~~perceived ~~announced, the Sponsor and the Sub-Adviser,~~ as ~~applicable~~being onused ~~behalf~~in ofconnection ~~the~~with ~~Trust,~~illicit ~~will not support the inclusion of any forked assets~~transactions.

~~Unless an announcement is made informing investors that a fork will be supported, a newly-forked asset should be considered ineligible for inclusion in the Trust.~~24

~~Network~~The ~~Forks~~inability to recognize the economic benefit of a “fork” or an “airdrop” could adversely impact an investment in the Trust.

~~Bitcoin,~~The ~~along~~only ~~with~~digital ~~many~~asset ~~other~~to ~~digital~~be ~~assets,~~held ~~are~~by ~~open-source projects. The infrastructure and ecosystem that powers~~ the ~~Bitcoin~~Trust ~~network~~will ~~are~~be developed by different parties, including affiliated and non-affiliated engineers, developers, miners, platform developers, evangelists, marketers, exchange operators and other companies based around a service regarding bitcoin~~, each of whom may have different motivations, drivers, philosophies and incentives~~.

AsFrom atime ~~result~~to time, ~~any~~the ~~individual~~Trust ~~can~~may ~~propose~~be ~~refinements~~entitled to or ~~improvements~~come tointo ~~the~~possession ~~Bitcoin~~of ~~network’s~~rights ~~source~~to ~~code~~acquire, ~~through~~or ~~one~~otherwise orestablish ~~more~~dominion ~~software~~and ~~upgrades~~control ~~that~~over, ~~could~~any ~~alter~~virtual currency ~~the~~or ~~protocols~~other ~~governing~~asset ~~the~~or ~~Bitcoin~~right, ~~network~~which ~~and~~rights are incident to the ~~properties~~Trust’s ownership of bitcoin. ~~When~~and aarise ~~modification~~without isany ~~proposed~~action ~~and~~of athe ~~substantial majority~~Trust, or of ~~users~~the ~~and~~Sponsor ~~miners~~or ~~consent~~Sub-Adviser toon ~~the~~behalf ~~modification,~~of the ~~change~~Trust is(“Incidental ~~implemented,~~Rights”) and/or ~~the~~virtual ~~Bitcoin~~currency ~~network~~tokens, ~~remains~~or ~~uninterrupted.~~other ~~However, a~~asset ~~“hard~~or ~~fork”~~right, ~~occurs~~acquired ifby ~~less~~the ~~than~~Trust athrough ~~substantial~~the ~~majority~~exercise of(subject ~~users~~to ~~and~~the ~~miners~~applicable ~~consent~~provisions toof the ~~proposed~~Trust ~~modification,~~Agreement) ~~and~~of ~~the~~any ~~modification~~Incidental Right is(“IR ~~not~~Virtual ~~compatible~~Currency”) ~~with~~by ~~the~~virtue ~~software~~of ~~prior to~~ its ~~modification.~~ownership Inof ~~other words~~bitcoin, ~~two~~generally ~~incompatible~~through ~~networks~~a ~~would~~fork ~~then~~in ~~exist:~~the ~~(1)~~Bitcoin ~~one~~blockchain, ~~network~~an airdrop ~~running~~offered ~~the~~to ~~pre-modified~~holders ~~software~~of ~~and~~bitcoin ~~(2)~~or ~~another~~other ~~network~~similar ~~running~~event. ~~the~~Pursuant ~~modified~~to ~~software.~~the ~~The~~Trust ~~effect~~Agreement, ofthe ~~such~~Sponsor ahas ~~fork~~the ~~would~~right, bein ~~the~~their ~~existence~~discretion, ofto ~~two~~determine ~~versions~~what ofaction ~~bitcoin~~to ~~running~~take in ~~parallel,~~connection ~~and~~with the ~~creation~~Trust’s ofentitlement ato ~~new~~or ~~digital~~ownership ~~asset~~of ~~which~~Incidental ~~lacks~~Rights ~~interchangeability~~or ~~with~~any ~~its~~IR ~~predecessor.~~Virtual ~~This~~Currency. isUnder inthe ~~contrast~~terms toof athe ~~“soft~~Trust ~~fork~~Agreement,” orthe aTrust ~~proposed~~may ~~modification~~take toany ~~the~~lawful ~~software~~action ~~governing~~necessary ~~the~~or ~~network~~desirable ~~that~~in ~~results~~connection inwith athe ~~post-update~~Trust’s ~~network~~ownership ~~that~~of isIncidental ~~compatible~~Rights, ~~with~~including the ~~network~~acquisition of IR Virtual Currency, as itdetermined ~~existed~~by ~~prior~~the toSponsor in the ~~update~~Sponsor’s sole discretion, ~~because~~unless itsuch ~~restricts~~action would adversely affect the ~~network~~status ~~operations~~of ~~that~~the ~~can~~Trust beas a grantor trust for U.S. federal income tax purposes ~~performed~~or ~~after~~otherwise be prohibited by the ~~update~~Trust Agreement.

~~Forks~~With ~~occur~~respect ~~for a variety of reasons. A fork could occur after a significant security breach. Participants on the network could elect~~ to ~~“fork”~~any ~~the network to its state before the hack, effectively reversing the hack. A~~ fork ~~could also be introduced by an unintentional~~, ~~unanticipated~~ ~~software~~airdrop ~~flaw~~or insimilar ~~the multiple versions of otherwise compatible software users run. Such a fork could adversely affect bitcoin’s viability. It is possible~~event, ~~however, that a substantial number of users and miners could adopt an incompatible version of~~ the ~~digital~~Sponsor ~~asset while~~will ~~resisting~~cause ~~community-led efforts to merge~~ the ~~two~~Trust chains. This would result in a permanent fork. For example, in July 2016, Ethereum “forked” into Ethereum and a new digital asset, Ethereum Classic, as a result of the Ethereum network community’s response to airrevocably ~~significant~~abandon ~~security breach in which an anonymous hacker exploited a smart contract running on~~ the ~~Ethereum~~Incidental ~~network~~Rights toor ~~syphon~~IR ~~approximately $60~~Virtual ~~million of ETH held by the DAO, a distributed autonomous organization, into a segregated account~~Currency. In ~~response to~~ the ~~hack, most participants~~ inevent the ~~Ethereum~~Trust ~~community~~seeks ~~elected~~ to ~~adopt~~change athis ~~“fork” that effectively reversed the hack. However~~position, aan ~~minority~~application ofwould ~~users~~need ~~continued~~ to ~~develop~~be ~~the~~filed ~~original blockchain, now referred to as “Ethereum Classic”~~ with the ~~digital~~SEC ~~asset~~by onthe ~~that~~Exchange ~~blockchain~~seeking ~~now~~approval ~~referred~~ to amend asits ~~Ethereum~~listing ~~Classic, or ETC~~rules. ~~ETC now trades on several digital asset exchanges.~~

27Investors should be aware that investing in Shares of the Trust is not equivalent to investing directly in bitcoin. An investor does not have a claim to any “forked” assets. Unless otherwise announced, the Sponsor and the Sub-Adviser, as applicable on behalf of the Trust, will not support the inclusion of any forked assets.

AUnless ~~fork~~an ~~may~~announcement ~~occur as a result~~is ofmade ~~disagreement~~informing ~~among~~investors ~~network~~that ~~participants as to whether~~ a ~~proposed~~fork ~~modification~~will ~~to the network should~~ be ~~accepted. For example~~supported, ona ~~August 1, 2017, after extended debates among developers as to how to improve the Bitcoin network’s transaction capacity, the Bitcoin network was~~ newly-forked byasset ashould ~~group~~be ofconsidered ~~developers~~ineligible ~~and~~for ~~miners~~inclusion ~~resulting~~ in the ~~creation of a new blockchain, which underlies the new digital asset “Bitcoin Cash~~Trust.” Bitcoin and Bitcoin Cash now operate on separate, independent blockchains. Since then, the Bitcoin network has forked several times to launch new digital assets, such as Bitcoin Gold, Bitcoin Silver and Bitcoin Diamond. Litecoin was also the result of a fork from the original Bitcoin blockchain.

~~Significant~~Network ~~forks are typically announced several months in advance~~Forks. The circumstances of each fork are unique, and their relative significance varies. It is possible that a particular fork may result in a significant disruption to bitcoin and, potentially, may result in broader market disruption should pricing become difficult following the fork. It is not possible to predict with accuracy the impact that any anticipated fork could have or for how long any resulting disruption may exist.

~~Forks~~Bitcoin, ~~may~~along ~~have~~with amany ~~detrimental~~other ~~effect~~digital ~~on the value of bitcoin~~assets, ~~including~~are ~~by negatively affecting cryptocurrency allocations or by failing to capture of the full value of the newly~~open-~~forked~~source ~~bitcoin if it is excluded from the Index~~projects. ~~Forks~~The ~~can~~infrastructure ~~also~~and ~~introduce~~ecosystem ~~new~~that ~~security~~powers ~~risks. For example, forks may result in “replay attacks,” or attacks in which transactions from one network were rebroadcast to nefarious effect on~~ the ~~other~~Bitcoin network~~. After~~ aare ~~hard~~developed ~~fork,~~by ~~it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing power~~different ~~of the digital asset network~~parties, ~~thereby~~including ~~making~~affiliated ~~digital assets that rely on proof of work more susceptible to attack. For example, when the Ethereum~~ and ~~Ethereum~~non-affiliated ~~Classic networks~~engineers, ~~two other digital asset networks~~developers, ~~split in July 2016~~miners, ~~replay~~platform ~~attacks~~developers, ~~in which transactions from one network were rebroadcast to nefarious effect on the other network~~evangelists, ~~plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced in July 2016 that it had lost 40~~marketers,~~000~~ ~~Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks.~~exchange ~~Similar~~operators ~~replay attack concerns occurred in connection with the Bitcoin Cash~~ and ~~Bitcoin~~other SVcompanies ~~networks~~based ~~split~~around ~~in November 2018. Another possible result of~~ a ~~hard~~service ~~fork~~regarding isbitcoin, aneach ~~inherent decrease in the level~~ of ~~security~~whom ~~due~~may tohave ~~significant~~different ~~amounts of mining power remaining on one network or migrating instead to the new forked network. After a hard fork~~motivations, ~~it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing power of a digital asset network that retained or attracted less mining power~~drivers, ~~thereby making~~philosophies ~~digital~~and ~~assets that rely on proof-of-work more susceptible to attack~~incentives.

AAs ~~hard~~a ~~fork~~result, ~~may~~any ~~adversely~~individual ~~affect~~can ~~the~~propose ~~price~~refinements ofor ~~bitcoin~~improvements atto the ~~time~~Bitcoin ofnetwork’s ~~announcement~~source orcode ~~adoption.~~through ~~For~~one ~~example,~~or ~~the~~more ~~announcement~~software ofupgrades athat ~~hard~~could ~~fork~~alter the ~~could~~protocols ~~lead~~governing tothe ~~increased demand~~Bitcoin ~~for~~network and the ~~pre~~properties ~~fork~~of ~~digital~~bitcoin. ~~asset,~~When ina ~~anticipation~~modification ~~that~~is ~~ownership~~proposed ofand ~~the~~a ~~pre~~substantial ~~fork~~majority of ~~digital~~users ~~asset~~and ~~would~~miners ~~entitle~~consent ~~holders~~ to athe ~~new~~modification, ~~digital asset~~the ~~following~~change ~~the~~is ~~fork.~~implemented ~~The~~and ~~increased~~the ~~demand~~Bitcoin ~~for~~network ~~the~~remains ~~pre~~uninterrupted. However, a “hard fork” ~~digital~~occurs ~~asset~~if ~~may~~less ~~cause~~than ~~the~~a ~~price~~substantial majority of ~~the~~users ~~digital~~and ~~asset~~miners consent to ~~rise. After~~ the ~~hard~~proposed ~~fork~~modification, itand the modification is ~~possible~~not ~~the~~compatible ~~aggregate~~with ~~price~~the ofsoftware ~~the~~prior ~~two~~to ~~versions~~its ofmodification. ~~the~~In ~~digital~~other ~~asset~~words, ~~running~~two inincompatible ~~parallel~~networks would bethen ~~less~~exist: ~~than~~(1) ~~the~~one network ~~price~~running of the ~~digital~~pre-modified ~~asset~~software ~~immediately~~and ~~prior~~(2) toanother network running the ~~fork~~modified software. ~~Furthermore,~~The ~~while~~effect ~~the~~of ~~Sponsor~~such ~~will,~~a asfork ~~permitted~~would bybe the ~~terms~~existence of two versions of ~~the~~bitcoin ~~Trust Agreement~~running in parallel, ~~determine~~and ~~which~~the ~~network~~creation isof ~~generally~~a ~~accepted~~new asdigital ~~the~~asset ~~Bitcoin~~which ~~network~~lacks ~~and~~interchangeability ~~should~~with ~~therefore~~its bepredecessor. This ~~considered~~is ~~the~~in ~~appropriate~~contrast ~~network for~~to ~~the~~a ~~Trust’s~~“soft ~~purposes~~fork,” ~~there~~or isa noproposed ~~guarantee~~modification ~~that~~to the ~~Sponsor~~software ~~will~~governing ~~choose~~ the network ~~and~~that ~~the~~results ~~associated~~in ~~digital~~a ~~asset~~post-update network that is ~~ultimately~~ ~~the~~compatible ~~most~~with ~~valuable~~the ~~fork.~~network ~~Either~~as ofit ~~these~~existed ~~events~~prior ~~could~~to ~~therefore adversely impact~~ the ~~value~~update, ofbecause ~~the~~it ~~Shares.~~restricts ~~When Bitcoin Cash forked from~~ the ~~Bitcoin~~ network, ~~the~~operations ~~value~~that ofcan ~~Bitcoin~~be performed ~~went~~after ~~from~~the ~~$2,800 to $2,700~~update.

InForks ~~principle,~~occur for a ~~hard~~variety of reasons. A fork could ~~change~~occur ~~the~~after ~~source~~a ~~code~~significant ~~for~~security ~~the~~breach. ~~Bitcoin~~Participants on the network, ~~including~~could elect to “fork” the network ~~source~~to ~~code~~its ~~which~~state ~~limits~~before the ~~supply~~hack, ofeffectively ~~bitcoin~~reversing tothe ~~21 million~~hack. ~~Although many~~A ~~observers~~fork ~~believe~~could ~~this~~also isbe ~~unlikely~~introduced atby ~~present~~an unintentional, ~~there~~unanticipated software isflaw noin ~~guarantee~~the ~~that~~multiple ~~the~~versions ~~current~~of 21otherwise ~~million~~compatible ~~supply~~software ~~cap~~users ~~for~~run. ~~outstanding~~Such a fork could adversely affect bitcoin,’s ~~which~~viability. It is ~~estimated~~possible, tohowever, bethat ~~reached~~a bysubstantial ~~approximately~~number of users and miners could adopt an incompatible version of the ~~year~~digital ~~2140,~~asset while ~~will~~resisting ~~not~~community-led beefforts ~~changed~~to merge the two chains. IfThis would result in a ~~hard~~permanent fork. ~~changing~~For ~~the~~example, 21in ~~million~~July ~~supply~~2016, ~~cap~~Ethereum is“forked” ~~widely~~into ~~adopted~~Ethereum and a new digital asset, Ethereum Classic, as a result of the ~~limit~~Ethereum network community’s response to a significant security breach in which an anonymous hacker exploited a smart contract running on the ~~supply~~Ethereum network to syphon approximately $60 million of ~~bitcoin~~ETH ~~could~~held beby ~~lifted~~the DAO, ~~which~~a ~~could~~distributed ~~have~~autonomous anorganization, ~~adverse~~into ~~impact~~a onsegregated account. In response to the ~~value~~hack, most participants in the Ethereum community elected to adopt a “fork” that effectively reversed the hack. However, a minority of ~~bitcoin~~users ~~and~~continued to develop the ~~value~~original ofblockchain, now referred to as “Ethereum Classic” with the ~~Shares~~digital asset on that blockchain now referred to as Ethereum Classic, or ETC. ETC now trades on several digital asset exchanges.

If bitcoin were to fork into two digital assets, the Trust may hold, in addition to its existing bitcoin balance, a right to claim an equivalent amount of the new “forked” asset following the hard fork. However, the Index does not track forks involving bitcoin. The Trust has adopted procedures to address situations involving a fork that results in the issuance of new alternative bitcoin that the Trust may receive. The holder of bitcoin has no discretion in a hard fork; it merely has the right to claim the new bitcoin on a pro rata basis while it continues to hold the same number of bitcoin.25

~~Airdrops~~A fork may occur as a result of disagreement among network participants as to whether a proposed modification to the network should be accepted. For example, on August 1, 2017, after extended debates among developers as to how to improve the Bitcoin network’s transaction capacity, the Bitcoin network was forked by a group of developers and miners resulting in the creation of a new blockchain, which underlies the new digital asset “Bitcoin Cash.” Bitcoin and Bitcoin Cash now operate on separate, independent blockchains. Since then, the Bitcoin network has forked several times to launch new digital assets, such as Bitcoin Gold, Bitcoin Silver and Bitcoin Diamond. Litecoin was also the result of a fork from the original Bitcoin blockchain.

~~Bitcoin~~Significant ~~may~~forks ~~become~~are ~~subject~~typically toannounced anseveral ~~occurrence~~months ~~similar~~in toadvance. aThe ~~fork,~~circumstances ~~which~~of iseach ~~known~~fork asare ~~an “airdrop.” In an airdrop~~unique, ~~the~~and ~~promotors~~their ofrelative asignificance ~~new~~varies. ~~digital~~It ~~asset~~is ~~announce~~possible tothat ~~holders~~a ofparticular ~~another~~fork ~~digital~~may ~~asset~~result ~~that~~in ~~they~~a ~~will~~significant bedisruption ~~entitled~~ to ~~claim~~bitcoin aand, ~~certain~~potentially, ~~amount~~may ofresult ~~the~~in ~~new~~broader ~~digital~~market ~~asset~~disruption ~~for~~should pricing ~~free,~~become ~~based~~difficult onfollowing the ~~fact~~ ~~that~~fork. ~~they~~It ~~hold~~is ~~such~~not ~~other~~possible ~~digital~~to ~~asset.~~predict ~~For~~with ~~example,~~accuracy ~~in March 2017,~~ the ~~promoters~~impact ~~of Stellar Lumens announced~~ that ~~anyone~~any ~~that~~anticipated ~~owned bitcoin~~fork ~~as of June 26, 2017,~~ could ~~claim,~~have or ~~until~~for ~~August~~how ~~27,~~long ~~2017,~~any aresulting ~~certain~~disruption ~~amount~~may ~~of Stellar Lumens~~exist. ~~Airdrops are not included in the Index under its current methodology.~~

~~The~~Forks ~~Index~~may ~~currently~~have ~~does~~a ~~not~~detrimental ~~track~~effect ~~airdrops~~on ~~involving~~the value of bitcoin, including by negatively affecting cryptocurrency allocations or by failing to capture of the full value of the newly-forked bitcoin if it is excluded from the Index. ~~Accordingly~~Forks can also introduce new security risks. For example, forks may result in “replay attacks,” or attacks in which transactions from one network were rebroadcast to nefarious effect on the ~~Trust~~other ~~will~~network. After ~~not~~a ~~participate~~hard fork, it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing power of the digital asset network, thereby making digital assets that rely on proof of work more susceptible to attack. For example, when the Ethereum and Ethereum Classic networks, two other digital asset networks, split in ~~airdrops~~July 2016, replay attacks, in which transactions from one network were rebroadcast to nefarious effect on the other network, plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced in July 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks. Similar replay attack concerns occurred in connection with the Bitcoin Cash and Bitcoin SV networks split in November 2018. Another possible result of a hard fork is an inherent decrease in the level of security due to significant amounts of mining power remaining on one network or migrating instead to the new forked network. After a hard fork, it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing power of a digital asset network that retained or attracted less mining power, thereby making digital assets that rely on proof-of-work more susceptible to attack.

28A hard fork may adversely affect the price of bitcoin at the time of announcement or adoption. For example, the announcement of a hard fork could lead to increased demand for the pre fork digital asset, in anticipation that ownership of the pre fork digital asset would entitle holders to a new digital asset following the fork. The increased demand for the pre fork digital asset may cause the price of the digital asset to rise. After the hard fork, it is possible the aggregate price of the two versions of the digital asset running in parallel would be less than the price of the digital asset immediately prior to the fork. Furthermore, while the Sponsor will, as permitted by the terms of the Trust Agreement, determine which network is generally accepted as the Bitcoin network and should therefore be considered the appropriate network for the Trust’s purposes, there is no guarantee that the Sponsor will choose the network and the associated digital asset that is ultimately the most valuable fork. Either of these events could therefore adversely impact the value of the Shares. When Bitcoin Cash forked from the Bitcoin network, the value of Bitcoin went from $2,800 to $2,700.

In principle, a hard fork could change the source code for the Bitcoin isnetwork, ~~subject~~including the source code which limits the supply of bitcoin to 21 million. Although ~~cybersecurity~~many ~~risks~~observers believe this is unlikely at present, there is no guarantee that the current 21 million supply cap for outstanding bitcoin, which ~~could~~is ~~adversely~~estimated ~~affect~~to anbe ~~investment~~reached inby approximately the ~~Trust~~year or2140, will not be changed. If a hard fork changing the ~~ability~~21 million supply cap is widely adopted, the limit on the supply of bitcoin could be lifted, which could have an adverse impact on the ~~Trust~~value toof ~~operate~~bitcoin and the value of the Shares.

~~Users~~If of bitcoin, ~~and~~were ~~therefore investors~~to infork ~~bitcoin-related~~into two ~~investment~~digital ~~products~~assets, ~~such as~~ the Trust may hold, ~~are~~in ~~exposed~~addition to anits ~~elevated~~existing ~~risk~~bitcoin ~~of fraud and loss~~balance, ~~including,~~a ~~but not~~right ~~limited~~ to, ~~through~~claim ~~cyber-attacks.~~an ~~Bitcoin~~equivalent ~~can~~amount beof ~~stolen,~~the ~~and~~new “forked” ~~bitcoin~~asset ~~stored~~following inthe ahard ~~digital~~fork. ~~wallet~~However, ~~accessible~~the ~~via~~Index ~~private~~does ~~key, can be compromised. While digital wallets do~~ not ~~store~~track orforks ~~contain~~involving ~~the actual~~ bitcoin,. ~~they~~The ~~store~~Trust ~~public~~has ~~and~~adopted ~~private keys, which are used as~~procedures anto address ~~for~~situations ~~receiving~~involving ~~bitcoin~~a orfork ~~for~~that ~~spending~~results in the ~~bitcoin,~~issuance ~~with~~of ~~both~~new ~~forms~~alternative ofbitcoin ~~transactions~~that ~~recorded~~the onTrust ~~the~~may ~~public~~receive. ~~immutable~~The ~~ledger,~~holder ~~the~~of ~~blockchain.~~bitcoin Byhas ~~using~~no ~~the~~discretion ~~private~~in ~~key,~~ a ~~person~~hard isfork; ~~able to spend bitcoin, effectively sending~~ it ~~away~~merely ~~from~~has the ~~account~~right ~~and~~to ~~recording that~~claim ~~transaction on~~ the ~~blockchain.~~new ~~If a private key is compromised,~~ bitcoin ~~associated~~on ~~with~~a ~~that~~pro ~~specific~~rata ~~public~~basis ~~key~~while ~~may~~it becontinues ~~stolen. Unlike~~to ~~traditional~~hold ~~banking transactions, once a transaction has been added to~~ the ~~blockchain,~~same itnumber ~~cannot be reversed. Several exchanges specializing in sales~~ of bitcoin~~, for example, have already had their operations impacted by cyber-attacks~~.

~~Thefts and cyber-attacks can have a negative impact on the reputation, market price, value, or liquidity of bitcoin~~Airdrops. Through investment in the Trust, investors would be indirectly exposed to the risk and potential impact of a cyber-attack. A loss associated with cyberattack, including a total loss, is possible. While the Sponsor and the Bitcoin Custodian have taken reasonable measures to prevent a theft or hacking of the Trust’s bitcoin holdings, such an event cannot be fully excluded from the Trust’s overall market exposure, and the losses associated with such an event would be borne by investors.

~~Digital asset networks, including the~~ Bitcoin ~~network,~~may ~~are~~become subject to ~~control~~an byoccurrence ~~entities~~similar ~~that~~to ~~capture~~ a ~~significant~~fork, ~~amount~~which ofis ~~the~~known ~~network’s~~as ~~processing~~an ~~power~~“airdrop.” orIn ~~a significant~~an ~~number~~airdrop, ~~of developers important for~~ the ~~operation~~promotors ~~and maintenance~~ of ~~such~~a new digital asset ~~network. If a single miner, or a group~~announce ofto ~~miners~~holders ~~acting in concert, control (even temporarily) a majority~~ of ~~the~~another ~~network~~digital ~~mining~~asset ~~power~~that ~~(known~~they aswill ~~hash power) of a particular blockchain network, this control could~~ be ~~used~~entitled to ~~undertake~~claim ~~harmful acts. Such an attack is called~~ a ~~“51%”~~certain ~~attack.~~amount ~~For example, an individual or group controlling a majority~~ of the ~~Bitcoin~~new ~~network~~digital ~~could~~asset ~~prevent~~for ~~transactions from posting accurately~~free, orbased ~~at all,~~ on the ~~blockchain.~~ Itfact ~~could~~that bethey ~~possible~~hold ~~for~~such ~~the~~other ~~malicious~~digital ~~actor~~asset. toFor ~~control~~example, ~~exclude~~in orMarch ~~modify~~2017, the ~~ordering~~promoters of ~~transactions,~~Stellar ~~though~~Lumens itannounced ~~could~~that ~~not~~anyone ~~generate new~~that owned bitcoin oras ~~transactions.~~of ~~Further~~June 26, a2017, ~~bad actor~~ could ~~“double-spend”~~claim, ~~its~~until ~~own~~August ~~bitcoin~~27, ~~(i.e.~~2017, ~~spend~~a ~~the~~certain ~~same~~amount ~~bitcoin in more than one transaction) and prevent the confirmation~~ of ~~other~~Stellar ~~users’ transactions for so long as it maintained control~~Lumens. ToThe ~~the~~Index ~~extent that~~does ~~such malicious actor or botnet did~~ not ~~yield~~include airdrops under its ~~control~~current ofmethodology ~~the processing power on the Bitcoin network~~ or ~~the~~track ~~network~~airdrops ~~community did~~involving ~~not~~bitcoin. ~~reject the fraudulent blocks as malicious~~Accordingly, ~~reversing any changes made to~~ the ~~blockchain~~Trust ~~may~~will not beparticipate ~~possible. Further, a malicious actor or botnet could create a flood of transactions~~ in ~~order to slow down confirmations of transactions on the Bitcoin network~~airdrops.

~~Other~~The ~~digital~~Index ~~asset~~currently ~~networks~~does not ~~have~~track ~~been~~airdrops ~~subject~~involving ~~to malicious activity achieved through control of over 50% of the processing power on the network~~bitcoin. ~~Any~~Accordingly, ~~similar attacks on~~ the ~~Bitcoin~~Trust ~~network~~will ~~could~~not ~~negatively~~participate ~~impact~~in ~~the value of bitcoin and the value of the Shares~~airdrops.

In the past, mining pools have gained control of significant amounts of the processing power or “hash rate” of the Bitcoin network. If a mining pool obtains control of more than 50% of the hash rate of the Bitcoin network, a malicious actor would be able to gain full control of the network and the ability to alter the blockchain. During May and June 2014, mining pool gHash.IO’s processing power approached and, during a twenty-four to forty-eight hour period, may have exceeded 50% of the processing power on the Bitcoin network. Although no malicious activity or abnormal transaction recording was observed at the time, the incident focused attention on the influence of mining pools. Mining pools have become increasingly concentrated both in terms of the providers and the geographic distribution of providers in recent years.26

~~Moreover,~~Bitcoin ~~certain~~is ~~hardware providers~~subject may create hardware that collectively has majority power, and the manufacturer could potentially exert control itself. For example, it was discovered that the mining machines produced by Bitmain contained backdoor code that would allow Bitmain to ~~remotely shut down~~ ~~the~~cybersecurity ~~mining machines. This vulnerability is colloquially referred to as the “Antbleed backdoor.” At worst~~risks, ~~the~~which ~~Antbleed backdoor~~ could ~~have~~adversely ~~allowed~~affect ~~Bitmain to shut off up to~~ an ~~estimated~~investment ~~70%~~in of the ~~global~~Trust ~~hash~~or ~~rate. Bitmain released an official response to~~ the ~~controversy claiming~~ability ~~that the Antbleed backdoor had no malicious intent, and on April 28, 2017, the day following the discovery~~ of the ~~Antbleed~~Trust ~~backdoor, Bitmain released new source code and firmware upgrades for its mining hardware~~ to ~~remove the backdoor~~operate. ~~The provision of bitcoin mining hardware is also becoming increasingly centralized and concentrated among a few key players such as Bitmain.~~

29Users of bitcoin, and therefore investors in bitcoin-related investment products such as the Trust, are exposed to an elevated risk of fraud and loss, including, but not limited to, through cyber-attacks. Bitcoin can be stolen, and bitcoin stored in a digital wallet, accessible via private key, can be compromised. While digital wallets do not store or contain the actual bitcoin, they store public and private keys, which are used as an address for receiving bitcoin or for spending the bitcoin, with both forms of transactions recorded on the public immutable ledger, the blockchain. By using the private key, a person is able to spend bitcoin, effectively sending it away from the account and recording that transaction on the blockchain. If a private key is compromised, bitcoin associated with that specific public key may be stolen. Unlike traditional banking transactions, once a transaction has been added to the blockchain, it cannot be reversed. Several exchanges specializing in sales of bitcoin, for example, have already had their operations impacted by cyber-attacks.

AThefts ~~51%~~and ~~attack~~cyber-attacks iscan have ~~more~~a ~~likely to~~negative ~~happen~~impact inon the ~~context~~reputation, ofmarket ~~digital~~price, ~~assets~~value, ~~with~~or ~~smaller~~liquidity ~~market~~of ~~capitalizations~~bitcoin. ~~due~~Through toinvestment in the ~~reduced~~Trust, ~~computing~~investors ~~power~~would be ~~threshold~~indirectly ~~required~~exposed to ~~control~~ athe ~~majority~~risk and potential impact of a ~~given network~~cyber-attack. ~~Nevertheless,~~A itloss isassociated ~~theoretically~~with ~~possible~~a cyber-attack, ~~albeit~~including ~~computationally~~a ~~expensive~~total loss, is topossible. ~~mount~~While athe ~~similar 51%~~Sponsor ~~attack~~and onthe ~~bitcoin~~Bitcoin orCustodians ~~other~~have ~~digital~~taken ~~assets~~reasonable ~~with~~measures ~~large~~to ~~market~~prevent ~~capitalization.~~a Iftheft ~~the~~or ~~feasibility~~hacking of athe ~~bad~~Trust’s bitcoin ~~actor~~holdings, ~~gaining~~such ~~control~~an ofevent ~~the processing~~cannot ~~power~~be onfully excluded from the ~~Bitcoin~~Trust’s ~~network~~overall ~~increases~~market exposure, ~~there~~and ~~may~~the belosses aassociated ~~negative~~with such ~~effect~~an onevent anwould ~~investment~~be inborne ~~the~~by ~~Trust~~investors.

ADigital ~~malicious~~asset ~~actor~~networks, ~~may also~~including ~~obtain~~the Bitcoin network, are subject to control ~~over~~by ~~the~~entities ~~Bitcoin~~that capture a significant amount of the network’s ~~through~~processing ~~its~~power ~~influence~~or ~~over~~a significant ~~core~~number of developers byimportant ~~gaining~~for ~~direct~~the ~~control~~operation ~~over~~and maintenance of such digital asset network. If a ~~core~~single ~~developer~~miner, or a group anof ~~otherwise~~miners ~~influential~~acting ~~programmer.~~in Toconcert, control (even temporarily) a majority of the ~~extent~~network ~~that~~mining ~~users~~power ~~and~~(known ~~miners~~as ~~accept~~hash ~~amendments~~power) of a particular blockchain network, this control could be used to undertake harmful acts. Such an attack is called a “51%” attack. For example, an individual or group controlling a majority of the ~~source~~Bitcoin ~~code~~network ~~proposed~~could byprevent transactions from posting accurately, or at all, on the ~~controlled~~blockchain. ~~core~~It ~~developer~~could be possible for the malicious actor to control, ~~other~~exclude ~~core~~or ~~developers~~modify dothe ordering of transactions, though it could not ~~counter~~generate new ~~such~~bitcoin ~~amendments~~or transactions. Further, ~~and~~a ~~such~~bad ~~amendments~~actor ~~enable~~could ~~the~~“double-spend” ~~malicious~~its ~~exploitation~~own ofbitcoin (i.e., spend the ~~Bitcoin~~same bitcoin in more ~~network,~~than one transaction) and prevent the ~~risk~~confirmation of other users’ transactions for so long as it maintained control. To the extent that asuch malicious actor ~~may~~or bebotnet ~~able~~did tonot ~~obtain~~yield its control of the processing power on the Bitcoin network inor ~~this~~the ~~manner~~network ~~exists~~community did not reject the fraudulent blocks as malicious, ~~which~~reversing any changes made to the blockchain may ~~adversely~~not be possible. Further, a malicious ~~affect~~actor ~~the~~or ~~value~~botnet could create a flood of transactions in order to slow down confirmations of transactions on the ~~Shares~~Bitcoin network.

ToOther ~~the~~digital ~~extent~~asset ~~that the Bitcoin~~networks ~~ecosystem,~~have ~~including~~been ~~the~~subject ~~core~~to ~~developers~~malicious ~~and~~activity ~~the~~achieved ~~administrators~~through control of ~~mining~~over ~~pools,~~50% ~~does not act to ensure greater decentralization~~ of ~~mining~~ the processing power, ~~the~~on ~~feasibility of a malicious actor obtaining control of~~ the ~~processing~~network. ~~power~~Any similar attacks on the Bitcoin network ~~will~~could ~~increase, which~~negatively ~~may~~impact ~~adversely~~the ~~affect~~value of bitcoin and the value of the Shares.

IfIn ~~any~~the ofpast, ~~these~~mining ~~exploitations~~pools have gained control of significant amounts of the processing power or ~~attacks~~“hash ~~occur,~~rate” itof ~~could~~the ~~result~~Bitcoin innetwork. If a ~~loss~~mining pool obtains control of ~~public~~more ~~confidence~~than in50% ~~bitcoin~~of ~~and~~the ahash ~~decline~~rate inof the ~~value~~Bitcoin network, a malicious actor would be able to gain full control of ~~bitcoin~~the network and the ability to alter the blockchain. During May and June 2014, asmining pool GHash.IO’s processing power approached and, during a ~~result~~twenty-four to forty-eight hour period, ~~adversely~~may have exceeded 50% of the processing power on the Bitcoin network. Although no malicious ~~impact~~activity anor ~~investment~~abnormal transaction recording was observed at the time, the incident focused attention on the influence of mining pools. Mining pools have become increasingly concentrated both in terms of the ~~Shares~~providers and the geographic distribution of providers in recent years.

IfMoreover, ~~miners~~certain ~~expend less~~hardware ~~processing~~providers may create hardware that collectively has majority power, onand the ~~Bitcoin~~manufacturer ~~network,~~could potentially exert control itself. For example, it was discovered that the mining machines produced by Bitmain contained backdoor code that would allow Bitmain to remotely shut down the mining machines. This vulnerability is colloquially referred to as the “Antbleed backdoor.” At worst, the Antbleed backdoor could ~~increase~~have allowed Bitmain to shut off up to an estimated 70% of the ~~likelihood~~global hash rate. Bitmain released an official response to the controversy claiming that the Antbleed backdoor had no malicious intent, and on April 28, 2017, the day following the discovery of the Antbleed backdoor, Bitmain released new source code and firmware upgrades for its mining hardware to remove the backdoor. The provision of bitcoin mining hardware is also becoming increasingly centralized and concentrated among a ~~malicious~~few ~~actor~~key ~~obtaining~~players ~~control~~such as Bitmain.

~~Miners~~A ~~ceasing~~51% ~~operations~~attack is more likely ~~would~~to ~~reduce~~happen in the ~~collective~~context ~~processing~~of ~~power~~digital onassets ~~the~~with ~~Bitcoin~~smaller ~~network,~~market ~~which~~capitalizations ~~would~~due ~~adversely~~to ~~affect~~ the ~~confirmation~~reduced ~~process~~computing ~~for~~power ~~transactions (i.e.,~~threshold ~~temporarily~~required ~~decreasing~~to control ~~the~~a ~~speed~~majority atof ~~which~~a ~~blocks~~given ~~are~~network. ~~added~~Nevertheless, toit ~~the~~is ~~Bitcoin~~theoretically ~~blockchain~~possible, ~~until~~albeit ~~the~~computationally ~~next~~expensive, ~~scheduled~~to ~~adjustment~~mount ina ~~difficulty~~similar ~~for~~51% ~~block~~attack ~~solutions).~~on Ifbitcoin aor ~~reduction~~other indigital ~~processing~~assets ~~power~~with ~~occurs,~~large ~~the~~market ~~Bitcoin~~capitalization. ~~network~~If ~~may~~the befeasibility ~~more~~of ~~vulnerable to~~ a ~~malicious~~bad actor ~~obtaining~~ gaining control ~~in excess~~ of ~~fifty percent (50%) of~~ the processing power on the Bitcoin network. ~~As a result~~increases, itthere may be ~~possible for~~ a ~~bad~~negative ~~actor to~~effect ~~manipulate~~on ~~the Bitcoin network and hinder transactions. Any reduction in confidence in the confirmation process or processing power of the Bitcoin network may adversely affect~~ an investment in the Trust.

~~Cancer nodes.~~27

~~Cancer~~A ~~nodes~~malicious ~~are~~actor ~~computers~~may also ~~that~~obtain ~~appear~~control toover ~~be participating in~~ the Bitcoin network ~~but~~through ~~that~~its ~~are~~influence ~~not~~over incore ~~fact~~developers ~~connected~~by togaining ~~the~~direct ~~network,~~control ~~which~~over a ~~malicious~~core ~~actor~~developer ~~sets~~or upan tootherwise ~~place~~influential programmer. To the extent that users ~~onto~~and aminers ~~separate~~accept ~~network~~amendments orto ~~disconnect~~the ~~them~~source ~~from~~code proposed by the ~~Bitcoin~~controlled core ~~network.~~developer, Byother ~~using~~core ~~cancer~~developers ~~nodes~~do not counter such amendments, aand such amendments enable the malicious ~~actor~~exploitation ~~can~~of ~~disconnect~~the Bitcoin network, the ~~target~~risk ~~user~~that ~~from~~a malicious actor may be able to obtain control of the ~~bitcoin~~Bitcoin ~~economy~~network ~~entirely~~in bythis ~~refusing~~manner toexists, ~~relay~~which ~~any~~may ~~blocks~~adversely affect orthe ~~transactions~~value of the Shares.

~~Double-spending~~To ~~risks~~the extent that the Bitcoin ecosystem, including the core developers and the administrators of mining pools, does not act to ensure greater decentralization of mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin network will increase, which may adversely affect the value of the Shares.

AIf ~~malicious~~any ~~actor~~of ~~may~~these ~~attempt~~exploitations toor ~~double~~attacks ~~spend bitcoin (i.e.~~occur, ~~allow~~it ~~for~~could ~~the~~result ~~same~~in ~~units~~a ofloss ~~bitcoin to be spent on multiple occasions) by altering the formation~~ of ~~the blockchain,~~public ~~where~~confidence ~~the~~in ~~malicious~~bitcoin ~~actor has enough network control to confirm~~ and ~~post such transactions to the blockchain. In~~ a ~~double spending~~decline ~~situation,~~in the ~~related~~value ~~record~~ of ~~the~~bitcoin ~~transaction~~and, ~~posted~~as ona ~~the Bitcoin network~~result, ~~would become falsified. This could have a detrimental~~adversely ~~effect~~impact onan ~~both~~investment ~~the~~in ~~sender and~~ the ~~receiver~~Shares.

~~There~~If ~~are~~miners ~~several~~expend ~~ways a malicious~~less ~~actor~~processing ~~could~~power ~~attempt~~on ~~a double-spend, including, but not limited to, sending two conflicting transactions to~~ the Bitcoin network, ~~and creating one transaction but sending the bitcoin before releasing that associated block to the blockchain, which would invalidate~~ it. Oncould anincrease ~~exchange with multiple currency trading pairs, it would be possible for a person or individual controlling~~ the ~~majority~~likelihood of a ~~blockchain~~malicious ~~network to~~actor ~~double-spend~~obtaining ~~the coins they~~ control ~~and then subsequently trade them for other currency pairs and transfer them off the exchange to their own private wallet(s)~~.

~~All~~Miners ~~double-spend~~ceasing ~~attacks require~~operations ~~that~~would reduce the ~~miner~~collective ~~sequence~~processing ~~and~~power ~~execute~~on the ~~steps~~Bitcoin ofnetwork, ~~its~~which ~~attack~~would ~~with~~adversely ~~sufficient~~affect ~~speed~~the ~~and~~confirmation ~~accuracy~~process for transactions (i.e., ~~Double-spend~~temporarily ~~attacks~~decreasing ~~require~~the ~~extensive coordination~~speed ~~and~~at which blocks are ~~very~~added ~~expensive.~~to ~~Typically,~~the ~~transactions~~Bitcoin ~~that~~blockchain ~~allow~~until ~~for~~the anext ~~zero-confirmation~~scheduled ~~acceptance~~adjustment ~~tend~~in todifficulty for beblock ~~prone~~solutions). toIf ~~these~~a ~~types of~~reduction ~~attacks.~~in ~~Accordingly~~processing power occurs, ~~traders~~the ~~and~~Bitcoin ~~merchants~~network may ~~execute~~be ~~instantaneous/zero-confirmation~~more ~~transactions~~vulnerable ~~only~~to ifa ~~they~~malicious ~~are~~actor ~~of sufficiently~~obtaining ~~low-value.~~control ~~Users~~in ~~and~~excess ~~merchants~~of ~~can~~fifty ~~take~~percent ~~additional~~(50%) ~~precautions~~of bythe ~~adjusting~~processing ~~their~~power on the Bitcoin network. ~~software~~As ~~programs~~a toresult, ~~connect~~it ~~only~~may tobe ~~other~~possible ~~well-connected~~for a bad actor ~~participants~~to inmanipulate the Bitcoin network and tohinder ~~disable~~transactions. ~~incoming~~Any ~~connections.~~reduction ~~Tactics~~in toconfidence ~~avoid~~in ~~double-spend~~the ~~such~~confirmation asprocess ~~requiring~~or ~~multiple~~processing ~~confirmations~~power ~~can~~of ~~slow down transaction speeds on~~ the Bitcoin network ~~and~~may ~~could~~adversely ~~impact~~affect ~~the~~an ~~value~~investment ofin ~~bitcoin~~the Trust.

~~Flaws~~Cancer ~~in source code~~nodes.

ItCancer isnodes ~~possible~~are computers that ~~flaws or~~appear ~~mistakes in the released and public source code could lead~~ to ~~catastrophic~~be ~~damage~~participating toin ~~bitcoin,~~ the Bitcoin network, ~~and~~but ~~any~~that ~~underlying technology.~~are Itnot isin ~~possible~~fact ~~that~~connected ~~contributors~~ to the ~~Bitcoin~~ network, ~~would~~which bea ~~unable~~malicious toactor ~~stop this damage before it spreads further. It~~sets isup ~~further~~to ~~possible~~place ~~that~~users onto a ~~dedicated~~separate ~~team~~network or adisconnect ~~group~~them offrom ~~contributors~~the orBitcoin ~~other~~network. ~~technical~~By ~~group~~using ~~may~~cancer ~~attack~~nodes, ~~the~~a ~~code,~~malicious ~~directly~~actor ~~leading~~can todisconnect ~~catastrophic~~the ~~damage.~~target Inuser ~~any~~from ~~of these situations,~~ the ~~value~~bitcoin ofeconomy ~~Shares~~entirely ofby ~~the~~refusing ~~Trust~~to ~~can~~relay beany ~~adversely~~blocks ~~affected~~or transactions.

30Double-spending risks.

InA ~~the~~malicious ~~past,~~actor ~~flaws~~may ~~in the~~attempt ~~source~~to ~~code~~double ~~for~~spend ~~digital~~bitcoin ~~asset networks have been exposed and exploited~~(i.e., ~~including~~allow ~~flaws~~for ~~that~~the ~~disabled~~same ~~some~~units ~~functionality~~of ~~for~~bitcoin ~~users,~~to ~~exposed users’~~be ~~personal~~spent ~~information~~on ~~and/or~~multiple ~~resulted~~occasions) inby altering the ~~theft~~formation of ~~users’ digital assets. Several errors and defects have been publicly~~the ~~found and corrected~~blockchain, ~~including~~where ~~those that disabled some functionality for users and exposed users’ personal information. Discovery of flaws in or exploitations of~~ the ~~source code that allow~~ malicious ~~actors~~actor tohas ~~take~~enough ~~or create money in contravention of known~~ network ~~rules~~ ~~have~~control ~~occurred. The cryptography underlying bitcoin could prove~~ to beconfirm ~~flawed or ineffective, or negatively impacted by developments in mathematics~~ and~~/or~~ ~~technology,~~post such astransactions ~~advances~~to inthe ~~digital computing, algebraic geometry and quantum computing~~blockchain. In ~~any~~a ~~of these circumstances,~~double aspending ~~malicious actor may be able to steal bitcoin held by others~~situation, ~~which could adversely affect~~ the ~~demand~~related ~~for~~record ~~bitcoin and therefore adversely impact the price~~ of ~~bitcoin and~~ the ~~value of the Shares. Even if another digital asset other than bitcoin were affected by similar circumstances~~transaction, ~~any~~ ~~reduction~~posted inon ~~confidence in~~ the ~~robustness~~Bitcoin ofnetwork, ~~the~~would ~~source~~become ~~code~~falsified. orThis ~~cryptography~~could ~~underlying~~have ~~digital~~a ~~assets~~detrimental effect ~~generally~~on ~~could~~both ~~negatively affect~~ the ~~demand~~sender ~~for all digital assets, including bitcoin,~~ and ~~therefore adversely affect~~ the ~~value of the Shares~~receiver.

~~Mathematical~~There orare ~~technological~~several ways a malicious ~~advances~~actor could ~~undermine~~attempt a double-spend, including, but not limited to, sending two conflicting transactions to the ~~Bitcoin~~network, and creating one transaction but sending the bitcoin before releasing that associated block to the blockchain, which would invalidate it. On an exchange with multiple currency trading pairs, it would be possible for a person or individual controlling the majority of a blockchain network’s to ~~consensus~~double-spend ~~mechanism~~the coins they control and then subsequently trade them for other currency pairs and transfer them off the exchange to their own private wallet(s).

~~The~~All ~~Bitcoin~~double-spend ~~network~~attacks ~~is premised~~require onthat ~~multiple~~the ~~persons~~miner ~~competing~~sequence toand ~~solve~~execute ~~cryptographic~~the ~~puzzles~~steps ~~quickly~~of its attack with sufficient speed and accuracy. ItDouble-spend isattacks ~~possible~~require ~~that~~extensive coordination ~~mathematical~~and orare ~~technological~~very ~~advances~~expensive. Typically, ~~such~~transactions that allow for a zero-confirmation acceptance tend to be prone to these types asof ~~the~~attacks. ~~development~~Accordingly, traders and merchants may execute instantaneous/zero-confirmation transactions only if they are of ~~quantum~~sufficiently low-value. ~~computers~~Users ~~with~~and ~~significantly~~merchants ~~more~~can ~~power~~take ~~than~~additional ~~computers~~precautions ~~presently~~by ~~available,~~adjusting ~~could~~their ~~undermine~~network orsoftware ~~vitiate~~programs to connect only to other well-connected participants in the Bitcoin network and to disable incoming connections. Tactics to avoid double-spend such as requiring multiple confirmations ~~cryptographic~~can ~~consensus~~slow ~~mechanism~~down ~~underpinning~~transaction speeds on the Bitcoin network and could impact the value of bitcoin.

~~The~~Flaws ~~Bitcoin~~in ~~network faces~~source ~~scaling challenges and efforts to increase the volume of transactions may not be successful~~code.

~~Many~~It ~~digital~~is ~~asset~~possible ~~networks~~that flaws ~~face~~or ~~significant~~mistakes ~~scaling~~in ~~challenges~~the ~~due~~released and public source code could lead to catastrophic damage to bitcoin, the ~~fact~~Bitcoin network, and any underlying technology. It is possible that ~~public~~contributors ~~blockchains~~to ~~generally~~the ~~face~~Bitcoin network would be unable to stop this damage before it spreads further. It is further possible that a ~~trade-off~~dedicated ~~between~~team ~~security~~or ~~and~~a ~~scalability~~group of contributors or other technical group may attack the code, directly leading to catastrophic damage. In any of these situations, the value of Shares of the Trust can be adversely affected.

As of July 2017, bitcoin could handle, on average, five to seven transactions per second. For several years, participants in the Bitcoin ecosystem debated potential approaches to increasing the average number of transactions per second that the Bitcoin network could handle. As of August 2017, the Bitcoin network was upgraded with a technical feature known as “segregated witness” that, among other things, could potentially approximately double the transactions per second that can be handled on-chain. More importantly, segregated witness also enables so-called second layer solutions, such as the Lightning Network or payment channels, which could potentially allow faster transaction settlement.28

AnIn ~~increasing~~the ~~number~~past, offlaws ~~wallets~~in the ~~and~~source code for digital asset ~~intermediaries,~~networks ~~such~~have asbeen ~~bitcoin~~exposed ~~spot~~and ~~markets~~exploited, ~~have~~including ~~begun~~flaws ~~supporting~~that ~~segregated~~disabled ~~witness~~some functionality for users, exposed users’ personal information and/or resulted in the ~~Lightning~~theft ~~Network,~~of ~~or similar~~users’ ~~technology~~digital assets. ~~The~~Several ~~Lightning~~errors ~~Network~~and isdefects anhave ~~open-source~~been ~~decentralized~~publicly found ~~network~~and corrected, including those that ~~enables~~disabled ~~instant~~some ~~off-Bitcoin~~functionality ~~blockchain~~for ~~transfers~~users and exposed users’ personal information. Discovery of ~~the~~flaws ~~ownership~~in ofor ~~bitcoin~~exploitations ~~without~~of the ~~need~~source ofcode athat ~~trusted~~allow ~~third~~malicious ~~party.~~actors ~~The~~to ~~system~~take ~~utilizes~~or ~~bidirectional~~create ~~payment~~money ~~channels~~in ~~that~~contravention ~~consist~~ of ~~multi-signature~~known ~~addresses~~network rules have occurred. ~~One~~The ~~on-blockchain~~cryptography ~~transaction~~underlying isbitcoin ~~needed~~could prove to ~~open~~be aflawed ~~channel~~or ~~and~~ineffective, ~~another~~or ~~on-blockchain~~negatively ~~transaction~~impacted ~~can~~by ~~close~~developments ~~the~~in ~~channel~~mathematics and/or technology, such as advances in digital computing, algebraic geometry and quantum computing. ~~Once~~In aany ~~channel~~of isthese ~~open~~circumstances, a ~~value~~malicious ~~can~~actor may be ~~transferred~~able ~~instantly~~to ~~between~~steal ~~counterparties~~bitcoin held by others, ~~who~~which ~~are~~could ~~engaging~~adversely inaffect ~~real~~the demand for bitcoin ~~transactions~~and therefore adversely ~~without~~impact ~~broadcasting~~the ~~them~~price toof bitcoin and the ~~Bitcoin~~value ~~network~~of the Shares. ~~New~~Even ~~transactions~~if ~~will~~another ~~replace~~digital ~~previous~~asset ~~transactions~~other ~~and~~than ~~the~~bitcoin ~~counterparties~~were ~~will~~affected ~~store~~by similar circumstances, ~~everything~~any ~~locally~~reduction asin ~~long~~confidence asin the ~~channel~~robustness ~~stays~~of ~~open~~the tosource ~~increase~~code ~~transaction~~or ~~throughput~~cryptography underlying digital assets generally could negatively affect the demand for all digital assets, including bitcoin, and ~~reduce~~therefore ~~computational~~adversely ~~burden~~affect onthe value of the ~~Bitcoin network~~Shares.

AsMathematical ~~the~~or ~~use of digital asset~~technological ~~networks~~advances ~~increases~~could ~~without~~undermine ~~a corresponding increase in transaction processing speed of~~ the ~~networks, average fees and settlement times can increase significantly.~~ Bitcoin network’s ~~network~~consensus ~~has been, at times, at capacity, which has led to increased transaction fees~~mechanism. Since January 1, 2019, bitcoin transaction fees have increased from $0.18 per-bitcoin transaction, on average, to a high of $60.95 per transaction, on average, on April 20, 2021. As of December 31, 2023, bitcoin transaction fees were $4.45 per transaction, on average, over a one-year trailing basis.

~~Increased~~The ~~fees~~Bitcoin ~~and~~network ~~decreased settlement~~is ~~speeds could preclude certain use cases for bitcoin (e.g., micropayments), and can reduce demand for and the price of bitcoin,~~premised ~~which~~on ~~could~~multiple ~~adversely~~persons ~~impact~~competing ~~the~~to ~~value~~solve ofcryptographic ~~the~~puzzles ~~Shares~~quickly. ~~There~~It is nopossible ~~guarantee~~ that ~~any~~mathematical ~~of the mechanisms in place~~ or ~~being~~technological ~~explored~~advances, ~~for~~such ~~increasing~~as the ~~scale~~development of ~~settlement~~quantum ofcomputers ~~transactions~~with insignificantly ~~bitcoin~~more ~~will~~power bethan ~~effective,~~computers orpresently ~~how~~available, ~~long~~could ~~these~~undermine ~~mechanisms~~or ~~will~~vitiate ~~take to become effective,~~the ~~which~~cryptographic ~~could~~consensus ~~adversely~~mechanism ~~impact~~underpinning ~~an investment in~~ the ~~Shares~~Bitcoin network.

31The Bitcoin network faces scaling challenges and efforts to increase the volume of transactions may not be successful.

~~New~~Many ~~competing~~ digital asset networks ~~assets~~face ~~may~~significant ~~pose~~scaling achallenges ~~challenge~~due to ~~bitcoin’s~~the ~~current~~fact ~~market~~that ~~position,~~public ~~resulting~~blockchains ingenerally aface ~~reduction in demand for bitcoin, which could have~~ a ~~negative~~trade-off ~~impact~~between onsecurity ~~the price of bitcoin~~ and ~~may have a negative impact on the performance of the Trust~~scalability.

~~Bitcoin~~As ~~faces~~of ~~significant~~July 2017, bitcoin could ~~competition~~handle, ~~from~~on ~~other~~average, ~~digital~~five ~~assets~~to seven transactions per second. For several years, asparticipants ~~well~~in asthe ~~from~~Bitcoin ~~other~~ecosystem ~~technologies~~debated orpotential approaches ~~payment~~to ~~forms~~increasing the average number of transactions per second that the Bitcoin network could handle. As of August 2017, ~~such~~the Bitcoin network was upgraded with a technical feature known as ~~Swift,~~“segregated ~~ACH~~witness” that, ~~remittance~~among ~~networks~~other things, ~~credit cards~~could ~~and~~potentially ~~cash.~~approximately double ~~There~~the istransactions noper ~~guarantee~~second that ~~bitcoin~~can ~~will~~be ~~become~~handled aon-chain. ~~dominant~~More ~~form~~importantly, ofsegregated ~~payments~~witness also enables so-called second layer solutions, ~~store~~such ofas ~~value~~the Lightning Network or ~~method~~payment ofchannels, ~~exchange~~which could potentially allow faster transaction settlement.

~~The~~An ~~Bitcoin~~increasing ~~network~~number and bitcoin, as an asset, hold a “first-to-market” advantage over other digital assets. This first-to-market advantage has resulted in the Bitcoin network evolving into the most well-developed network of ~~any digital asset. The Bitcoin network enjoys the largest user base~~wallets and ~~has more mining power in use to secure the Bitcoin network than any other~~ digital asset. ~~However~~intermediaries, ~~despite~~such ~~the~~as ~~first-mover~~bitcoin ~~advantage of~~spot ~~the Bitcoin network over other digital assets~~markets, ithave isbegun ~~possible~~supporting ~~that~~segregated ~~real~~witness orand ~~perceived shortcomings in~~ the ~~Bitcoin~~Lightning ~~network~~Network, or ~~technological,~~ ~~regulatory~~similar ortechnology. ~~other~~The ~~developments,~~Lightning ~~could~~Network ~~result~~is inan aopen-source ~~decline~~decentralized innetwork ~~popularity~~that ~~and~~enables ~~acceptance~~instant ~~of bitcoin and the~~ off-Bitcoin ~~network,~~blockchain ~~and other~~transfers ~~digital~~of ~~currencies~~the ~~and~~ownership ~~trading~~of ~~systems~~bitcoin ~~could~~without ~~become more widely accepted and used than~~ the ~~Bitcoin~~need ~~network. Bitcoin is one~~ of ~~the few virtual currencies in which there are strong arguments that bitcoin is not~~ a ~~“security”~~trusted ~~under~~third ~~the federal securities laws~~party. ~~See~~ ~~Risk~~The ~~Factors—Future~~system ~~legal~~utilizes orbidirectional ~~regulatory~~payment ~~developments~~channels ~~may~~that ~~negatively affect the value~~ consist of ~~bitcoin~~multi-signature oraddresses. ~~require~~One ~~the~~on-blockchain ~~Trust~~transaction oris ~~the Sponsor~~needed to ~~become~~open ~~registered~~a ~~with~~channel ~~the~~and ~~SEC~~another oron-blockchain ~~CFTC,~~transaction ~~which~~can ~~may cause~~ close the ~~Trust to incur unforeseen expenses or liquidate~~channel. ~~Regulatory~~Once ~~changes or~~a ~~guidance~~channel ~~that~~is ~~result~~open, invalue ~~other~~can ~~virtual~~be ~~currencies~~transferred ~~not~~instantly ~~meeting~~between ~~the definition of “security” will reduce advantages associated with bitcoin’s current regulatory status~~counterparties, ~~which~~who ~~could~~are ~~adversely~~engaging ~~impact an investment~~ in ~~the~~real ~~Shares.~~bitcoin ~~Promoters of other digital assets~~transactions ~~claim~~without ~~that~~broadcasting ~~those~~them ~~digital~~to ~~assets have solved certain of~~ the ~~purported drawbacks of the~~ Bitcoin network~~, for example, allowing faster settlement times, reducing mining fees, or reducing electricity usage in connection with mining~~. IfNew ~~these~~transactions ~~digital~~will ~~assets~~replace ~~are~~previous ~~successful,~~transactions ~~such success could reduce demand for bitcoin~~ and ~~adversely affect~~ the ~~value~~counterparties ofwill ~~bitcoin and an investment in the Trust. It is currently unclear which~~store ~~digital~~everything ~~assets,~~locally ifas ~~any,~~long ~~will become and remain dominant,~~ as the ~~sector~~channel ~~continues~~stays open to ~~innovate~~increase ~~and~~transaction ~~evolve.~~throughput ~~Changes in the viability of any digital asset ecosystem may adversely impact pricing~~ and ~~liquidity~~reduce ofcomputational ~~bitcoin~~burden ~~and,~~on ~~therefore, of~~ the ~~Trust~~Bitcoin network.

~~Competition~~As ~~from~~the ~~central bank~~use of digital ~~currencies~~asset networks ~~(“CBDCs”)~~increases ~~could~~without ~~adversely~~a ~~affect~~corresponding increase in transaction processing speed of the ~~value~~networks, average fees and settlement times can increase significantly. Bitcoin’s network has been, at times, at capacity, which has led to increased transaction fees. Since January 1, 2019, bitcoin transaction fees have increased from $0.18 per-bitcoin transaction, on average, to a high of $60.95 per transaction, on average, on April 20, 2021. As of December 31, 2024, bitcoin ~~and~~transaction ~~other~~fees ~~digital~~were ~~assets~~$- per transaction, on average, over a one-year trailing basis.

~~Central~~Increased ~~banks~~fees ~~have~~and ~~introduced~~decreased ~~digital~~settlement ~~forms~~speeds ofcould ~~legal~~preclude ~~tender.~~certain ~~China’s~~use ~~CBDC~~cases ~~project,~~for ~~known~~bitcoin as(e.g., ~~Digital Currency Electronic Payment~~micropayments), ~~has~~and ~~reportedly~~can ~~been~~reduce ~~tested~~demand ~~in a~~for ~~live~~and ~~pilot program conducted in multiple cities in China. A recent study published by~~ the ~~Bank~~price ~~for~~of ~~International Settlements estimated~~bitcoin, ~~that~~which atcould ~~least~~adversely 36impact ~~central~~the ~~banks~~value ~~have~~of ~~published~~the ~~retail or wholesale CBDC work ranging from research to pilot projects~~Shares. ~~Whether~~There oris ~~not~~no ~~they incorporate~~guarantee ~~blockchain~~that orany ~~similar~~of ~~technology, CBDCs, as legal tender in~~ the ~~issuing~~mechanisms ~~jurisdiction, could have an advantage~~ in ~~competing with,~~place or ~~replacing,~~being ~~bitcoin~~explored ~~and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental~~for ~~entities~~increasing ~~have also announced cooperative initiatives and consortia with private sector entities, with~~ the ~~goal~~scale of ~~leveraging~~settlement ~~blockchain and~~of ~~other~~transactions ~~technology to reduce friction~~ in ~~cross-border~~bitcoin ~~and~~will ~~interbank~~be ~~payments and settlement~~effective, ~~and~~or ~~commercial~~how ~~banks~~long ~~and~~these ~~other~~mechanisms ~~financial institutions~~will ~~have~~take ~~also recently announced a number of initiatives of their own~~ to ~~incorporate~~become ~~new technologies~~effective, ~~including blockchain and~~ ~~similar technologies, into their payments and settlement activities,~~ which could ~~compete with, or reduce the demand for, bitcoin. As a result of any of the foregoing factors, the value of bitcoin could decrease, which could~~ adversely ~~affect~~impact an investment in the ~~Trust~~Shares.

~~Prices~~New ofcompeting ~~bitcoin~~digital assets may be ~~affected~~pose ~~due~~a challenge to ~~stablecoins~~bitcoin’s current market position, resulting in a reduction in demand for bitcoin, which could have a negative impact on the ~~activities~~price of ~~stablecoin~~bitcoin ~~issuers~~ and ~~their~~may ~~regulatory~~have ~~treatment~~a negative impact on the performance of the Trust.

~~While~~Bitcoin ~~the~~faces ~~Trust does not invest~~significant incompetition ~~stablecoins,~~from ~~it may nonetheless be exposed to these and~~ other ~~risks that stablecoins pose for the bitcoin market through its investment in bitcoin. Stablecoins are~~ digital assets, ~~designed to have a stable value over time~~ as ~~compared~~well ~~to typically volatile digital assets and are typically marketed~~ as ~~being~~from ~~pegged~~other totechnologies aor ~~fiat~~payment ~~currency~~forms, such as ~~the~~Swift, ~~U.S. dollar. Although the prices of stablecoins are intended to be stable~~ACH, inremittance ~~many cases their prices fluctuate~~networks, ~~sometimes significantly. This volatility has in the past apparently impacted the price~~credit ofcards ~~bitcoin. Stablecoins are a relatively new phenomenon,~~ and ~~it is impossible to know all of the risks that they could pose to participants in the bitcoin market~~cash. InThere ~~addition,~~is ~~some~~no ~~have~~guarantee ~~argued~~ that ~~some stablecoins, particularly Tether, are improperly issued without sufficient backing in a way that could cause artificial rather than genuine demand for~~ bitcoin, ~~raising~~will ~~its~~become price, and also argue that those associated with certain stablecoins are involved in laundering money. On February 17, 2021, the New York Attorney General entered an agreement with Tether’s operators, requiring them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a ~~settlement~~dominant ~~with Tether’s~~form ~~operators~~of ~~in which they agreed to pay $42.5 million in fines to settle charges that~~payments, ~~among~~store ~~others,~~of ~~Tether’s~~value ~~claims that~~or itmethod ~~maintained sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount~~ of ~~corresponding~~ ~~fiat currency” held by Tether were untrue~~exchange.

Stablecoins are reliant on the U.S. banking system and U.S. treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adversely affect the value of the Shares.29

~~Given~~The Bitcoin network and bitcoin, as an asset, hold a “first-to-market” advantage over other digital assets. This first-to-market advantage has resulted in the ~~role~~Bitcoin ~~that~~network ~~stablecoins~~evolving into the most well-developed network of any digital asset. The Bitcoin network enjoys the largest user base ~~play~~and has more mining power in ~~global~~use to secure the Bitcoin network than any other digital asset. ~~markets~~However, ~~their~~despite ~~fundamental~~the ~~liquidity~~first-mover ~~can~~advantage of ~~have~~the Bitcoin network over other digital assets, it is possible that real or perceived shortcomings in the Bitcoin network, or technological, regulatory or other developments, could result in a ~~dramatic~~decline ~~impact~~in onpopularity and acceptance of bitcoin and the ~~broader~~Bitcoin network, and other digital ~~asset~~currencies ~~market~~and trading systems could become more widely accepted and used than the Bitcoin network. Bitcoin is one of the few virtual currencies in which there are strong arguments that bitcoin is not a “security” under the federal securities laws. See Risk Factors—Future legal or regulatory developments may negatively affect the value of bitcoin or require the Trust or the Sponsor to become registered with the SEC or CFTC, ~~including~~which may cause the Trust to incur unforeseen expenses or liquidate. Regulatory changes or guidance that result in other virtual currencies not meeting the ~~market~~definition of “security” will reduce advantages associated with bitcoin’s current regulatory status, which could adversely impact an investment in the Shares. Promoters of other digital assets claim that those digital assets have solved certain of the purported drawbacks of the Bitcoin network, for example, allowing faster settlement times, reducing mining fees, or reducing electricity usage in connection with mining. If these digital assets are successful, such success could reduce demand for bitcoin and adversely affect the value of bitcoin and an investment in the Trust. It is currently unclear which digital assets, if any, will become and remain dominant, as the sector continues to innovate and evolve. Changes in the viability of any digital asset ecosystem may adversely impact pricing and liquidity of bitcoin and, therefore, of the Trust.

~~Volatility~~Competition infrom ~~stablecoins,~~central ~~operational~~bank ~~issues~~digital ~~with~~currencies ~~stablecoins~~ (~~for example, technical issues that prevent settlement~~“CBDCs”), ~~concerns about the sufficiency of any reserves that support stablecoins, or regulatory concerns about stablecoin issuers or intermediaries, such as bitcoin spot markets, that support stablecoins,~~ could ~~impact~~adversely ~~individuals’~~affect ~~willingness to trade on trading venues that rely on stablecoins and could impact~~ the ~~price~~ value of bitcoin, and inother ~~turn,~~digital ~~an investment in the Shares~~assets.

32Central banks have introduced digital forms of legal tender. China’s CBDC project, known as Digital Currency Electronic Payment, has reportedly been tested in a live pilot program conducted in multiple cities in China. A recent study published by the Bank for International Settlements estimated that at least 36 central banks have published retail or wholesale CBDC work ranging from research to pilot projects. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replacing, bitcoin and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental entities have also announced cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments and settlement activities, which could compete with, or reduce the demand for, bitcoin. As a result of any of the foregoing factors, the value of bitcoin could decrease, which could adversely affect an investment in the Trust.

~~Operational~~Prices ~~cost~~of bitcoin may ~~exceed~~be ~~the~~affected ~~award~~due ~~for~~to ~~solving~~stablecoins, ~~blocks~~the oractivities ~~transaction~~of ~~fees.~~stablecoin ~~Increased~~issuers ~~transaction~~and ~~fees~~their ~~may~~regulatory ~~adversely affect the usage of the Bitcoin network~~treatment.

~~Miners~~While ~~generate~~the ~~revenue~~Trust ~~from~~does not invest ~~both~~in ~~newly~~stablecoins, ~~created~~it may nonetheless be exposed to these and other risks that stablecoins pose for the bitcoin ~~(known~~market through its investment in bitcoin. Stablecoins are digital assets designed to have a stable value over time as ~~the~~compared ~~“block~~to ~~reward”)~~typically volatile digital assets and ~~from~~are ~~fees~~typically ~~taken~~marketed ~~upon~~as ~~verification~~being pegged to a fiat currency, such as the U.S. dollar. Although the prices of ~~transactions~~stablecoins are intended to be stable, in many cases their prices fluctuate, sometimes significantly. IfThis volatility has in the ~~aggregate~~past apparently impacted the price ~~revenue~~of ~~from~~bitcoin. ~~transaction~~Stablecoins ~~fees~~are a relatively new phenomenon, and it is impossible to know all of the ~~block~~risks ~~reward~~that isthey ~~below~~could pose to participants in the bitcoin market. In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backing in a ~~miner~~way that could cause artificial rather than genuine demand for bitcoin, raising its price, and also argue that those associated with certain stablecoins are involved in laundering money. On February 17, 2021, the New York Attorney General entered an agreement with Tether’s ~~cost~~operators, ~~the~~requiring ~~miner~~them ~~may~~to cease ~~operations~~any further trading activity with New York persons and pay $18.5 ~~Additionally,~~million in ~~the~~penalties ~~event~~for offalse aand ~~fork~~misleading ofstatements made regarding the ~~Bitcoin~~assets ~~network~~backing Tether. On October 15, ~~some~~2021, ~~miners~~the ~~may~~CFTC ~~choose~~announced a settlement with Tether’s operators in which they agreed to ~~mine~~pay ~~the~~$42.5 ~~alternative~~million ~~new~~in ~~bitcoin~~fines ~~resulting~~to ~~from~~settle ~~the~~charges ~~fork~~that, ~~thus~~among ~~reducing~~others, Tether’s claims ~~processing~~that ~~power~~it onmaintained sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the ~~original~~“equivalent ~~blockchain~~amount of corresponding fiat currency” held by Tether were untrue.

~~Furthermore,~~Stablecoins ~~the~~are ~~incentives for~~reliant ~~miners to contribute processing power to~~ on the ~~Bitcoin~~U.S. ~~network~~banking issystem ~~set~~and ~~to decrease over time~~U.S. ~~As a result of the Bitcoin network’s “halving” mechanism~~treasuries, ~~the~~and ~~block reward that miners receive for successfully mining a block are cut in half each time~~ the ~~Bitcoin network~~failure ~~mines 210,000 blocks. This type~~ of ~~“halving”~~either ~~event~~to ~~generally~~function ~~occurs~~normally ~~once~~could ~~every~~impede ~~four years and will continue until~~ the ~~maximum~~function ~~possible~~of ~~21 million bitcoin have been mined~~ stablecoins, and ~~released~~therefore ~~into~~could ~~circulation.~~adversely ~~Currently,~~affect ~~there~~the ~~are~~value ~~approximately~~of 19the ~~million bitcoin that have been mined and are in circulation~~Shares.

~~Once~~Given ~~new~~the ~~bitcoin~~role ~~tokens~~that ~~are~~stablecoins noplay ~~longer~~in ~~awarded~~global ~~for~~digital ~~adding~~asset ~~a new block~~markets, ~~miners~~their ~~will~~fundamental ~~only~~liquidity can have ~~transaction~~a ~~fees~~dramatic toimpact ~~incentivize~~on ~~them,~~the ~~and~~broader asdigital aasset ~~result~~market, ~~it is expected~~including ~~that~~the ~~miners~~market ~~will need to be better compensated with higher transaction fees to ensure that there is adequate incentive~~ for ~~them to continue mining~~bitcoin.

IfVolatility ~~transaction~~in ~~confirmation~~stablecoins, ~~fees~~operational ~~become~~issues ~~too~~with ~~high,~~stablecoins ~~the~~(for ~~marketplace~~example, ~~may~~technical beissues ~~reluctant~~that toprevent ~~use~~settlement), ~~bitcoin.~~concerns ~~This~~about ~~may~~the ~~result~~sufficiency ~~in decreased usage and limit expansion~~ of ~~the~~any ~~Bitcoin~~reserves ~~network~~that insupport ~~the retail~~stablecoins, ~~commercial~~or ~~and~~regulatory ~~payments~~concerns ~~space,~~about ~~adversely~~stablecoin ~~impacting~~issuers ~~investment~~or inintermediaries, ~~the~~such ~~Trust.~~as ~~Conversely,~~bitcoin ifspot ~~the~~markets, ~~reward~~that ~~for miners~~support orstablecoins, ~~the~~could ~~value~~impact ofindividuals’ ~~the~~willingness ~~transaction~~to ~~fees~~trade ison ~~insufficient~~trading tovenues ~~motivate~~that ~~miners,~~rely ~~they~~on ~~may~~stablecoins ~~cease~~and ~~expending~~could ~~processing~~impact ~~power~~the ~~for~~price of ~~any~~bitcoin, ~~blockchain to~~and ~~solve~~in ~~blocks~~turn, ~~and~~an ~~confirm~~investment ~~transactions~~in the Shares.

Ultimately, if the awards of new bitcoin for solving blocks declines and transaction fees for recording transactions are not sufficiently high to incentivize miners, or if the costs of validating transactions grow disproportionately, miners may operate at a loss, transition to other networks, or cease operations altogether. Each of these outcomes could, in turn, slow transaction validation and usage, which could have a negative impact on the Bitcoin network and could adversely affect the value of the bitcoin held by the Trust.30

AnOperational ~~acute~~cost ~~cessation of mining~~may ~~operations~~exceed ~~would reduce~~ the ~~collective~~award ~~processing~~for ~~power~~solving ~~on the Bitcoin network, which would adversely affect the transaction verification process by temporarily decreasing the speed at which~~ blocks ~~are~~or added to the blockchain and make the blockchain more vulnerable to a malicious actor obtaining control in excess of 50% of the processing power on the blockchain. Reductions in processing power could result in material, though temporary, delays in transaction ~~confirmation time~~fees. ~~Any~~Increased ~~reduction in confidence in the~~ transaction ~~verification~~fees ~~process or mining processing power~~ may adversely ~~impact~~affect the ~~value~~usage of ~~Shares of~~ the ~~Trust~~Bitcoin ~~or the ability of the Sponsor to operate~~network.

~~Electricity~~Miners ~~usage~~generate revenue from both newly created bitcoin (known as the “block reward”) and from fees taken upon verification of transactions. If the aggregate revenue from transaction fees and the block reward is below a miner’s cost, the miner may cease operations. Additionally, in the event of a fork of the Bitcoin network, some miners may choose to mine the alternative new bitcoin resulting from the fork, thus reducing processing power on the original blockchain.

~~Bitcoin~~Furthermore, ~~uses~~the ~~a system called~~incentives ~~proof-of-work~~for miners to ~~validate~~contribute ~~transaction~~processing ~~information.~~power ~~It’s~~to ~~called~~the ~~proof-of-work~~Bitcoin ~~because~~network ~~solving~~is ~~the~~set ~~encrypted~~to ~~hash~~decrease ~~takes~~over time. ~~and~~As ~~energy, which~~a ~~acts~~result ~~as proof that work was done. Proof-~~of~~-stake~~ ~~cryptocurrencies~~the ~~allow~~Bitcoin ~~people~~network’s “halving” tomechanism, ~~pledge~~the orblock ~~lock~~reward upthat ~~some~~miners ofreceive ~~their~~for ~~holdings~~successfully asmining a ~~way~~ ofblock ~~vouching~~are ~~for~~cut ~~the~~in ~~accuracy~~half ofeach ~~newly~~time ~~added~~the ~~information. Meanwhile, proof-of-work cryptocurrencies require people to solve complex~~Bitcoin ~~cryptographic~~network ~~puzzles~~mines —210,000 ~~which~~blocks. ~~can~~This ~~incur~~type ~~significant~~of ~~energy~~“halving” ~~costs~~event —generally ~~before~~occurs ~~they’re~~once ~~allowed~~every tofour ~~propose~~years aand ~~new~~will ~~block.~~continue ~~Proof~~until ofthe ~~work~~maximum ~~requires~~possible ~~users~~21 tomillion ~~mine~~bitcoin orhave ~~complete~~been ~~complex~~mined ~~computational~~and ~~puzzles~~released ~~before~~into ~~submitting~~circulation. ~~new~~Currently, ~~transactions~~there toare ~~the~~approximately ~~network.~~20 ~~This~~million ~~expenditure~~bitcoin ofthat ~~time,~~have ~~computing~~been ~~power~~mined and ~~energy~~are isin ~~intended to make the cost of fraud higher than the potential rewards of a dishonest action~~circulation.

~~Anyone~~Once ~~that~~new ~~owns~~bitcoin ~~the~~tokens ~~specific~~are ~~proof-of-stake~~no ~~cryptocurrency~~longer ~~can~~awarded ~~participate~~for inadding ~~staking,~~a ~~subject~~new ~~to certain minimum amounts as determined by the applicable proof-of-stake cryptocurrency. Generally~~block, ~~the~~miners ~~higher~~will ~~the~~only ~~amount~~have ~~staked~~transaction byfees ~~any actor, the higher the chances of being chosen by the applicable blockchain~~ to ~~act~~incentivize asthem, ~~validator~~ and ~~reaping~~as ~~validator~~a ~~rewards; in other words~~result, ~~the~~it ~~higher~~is ~~the stake, the higher the chances of earning a staking reward.~~expected ~~This~~that ~~has~~miners ~~led~~will need to ~~the~~be ~~creation~~better ofcompensated ~~staking~~with ~~pools,~~higher ~~where~~transaction ~~third~~fees ~~parties combine smaller stakes into large pools, which leads~~ to ~~higher~~ensure ~~returns for~~that ~~owners~~there ofis ~~small~~adequate ~~stakes,~~incentive ~~in return~~ for athem ~~fee~~to ~~collected by the third parties~~continue mining.

~~Digital~~If ~~asset~~transaction ~~mining operations~~confirmation ~~can~~fees ~~consume~~become ~~significant~~too ~~amounts of electricity~~high, ~~which~~the marketplace may ~~have~~be areluctant ~~negative~~to ~~environmental~~use ~~impact~~bitcoin. ~~and~~This ~~give~~may ~~rise~~result toin ~~public~~decreased ~~opinion~~usage ~~against allowing,~~and orlimit ~~government~~expansion ~~regulations~~of ~~restricting,~~ the ~~use~~Bitcoin network ofin ~~electricity~~the ~~for mining operations. Additionally~~retail, ~~miners~~commercial ~~may~~and bepayments ~~forced~~space, toadversely ~~cease operations~~impacting ~~during~~investment anin ~~electricity~~the ~~shortage~~Trust. ~~or power outage~~Conversely, or if ~~electricity~~the ~~prices~~reward ~~increase~~for ~~where~~miners or the ~~mining~~value ~~activities~~of ~~are~~the ~~performed. This~~transaction ~~could~~fees ~~adversely~~is ~~affect~~insufficient ~~the~~to ~~price~~motivate ~~of bitcoin~~miners, orthey ~~the~~may ~~operation~~cease ofexpending ~~the~~processing ~~Bitcoin~~power ~~network,~~for ~~and~~any ~~accordingly~~blockchain to ~~decrease~~solve ~~the~~blocks ~~value~~and ofconfirm ~~the Shares~~transactions.

~~Concerns~~Ultimately, ~~have~~if ~~been~~the ~~raised~~awards ~~about~~of ~~the~~new ~~electricity~~bitcoin ~~required~~for tosolving ~~secure~~blocks declines and ~~maintain~~transaction ~~digital~~fees ~~asset~~for ~~networks.~~recording ~~For~~transactions ~~example,~~are asnot ofsufficiently ~~December~~high ~~31,~~to ~~2023,~~incentivize ~~approximately 558~~miners, ~~million~~or ~~tera~~if ~~hashes are performed every second in connection with mining on~~ the ~~Bitcoin~~costs ~~network.~~of ~~Although~~validating ~~measuring~~transactions ~~the~~grow ~~electricity~~disproportionately, ~~consumed by~~miners ~~this~~may ~~process~~operate isat ~~difficult~~a ~~because~~loss, ~~these~~transition ~~operations~~to ~~are~~other ~~performed by various machines with varying levels of efficiency~~networks, ~~the~~or ~~process~~cease ~~consumes~~operations ~~a significant amount of energy~~altogether. ~~The~~Each ~~operations~~ of ~~the~~these ~~Bitcoin~~outcomes ~~network and other digital asset networks may also consume significant amounts of energy. Further~~could, in ~~addition~~turn, toslow ~~the~~transaction ~~direct~~validation ~~energy~~and ~~costs~~usage, ofwhich ~~performing~~could ~~calculations~~have ona ~~any~~negative ~~given digital asset network, there~~impact ~~are~~on ~~indirect~~the ~~costs~~Bitcoin ~~that impact a~~ network’s ~~total~~and ~~energy~~could ~~consumption,~~adversely ~~including~~affect the ~~costs~~value of ~~cooling~~ the ~~machines~~bitcoin ~~that~~held ~~perform~~by ~~these calculations~~the Trust.

33An acute cessation of mining operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the transaction verification process by temporarily decreasing the speed at which blocks are added to the blockchain and make the blockchain more vulnerable to a malicious actor obtaining control in excess of 50% of the processing power on the blockchain. Reductions in processing power could result in material, though temporary, delays in transaction confirmation time. Any reduction in confidence in the transaction verification process or mining processing power may adversely impact the value of Shares of the Trust or the ability of the Sponsor to operate.

~~Driven~~Electricity by concerns around energy consumption and the impact on public utility companies, various states and cities have implemented, or are considering implementing, moratoriums on mining activity in their jurisdictionsusage. A significant reduction in mining activity as a result of such actions could adversely affect the security of the Bitcoin network by making it easier for a malicious actor or botnet to manipulate the relevant blockchain. If regulators or public utilities take action that restricts or otherwise impacts mining activities, such actions could result in decreased security of a digital asset network, including the Bitcoin network, and consequently adversely impact the value of the Shares.

~~Miners~~Bitcoin ~~could~~uses ~~act~~a insystem called ~~collusion~~proof-of-work to ~~raise~~validate transaction ~~fees~~information. It’s called proof-of-work because solving the encrypted hash takes time and energy, which acts as proof that work was done. Proof-of-stake cryptocurrencies allow people to pledge or lock up some of their holdings as a way of vouching for the accuracy of newly added information. Meanwhile, proof-of-work cryptocurrencies require people to solve complex cryptographic puzzles — which ~~may~~can ~~adversely~~incur ~~affect~~significant energy costs — before they’re allowed to propose a new block. Proof of work requires users to mine or complete complex computational puzzles before submitting new transactions to the ~~usage~~network. This expenditure of time, computing power and energy is intended to make the ~~Bitcoin~~cost ~~network~~of fraud higher than the potential rewards of a dishonest action.

~~Bitcoin~~Anyone ~~miners~~that ~~collect~~owns ~~fees for each transaction they confirm. Miners validate unconfirmed transactions by adding~~ the ~~previously~~specific proof-of-stake ~~unconfirmed~~cryptocurrency ~~transactions~~can toparticipate ~~new blocks~~ in ~~the blockchain. Miners are not forced to confirm any specific transaction~~staking, ~~but~~subject ~~they are economically incentivized~~ to ~~confirm~~certain ~~valid transactions~~minimum amounts as adetermined ~~means~~by ofthe ~~collecting~~applicable ~~fees~~proof-of-stake cryptocurrency. ToGenerally, the ~~extent~~higher ~~that~~the ~~any~~amount ~~miners~~staked ~~cease~~by toany ~~record transactions in solved blocks~~actor, ~~such~~the ~~transactions will~~higher ~~not be recorded on~~ the ~~Bitcoin~~chances ~~network~~of ~~until~~being achosen ~~block is solved~~ by ~~a miner who does not require~~ the ~~payment~~applicable ~~of transaction fees. Miners~~blockchain ~~have~~to ~~historically~~act ~~accepted~~as ~~relatively~~validator ~~low~~and ~~transaction~~reaping ~~confirmation~~validator ~~fees,~~rewards; ~~because miners have a very low marginal cost of validating unconfirmed transactions. If miners collude~~ in another ~~anticompetitive~~words, ~~manner~~the tohigher ~~reject~~the ~~low transaction fees~~stake, ~~then~~the ~~bitcoin users could be forced to pay~~ higher ~~fees, thus reducing~~ the ~~attractiveness~~chances of ~~the~~earning ~~Bitcoin~~a ~~network,~~staking orreward. This tohas ~~wait~~led ~~longer times for their transactions~~ to ~~be validated by a miner who does not require~~ the ~~payment~~creation of astaking ~~transaction~~pools, ~~fee.~~where ~~Bitcoin~~third ~~mining~~parties ~~occurs~~combine ~~globally,~~smaller ~~and~~stakes itinto ~~may~~large bepools, ~~difficult~~which ~~for~~leads ~~authorities~~ to ~~apply~~higher ~~antitrust~~returns for ~~regulations~~owners ~~across~~of ~~multiple~~small ~~jurisdictions.~~stakes, ~~Any~~in ~~collusion~~return ~~among~~for ~~miners~~a ~~may~~fee ~~adversely~~collected ~~impact~~by ~~an investment in~~ the ~~Trust or~~third ~~the ability of the Trust to operate~~parties.

AsDigital ~~technology~~asset ~~advances,~~mining operations ~~miners~~can consume significant amounts of electricity, which may behave ~~unable~~a negative environmental impact and give rise to ~~acquire~~public opinion against allowing, or government regulations restricting, the ~~digital~~use ~~asset~~of electricity for mining ~~hardware~~operations. ~~necessary~~Additionally, tominers ~~develop~~may ~~and~~be ~~launch~~forced ~~their~~to cease operations. Aduring ~~decline~~an inelectricity shortage or power outage, or if electricity prices increase where the ~~bitcoin~~ mining ~~population~~activities are performed. This could adversely affect the price of bitcoin, or the operation of the Bitcoin network, and anaccordingly ~~investment~~decrease inthe value of the ~~Trust~~Shares.

Due to the increasing demand for digital asset mining hardware, miners may be unable to acquire the proper mining equipment or suitable amounts of equipment necessary to continue their operations or develop and launch their operations. In addition, because successful mining of a digital asset that uses “proof of work” validation requires maintaining or exceeding a certain level of computing power relative to other validators, miners will need to upgrade their mining hardware periodically to keep up with their competition. The development of supercomputers with disproportionate computing power may threaten the integrity of the bitcoin market by concentrating mining power, which would make it unprofitable for other miners to mine. The expense of purchasing or upgrading new equipment may be substantial and diminish returns to miners dramatically. A decline in miners may result in a decrease in the value of bitcoin and the value of the Trust.31

IfConcerns ~~profit~~have ~~margins~~been raised about the electricity required to secure and maintain digital asset networks. For example, as of December 31, 2024, approximately - million ~~bitcoin~~tera hashes are performed every second in connection with mining ~~operations~~on ~~are~~the ~~not~~Bitcoin ~~high,~~network. ~~miners~~Although ~~may~~measuring ~~elect~~the toelectricity ~~immediately~~consumed ~~sell~~by this ~~bitcoin~~process ~~earned~~is difficult because these operations are performed by ~~mining~~various machines with varying levels of efficiency, ~~resulting~~the inprocess consumes a ~~reduction~~significant inamount of energy. The operations of the Bitcoin network and other digital asset networks may also consume significant amounts ~~price~~of energy. Further, in addition to the direct energy costs of ~~bitcoin~~performing calculations on any given digital asset network, there are indirect costs that ~~could~~impact ~~adversely~~a ~~affect~~network’s antotal ~~investment~~energy inconsumption, including the ~~Trust~~costs of cooling the machines that perform these calculations.

~~Bitcoin~~Driven ~~network~~by ~~mining~~concerns ~~operations~~around ~~have~~energy ~~rapidly~~consumption ~~evolved~~and ~~over~~ the ~~past~~impact ~~several~~on ~~years~~public ~~from~~utility ~~individual users mining with computer processors~~companies, ~~graphics~~various ~~processing~~states ~~units~~ and ~~first-generation~~ ~~ASIC~~cities ~~(application-specific~~have ~~integrated~~implemented, ~~circuit)~~or ~~machines.~~are ~~New~~considering ~~processing~~implementing, moratoriums ~~power~~on ismining ~~predominantly~~activity ~~added~~in totheir ~~the~~jurisdictions. ~~Bitcoin~~A ~~network currently~~significant byreduction ~~“professionalized”~~in mining ~~operations.~~activity ~~Such~~as ~~operations~~a ~~may~~result ~~use~~of ~~proprietary~~such ~~hardware~~actions orcould ~~sophisticated~~adversely affect ~~ASIC~~the ~~machines acquired~~security ~~from~~of ~~ASIC~~the ~~manufacturers.~~Bitcoin ~~Significant~~network ~~capital~~by ismaking ~~necessary~~it easier for ~~mining~~a ~~operations~~malicious toactor ~~acquire~~or ~~this~~botnet ~~hardware,~~to ~~lease~~manipulate ~~operating~~the ~~space~~relevant blockchain. ~~(often~~If inregulators ~~data centers~~ or ~~warehousing~~public ~~facilities),~~utilities ~~afford~~take ~~electricity~~action ~~costs~~that ~~and~~restricts ~~employ~~or ~~technicians~~otherwise toimpacts ~~operate the~~ mining ~~farms.~~activities, Assuch aactions could result~~, professionalized~~ ~~mining~~in ~~operations~~decreased security ~~are~~ of a ~~greater~~digital ~~scale~~asset ~~than prior Bitcoin~~ network, ~~validators~~including ~~and~~the ~~have~~Bitcoin ~~more defined~~network, ~~regular expenses~~ and ~~liabilities.~~consequently Inadversely ~~past~~impact ~~years,~~the ~~individual~~value ~~miners~~of ~~are~~the ~~believed to have been more likely to hold newly mined bitcoin for extended periods~~Shares.

AMiners ~~professional~~could ~~mining~~act ~~operation~~in ~~operating~~collusion ~~at a low profit margin may be more likely~~ to ~~sell~~raise atransaction ~~higher percentage of its newly mined bitcoin rapidly~~fees, ~~and~~which it may ~~partially or~~adversely ~~completely~~affect ~~cease operations if its profit margin is negative. In a low profit margin environment, a higher percentage of~~ the ~~new~~usage ~~bitcoin mined each day will be sold into the bitcoin market more rapidly, thereby reducing bitcoin prices. The network effect~~ of ~~reduced profit margins resulting in greater sales of newly mined bitcoin could result in a reduction in~~ the ~~price~~Bitcoin ~~of bitcoin that could adversely affect an investment in the Trust~~network.

~~Large-Scale~~Bitcoin ~~Sales~~miners collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. To the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the Bitcoin network until a block is solved by a miner who does not require the payment of transaction fees. Miners have historically accepted relatively low transaction confirmation fees, because miners have a very low marginal cost of validating unconfirmed transactions. If miners collude in an anticompetitive manner to reject low transaction fees, then bitcoin users could be forced to pay higher fees, thus reducing the attractiveness of the Bitcoin network, or to wait longer times for their transactions to be validated by ~~Distributions~~a miner who does not require the payment of a transaction fee. Bitcoin mining occurs globally, and it may be difficult for authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact an investment in the Trust or the ability of the Trust to operate.

~~Some~~As ~~entities~~technology ~~hold large amounts~~advances, ofminers ~~bitcoin~~may ~~relative~~be tounable ~~other market participants, and~~ to acquire the ~~extent~~digital ~~such~~asset ~~entities~~mining ~~engage~~hardware innecessary ~~large-scale~~to ~~hedging,~~develop ~~sales~~and orlaunch ~~distributions on~~their ~~non-market~~operations. ~~terms,~~A ordecline ~~sales~~ in the ~~ordinary~~bitcoin mining ~~course,~~population it could ~~result in a reduction in the price of bitcoin and~~ adversely affect the ~~value~~ ofBitcoin ~~the~~network Shares. Additionally, political or economic crises may motivate large-scale acquisitions or sales of digital assets, including bitcoin, either globally or locally. Such large-scale sales or distributions could result in selling pressure that may reduce the price of bitcoin and ~~adversely affect~~ an investment in the ~~Shares~~Trust.

AsDue ofto the ~~date~~increasing ofdemand for ~~this~~digital ~~report~~asset mining hardware, ~~the~~ ~~largest~~miners ~~100~~may ~~bitcoin~~be ~~wallets~~unable ~~held~~to aacquire ~~substantial~~the ~~amount~~proper ofmining ~~the~~equipment ~~outstanding~~or ~~supply~~suitable amounts of ~~bitcoin,~~equipment necessary to continue their operations or develop and itlaunch istheir ~~possible~~operations. ~~that~~In ~~some~~addition, because successful mining of ~~these wallets~~a ~~are~~digital ~~controlled~~asset bythat ~~the~~uses “proof ~~same~~of ~~person~~work” validation requires maintaining or ~~entity.~~exceeding ~~Moreover,~~a itcertain islevel ~~possible~~of ~~that~~computing power relative to other ~~persons~~validators, miners orwill ~~entities~~need ~~control~~to ~~multiple~~upgrade ~~wallets~~their mining hardware periodically to keep up with their competition. The development of supercomputers with ~~that~~disproportionate ~~collectively~~computing ~~hold~~power amay ~~significant~~threaten ~~number~~the integrity of the bitcoin, ~~even~~market ifby ~~each~~concentrating ~~wallet~~mining ~~individually~~power, ~~only~~which ~~holds~~would amake ~~small~~it ~~amount.~~unprofitable for Asother aminers ~~result~~to ofmine. ~~this concentration~~The expense of ~~ownership,~~purchasing ~~large~~or ~~sales~~upgrading bynew ~~such~~equipment ~~holders~~may ~~could~~be ~~have~~substantial anand ~~adverse~~diminish ~~effect~~returns onto ~~the~~miners ~~market~~dramatically. A ~~price~~decline in miners may result in a decrease in the value of bitcoin and the value of the Trust.

34If 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.

~~Congestion~~Bitcoin ornetwork ~~delay~~mining operations inhave rapidly evolved over the past several years from individual users mining with computer processors, graphics processing units and first-generation ASIC (application-specific integrated circuit) machines. New processing power is predominantly added to the Bitcoin network currently by “professionalized” mining operations. Such operations may ~~delay~~use ~~purchases~~proprietary hardware or ~~sales~~sophisticated ASIC machines acquired from ASIC manufacturers. Significant capital is necessary for mining operations to acquire this hardware, lease operating space (often in data centers or warehousing facilities), afford electricity costs and employ technicians to operate the mining farms. As a result, professionalized mining operations are of a greater scale than prior Bitcoin network validators and have more defined, regular expenses and liabilities. In past years, individual miners are believed to have been more likely to hold newly mined bitcoin byfor ~~the~~extended ~~Trust~~periods.

~~The~~A ~~size~~professional ofmining ~~each block on~~operation ~~the~~operating ~~Bitcoin~~at ~~blockchain~~a islow ~~currently~~profit ~~limited~~margin ~~and~~may isbe ~~significantly~~more ~~below~~likely ~~the~~to ~~level~~sell ~~that~~a ~~centralized~~higher ~~systems~~percentage ~~can~~of ~~provide.~~its ~~Increased~~newly ~~transaction volume~~mined ~~could~~bitcoin ~~result~~rapidly, inand ~~delays~~it inmay ~~the~~partially or ~~recording~~completely ofcease ~~transactions~~operations ~~due~~if toits ~~congestion~~profit inmargin ~~the~~is ~~Bitcoin network~~negative. ~~Moreover,~~In ~~unforeseen~~a ~~system~~low ~~failures, disruptions~~profit inmargin ~~operations~~environment, ora ~~poor~~higher ~~connectivity~~percentage ~~may also result in delays in the recording~~ of ~~transactions on~~ the ~~Bitcoin~~new ~~network. Any~~bitcoin ~~delay~~mined ineach ~~the~~day ~~Bitcoin~~will ~~network~~be ~~could~~sold ~~affect~~into the ~~Authorized~~bitcoin ~~Participant’s~~market ~~ability~~more torapidly, ~~buy~~thereby orreducing ~~sell~~ bitcoin atprices. anThe ~~advantageous~~network ~~price~~effect ~~resulting in~~of ~~decreased~~reduced ~~confidence~~profit margins resulting in ~~the~~greater ~~Bitcoin~~sales ~~network.~~of ~~Over~~newly ~~the~~mined ~~longer~~bitcoin ~~term,~~could ~~delays~~result in ~~confirming~~a ~~transactions~~reduction ~~could~~in ~~reduce~~ the ~~attractiveness to~~price ~~merchants and other commercial parties as a means~~ of ~~payment.~~bitcoin Asthat acould ~~result,~~adversely ~~the~~affect an ~~Bitcoin~~investment ~~network~~in ~~and~~ the ~~value of the~~ Trust~~’s Shares would be adversely affected~~.

~~Risks Associated with Investing in the Trust~~32

~~Investment~~Large-Scale ~~Related~~Sales ~~Risks~~or Distributions.

~~Investing~~Some inentities ~~bitcoin~~hold ~~and, consequently,~~large ~~the Trust, is speculative. The price~~ amounts of bitcoin isrelative ~~volatile,~~to ~~and~~other market ~~movements~~participants, ofand ~~bitcoin are difficult~~ to ~~predict.~~the ~~Supply and~~extent ~~demand~~such ~~changes~~entities ~~rapidly~~engage ~~and~~in islarge-scale ~~affected by a variety of factors~~hedging, ~~including~~sales ~~regulation~~or ~~and~~distributions on ~~general~~non-market ~~economic trends~~terms, ~~such~~or assales ~~interest rates,~~in ~~availability~~the ofordinary ~~credit~~course, ~~credit~~it ~~defaults,~~could ~~inflation~~result ~~rates~~in ~~and~~a ~~economic~~reduction ~~uncertainty.~~in ~~All~~the ~~investments~~price ~~made~~of bybitcoin ~~the~~and ~~Trust~~adversely ~~will~~affect ~~risk~~ the value ~~loss~~ of ~~capital~~the Shares. ~~Therefore~~Additionally, anpolitical ~~investment~~or ineconomic ~~the~~crises ~~Trust~~may ~~involves~~motivate alarge-scale ~~high~~acquisitions ~~degree~~or sales of ~~risk~~digital assets, including ~~the risk that the entire amount invested~~ ~~may~~bitcoin, beeither ~~lost.~~globally ~~No guarantee~~ or ~~representation~~locally. isSuch ~~made~~large-scale ~~that~~sales ~~the~~or ~~Trust’s~~distributions ~~investment~~could ~~program~~result ~~will~~in beselling ~~successful,~~pressure that ~~the~~may ~~Trust~~reduce ~~will~~the price ~~achieve~~of ~~its~~bitcoin ~~investment~~and ~~objective~~adversely oraffect ~~that~~an ~~there~~investment ~~will be any return of capital invested to investors~~ in the ~~Trust, and investment results may vary~~Shares.

~~The~~As ~~NAV~~of orthe date of this report, the ~~Principal~~largest ~~Market~~100 bitcoin wallets held a substantial amount of the outstanding supply of bitcoin, and it is possible that some of these ~~NAV~~wallets ~~may~~are ~~not~~controlled ~~always~~by ~~correspond~~the tosame person or entity. Moreover, it is possible that other persons or entities control multiple wallets that collectively hold a significant number of bitcoin, even if each wallet individually only holds a small amount. As a result of this concentration of ownership, large sales by such holders could have an adverse effect on the market price of bitcoin.

~~The~~Congestion ~~NAV~~ or ~~the Principal Market~~delay ~~NAV of the Trust will change as fluctuations occur~~ in the ~~market~~Bitcoin ~~price~~network ~~of the Trust’s bitcoin holdings. Shareholders should be aware that the public trading price per share~~ may bedelay ~~different~~purchases ~~from~~or ~~the~~sales ~~NAV for a number~~ of reasons, including price volatility and the fact that supply and demand forces at work in the secondary trading market for shares are related, but not identical, to the supply and demand forces influencing the market price of bitcoin asby ~~reflected in~~ the ~~Index~~Trust.

AnThe ~~Authorized~~size ~~Participant~~of each block on ~~may~~the beBitcoin ~~able~~blockchain tois ~~create~~currently orlimited ~~redeem~~and ais ~~Basket~~significantly atbelow athe ~~discount~~level orthat acentralized ~~premium~~systems can provide. Increased transaction volume could result in delays in the recording of transactions due to congestion in the ~~public~~Bitcoin ~~trading~~network. ~~price~~Moreover, ~~per~~unforeseen ~~share~~system failures, disruptions ~~and~~in operations, or poor connectivity may also result in delays in the ~~Trust~~recording ~~will~~of ~~therefore~~transactions on the Bitcoin network. Any ~~maintain~~delay ~~its~~in ~~intended~~the ~~fractional~~Bitcoin ~~exposure~~network could affect the Authorized Participant’s ability to buy or sell bitcoin at an advantageous price resulting in decreased confidence in the Bitcoin network. Over the longer term, delays in confirming transactions could reduce the attractiveness to merchants and other commercial parties as a ~~specific~~means ~~amount~~of payment. As a result, the Bitcoin network and the value of ~~bitcoin~~the ~~per~~Trust’s ~~share~~Shares would be adversely affected.

~~Deviations~~Risks ~~between~~Associated ~~the~~with ~~Trust’s~~Investing ~~NAV~~in ~~and NAV per Share versus~~ the Trust~~’s Principal Market NAV and Principal Market NAV per Share may occur.~~

~~The~~Investment ~~Trust~~Related ~~uses the Index to determine its NAV and NAV per Share~~Risks. However, for financial statement purposes, the Trust’s bitcoin is carried at fair value as required by U.S. generally accepted accounting principles (“GAAP”), which requires a determination based on the price of bitcoin on principal market as identified by the Trust as set for in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”). See “Net Asset Value Determinations” below. The Trust expects the applicable NAV and NAV per Share and corresponding Principal Market NAV and Principal Market NAV to accurately reflect the price of bitcoin. However, deviations can occur between the prices from the principal market chosen by the GAAP fair value methodology and Index, which takes into consideration prices from all of the markets used to calculate the Index.

~~Different~~Investing ~~from~~in ~~directly~~bitcoin and, ~~owning~~consequently, the Trust, is speculative. The price of bitcoin is volatile, and market movements of bitcoin are difficult to predict. Supply and demand changes rapidly and is affected by a variety of factors, including regulation and general economic trends, such as interest rates, availability of credit, credit defaults, inflation rates and economic uncertainty. All investments made by the Trust will risk the loss of capital. Therefore, an investment in the Trust involves a high degree of risk, including the risk that the entire amount invested may be lost. No guarantee or representation is made that the Trust’s investment program will be successful, that the Trust will achieve its investment objective or that there will be any return of capital invested to investors in the Trust, and investment results may vary.

~~Investors~~The ~~should~~NAV beor ~~aware that~~ the ~~market~~Principal ~~value~~Market NAV ~~of Shares of the Trust~~ may not ~~have~~always acorrespond ~~direct~~to ~~relationship with~~ the ~~prevailing~~market price of bitcoin~~, and changes in the prevailing price of bitcoin similarly will not necessarily result in a comparable change in the market value of Shares of the Trust~~. The performance of the Trust will not reflect the specific return an investor would realize if the investor actually held or purchased bitcoin directly. The differences in performance may be due to factors such as fees, transaction costs, operating hours of the Exchange and index tracking risk. Investors will also forgo certain rights conferred by owning bitcoin directly, such as the right to claim airdrops. See “Risk Factors — The inability to recognize the economic benefit of a “fork” or an “airdrop” could adversely impact an investment in the Trust.”

~~Index~~The ~~tracking~~NAV ~~risk~~or the Principal Market NAV of the Trust will change as fluctuations occur in the market price of the Trust’s bitcoin holdings. Shareholders should be aware that the public trading price per share may be different from the NAV for a number of reasons, including price volatility and the fact that supply and demand forces at work in the secondary trading market for shares are related, but not identical, to the supply and demand forces influencing the market price of bitcoin as reflected in the Index.

~~Although~~An ~~the~~Authorized ~~Trust will attempt~~Participant tomay ~~structure~~be ~~its~~able ~~portfolio~~to socreate ~~that~~or ~~investments~~redeem ~~track~~a ~~the~~Basket ~~Index,~~at ~~the~~a ~~Trust~~discount ~~may~~or ~~not~~a ~~achieve~~premium to the ~~desired~~public ~~degree~~trading ofprice ~~correlation~~per ~~between~~share, ~~its performance~~ and ~~that of~~ the ~~Index~~Trust ~~and~~will ~~thus~~therefore maintain ~~may not achieve~~ its ~~investment~~intended ~~objective.~~fractional ~~The~~exposure ~~difference in performance may be due~~ to ~~factors such~~a asspecific ~~fees,~~amount ~~transaction costs, redemptions~~ of, ~~and~~bitcoin ~~subscriptions~~per ~~for, Shares, pricing differences or the cost to the Trust of complying with various new or existing regulatory requirements~~share.

35Deviations between the Trust’s NAV and NAV per Share versus the Trust’s Principal Market NAV and Principal Market NAV per Share may occur.

~~Liquidity~~The ~~risk~~Trust uses the Index to determine its NAV and NAV per Share. However, for financial statement purposes, the Trust’s bitcoin is carried at fair value as required by GAAP, which requires a determination based on the price of bitcoin on principal market as identified by the Trust as set for in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”). See “Net Asset Value Determinations” below. The Trust expects the applicable NAV and NAV per Share and corresponding Principal Market NAV and Principal Market NAV to accurately reflect the price of bitcoin. However, deviations can occur between the prices from the principal market chosen by the GAAP fair value methodology and Index, which takes into consideration prices from all of the markets used to calculate the Index.

The ability of the Trust or a Bitcoin Counterparty to buy or sell bitcoin may be adversely affected by limited trading volume, lack of a market maker in the digital asset markets, or legal restrictions. It is also possible that a bitcoin spot market or governmental authority may suspend or restrict trading in bitcoin altogether. Therefore, it may not always be possible to execute a buy or sell order at the desired price or to liquidate an open position due to market conditions on spot markets, regulatory issues affecting bitcoin or other issues affecting counterparties. Bitcoin is a new asset with a very limited trading history. Therefore, the markets for bitcoin may be less liquid and more volatile than other markets for more established products.33

~~Shares~~If of the ~~Trust~~process ~~are~~of ~~intended~~creation ~~to be listed~~ and ~~traded~~redemption onof ~~the~~Baskets ~~Exchange.~~encounters ~~There~~any isunanticipated nodifficulties, ~~certainty~~the ~~that~~possibility ~~there~~for ~~will~~arbitrage betransactions ~~liquidity~~by ~~available~~Authorized onParticipants intended ~~the~~to ~~Exchange~~keep ~~or that~~ the ~~market~~ price ~~will~~of bethe inShares ~~line~~closely ~~with~~linked ~~the~~to ~~NAV or~~ the ~~Principal~~price ~~Market~~of ~~NAV~~bitcoin atmay ~~any~~not ~~given~~exist ~~time.~~and, ~~There~~as isa ~~also~~result, ~~no guarantee that once~~ the ~~Shares~~price of the Shares ~~Trust~~may ~~are~~fall ~~listed~~ or ~~traded~~otherwise ondiverge ~~the~~from ~~Exchange that they will remain so listed or traded~~NAV.

If ~~demand~~the ~~for~~processes of creation and redemption of Shares (which depend on timely transfers of bitcoin to and by the Bitcoin Custodians) encounter any unanticipated difficulties ~~Trust~~due ~~exceeds~~to, for example, the ~~availability~~price volatility of bitcoin, the insolvency, business failure or interruption, default, failure to perform, security breach, or other problems affecting the Bitcoin Custodians, any operational issues that may arise from ~~exchanges~~creating and redeeming Shares via cash transactions, the ~~Trust~~closing isof ~~not~~bitcoin ~~able~~trading platforms due to ~~secure~~fraud, ~~additional~~failures, ~~supply~~security breaches or otherwise, ~~Shares~~or ofnetwork outages or congestion, spikes in transaction fees demanded by miners, or other problems or disruptions affecting the ~~Trust~~Bitcoin ~~may~~network, then potential ~~trade~~market atparticipants, asuch ~~premium~~as tothe ~~their~~Authorized ~~underlying~~Participants ~~value.~~and ~~Investors~~their customers, who ~~pay~~would aotherwise ~~premium~~be ~~risk~~willing ~~losing~~to ~~such~~purchase ~~premium~~or ifredeem ~~demand~~Baskets to ~~for~~take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the ~~Trust~~underlying ~~abates~~bitcoin ormay not take the ~~Sponsor~~risk isthat, as a result of those difficulties, they may not be able to ~~source~~realize ~~more~~the ~~bitcoin~~profit they expect. In certain such ~~circumstances~~cases, the Sponsor may suspend the process of creation and redemption of Baskets. During such times, trading spreads, and the resulting premium or discount, on Shares may widen. Alternatively, in the case of a network outage or other problems affecting the ~~Trust~~Bitcoin network, the processing of transactions on the Bitcoin network may be disrupted, which in turn could ~~also~~affect ~~trade~~the atcreation aor ~~discount~~redemption of Baskets. If this is the case, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the price of bitcoin and may fall or otherwise diverge from NAV. Furthermore, in the event that the market for bitcoin should become relatively illiquid and thereby materially restrict opportunities for arbitraging by delivering bitcoin in return for Baskets, the price of Shares may diverge from the value of bitcoin.

~~Prior~~Owning toShares ~~their~~is ~~issuance, there~~different ~~was~~than nodirectly ~~public~~owning ~~market for Shares of the Trust~~bitcoin.

~~Counterparty~~Investors should be aware that the market value of Shares of the Trust may not have a direct relationship with the prevailing price of bitcoin, and changes in the prevailing price of bitcoin similarly will not necessarily result in a comparable change in the market value of Shares of the Trust. The performance of the Trust will not reflect the specific return an investor would realize if the investor actually held or purchased bitcoin directly. The differences in performance may be due to factors such as fees, transaction costs, operating hours of the Exchange and index tracking risk. Investors will also forgo certain rights conferred by owning bitcoin directly, such as the right to claim airdrops. See “Risk Factors — The inability to recognize the economic benefit of a ‘fork’ or an ‘airdrop’ could adversely impact an investment in the Trust.”

~~The~~Index ~~Sponsor,~~tracking ~~Trust, Bitcoin Counterparty, and Authorized Participants are subject to counterparty~~ risk. A Bitcoin Counterparty may fail to deliver to the Trust’s account at the Bitcoin Custodian the amount of bitcoin associated with a creation order, a Bitcoin Counterparty may fail to deliver to the Trust’s account at the Cash Custodian the amount of cash associated with a redemption order, or the Cash Custodian may fail to deliver to the Authorized Participant at settlement the cash proceeds from the sale of bitcoin associated with a redemption order.

~~The~~Although ~~value~~the ofTrust will attempt to structure its portfolio so that investments track the ~~Shares~~Index, the Trust may not achieve the desired degree of correlation between its performance and that of the Index and thus may not achieve its investment objective. The difference in performance may be ~~influenced~~due byto afactors such ~~variety~~as fees, transaction costs, redemptions of, ~~factors~~and ~~unrelated~~subscriptions for, Shares, pricing differences or the cost to the ~~value~~Trust of ~~bitcoin~~complying with various new or existing regulatory requirements.

~~The~~Liquidity value of the Shares may be influenced by a variety of factors unrelated to the price of bitcoin and the bitcoin exchanges included in the Index that may have an adverse effect on the price of the Shares. These factors include, but are not limited to, the following factors:risk

●The ~~Unanticipated~~ability ~~problems~~of orthe ~~issues~~Trust ~~with~~or a ~~respect~~Bitcoin Counterparty to ~~the~~buy ~~mechanics~~or ofsell ~~the~~bitcoin ~~Trust’s~~may ~~operations~~be ~~and~~adversely ~~the~~affected by limited trading volume, lack of a market maker in the ~~Shares~~digital asset markets, or legal restrictions. It is also possible that a bitcoin spot market or governmental authority may ~~arise,~~suspend or restrict trading in ~~particular~~bitcoin ~~due~~altogether. Therefore, it may not always be possible to ~~the~~execute ~~fact~~a ~~that~~buy or sell order at the ~~mechanisms~~desired ~~and~~price ~~procedures~~or ~~governing~~to ~~the~~liquidate an ~~creation~~open ~~and~~position ~~offering~~due ofto ~~the~~market ~~Shares~~conditions ~~and~~on ~~storage~~spot ofmarkets, regulatory issues affecting bitcoin ~~have~~or ~~been~~other ~~developed~~issues ~~specifically~~affecting counterparties. Bitcoin is a new asset with a very limited trading history. Therefore, the markets for ~~this~~bitcoin ~~product;~~may be less liquid and more volatile than other markets for more established products.

●Shares ~~The~~of the Trust ~~could~~are ~~experience~~intended to ~~difficulties~~be inlisted ~~operating~~ and ~~maintaining~~traded ~~its~~on ~~technical~~the ~~infrastructure,~~Exchange. ~~including~~There is no certainty that there will be liquidity available on the Exchange or that the market price will be in ~~connection~~line with ~~expansions~~the NAV or ~~updates~~the toPrincipal ~~such~~Market ~~infrastructure,~~NAV ~~which~~at ~~are~~any ~~likely~~given totime. beThere ~~complex~~is ~~and~~also ~~could~~no ~~lead~~guarantee tothat ~~unanticipated~~once ~~delays,~~the ~~unforeseen~~Shares ~~expenses~~of ~~and~~the Trust ~~security~~are ~~vulnerabilities;~~listed or traded on the Exchange that they will remain so listed or traded.

●If ~~The~~demand ~~Trust~~for ~~could~~Shares ~~experience~~of ~~unforeseen~~the Trust ~~issues~~exceeds ~~relating~~the toavailability ~~the~~of ~~performance~~bitcoin ~~and~~from ~~effectiveness~~exchanges ofand the ~~security~~Trust ~~procedures~~is ~~used~~not able to ~~protect~~secure additional supply, Shares of the Trust’s ~~account~~may trade ~~with~~at ~~the~~a ~~Bitcoin~~premium ~~Custodian,~~to ortheir ~~the~~underlying ~~security~~value. ~~procedures~~Investors ~~may~~who ~~not~~pay ~~protect~~a ~~against~~premium ~~all~~risk ~~errors,~~losing ~~software~~such ~~flaws~~premium orif ~~other~~demand ~~vulnerabilities~~for inthe Shares of the Trust’s abates ~~technical~~or ~~infrastructure,~~the ~~which~~Sponsor ~~could~~is ~~result~~able into ~~theft,~~source ~~loss~~more orbitcoin. ~~damage~~In such circumstances, Shares of ~~its~~the ~~assets;~~Trust orcould also trade at a discount.

●Prior ~~Service providers may decide~~ to ~~terminate~~ their ~~relationships~~issuance, ~~with~~there was ~~the~~no ~~Trust~~public ~~due~~market tofor ~~concerns~~Shares ~~that the introduction~~ of ~~privacy enhancing features to~~ the ~~Bitcoin network may increase the potential for bitcoin to be used to facilitate crime, exposing such service providers to potential reputational harm~~Trust.

~~Any of these factors could affect the value of the Shares, either directly or indirectly through their effect on the Trust’s assets.~~34

36Counterparty risk.

The ~~Administrator~~Sponsor, isTrust, Bitcoin ~~solely~~Counterparty, ~~responsible~~and ~~for~~Authorized ~~determining~~Participants ~~the~~are ~~value~~subject ofto counterparty risk. A Bitcoin Counterparty may fail to deliver to the Trust’s account at a Bitcoin Custodian the amount of bitcoin associated with a creation order, ~~the~~a ~~Trust’s~~Bitcoin ~~NAV~~Counterparty ~~and~~may ~~the~~fail to deliver to the Trust’s ~~Principal~~account ~~Market NAV.~~at ~~The~~the ~~value~~Cash Custodian the amount of cash associated with a redemption order, or the ~~Shares~~Cash Custodian may ~~experience~~fail anto ~~adverse~~deliver to ~~effect~~the inAuthorized Participant at settlement the ~~event~~cash ofproceeds ~~any~~from ~~errors,~~the ~~discontinuance~~sale orof ~~changes~~bitcoin inassociated ~~such~~with ~~valuation calculations~~a redemption order.

The ~~Administrator~~value ~~will~~of ~~determine~~ the ~~Trust’s NAV and the Trust’s Principal Market NAV. The Administrator’s determination is made utilizing data from~~Shares ~~the~~may ~~Bitcoin~~be ~~Custodian’s~~influenced ~~operations and the Index (in the case of the NAV) and the principal market for bitcoin as determined~~ by ~~the~~ ~~Trust~~a ~~(in~~variety ~~the case~~ of ~~the~~factors ~~Principal~~unrelated ~~Market~~to ~~NAV). To~~ the ~~extent~~value ~~that the Trust’s NAV or the Principal Market NAV are incorrectly calculated, the Administrator may not be liable for any error and such misreporting~~ of ~~valuation data could adversely affect an investment in the Shares~~bitcoin.

The ~~Administrator~~value ~~determines the NAV~~ of the ~~Trust~~Shares asmay be ofinfluenced ~~4:00~~by ~~p.m.~~a ~~ET,~~variety onof ~~each~~factors ~~Business~~unrelated ~~Day,~~to ~~as soon as practicable after that time and determines~~ the ~~Principal~~price ~~Market NAV as~~ of ~~4:00~~bitcoin ~~p.m.~~and ~~ET, on~~ the ~~valuation~~bitcoin ~~date.~~exchanges Ifincluded ~~the Index is not available, or if the Sponsor determines~~ in ~~good faith that~~ the Index ~~does~~ ~~not~~that ~~reflect~~may have an ~~accurate~~adverse ~~bitcoin~~effect ~~price,~~on ~~then~~ the ~~Administrator~~price ~~will~~of ~~determine NAV by reference to~~ the ~~Trust’s principal market~~Shares. ~~There~~ ~~are~~These nofactors ~~predefined~~include, ~~criteria~~but toare ~~make~~not alimited ~~good faith assessment as~~ to ~~which of the rules the Sponsor will apply~~, ~~and~~ the ~~Sponsor~~following ~~may make this determination in its sole discretion.~~factors:

~~The~~● ~~Trust~~Unanticipated isproblems ~~subject~~or toissues ~~the risk~~with ~~that~~respect ~~the~~to ~~Administrator may calculate~~ the ~~Index~~mechanics ~~in a manner that ultimately inaccurately reflects the price~~ of ~~bitcoin. To~~ the ~~extent that the NAV, Principal Market NAV, the Index, the Administrator~~Trust’s oroperations ~~the Sponsor’s other valuation methodology are incorrectly calculated, neither the Sponsor, the Administrator nor the Trustee will be liable for any error~~ and ~~such misreporting of valuation data could adversely affect~~ the ~~value~~trading of the Shares ~~and~~may ~~investors~~arise, ~~could suffer a substantial loss on their investment~~ in ~~the~~particular ~~Trust.~~due ~~Moreover, the~~to ~~terms of~~ the ~~Trust~~fact ~~Agreement~~that ~~do not prohibit~~ the ~~Sponsor~~mechanisms ~~from changing the Index or other valuation method used to calculate the NAV~~ and ~~Principal~~procedures ~~Market~~governing ~~NAV of~~ the ~~Trust.~~creation ~~Any~~and ~~such~~offering ~~change in the Index or other valuation method could affect the value~~ of the Shares and ~~investors~~ ~~could~~storage ~~suffer~~of abitcoin ~~substantial~~have ~~loss~~been ondeveloped ~~their~~specifically ~~investment~~for inthis ~~the Trust.~~product;

~~Bitcoin~~● ~~Counterparties’ buying~~The Trust could experience difficulties in operating and ~~selling~~maintaining ~~activity~~its ~~associated~~technical infrastructure, including in connection with ~~the~~expansions ~~creation~~or ~~and~~updates ~~redemption~~to ofsuch ~~Baskets~~infrastructure, ~~may~~which ~~adversely~~are ~~affect~~likely anto ~~investment~~be incomplex ~~the~~and ~~Shares.~~could lead to unanticipated delays, unforeseen expenses and security vulnerabilities;

● The ~~purchase~~Trust ofcould ~~bitcoin~~experience ~~in connection~~unforeseen ~~with~~issues ~~Basket~~relating ~~creation~~to ~~orders~~the ~~may~~performance ~~cause~~and ~~the~~effectiveness ~~price~~ of ~~bitcoin~~the tosecurity ~~increase,~~procedures ~~which~~used ~~will~~to ~~result~~protect inthe ~~higher~~Trust’s ~~prices~~account ~~for~~with ~~the~~a ~~Shares. Increases~~Bitcoin inCustodian, or the ~~bitcoin~~security ~~prices~~procedures may ~~also~~not ~~occur~~protect asagainst aall ~~result~~errors, ofsoftware ~~bitcoin~~flaws ~~purchases~~or by other ~~market~~vulnerabilities ~~participants who attempt to benefit from an increase~~ in the ~~market~~Trust’s ~~price~~technical ofinfrastructure, ~~bitcoin~~which ~~when~~could ~~Baskets~~result ~~are~~in ~~created.~~theft, ~~The~~loss ~~market~~or ~~price~~damage of ~~bitcoin~~its ~~may~~assets; ~~therefore decline immediately after Baskets are created.~~or

~~Selling~~● ~~activity~~Service ~~associated with~~providers ~~sales~~may ofdecide ~~bitcoin~~to interminate ~~connection~~their relationships with ~~redemption~~the ~~orders~~Trust ~~may~~due ~~decrease~~to concerns that the ~~bitcoin~~introduction ~~prices,~~of ~~which~~privacy ~~will~~enhancing ~~result~~features into ~~lower~~the ~~prices~~Bitcoin ~~for~~network may increase the ~~Shares.~~ ~~Decreases~~potential infor bitcoin ~~prices~~to ~~may~~be ~~also~~used ~~occur~~to asfacilitate acrime, ~~result~~exposing ofsuch ~~selling~~service ~~activity~~providers byto ~~other~~potential ~~market~~reputational ~~participants~~harm.

InAny ~~addition~~of tothese ~~the~~factors ~~effect~~could ~~that~~affect ~~purchases~~the ~~and~~value ~~sales~~ of ~~bitcoin as part of~~ the ~~creation and redemption process may have on the price of bitcoin~~Shares, ~~sales~~either ~~and~~directly ~~purchases of~~or ~~bitcoin~~indirectly bythrough ~~similar~~their ~~investment~~effect ~~vehicles~~on ~~(if developed) could impact~~ the ~~price~~Trust’s ~~of bitcoin~~assets. ~~If the price of bitcoin declines, the trading price of the Shares will generally also decline.~~

The ~~inability~~Administrator ~~of Bitcoin~~is ~~Counterparties~~solely toresponsible ~~hedge~~for ~~their~~determining ~~bitcoin~~the ~~exposure~~value ~~may~~of ~~adversely~~the ~~affect~~Trust’s bitcoin, the ~~liquidity~~Trust’s ofNAV ~~Shares~~ and the Trust’s Principal Market NAV. The value of the Shares may experience an ~~investment~~adverse effect in the ~~Shares~~event of any errors, discontinuance or changes in such valuation calculations.

~~Authorized~~The ~~Participants~~Administrator ~~and market makers~~ will ~~generally want to hedge their exposure in connection with Basket creation and redemption orders. To~~ determine the ~~extent~~Trust’s ~~Authorized Participants~~NAV and ~~market makers are unable to hedge their exposure due to market conditions (e.g., insufficient bitcoin liquidity in~~ the ~~market,~~ ~~inability~~Trust’s toPrincipal ~~locate~~Market ~~an appropriate hedge counterparty, etc~~NAV.), ~~such~~The ~~conditions~~Administrator’s ~~may~~determination ~~make~~is itmade ~~difficult~~utilizing ~~for~~data ~~Authorized Participants~~from tothe ~~create~~Bitcoin orCustodians’ ~~redeem~~operations ~~Baskets~~and ~~(or~~the ~~cause~~Index ~~them~~(in tothe ~~not~~case ~~create~~of orthe ~~redeem Baskets~~NAV). Inand ~~addition,~~ the ~~hedging~~principal ~~mechanisms~~market ~~employed~~for ~~by Bitcoin Counterparties to hedge their exposure to~~ bitcoin ~~may not function~~ as ~~intended,~~determined ~~which may make it more difficult for them to enter into such transactions.~~by ~~Such~~the ~~events~~Trust ~~could~~(in ~~negatively impact~~ the ~~market~~case ~~price~~ of ~~Shares and~~ the ~~spread~~Principal atMarket ~~which Shares trade on the open market~~NAV). To the extent ~~Bitcoin~~ ~~Counterparties~~that ~~wish~~the toTrust’s ~~use~~NAV ~~futures~~or tothe ~~hedge~~Principal ~~their~~Market ~~exposure,~~NAV ~~note~~are ~~that while growing in recent years~~incorrectly calculated, the ~~market~~Administrator ~~for exchange-traded bitcoin futures has a limited trading history and operational experience and~~ may not be ~~less~~liable ~~liquid,~~for ~~more~~any ~~volatile~~error and ~~more~~such ~~vulnerable~~misreporting ~~to economic, market and industry changes than more established futures markets. The liquidity~~ of ~~the~~valuation ~~market~~data ~~will~~could ~~depend~~adversely ~~on,~~affect ~~among~~an ~~other things,~~investment ~~the adoption of bitcoin and the commercial and speculative interest~~ in the ~~market~~Shares.

~~Arbitrage~~The ~~transactions~~Administrator determines ~~intended~~the toNAV ~~keep~~of the ~~price~~Trust as of ~~Shares~~4:00 ~~closely~~p.m. ~~linked~~ET, toon each Business Day, as soon as practicable after that time and determines the ~~price~~Principal Market NAV as of ~~bitcoin~~4:00 ~~may~~p.m. beET, ~~problematic~~on the valuation date. If the Index is not available, or if the ~~process~~Sponsor ~~for~~determines in good faith that the ~~creation~~Index does ~~and~~not ~~redemption~~reflect an accurate bitcoin price, then the Administrator will determine NAV by reference to the Trust’s principal market. There are no predefined criteria to make a good faith assessment as to which of ~~Baskets~~the ~~encounters~~rules ~~difficulties~~the Sponsor will apply, ~~which~~and ~~may~~the ~~adversely~~Sponsor ~~affect~~may make anthis ~~investment~~determination in ~~the~~its ~~Shares~~sole discretion.

IfThe ~~the~~Trust ~~processes~~is ofsubject ~~creation~~to the ~~and~~risk ~~redemption~~that the Administrator may calculate the Index in a manner that ultimately inaccurately reflects the price of bitcoin. To the ~~Shares~~extent that ~~encounter~~the ~~any~~NAV, ~~unanticipated~~Principal ~~difficulties~~Market NAV, ~~potential~~the ~~market~~Index, ~~participants~~the ~~who~~Administrator’s ~~would~~or ~~otherwise~~the beSponsor’s ~~willing~~other tovaluation methodology are incorrectly ~~purchase~~calculated, orneither ~~redeem~~the ~~Baskets~~Sponsor, tothe ~~take~~Administrator ~~advantage~~nor ofthe Trustee will be liable for any ~~arbitrage~~error ~~opportunity~~and ~~arising~~such ~~from~~misreporting ~~discrepancies~~of ~~between~~valuation data could adversely affect the ~~price~~value of the Shares and investors could suffer a substantial loss on their investment in the Trust. Moreover, the ~~price~~terms of the ~~underlying~~Trust ~~bitcoin~~Agreement ~~may~~do not ~~take~~prohibit the ~~risk~~Sponsor ~~that,~~from aschanging athe ~~result~~Index ofor ~~those~~other ~~difficulties,~~valuation ~~they~~method ~~may~~used ~~not be able~~ to ~~realize~~calculate the NAV ~~profit~~and ~~they~~Principal ~~expect.~~Market IfNAV ~~this~~of is the ~~case,~~Trust. Any such change in the ~~liquidity~~Index ofor ~~Shares~~other ~~may~~valuation ~~decline,~~method ~~and~~could affect the ~~price~~value of the Shares ~~may~~and investors ~~fluctuate~~could ~~independently of~~suffer ~~the~~a ~~price~~substantial ofloss ~~bitcoin~~on ~~and~~their ~~may~~investment ~~fall~~in the Trust.

3735

~~Security~~Bitcoin ~~threats and~~Counterparties’ ~~cyber-attacks~~buying ~~could result in the halting of Trust operations~~ and aselling ~~loss~~activity ofassociated ~~Trust~~with ~~assets or damage to~~ the ~~reputation~~creation ofand ~~the~~redemption ~~Trust, each~~ of ~~which~~Baskets ~~could~~may ~~result~~adversely inaffect aan ~~reduction~~investment in the ~~price of the~~ Shares.

~~Security~~The ~~breaches,~~purchase ~~cyber-attacks, computer malware and computer hacking attacks have been a prevalent concern in relation to digital assets. Multiple thefts~~ of bitcoin in ~~and~~connection ~~other~~with ~~digital~~Basket ~~assets~~creation ~~from~~orders ~~other~~may ~~holders~~cause ~~have occurred in~~ the ~~past.~~price ~~Because~~ of ~~the decentralized process for transferring~~ bitcoin~~, thefts~~ ~~can be difficult~~ to ~~trace~~increase, which ~~may~~will ~~make~~result ~~bitcoin~~in ahigher ~~particularly~~prices ~~attractive target~~ for ~~theft.~~the ~~Cyber security failures or breaches~~Shares. ofIncreases ~~one~~in ~~or more of~~ the ~~Trust’s~~bitcoin ~~service~~prices ~~providers~~may ~~(including~~also ~~but~~occur ~~not~~as ~~limited~~a ~~to,~~result ~~the~~of ~~Index~~bitcoin ~~Provider,~~purchases ~~the~~by ~~Transfer~~other ~~Agent,~~market ~~the~~participants ~~Administrator, or~~who ~~the~~attempt ~~Bitcoin Custodian) have the ability~~ to ~~cause~~benefit ~~disruptions~~from an ~~and~~increase ~~impact business operations, potentially resulting~~ in ~~financial~~the ~~losses, violations~~market price of ~~applicable~~bitcoin ~~privacy~~when ~~and~~Baskets ~~other~~are ~~laws,~~created. ~~regulatory~~The ~~fines,~~market ~~penalties,~~price ~~reputational~~of ~~damage,~~bitcoin ~~reimbursement~~may ortherefore ~~other~~decline ~~compensation~~immediately after ~~costs,~~Baskets ~~and/or~~are ~~additional compliance costs~~created.

~~The~~Selling ~~Trust~~activity ~~and its service~~associated ~~providers’~~with ~~use~~sales of internet, technology and information systems (including mobile devices and cloud-based service offerings) may expose the Trust to potential risks linked to cyber-security breaches of those technological or information systems. Security breaches, computer malware, ransomware and computer hacking attacks have been a prevalent concern in relation to digital assets. The Sponsor believes that the Trust’s bitcoin ~~held~~ in ~~the~~connection ~~Trust’s account~~ with ~~the~~redemption ~~Bitcoin~~orders ~~Custodian~~may ~~will~~decrease ~~be an appealing target to hackers or malware distributors seeking to destroy, damage or steal~~ the ~~Trust’s~~ bitcoin orprices, ~~private~~which ~~keys and~~ will ~~only~~result ~~become~~in ~~more~~lower ~~appealing as~~prices ~~the~~for ~~Trust’s assets grow. To~~ the ~~extent that the Trust, the Sponsor or the Bitcoin Custodian is unable to identify and mitigate~~ orShares. ~~stop~~Decreases ~~new security threats or otherwise adapt to technological changes~~ in ~~the~~bitcoin ~~digital~~prices ~~asset~~may ~~industry,~~also ~~the~~occur ~~Trust’s~~as ~~bitcoin~~a ~~may be~~result ~~subject~~of toselling ~~theft,~~activity ~~loss,~~by ~~destruction or~~ other ~~attack~~market participants.

~~The~~In ~~Sponsor~~addition ~~has~~to ~~evaluated~~ the ~~security~~effect that ~~procedures~~purchases inand ~~place~~sales ~~for~~of ~~safeguarding~~bitcoin ~~the~~as ~~Trust’s~~part ~~bitcoin.~~of ~~Nevertheless,~~ the ~~security~~creation ~~procedures~~and ~~cannot~~redemption ~~guarantee~~process ~~the prevention~~may ofhave ~~any~~on ~~loss~~the ~~due~~price toof ~~a security breach~~bitcoin, ~~software~~sales ~~defect~~and ~~or act~~ purchases of ~~God~~bitcoin ~~that may be borne~~ by ~~the~~similar ~~Trust.~~investment ~~Access~~vehicles to(if ~~the~~developed) ~~Trust’s bitcoin~~ could beimpact ~~restricted~~the byprice ~~natural~~of ~~events~~bitcoin. ~~(such~~If asthe anprice ~~earthquake~~of orbitcoin ~~flood)~~declines, orthe ~~human~~trading price ~~actions~~of ~~(such~~the asShares awill ~~terrorist~~generally ~~attack)~~also decline.

The ~~security~~inability ~~procedures~~of ~~and~~Bitcoin ~~operational~~Counterparties ~~infrastructure may be breached due~~ to ~~the~~hedge ~~actions~~their ofbitcoin ~~outside~~exposure ~~parties, error or malfeasance of an employee of the Sponsor, the Sub-Adviser, the Bitcoin Custodian, or otherwise, and, as a result, an unauthorized party~~ may ~~obtain~~adversely ~~access~~affect to the ~~Trust’s~~liquidity ~~account with~~of ~~the~~Shares ~~Bitcoin Custodian, the private keys (~~and ~~therefore bitcoin) or other data of~~ the ~~Trust.~~value ~~Additionally, outside parties may attempt to fraudulently induce employees~~ of ~~the~~an ~~Sponsor,~~investment ~~the Sub-Adviser, the Bitcoin Custodian, or the Trust’s other service providers to disclose sensitive information~~ in ~~order to gain access to~~ the ~~Trust’s infrastructure~~Shares. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, the Sponsor and the Bitcoin Custodian may be unable to anticipate these techniques or implement adequate preventative measures.

AnAuthorized ~~actual~~Participants orand market ~~perceived~~makers ~~breach of~~will ~~the~~generally ~~Trust’s~~want ~~account~~to hedge their exposure in connection with ~~the~~Basket ~~Bitcoin~~creation ~~Custodian~~and ~~could~~redemption ~~harm~~orders. To the ~~Trust’s~~extent ~~operations~~Authorized Participants and market makers are unable to hedge their exposure due to market conditions (e.g., ~~result~~insufficient bitcoin liquidity in ~~partial~~the market, inability to locate an appropriate hedge counterparty, etc.), such conditions may make it difficult for Authorized Participants to create or ~~total~~redeem ~~loss~~Baskets of(or cause them to not create or redeem Baskets). In addition, the hedging mechanisms employed by Bitcoin Counterparties ~~Trust’s~~to ~~assets~~hedge their exposure to bitcoin may not function as intended, ~~damage~~which ~~the~~may ~~Trust’s~~make ~~reputation~~it ~~and~~more difficult for them to enter into such transactions. Such events could negatively ~~affect~~impact the market ~~perception~~price of ~~the~~Shares ~~effectiveness~~and of the ~~Trust, all~~spread ofat which ~~could~~Shares intrade ~~turn~~on ~~reduce~~the ~~demand~~open ~~for~~market. To the ~~Shares~~extent Bitcoin Counterparties wish to use futures to hedge their exposure, ~~resulting~~note inthat awhile ~~reduction~~growing in recent years, the ~~price~~market offor ~~the~~exchange-traded bitcoin ~~Shares.~~futures ~~The~~has ~~Trust~~a limited trading history and operational experience and may ~~also~~be ~~cease~~less liquid, more volatile and more vulnerable to ~~operations~~economic, ~~the~~market ~~occurrence~~and ofindustry ~~which~~changes ~~could~~than ~~similarly~~more ~~result~~established infutures amarkets. ~~reduction~~The inliquidity of the ~~price~~market will depend on, among other things, the adoption of bitcoin and the ~~Shares~~commercial and speculative interest in the market.

~~While~~Arbitrage ~~the Sponsor has established~~transactions ~~business~~intended ~~continuity~~to ~~plans~~keep ~~and~~the ~~systems~~price ~~that~~of itShares ~~believes~~closely ~~are~~linked ~~reasonably designed~~ to ~~prevent~~the ~~cyber~~price ~~attacks,~~of ~~there~~bitcoin ~~are~~may ~~inherent~~be ~~limitations in~~problematic ~~such~~if ~~plans~~the ~~and~~process ~~systems~~for ~~including~~ the ~~possibility~~creation ~~that~~and ~~certain risks have not been, or cannot be, identified. Service providers may~~redemption ~~have~~of ~~limited~~Baskets ~~indemnification~~encounters ~~obligations to the Trust~~difficulties, which ~~could~~may beadversely ~~negatively~~affect ~~impacted~~an asinvestment ain ~~result~~the Shares.

If the ~~Trust’s~~processes ~~holdings~~ of ~~bitcoin~~creation and ~~are~~redemption ~~lost,~~of ~~stolen~~the orShares ~~destroyed~~encounter ~~under~~any ~~circumstances~~unanticipated ~~rendering~~difficulties, apotential ~~party~~market ~~liable~~participants towho ~~the~~would ~~Trust,~~otherwise ~~the~~be ~~responsible~~willing ~~party may not have~~to ~~the~~purchase ~~financial~~or ~~resources,~~redeem ~~including~~Baskets ~~insurance coverage, sufficient~~ to ~~satisfy~~take ~~the~~advantage ~~Trust’s~~of ~~claim.~~any ~~For~~arbitrage ~~example,~~opportunity asarising tofrom adiscrepancies ~~particular event~~between ~~of loss,~~ the ~~only~~price ~~source~~ of ~~recovery~~the ~~for~~Shares and the ~~Trust~~price ~~may~~of ~~be limited to~~ the ~~relevant~~underlying ~~custodian~~bitcoin ~~or,~~may tonot take the ~~extent~~risk ~~identifiable~~that, ~~other responsible~~as ~~third parties (for example,~~ a ~~thief~~result orof ~~terrorist)~~those difficulties, ~~any~~they ~~of which~~ may not ~~have~~be ~~the~~able ~~financial~~to ~~resources~~realize ~~(including liability~~the ~~insurance~~profit ~~coverage)~~they toexpect. ~~satisfy~~If athis ~~valid~~is ~~claim of~~ the ~~Trust. Similarly~~case, ~~as noted below,~~ the ~~Trust’s~~liquidity ~~Bitcoin~~of ~~Custodian~~Shares ~~has~~may ~~extraordinarily limited~~decline, ~~liability~~and to the ~~Trust,~~price ~~which~~of ~~will adversely affect~~ the ~~Trust’s~~Shares ~~ability~~may tofluctuate ~~seek~~independently of ~~recovery~~the ~~from~~price ~~them,~~of ~~even~~bitcoin ~~when~~and ~~they~~may ~~are at fault~~fall.

ItSecurity ~~may~~threats ~~not~~and cyber-attacks becould ~~possible,~~result ~~either because~~in ofthe ahalting ~~lack~~ of ~~available~~Trust ~~policies~~operations orand ~~because~~a loss of ~~prohibitive~~Trust ~~cost,~~assets ~~for~~or ~~the~~damage ~~Trust~~ to ~~obtain~~the ~~insurance~~reputation ~~that would cover losses~~ of the Trust’s, ~~bitcoin.~~each of Ifwhich ancould ~~uninsured~~result ~~loss~~in ~~occurs or~~ a ~~loss~~reduction ~~exceeds~~in ~~policy limits,~~ the ~~Trust~~price ~~could lose all~~ of ~~its~~the ~~assets~~Shares.

38Security breaches, cyber-attacks, computer malware and computer hacking attacks have been a prevalent concern in relation to digital assets. Multiple thefts of bitcoin and other digital assets from other holders have occurred in the past. Because of the decentralized process for transferring bitcoin, thefts can be difficult to trace, which may make bitcoin a particularly attractive target for theft. Cybersecurity failures or breaches of one or more of the Trust’s service providers (including but not limited to, the Index Provider, the Transfer Agent, the Administrator, or the Bitcoin Custodians) have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs.

The Trust and its service providers’ use of internet, technology and information systems (including mobile devices and cloud-based service offerings) may expose the Trust to potential risks linked to cybersecurity breaches of those technological or information systems. Security breaches, computer malware, ransomware and computer hacking attacks have been a prevalent concern in relation to digital assets. The Sponsor believes that the Trust’s bitcoin held in the Trust’s account with the Bitcoin Custodians will be an appealing target to hackers or ~~Custodian~~malware ~~could~~distributors seeking to destroy, damage or steal the Trust’s bitcoin or private keys and will only become ~~insolvent~~more appealing as the Trust’s assets grow. To the extent that the Trust, the Sponsor or the Bitcoin Custodians are unable to identify and mitigate or stop new security threats or otherwise adapt to technological changes in the digital asset industry, the Trust’s bitcoin may be subject to theft, loss, destruction or other attack.

The Trust’s assets will be held in one or more accounts maintained for the Trust by the Bitcoin Custodian or at other custodian banks which may be located in other jurisdictions. The Bitcoin Custodian is not a depository institution as it not insured by the FDIC. The insolvency of the Bitcoin Custodian or of any broker, custodian bank or clearing corporation used by the Bitcoin Custodian, may result in the loss of all or a substantial portion of the Trust’s assets or in a significant delay in the Trust having access to those assets. Additionally, custody of digital assets presents inherent and unique risks relating to access loss, theft and means of recourse in such scenarios. These risks are applicable to the Trust’s use of Coinbase Custody.36

The Sponsor has evaluated the security procedures in place for safeguarding the Trust’s ~~may~~bitcoin. ~~change~~Nevertheless, the ~~custodial arrangements~~security ~~described~~procedures incannot ~~this~~guarantee ~~report~~the prevention atof any ~~time~~loss ~~without~~due ~~notice~~to a security breach, software defect or act of God that may be borne by the Trust. Access to ~~Shareholders~~the Trust’s bitcoin could be restricted by natural events (such as an earthquake or flood) or human actions (such as a terrorist attack).

The ~~Trust~~security isprocedures ~~subject~~and tooperational ~~risks~~infrastructure may be breached due to ~~its~~the ~~concentration~~actions of ~~investments~~outside parties, error or malfeasance of an employee of the Sponsor, the Sub-Adviser, the Bitcoin Custodians, or otherwise, and, as a result, an unauthorized party may obtain access to the Trust’s account with the Bitcoin Custodians, the private keys (and therefore bitcoin) or other data of the Trust. Additionally, outside parties may attempt to fraudulently induce employees of the Sponsor, the Sub-Adviser, the Bitcoin Custodians, or the Trust’s other service providers to disclose sensitive information in order to gain access to the Trust’s infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a ~~single~~predetermined event ~~asset~~and often are not recognized until launched against a target, the Sponsor and the Bitcoin Custodians may be unable to anticipate these techniques or implement adequate preventative measures.

~~Unlike~~An ~~other~~actual ~~funds~~or ~~that~~perceived ~~may~~breach ~~invest~~of ~~in diversified assets,~~ the Trust’s ~~investment~~account ~~strategy~~with isthe ~~concentrated~~Bitcoin inCustodians acould ~~single~~harm ~~asset~~the ~~within~~Trust’s aoperations, ~~single~~result ~~asset~~in ~~class.~~partial ~~This concentration~~or ~~maximizes~~total loss of the Trust’s ~~degree~~assets, ofdamage the Trust’s ~~exposure~~reputation toand anegatively ~~variety~~affect ofthe market ~~risks~~perception ~~associated~~of ~~with~~the ~~bitcoin~~effectiveness ~~and~~of ~~digital~~the ~~assets.~~Trust, Byall ~~concentrating~~of ~~its~~which ~~investment~~could ~~strategy solely~~ in ~~bitcoin,~~turn ~~any~~reduce ~~losses~~demand ~~suffered~~for asthe aShares, ~~result~~resulting ofin a ~~decrease~~reduction in the ~~value~~price of ~~bitcoin can be expected to reduce~~ the ~~value~~Shares. ofThe ~~an interest in the~~ Trust ~~and~~may ~~will~~also ~~not~~cease operations, bethe ~~offset~~occurrence byof ~~other~~which ~~gains~~could ifsimilarly ~~the~~result ~~Trust~~in ~~were~~a toreduction ~~invest~~ in ~~underlying assets~~the ~~that~~price ~~were~~of ~~diversified~~the Shares.

~~The~~While ~~lack~~the ofSponsor ~~active~~has ~~trading~~established ~~markets~~business ~~for~~continuity ~~the~~plans ~~Shares~~and ~~may~~systems ~~result~~that it believes are reasonably designed to prevent cyber-attacks, there are inherent limitations in ~~losses~~such onplans ~~Shareholders’~~and ~~investments~~systems atincluding the ~~time~~possibility ofthat ~~disposition~~certain ofrisks ~~Shares~~have not been, or cannot be, identified. Service providers may have limited indemnification obligations to the Trust, which could be negatively impacted as a result.

~~Although~~If ~~Shares of~~ the Trust’s holdings of bitcoin are ~~expected~~lost, tostolen beor ~~publicly~~destroyed ~~listed~~under ~~and~~circumstances ~~traded~~rendering ona anparty ~~exchange~~liable to the Trust, ~~there~~the ~~can~~responsible beparty nomay ~~guarantee~~not ~~that~~have the anfinancial ~~active~~resources, ~~trading~~including ~~market~~insurance ~~for~~coverage, ~~the~~sufficient ~~Shares~~to ~~will develop~~satisfy orthe beTrust’s ~~maintained~~claim. IfFor ~~Shareholders~~example, ~~need~~as to ~~sell~~a ~~their~~particular event ~~Shares~~of atloss, athe ~~time~~only ~~when~~source noof ~~active~~recovery ~~market~~ for ~~them~~the ~~exists~~Trust may be limited to the relevant custodian or, to the ~~price~~extent ~~Shareholders~~identifiable, other ~~receive~~responsible third parties (for ~~their~~example, ~~Shares~~a thief or terrorist), ~~assuming~~any ~~that~~of ~~Shareholders~~which ~~are~~may ~~able~~not have the financial resources (including liability insurance coverage) to ~~sell~~satisfy ~~them,~~a ~~may~~valid beclaim ~~lower~~of ~~than~~the Trust. Similarly, as noted below, the ~~price~~Bitcoin ~~that~~Custodians ~~Shareholders~~have ~~would~~extraordinarily ~~receive~~limited ifliability anto ~~active~~the ~~market~~Trust, ~~did~~which ~~exist~~will ~~and,~~adversely ~~accordingly~~affect the Trust’s ability to seek recovery from them, aeven ~~Shareholder~~when ~~may~~they ~~suffer~~are ~~losses~~at fault.

~~Several~~It ~~factors~~ may not be possible, either ~~affect~~because of a lack of available policies or because of prohibitive cost, for the Trust to obtain insurance that would cover losses of the Trust’s ~~ability~~bitcoin. toIf ~~achieve~~an ~~its~~uninsured ~~investment~~loss ~~objective~~occurs onor a ~~consistent~~loss ~~basis~~exceeds policy limits, the Trust could lose all of its assets.

~~There can be no assurance that the Trust will achieve its investment objective. Factors that may affect the Trust’s ability to meet its investment objective include: (1)~~ The ~~Trust’s or a~~ Bitcoin ~~Counterparty’s ability to purchase and sell bitcoin in an efficient manner to effectuate~~Custodians ~~creation~~could ~~and~~become redemption orders; (2) transaction fees associated with the Bitcoin network; (3) the bitcoin market becoming illiquid or disrupted; (4) the need to conform the Trust’s portfolio holdings to comply with investment restrictions or policies or regulatory or tax law requirements; (5) early or unanticipated closings of the markets on which bitcoin trades, resulting in the inability of Authorized Participants to execute intended portfolio transactions; and (6) accounting standardsinsolvent.

The ~~amount~~Trust’s ofassets ~~bitcoin~~are ~~represented~~held in accounts maintained for the Trust by the ~~Shares~~Bitcoin ~~will~~Custodians ~~decline~~and ~~over~~may ~~time~~in the future be held at other custodian banks which may be located in other jurisdictions. The Bitcoin Custodians are not depository institutions as they are not insured by the FDIC. The insolvency of the Bitcoin Custodians or of any broker, custodian bank or clearing corporation used by the Bitcoin Custodians, may result in the loss of all or a substantial portion of the Trust’s assets or in a significant delay in the Trust having access to those assets. Additionally, custody of digital assets presents inherent and unique risks relating to access loss, theft and means of recourse in such scenarios. These risks are applicable to the Trust’s use of Coinbase Custody.

The ~~amount~~Trust ofmay ~~bitcoin~~change ~~represented by~~ the ~~Shares~~custodial arrangements ~~will~~described ~~continue~~in tothis bereport ~~reduced~~at ~~during~~any ~~the~~time ~~life~~without ofnotice ~~the Trust due~~ to ~~the transfer of the Trust’s bitcoin to pay for the Sponsor Fee and other liabilities~~Shareholders.

~~Each outstanding Share represents a fractional, undivided interest in the bitcoin held by the Trust.~~ The Trust ~~does not generate any income and transfers bitcoin to pay for the Sponsor Fee and other liabilities. Therefore, the amount of bitcoin represented by each Share will gradually decline over time. This~~ is ~~also true with respect~~ subject to ~~Shares~~risks ~~that~~due ~~are issued in exchange for additional bitcoin over time, as the amount of bitcoin required~~ to ~~create~~its ~~Shares~~concentration ~~proportionally reflects the amount~~ of ~~bitcoin~~investments ~~represented~~in ~~by the Shares outstanding at the time of such creation unit being created. Assuming~~ a ~~constant~~single ~~bitcoin price, the trading price of the Shares is expected to gradually decline relative to the price of bitcoin as the amount of bitcoin represented by the Shares gradually declines~~asset.

~~Shareholders~~Unlike ~~should~~other befunds ~~aware~~ that may invest in diversified assets, the ~~gradual~~Trust’s ~~decline~~investment strategy is concentrated in a single asset within a single asset class. This concentration maximizes the ~~amount~~degree of the Trust’s exposure to a variety of market risks associated with bitcoin ~~represented~~and bydigital ~~the~~assets. By ~~Shares~~concentrating ~~will~~its ~~occur~~investment ~~regardless~~strategy ofsolely ~~whether~~in ~~the~~bitcoin, ~~trading~~any ~~price~~losses suffered as a result of a decrease in the value of bitcoin can ~~Shares~~be ~~rises~~expected orto ~~falls~~reduce the value of an interest in ~~response~~the Trust and will not be offset by other gains if the Trust were to ~~changes~~invest in ~~the~~underlying assets ~~price~~that ofwere ~~bitcoin~~diversified.

~~The development and commercialization of the Trust is subject to competitive pressures.~~37

~~The~~A ~~Trust~~lack ~~and~~of ~~the~~active ~~Sponsor~~trading ~~face~~markets ~~competition~~for ~~with respect to~~ the ~~creation~~Shares ofmay ~~competing~~result ~~products,~~in ~~such~~losses ason ~~exchange-traded~~Shareholders’ ~~products~~investments ~~offering~~at ~~exposure to~~ the ~~spot~~time ~~bitcoin market or other digital assets. If the SEC were to approve many or all~~ of ~~the~~disposition ~~currently pending applications for such exchange-traded bitcoin products, many or all~~ of ~~such products, including the Trust, could fail to acquire substantial assets, initially or at all~~Shares.

39Although Shares of the Trust are listed and traded on an exchange, there can be no guarantee that an active trading market for the Shares will be maintained. If Shareholders need to sell their Shares at a time when no active market for them exists, the price Shareholders receive for their Shares, assuming that Shareholders are able to sell them, may be lower than the price that Shareholders would receive if an active market did exist and, accordingly, a Shareholder may suffer losses.

~~The~~Several ~~Sponsor’s~~factors ~~competitors~~ may affect ~~have greater financial, technical and human resources than~~ the ~~Sponsor. Smaller or early-stage companies may also prove to be effective competitors, particularly through collaborative arrangements with large and established companies. The~~ Trust’s ~~competitors~~ability ~~may also charge a substantially lower fee than the Sponsor Fee in order~~ to achieve ~~initial~~its ~~market~~investment ~~acceptance~~objective ~~and~~on ~~scale. Accordingly, the Sponsor’s competitors may commercialize~~ a ~~competing~~consistent product more rapidly or effectively than the Sponsor is able to, which could adversely affect the Sponsor’s competitive position and the likelihood that the Trust will achieve initial market acceptance, and could have a detrimental effect on the scale and sustainability of the Trust and the Sponsor’s ability to generate meaningful revenues from the Trustbasis.

IfThere ~~the~~can ~~Trust~~be ~~fails~~no ~~to achieve~~assurance ~~sufficient~~that ~~scale due to competition,~~ the ~~Sponsor~~Trust ~~may~~will ~~have~~achieve ~~difficulty~~its ~~raising~~investment ~~sufficient~~objective. ~~revenue~~Factors tothat ~~cover~~may ~~the~~affect ~~costs associated with launching and maintaining~~ the Trust~~, and such shortfalls could impact the Sponsor~~’s ability to ~~properly~~meet ~~invest~~its ininvestment ~~robust ongoing operations~~objective ~~and~~include: ~~controls~~(1) ofThe ~~the~~ Trust’s toor ~~minimize~~ the ~~risk~~Bitcoin ofCounterparties’ ~~operating~~ability ~~events,~~to ~~errors,~~purchase orand ~~other~~sell ~~forms~~bitcoin ofin ~~losses~~an efficient manner to ~~the~~effectuate creation ~~Shareholders.~~and Inredemption ~~addition, the~~orders; ~~Trust~~(2) ~~may~~transaction ~~also~~fees ~~fail~~associated towith ~~attract~~the ~~adequate~~Bitcoin ~~liquidity~~network; in(3) the ~~secondary~~bitcoin market ~~due~~becoming toilliquid ~~such~~or disrupted; ~~competition,~~(4) ~~resulting~~the inneed ato ~~sub-standard~~conform ~~number of~~the ~~Authorized~~Trust’s ~~Participants~~portfolio ~~willing~~holdings to ~~make~~comply awith ~~market~~investment inrestrictions ~~the~~or ~~Shares,~~policies ~~which~~or inregulatory or ~~turn~~tax ~~could~~law ~~result~~requirements; in(5) aearly ~~significant~~or ~~premium~~unanticipated orclosings ~~discount~~of in the ~~Shares~~markets ~~for~~on ~~extended~~which ~~periods~~bitcoin ~~and~~trades, resulting in the ~~Trust’s~~inability ~~failure~~of Authorized Participants to ~~reflect~~execute ~~the~~intended ~~performance~~portfolio oftransactions; ~~the~~and ~~price~~(6) ofaccounting ~~bitcoin~~standards.

~~There~~The ~~can~~amount beof ~~no assurance~~bitcoin ~~that~~represented ~~the~~by ~~Trust will grow to or maintain an economically viable size. There is no guarantee that~~ the ~~Sponsor~~Shares will ~~maintain~~decline aover ~~commercial advantage relative to competitors offering similar products~~time. Whether or not the Trust and the Sponsor are successful in achieving the intended scale for the Trust may be impacted by a range of factors, such as the Trust’s timing in entering the market and its fee structure relative to those of competitive products.

AThe ~~loss~~amount of ~~confidence~~bitcoin represented orby ~~breach~~the ofShares ~~the~~will ~~Bitcoin~~continue ~~Custodian~~to ~~may~~be ~~adversely~~reduced ~~affect~~during the life of the Trust ~~and~~due to the ~~value~~transfer of anthe ~~investment~~Trust’s inbitcoin to pay for the Sponsor ~~Shares~~Fee and other liabilities.

~~Custody~~Each ~~and~~outstanding ~~security~~Share ~~services~~represents ~~for~~a ~~the~~fractional, ~~Trust’s~~undivided ~~bitcoin~~interest ~~are~~in ~~provided~~the bybitcoin ~~Coinbase~~held ~~Custody,~~by ~~although~~ the Trust. ~~may~~The ~~retain~~Trust ~~one~~does ornot ~~more~~generate ~~additional~~any ~~custodians~~income atand atransfers ~~later date.~~bitcoin ~~Bitcoin~~to ~~held~~pay for by the ~~Trust~~Sponsor ~~may~~Fee beand ~~custodied~~other orliabilities. ~~secured~~Therefore, inthe ~~different~~amount ~~ways~~of ~~(for~~bitcoin ~~example,~~represented aby ~~portion~~each ofShare ~~the~~will ~~Trust’s~~gradually ~~bitcoin~~decline ~~holdings~~over time. ~~may~~This beis ~~custodied~~also bytrue ~~Coinbase~~with ~~Custody~~respect ~~and~~to ~~another~~Shares ~~portion~~that byare ~~another~~issued ~~third-party~~in ~~custodian).~~exchange ~~Over~~for additional bitcoin over time, as the ~~Trust~~amount ~~may~~of ~~change~~bitcoin ~~the custody~~required orto ~~security~~create ~~arrangement~~Shares ~~for~~proportionally ~~all~~reflects orthe aamount ~~portion~~ of ~~its~~bitcoin ~~holdings.~~represented ~~The~~by ~~Sponsor~~the ~~will~~Shares ~~decide~~outstanding at the ~~appropriate~~time ~~custody~~of ~~and~~such ~~arrangements~~Creation ~~based on,~~Basket ~~among~~being ~~other~~created. ~~factors~~Assuming a constant bitcoin price, the ~~availability~~trading price of ~~experienced~~the ~~custodians~~Shares ~~and~~is ~~the~~expected ~~Trust’s~~to ~~ability~~gradually decline relative to ~~securely~~the ~~safeguard~~price of bitcoin as the amount of bitcoin represented by the Shares gradually declines.

~~The~~Shareholders ~~Trust~~should ~~expects~~be ~~Coinbase~~aware ~~Custody~~that ~~will~~the ~~custody~~gradual ~~most~~decline orin ~~all~~the amount of ~~its~~ bitcoin ~~holdings.~~represented Aby ~~loss~~the ofShares ~~confidence~~will oroccur ~~breach~~regardless of whether the ~~Bitcoin~~trading ~~Custodian~~price ~~may~~of ~~adversely affect~~ the Shares ~~Trust~~rises ~~and~~or ~~the~~falls ~~value~~in ofresponse anto ~~investment~~changes in the ~~Shares~~price of bitcoin.

The ~~Sponsor~~development ~~may need~~and tocommercialization ~~find~~of ~~and~~the ~~appoint~~Trust ais ~~replacement~~subject ~~bitcoin custodian or prime broker quickly, which could pose a challenge~~ to ~~the~~competitive ~~safekeeping of the Trust’s bitcoin~~pressures.

The ~~Sponsor~~Trust ~~could~~and ~~decide~~the toSponsor ~~replace~~face ~~the~~competition ~~Bitcoin~~with ~~Custodian~~respect asto the ~~Bitcoin~~creation ~~Custodian~~ of ~~the~~competing ~~Trust’s~~products, ~~bitcoin~~such ~~or the Prime Broker~~ as ~~the~~exchange-traded ~~provider~~products ofoffering ~~prime~~exposure ~~brokerages~~ to the ~~Trust.~~spot ~~Transferring~~bitcoin market ~~maintenance~~or ~~responsibilities~~other ofdigital ~~the~~assets. ~~Trust’s~~If ~~accounts with~~ the ~~Bitcoin~~SEC ~~Custodian~~were ~~and the Prime Broker~~ to ~~another~~approve ~~party~~many ~~will~~or ~~likely~~all beof ~~complex~~the ~~and~~currently ~~could~~pending ~~subject~~applications ~~the~~for ~~Trust’s~~such exchange-traded bitcoin toproducts, ~~the~~many ~~risk~~or all of ~~loss~~such ~~during~~products, including the ~~transfer~~Trust, ~~which~~ could ~~have~~ afail ~~negative~~to ~~impact~~acquire onsubstantial ~~the~~assets, ~~performance~~initially ~~of the Shares~~ or ~~result~~at ~~in loss of the Trust’s assets~~all.

The Sponsor’s competitors may ~~not~~have begreater ~~able to~~financial, ~~find~~technical aand ~~party~~human ~~willing~~resources tothan ~~serve as~~ the ~~Bitcoin~~Sponsor. ~~Custodian~~Smaller ~~under~~or ~~the~~early-stage ~~same~~companies ~~terms~~may asalso ~~the~~prove ~~current~~to ~~Custodial~~be ~~Services Agreement~~effective competitors, orparticularly asthrough ~~the Prime~~collaborative ~~Broker~~arrangements ~~under~~with ~~the~~large ~~same~~and ~~terms~~established ascompanies. ~~the~~The ~~current~~Trust’s ~~Prime~~competitors ~~Broker~~may ~~Agreement.~~also charge Toa ~~the~~substantially ~~extent~~lower ~~that~~fee than the Sponsor isFee ~~not~~in ~~able~~order to ~~find~~achieve ainitial ~~suitable~~market ~~party willing~~acceptance toand ~~serve~~scale. asAccordingly, the ~~Bitcoin~~Sponsor’s competitors ~~Custodian~~may orcommercialize ~~Prime~~a ~~Broker,~~competing asproduct ~~applicable,~~more rapidly or effectively than the Sponsor ~~may~~is beable ~~required~~ to, ~~terminate~~which ~~the~~could ~~Trust~~adversely ~~and liquidate~~affect the ~~Trust~~Sponsor’s ~~bitcoin.~~competitive Inposition ~~addition,~~and to the ~~extent~~likelihood that the ~~Sponsor~~Trust ~~finds~~will aachieve ~~suitable~~initial ~~party~~market ~~but~~acceptance, ~~must~~and ~~enter~~could ~~into~~have a ~~modified custodial~~detrimental ~~services~~effect ~~agreement~~on orthe ~~prime~~scale ~~broker~~and ~~agreement~~sustainability ~~that~~of ~~costs~~the ~~more,~~Trust and the ~~value~~Sponsor’s ofability ~~the~~to ~~Shares~~generate ~~could~~meaningful berevenues ~~adversely~~from ~~affected~~the Trust.

~~Lack~~If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue to cover the costs associated with launching and maintaining the Trust, and such shortfalls could impact the Sponsor’s ability to properly invest in robust ongoing operations and controls of ~~recourse~~the Trust to minimize the risk of operating events, errors, or other forms of losses to the Shareholders. In addition, the Trust may also fail to attract adequate liquidity in the secondary market due to such competition, resulting in a sub-standard number of Authorized Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in the Shares for extended periods and the Trust’s failure to reflect the performance of the price of bitcoin.

~~The~~There ~~Bitcoin~~can ~~Custodian~~be ~~has~~no assurance ~~limited~~that ~~liability, impairing~~ the ~~ability of the~~ Trust towill ~~recover~~grow ~~losses relating~~ to ~~its~~or ~~bitcoin~~maintain ~~and~~an ~~any~~economically ~~recovery~~viable ~~may~~size. beThere ~~limited,~~is ~~even in~~no ~~the~~guarantee ~~event~~that ~~of fraud. In addition,~~ the ~~Bitcoin~~Sponsor ~~Custodian~~will ~~may~~maintain ~~not~~a becommercial advantage ~~liable~~relative ~~for~~to ~~any~~competitors ~~delay~~offering insimilar ~~performance~~products. ofWhether ~~any~~or ofnot ~~its~~the ~~custodial~~Trust ~~obligations by~~and ~~reason~~the ofSponsor ~~any~~are ~~cause~~successful ~~beyond~~in ~~its~~achieving ~~reasonable~~the intended ~~control,~~scale ~~including~~for ~~force~~the ~~majeure~~Trust ~~events, war or terrorism, and~~ may ~~not~~ be ~~liable~~impacted ~~for~~by ~~any system~~a ~~failure~~range orof ~~third-party~~factors, ~~penetration~~such ofas ~~its~~the ~~systems.~~Trust’s Astiming ain ~~result,~~entering the ~~recourse~~market ofand ~~the~~its ~~Trust~~fee structure relative to ~~the~~those ~~Bitcoin~~of ~~Custodian~~competitive ~~may be limited~~products.

Under the Custodial Services Agreement, the Bitcoin Custodian’s liability is limited to the greater of (i) the market value of the Trust’s bitcoin held by the Bitcoin Custodian at the time the events giving rise to the liability occurred and (ii) the fair market value of the Trust’s bitcoin held by the Bitcoin Custodian at the time that the Bitcoin Custodian notifies the Sponsor or Trustee in writing, or the Sponsor or the Trustee otherwise has actual knowledge of the events giving rise to the liability.38

40A loss of confidence or breach of the Bitcoin Custodians may adversely affect the Trust and the value of an investment in the Shares.

~~Under~~Custody and security services for the Trust’s ~~Agreement,~~ bitcoin are provided by the ~~Trustee~~Bitcoin ~~and~~Custodians, although the ~~Sponsor~~Trust ~~will~~may ~~not~~retain beother ~~liable~~custodians ~~for~~at ~~any~~a ~~liability~~later ordate. Bitcoin ~~expense~~held ~~incurred~~by ~~absent~~the ~~gross~~Trust ~~negligence~~may be custodied or ~~wilful~~secured ~~misconduct~~in ondifferent ~~the part~~ways. ofOver time, the ~~Trustee~~Trust ormay change the ~~Sponsor~~custody or ~~breach~~security byarrangement for ~~the~~all ~~Sponsor~~or a portion of ~~the~~its ~~Trust~~holdings. ~~Agreement,~~The asSponsor ~~they~~will ~~case~~decide ~~may~~the ~~be.~~appropriate Ascustody aand ~~result~~arrangements based on, ~~the~~among ~~recourse~~other offactors, the ~~Trust~~availability orof ~~the~~experienced ~~Shareholder~~bitcoin tocustodians ~~Trustee~~and or the ~~Sponsor~~Trust’s ~~may~~ability beto ~~limited~~securely safeguard the bitcoin.

The ~~Index~~Trust ~~Provider~~expects ~~has~~that ~~limited~~the ~~liability~~Bitcoin ~~relating~~Custodians towill ~~the~~custody ~~use~~most ofor ~~the~~all ~~Index, impairing the ability~~ of the Trust’s tobitcoin ~~recover~~holdings. ~~losses~~A ~~relating~~loss ~~to its use~~ of ~~the~~confidence ~~Index. The Index Provider does not guarantee the accuracy, completeness,~~ or ~~performance~~breach of the ~~Index~~Bitcoin orCustodians may ~~the~~adversely ~~data~~affect ~~included~~the ~~therein~~Trust and ~~shall have no liability in connection with~~ the ~~Index~~value ~~or index calculation, errors, omissions or interruptions~~ of ~~the Index or any data included therein. The Index could be calculated now or in the future in a way that adversely affects~~ an investment in the ~~Trust~~Shares.

The ~~value~~Sponsor ofmay ~~the Shares~~need ~~will~~to befind ~~adversely~~and ~~affected~~appoint ifa ~~the~~replacement ~~Trust~~bitcoin iscustodian ~~required~~or toprime ~~indemnify~~broker ~~the Sponsor~~quickly, ~~the~~which ~~Sub-Adviser,~~could ~~the~~pose ~~Trustee,~~a ~~the~~challenge ~~Administrator,~~to the ~~Transfer Agent,~~safekeeping ~~the~~of ~~Bitcoin Custodian, or~~ the ~~Prime Broker~~Trust’s bitcoin.

~~Each~~The ~~of the~~ Sponsor, ~~the~~could ~~Sub-Adviser,~~decide to ~~the~~replace ~~Trustee,~~one ~~the~~or ~~Administrator,~~more ~~the~~of ~~Transfer Agent,~~ the Bitcoin ~~Custodian,~~Custodians ~~and~~as ~~the Prime Broker has~~ a ~~right~~custodian toof ~~be indemnified by~~ the Trust ~~for~~’s ~~certain~~bitcoin ~~liabilities~~ or ~~expenses~~the ~~that~~Prime itBroker ~~incurs~~as ~~without~~the ~~gross~~provider ~~negligence,~~of ~~bad~~prime brokerages ~~faith~~to orthe ~~wilful misconduct on its part~~Trust. ~~Therefore,~~Transferring ~~the Sponsor,~~maintenance ~~the~~responsibilities ~~Sub-Adviser,~~of the ~~Trustee,~~Trust’s ~~the~~accounts ~~Administrator,~~with the ~~Transfer Agent, the~~ Bitcoin ~~Custodian,~~Custodians and the Prime Broker ~~may~~to ~~require that~~another ~~the~~party ~~assets~~will oflikely ~~the~~be ~~Trust~~complex beand ~~sold~~could insubject ~~order~~the toTrust’s ~~cover~~bitcoin ~~losses~~to orthe ~~liability~~risk ~~suffered~~of byloss ~~it.~~during ~~Any~~the ~~sale~~transfer, ofwhich could ~~that~~have ~~kind~~a ~~would~~negative ~~reduce~~impact on the ~~bitcoin holdings~~performance of the ~~Trust~~Shares ~~and~~or ~~the~~result ~~value~~in loss of the ~~Shares~~Trust’s assets.

~~Intellectual~~The ~~property~~Sponsor may not be able ~~rights~~to ~~claims~~find a party willing to serve as a bitcoin custodian under the same terms as the current Custodial Services Agreements, or as a prime broker under the same terms as the current Prime Broker Agreement. To the extent that Sponsor is not able to find a suitable party willing to serve as a bitcoin custodian or a prime broker, as applicable, the Sponsor may ~~adversely~~be ~~affect~~required to terminate the Trust and liquidate the Trust’s bitcoin. In addition, to the extent that the Sponsor finds a suitable party but must enter into a modified custodial services agreement or prime broker agreement that costs more, the value of the Shares could be adversely affected.

~~The~~Lack ~~Sponsor is not aware~~ of ~~any~~ ~~intellectual property rights claims that may prevent the Trust from operating and holding bitcoin~~recourse. However, third parties may assert intellectual property rights claims relating to the operation of the Trust and the mechanics instituted for the investment in, holding of and transfer of bitcoin. Regardless of the merit of an intellectual property or other legal action, any legal expenses to defend or payments to settle such claims would be extraordinary expenses that would be borne by the Trust through the sale or transfer of its bitcoin and any threatened action that reduces confidence in long-term viability or the ability of end-users to hold and transfer bitcoin may adversely affect the value of the Shares. Additionally, a meritorious intellectual property rights claim could prevent the Trust from operating and force the Sponsor to terminate the Trust and liquidate its bitcoin. As a result, an intellectual property rights claim against the Trust could adversely affect the value of the Shares.

~~Unforeseeable~~The ~~risks~~Bitcoin Custodians have limited liability, impairing the ability of the Trust to recover losses relating to its bitcoin and any recovery may be limited, even in the event of fraud. In addition, the Bitcoin Custodians may not be liable for any delay in performance of any of its custodial obligations by reason of any cause beyond their reasonable control, including force majeure events, war or terrorism, and may not be liable for any system failure or third-party penetration of their systems. As a result, the recourse of the Trust to the Bitcoin Custodians may be limited.

~~Bitcoin~~Under ~~has~~the ~~gained~~Coinbase ~~commercial~~Custody ~~acceptance~~Agreement, ~~only~~the ~~within~~Coinbase ~~recent~~Custodian’s ~~years~~liability ~~and,~~is aslimited ato ~~result,~~the ~~there~~greater isof ~~little~~(i) ~~data~~the onmarket ~~its~~value ~~long-term~~of ~~investment~~the ~~potential.~~Trust’s ~~Additionally,~~bitcoin ~~due~~held by the Bitcoin Custodian at the time the events giving rise to the ~~rapidly~~liability ~~evolving~~occurred ~~nature~~and (ii) the fair market value of the Trust’s bitcoin ~~market,~~held ~~including~~by ~~advancements~~the inBitcoin Custodian at the ~~underlying~~time ~~technology~~that the Bitcoin Custodian notifies the Sponsor or ~~advancements~~Trustee in ~~competing technologies~~writing, ~~changes~~ toor ~~bitcoin~~the ~~may~~Sponsor or ~~expose~~the ~~investors~~Trustee inotherwise ~~the~~has ~~Trust~~actual toknowledge ~~additional~~of ~~risks~~the ~~which~~events ~~are~~giving ~~impossible~~rise to ~~predict~~the liability.

~~Risks~~Under ~~Associated~~the ~~with~~BitGo ~~the~~Custody ~~Index~~Agreement, BitGo and ~~Index~~its affiliates, including their officers, directors, agents, and employees, are not liable for any lost profits, special, incidental, ~~Pricing~~indirect, intangible, or consequential damages resulting from authorized or unauthorized use of the Trust or Sponsor’s site or services. This includes damages arising from any contract, tort, negligence, strict liability, or other legal grounds, even if BitGo was previously advised of, knew, or should have known about the possibility of such damages. However, this exclusion of liability does not extend to cases of BitGo’s fraud, willful misconduct, or gross negligence. In situations of gross negligence, BitGo’s liability is specifically limited to the value of the digital assets or fiat currency that were affected by the negligence. Additionally, the total liability of BitGo for direct damages is capped at the fees paid or payable to them under the relevant agreement during the twelve-month period immediately preceding the first incident that caused the liability.

~~The~~In ~~Index~~addition, ~~has~~BitGo ashall not be liable for delays, suspension of operations, whether temporary or permanent, failure in performance, or interruption of service which results directly or indirectly from any cause or condition beyond the reasonable control of BitGo, including, but not limited to, any ~~history~~delay or failure due to an act of God, natural disasters, act of civil or military authorities, act of terrorists, including, but not limited to, cyber-related terrorist acts, hacking, government restrictions, exchange or market rulings, civil disturbance, war, strike or other labor dispute, fire, interruption in telecommunications or Internet services or network provider services, failure of equipment and/or software, other catastrophe or any other occurrence which is beyond the reasonable control of BitGo.

The Index was developed by the Index Provider and has a limited performance history. Although the Index is based on materially the same methodology (except calculation time) as the Index Provider’s Bitcoin Reference Rate (“BRR”), which was first introduced in November 2016, the Index itself has only been in operation since February 2022, and the Index has only featured its current roster of Constituent Exchanges since May 2022. A longer history of actual performance through various economic and market conditions would provide greater and more reliable information for an investor to assess the Index’s performance. The Index Provider has substantial discretion at any time to change the methodology used to calculate the Index, including the spot markets that contribute prices to the Trust’s NAV. The Index Provider does not have any obligation to take the needs of the Trust, the Trust’s Shareholders, or anyone else into consideration in connection with such changes. There is no guarantee that the methodology currently used in calculating the Index will appropriately track the price of bitcoin in the future. The Index Provider has no obligation to take the needs of the Trust or the Shareholders into consideration in determining, composing, or calculating the Index.39

~~Pricing~~Under ~~sources~~the ~~used~~Anchorage ~~by the~~Custody ~~Index~~Agreement, ~~are~~except ~~digital~~for ~~asset~~Anchorage’s ~~spot~~bad ~~markets~~acts, ~~that~~confidentiality ~~facilitate~~obligations under the ~~buying~~Anchorage ~~and~~Custody ~~selling~~Agreement, ofindemnification ~~bitcoin~~obligations under ~~and~~Anchorage ~~other~~Custody ~~digital~~Agreement, ~~assets.~~or ~~Although~~obligations ~~many~~with ~~pricing sources~~respect ~~refer~~to rights to ~~themselves~~or aslimits ~~“exchanges,”~~on ~~they~~use ~~are~~under the Anchorage Custody Agreement, Anchorage is not ~~registered~~liable ~~with~~for any losses, whether in contract, tort or ~~supervised~~otherwise, for any amount in excess of fees paid by, the ~~SEC~~Trust orin ~~CFTC~~the ~~and~~twelve (12) domonths prior to when the liability arises. Moreover, Anchorage is not ~~meet~~liable for (i) losses which arise from its compliance with ~~the~~applicable ~~regulatory~~laws, ~~standards~~including ofsanctions alaws ~~national~~administered ~~securities~~by ~~exchange~~OFAC; or ~~designated~~(ii) ~~contract~~special, ~~market.~~indirect ~~For~~or ~~these~~consequential ~~reasons~~damages, ~~among~~or ~~others,~~lost ~~purchases~~profits ~~and~~or ~~sales~~loss of ~~bitcoin~~business ~~may~~arising bein ~~subject~~connection towith ~~temporary~~the ~~distortions~~Anchorage orCustody ~~other~~Agreement. ~~disruptions~~In ~~due~~addition, toAnchorage ~~various~~is ~~factors,~~not ~~including~~liable ~~the~~for ~~lack~~any oflosses ~~liquidity~~which inarise as a result of the ~~markets~~non-return ~~and~~of ~~government~~digital ~~regulation~~assets ~~and~~that ~~intervention.~~the ~~These~~Trust ~~circumstances~~has ~~could~~delegated ~~affect~~to ~~the~~Anchorage ~~price~~or ofa ~~bitcoin~~third ~~used~~party infor ~~Index~~on-chain ~~calculations~~services, ~~and~~such as staking, ~~therefore~~voting, ~~could~~vesting, ~~adversely~~and ~~affect~~signaling, ~~the~~unless ~~bitcoin~~such ~~price~~losses occur as ~~reflected~~a byresult ~~the~~of ~~Index~~Anchorage’s fraud or intentional misconduct.

41In addition, Anchorage shall not be liable for the failure to perform or any delay in the performance of its obligations under the Anchorage Custody Agreement to the extent such failure or delay is caused by or results from a circumstance beyond its reasonable control and that could not have been prevented or avoided by the exercise of due diligence, as long as the fact of the occurrence of such event is duly proven or is reasonably provable, including, but not limited to natural catastrophes, fire, explosions, pandemic or local epidemic, war or other action by a state actor, public power outages, civil unrests and conflicts, labor strikes or extreme shortages, acts of terrorism or espionage, Domain Name System server issues outside Anchorage’s direct control, technology attacks (e.g., DoS, DDoS, MitM), cyber-attack or malfunction on the blockchain network or protocol, or governmental action rendering performance illegal or impossible. Anchorage shall not be held liable by the Trust for such non-performance or delay.

~~The~~Under ~~Index~~the isTrust ~~based~~Agreement, the onTrustee ~~various inputs~~and ~~which~~the ~~include~~Sponsor ~~price~~will ~~data~~not ~~from~~be ~~various~~liable ~~third-party~~for ~~bitcoin~~any ~~spot~~liability ~~markets.~~or ~~The~~expense ~~Index~~incurred ~~Provider~~absent ~~does~~gross ~~not~~negligence ~~guarantee~~or willful misconduct on the ~~validity~~part of ~~any~~ the Trustee or the Sponsor or breach by the Sponsor of ~~these~~the ~~inputs~~Trust Agreement, ~~which~~as they case may be. ~~subject~~As toa ~~technological error~~result, ~~manipulative~~the ~~activity,~~recourse of the Trust or ~~fraudulent~~the ~~reporting~~Shareholder ~~from~~to ~~their~~Trustee ~~initial~~or ~~source~~the Sponsor may be limited.

~~Right~~The Index Provider has limited liability relating to ~~change~~the use of the Index, impairing the ability of the Trust to recover losses relating to its use of the Index. The Index Provider does not guarantee the accuracy, completeness, or performance of the Index or the data included therein and shall have no liability in connection with the Index or index calculation, errors, omissions or interruptions of the Index or any data included therein. The Index could be calculated now or in the future in a way that adversely affects an investment in the Trust.

● The ~~Sponsor,~~value inof ~~its~~the ~~sole~~Shares will ~~discretion,~~be ~~may~~adversely ~~cause~~affected if the Trust tois ~~track~~required ~~(or~~to ~~price~~indemnify ~~its~~the ~~portfolio~~Sponsor, ~~based~~the ~~upon)~~Sub-Adviser, anthe ~~index~~Trustee, ~~or standard other than~~ the ~~Index at any time~~Administrator, ~~with prior notice to~~ the ~~Shareholders~~Transfer Agent, ~~if investment conditions change or~~ the ~~Sponsor~~Bitcoin ~~believes~~Custodians, ~~that another index~~ or ~~standard better aligns with~~ the ~~Trust’s~~Prime ~~investment objective and strategy~~Broker. ~~The Sponsor may make this decision for a number of reasons, including, but not limited to the following:~~

●Each ~~Third~~of ~~parties~~the ~~may~~Sponsor, bethe ~~able~~Sub-Adviser, the toTrustee, ~~purchase~~the Administrator, the Transfer Agent, the Bitcoin Custodian, and ~~sell~~the ~~bitcoin~~Prime onBroker ~~public~~has a right to be indemnified by the Trust for certain liabilities or ~~private~~expenses ~~markets~~that ~~not~~it ~~included~~incurs ~~among~~without gross negligence, bad faith or willful misconduct on its part. Therefore, the Sponsor, ~~Constituent~~the ~~Exchanges~~Sub-Adviser, the Trustee, the Administrator, the Transfer Agent, the Bitcoin Custodian, and ~~such~~the ~~transactions~~Prime Broker may ~~take~~require that ~~place~~the atassets ~~prices~~of ~~materially~~the ~~higher~~Trust be sold in order to cover losses or ~~lower~~liability ~~than~~suffered by it. Any sale of that kind would reduce the ~~Index~~bitcoin holdings ~~price~~of the Trust and the value of the Shares.

●Intellectual ~~There~~property rights claims may beadversely ~~variances~~affect in the ~~prices~~Trust ofand ~~bitcoin on~~ the ~~various~~value ~~Constituent Exchanges, including as a result~~ of ~~differences~~the ~~in fee structures or administrative procedures on different Constituent Exchanges~~Shares.

● The ~~prices~~Sponsor onis ~~each~~not ~~Constituent~~aware ~~Exchange~~of any orintellectual ~~pricing~~property ~~source~~rights claims that may ~~not~~prevent the Trust from operating and holding bitcoin. However, third parties may assert intellectual property rights claims relating to the operation of the Trust and the mechanics instituted for the investment in, holding of and transfer of bitcoin. Regardless of the merit of an intellectual property or other legal action, any legal expenses to defend or payments to settle such claims would be ~~equal~~extraordinary expenses that would be borne by the Trust through the sale or transfer of its bitcoin and any threatened action that reduces confidence in long-term viability or the ability of end-users to hold and transfer bitcoin may adversely affect the value of the Shares. Additionally, a meritorious intellectual property rights claim could prevent the Trust from operating and force the Sponsor to terminate the Trust and liquidate its bitcoin. asAs ~~represented~~a byresult, an intellectual property rights claim against the ~~Index~~Trust could adversely affect the value of the Shares.

●Unforeseeable To the extent the Index price differs materially from the actual prices available on a Constituent Exchange, or the global market price of bitcoin, the price of the Shares may no longer track, whether temporarily or over time, the global market price of bitcoin, which could adversely affect an investment in the Trust by reducing investors’ confidence in the Shares’ ability to track the market price of bitcoinrisks.

●Bitcoin Tohas ~~the~~gained ~~extent~~commercial acceptance ~~market~~only ~~prices~~within ~~differ~~recent ~~materially~~years ~~from~~and, ~~the~~as ~~Index~~a ~~price~~result, ~~investors~~there ~~may~~is ~~lose~~little ~~confidence~~data inon ~~the~~its ~~Shares’~~long-term ~~ability~~investment topotential. ~~track~~Additionally, due to the ~~market~~rapidly ~~price~~evolving nature of the bitcoin market, ~~which~~including ~~could~~advancements ~~adversely~~in ~~affect~~ the ~~value~~underlying oftechnology or advancements in competing technologies, changes to bitcoin may expose investors in the ~~Shares~~Trust to additional risks which are impossible to predict.

~~The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance.~~40

Risks ~~related~~Associated towith the ~~pricing.~~Index and Index Pricing

AsThe ~~set forth under “Net Asset Value Determinations” below, the Trust’s portfolio will be priced, including for purposes of determining the NAV, based upon the~~ Index. ~~The~~has ~~price~~a ~~of bitcoin in U.S. Dollars or in other currencies available from other data sources may not be equal~~limited ~~to the prices used to calculate the NAV~~history.

The ~~NAV~~Index orwas developed by the ~~Principal~~Index ~~Market NAV~~Provider ofand ~~the~~has ~~Trust~~a ~~will~~limited ~~change~~performance ashistory. ~~fluctuations~~Although ~~occur~~the inIndex is based on materially the ~~market~~same ~~price~~methodology of(except calculation time) as the ~~Trust~~Index Provider’s ~~bitcoin~~Bitcoin ~~holdings~~Reference asRate ~~reflected~~(“BRR”), which was first introduced in November 2016, the Index. ~~Shareholders~~itself ~~should~~has beonly ~~aware~~been ~~that~~in operation since February 2022, and the ~~public~~Index has only featured its current roster of Constituent Exchanges since May 2022. A trading ~~price~~venue ~~per~~is ~~Share~~eligible ~~may~~as bea ~~different~~“Constituent ~~from~~Exchange” ~~the~~in ~~NAV~~any ~~and~~of the ~~Principal~~CME ~~Market~~CF ~~NAV~~Cryptocurrency ~~for~~Pricing aProducts if ~~number~~it offers a market that facilitates the spot trading of ~~reasons~~the relevant base digital asset against the corresponding quote asset, including markets ~~price~~where ~~volatility,~~the ~~trading~~quote ~~activity,~~asset is made fungible with the ~~closing~~accepted ofdigital ~~bitcoin~~asset ~~trading~~and ~~platforms~~makes ~~due~~trade todata ~~fraud,~~and ~~failure,~~order ~~security~~data available through an ~~breaches~~application orprogramming ~~otherwise~~interface with sufficient reliability, detail and ~~the~~timeliness. ~~fact~~A ~~that~~longer ~~supply~~history of actual performance through various economic and ~~demand~~market ~~forces~~conditions atwould ~~work~~provide ingreater ~~the~~and ~~secondary~~more ~~trading~~reliable ~~market~~information for ~~Shares~~an ~~are~~investor ~~related~~to assess the Index’s performance. The Index Provider has substantial discretion at any time to change the methodology used to calculate the Index, ~~but~~including the spot markets that contribute prices to the Trust’s NAV. The Index Provider does not ~~identical,~~have any obligation to take the ~~supply~~needs ~~and~~of ~~demand~~the ~~forces~~Trust, ~~influencing~~the Trust’s Shareholders, or anyone else into consideration in connection with such changes. There is no guarantee that the ~~market~~methodology currently used in calculating the Index will appropriately track the price of bitcoin in the future. The Index Provider has no obligation to take the needs of the Trust or the Shareholders into consideration in determining, composing, or calculating the Index.

AnPricing ~~Authorized~~sources ~~Participant~~used by the ~~may~~Index beare ~~able~~digital asset spot markets that facilitate the buying and selling of bitcoin and other digital assets. Although many pricing sources refer to ~~create~~themselves as “exchanges,” they are not registered with, or ~~redeem~~supervised aby, ~~Basket~~the atSEC or CFTC and do not meet the regulatory standards of a ~~discount~~national securities exchange or adesignated ~~premium~~contract tomarket. ~~the~~For ~~public~~these ~~trading~~reasons, ~~price~~among ~~per~~others, ~~Share~~purchases and sales of bitcoin may be subject to temporary distortions or other disruptions due to various factors, including the ~~Trust~~lack ~~will~~of ~~therefore~~liquidity ~~maintain~~in ~~its~~the ~~intended~~markets ~~fractional~~and ~~exposure~~government toregulation aand ~~specific~~intervention. ~~amount~~These circumstances could affect the price of bitcoin ~~per~~used ~~Share~~in Index calculations and, therefore, could adversely affect the bitcoin price as reflected by the Index.

~~Shareholders~~The ~~also~~Index ~~should~~is ~~note~~based on various ~~that~~inputs ~~the~~which ~~size~~include ofprice ~~the~~data ~~Trust~~from invarious ~~terms~~third-party bitcoin spot markets. The Index Provider does not guarantee the validity of ~~total~~any of ~~bitcoin~~these ~~held~~inputs, which may ~~change~~be ~~substantially~~subject ~~over~~to ~~time~~technological ~~and~~error, asmanipulative ~~Baskets~~activity, ~~are~~or ~~created~~fraudulent ~~and~~reporting ~~redeemed~~from their initial source.

InRight ~~the~~to ~~event~~change that the value of the Trust’s bitcoin holdings or bitcoin holdings per Share is incorrectly calculated, neither the Sponsor nor the Administrator will be liable for any error and such misreporting of valuation data could adversely affect the value of the Sharesindex.

42● The Sponsor, in its sole discretion, may cause the Trust to track (or price its portfolio based upon) an index or standard other than the Index at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor believes that another index or standard better aligns with the Trust’s investment objective and strategy. The Sponsor may make this decision for a number of reasons, including, but not limited to the following:

~~Regulatory~~● ~~Risk~~Third parties may be able to purchase and sell bitcoin on public or private markets not included among the Constituent Exchanges, and such transactions may take place at prices materially higher or lower than the Index price.

● There ~~is a lack of consensus regarding the regulation of digital assets, including bitcoin. Regulation of digital assets continues to evolve across different jurisdictions worldwide, which~~ may ~~cause~~be ~~uncertainty~~variances ~~and~~in ~~insecurity as to~~ the ~~legal~~prices ~~and tax status~~ of ~~a given digital asset. As~~ bitcoin ~~and~~on ~~digital assets have grown in both popularity and market size,~~ the ~~U.S.~~various ~~Congress~~Constituent ~~and a number of U.S. federal and state agencies have been examining the operations of digital asset networks~~Exchanges, ~~digital~~including ~~asset~~as users and the digital asset spot market. Many of these state and federal agencies have brought enforcement actions and issued advisories and rules relating to digital asset markets. Ongoing and future regulatory actions with respect to digital assets generally or any single digital asset in particular may alter, perhaps to a ~~materially~~result ~~adverse extent, the nature~~ of andifferences ~~investment~~ in ~~the~~fee ~~Shares~~structures ~~and/~~or ~~the~~administrative ~~ability~~procedures ofon ~~the~~different ~~Trust~~Constituent ~~to continue to operate~~Exchanges.

~~Recent~~● ~~events,~~The ~~including~~prices among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis, BlockFi and others, and other developments in the digital asset markets, have resulted in calls for heightened scrutiny and regulation of the digital asset industry, with a specific focus on ~~intermediaries~~each ~~such~~Constituent asExchange ~~digital~~or ~~asset~~pricing ~~exchanges,~~source ~~platforms, and custodians. Federal and state legislatures and regulatory agencies~~ may ~~introduce~~not ~~and~~be ~~enact~~equal ~~new laws and regulations~~ to ~~regulate~~the ~~crypto~~value ~~asset intermediaries, such as digital asset exchanges and custodians. The March 2023 collapses~~ of Silicon Valley Bank, Silvergate Bank, and Signature Bank, which in some cases provided services to the digital assets industry, may amplify and/or accelerate these trends. On January 3, 2023, the federal banking agencies issued a ~~joint~~bitcoin ~~statement~~as onrepresented ~~crypto-asset~~by ~~risks to banking organizations following events which exposed vulnerabilities in~~ the ~~crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility, and contagion risk~~Index. Although banking organizations are not prohibited from crypto-asset related activities, the agencies have expressed significant safety and soundness concerns with business models that are concentrated in crypto-asset related activities or have concentrated exposures to the crypto-asset sector.

~~U.S.~~● ~~federal~~To ~~and~~the ~~state~~extent ~~regulators, as well as~~ the ~~White~~Index ~~House,~~price ~~have~~differs ~~issued~~materially ~~reports~~from ~~and releases concerning crypto assets, including Bitcoin and crypto asset markets. Further, in 2023~~ the ~~House~~actual ofprices ~~Representatives~~available ~~formed~~on ~~two~~a ~~new~~Constituent ~~subcommittees: the Digital Assets~~Exchange, ~~Financial~~or ~~Technology and Inclusion Subcommittee and~~ the ~~Commodity~~global ~~Markets,~~market ~~Digital~~price ~~Assets,~~of ~~and Rural Development Subcommittee~~bitcoin, ~~each of which were formed in part to analyse issues concerning crypto assets and demonstrate a legislative intent to develop and consider~~ the ~~adoption~~price of ~~federal legislation designed to address~~ the ~~perceived~~ ~~need~~Shares ~~for~~may ~~regulation~~no oflonger ~~and~~track, ~~concerns~~whether ~~surrounding~~temporarily ~~the~~or ~~crypto~~over ~~industry. However~~time, the ~~extent~~global ~~and~~market ~~content~~price of ~~any forthcoming laws and regulations are not yet ascertainable with certainty~~bitcoin, ~~and~~which itcould ~~may~~adversely ~~not~~affect bean ~~ascertainable~~investment in the ~~near~~Trust ~~future.~~by Areducing ~~divided~~investors’ ~~Congress~~confidence ~~makes any~~in ~~prediction~~the ~~difficult.~~Shares’ Weability ~~cannot~~to ~~predict~~track ~~how these, and other related events, will affect us or~~ the ~~crypto~~market ~~asset~~price ~~business~~of bitcoin.

In● ~~August~~To ~~2021,~~ the ~~chair of~~extent ~~the~~market ~~SEC~~prices ~~stated~~differ ~~that~~materially hefrom ~~believed investors using digital asset trading platforms are not adequately protected, and that activities on~~ the ~~platforms~~Index ~~can implicate the securities laws~~price, ~~commodities laws and banking laws, raising a number of issues related to protecting~~ investors ~~and~~ ~~consumers,~~may ~~guarding~~lose ~~against~~confidence ~~illicit~~in ~~activity, and ensuring financial stability. The chair expressed a need for~~ the ~~SEC~~Shares’ toability ~~have additional authorities~~ to ~~prevent~~track transactions, products, and platforms from “falling between regulatory cracks,” as well as for more resources to protect investors in “this growing and volatile sector.” The chair called for federal legislation centering on digital asset trading, lending, and decentralized finance (“DeFi”) platforms, seeking “additional plenary authority” to write rules for digital asset trading and lending. It is not possible to predict whether Congress will grant additional authorities to the ~~SEC~~market orprice ~~other regulators, what the nature~~ of ~~such additional authorities might be~~bitcoin, ~~how~~which ~~they~~could ~~might~~adversely ~~impact~~affect the ~~ability of digital asset markets to function or how any new regulations that may flow from such authorities might impact the~~ value of ~~digital assets generally and bitcoin held by~~ the ~~Trust specifically. The consequences of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the Trust and the~~ Shares.

The Financial Crimes Enforcement Network (“FinCEN”) requires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply with the anti-money laundering regulations applicable to money transmitters. In 2015Sponsor, ~~FinCEN assessed a $700~~however,~~000 fine~~ ~~against~~is ~~a sponsor of a digital asset for violating several requirements of the BSA by acting as a money services business and selling~~under ~~the~~no ~~digital~~obligation ~~asset~~whatsoever ~~without registering with FinCEN, and by failing~~ to ~~implement~~make ~~and~~such ~~maintain~~changes an adequate anti-money laundering program. In 2017, FinCEN assessed a $110 million fine against BTC-e, a now defunct digital asset exchange, for similar violations. The requirement that exchangers that do business in ~~the~~any Ucircumstance.S. register with FinCEN and comply with anti-money laundering regulations may increase the cost of buying and selling bitcoin and therefore may adversely affect the price of bitcoin and an investment in the Shares. In a March 2018 letter from FinCEN’s assistant secretary for legislative affairs to U.S. Senator Ron Wyden, the assistant secretary indicated that under current law both the developers and the exchanges involved in the sale of tokens in an initial coin offering (“ICO”) may be required to register with FinCEN as money transmitters and comply with the anti-money laundering regulations applicable to money transmitters.

43Risks related to pricing.

The ~~Office~~Trust’s ~~of Foreign Assets~~portfolio ~~Control~~will ~~(“OFAC”)~~be ofpriced, ~~the~~including ~~U.S.~~for ~~Department~~purposes of ~~the~~determining ~~Treasury (~~the ~~“U.S.~~NAV, ~~Treasury~~based ~~Department”)~~upon ~~has~~the ~~added~~Index. ~~digital~~The ~~currency addresses~~price ~~to the list~~ of ~~Specially~~bitcoin ~~Designated~~in ~~Nationals whose assets are blocked, and with whom~~ U.S. ~~persons~~Dollars ~~are generally prohibited from dealing. Such actions by OFAC,~~ or ~~by similar organizations~~ in other ~~jurisdictions, may introduce uncertainty in the market as to~~ ~~whether~~currencies ~~bitcoin~~available ~~that~~from ~~has~~other ~~been~~data ~~associated~~sources ~~with~~may ~~such~~not ~~addresses in the past can~~ be ~~easily~~equal ~~sold. This “tainted” bitcoin may trade at a substantial discount~~ to ~~untainted bitcoin. Reduced fungibility in~~ the ~~bitcoin~~prices ~~markets~~used ~~may~~to ~~reduce~~calculate the ~~liquidity of bitcoin and therefore adversely affect their price~~NAV.

InThe ~~February~~NAV ~~2020,~~or ~~then-U.S. Treasury~~the ~~Secretary~~Principal ~~Steven~~Market NAV ~~Mnuchin~~of ~~stated~~the ~~that~~Trust ~~digital~~will ~~assets~~change ~~were~~as afluctuations ~~“crucial~~occur ~~area”~~in ~~on which~~ the ~~U.S.~~market ~~Treasury~~price ~~Department~~of ~~has spent~~the ~~significant~~Trust’s ~~time.~~bitcoin ~~Secretary~~holdings ~~Mnuchin~~as ~~announced~~reflected ~~that~~in the UIndex.S. Shareholders ~~Treasury~~should ~~Department~~be isaware ~~preparing~~that ~~significant~~the ~~new~~public ~~regulations~~trading ~~governing digital~~price ~~asset~~per ~~activities~~Share tomay ~~address~~be ~~concerns~~different ~~regarding~~from the ~~potential~~NAV ~~use for facilitating money laundering~~ and ~~other~~the ~~illicit~~Principal ~~activities. In~~Market ~~December~~NAV ~~2020,~~for ~~FinCEN,~~ a number ~~bureau~~of ~~within the U.S. Treasury Department~~reasons, ~~proposed~~including aprice ~~rule that would require financial institutions to submit reports~~volatility, ~~keep~~trading ~~records~~activity, ~~and verify~~ the ~~identity~~closing of ~~customers~~bitcoin ~~for~~trading ~~certain~~platforms ~~transactions~~due to orfraud, ~~from~~failure, ~~so-called~~security breaches ~~“unhosted”~~or ~~wallets~~otherwise, ~~also~~ ~~commonly~~and ~~referred~~the tofact asthat ~~self-hosted~~supply ~~wallets.~~and Indemand ~~January~~forces ~~2021,~~at ~~U.S.~~work ~~Treasury~~in ~~Secretary~~the ~~nominee~~secondary ~~Janet~~trading ~~Yellen~~market ~~stated~~for ~~her~~Shares ~~belief~~are ~~that~~related, but ~~regulators~~not ~~should~~identical, ~~“look closely at how~~ to ~~encourage~~ the ~~use~~supply ofand ~~digital~~demand ~~assets~~forces ~~for~~influencing ~~legitimate~~the ~~activities~~market ~~while~~price ~~curtailing~~of ~~their use for malign and illegal activities~~bitcoin.”

On February 15, 2022, Representative Warren Davidson introduced the “Keep Your Coins Act,” which is intended “[t]o prohibit Federal agencies from restricting the use of convertible virtual currency by a person to purchase goods or services for the person’s own use, and for other purposes.” That same day, Congressman Josh Gottheimer also announced a discussion draft of the “Stablecoin Innovation and Protection Act,” which is intended to define “qualified stablecoins” to differentiate them from “more volatile cryptocurrencies.”41

OnAn ~~March~~Authorized ~~17, 2022, Senators~~Participant ~~Elizabeth~~may ~~Warren,~~be ~~Jack~~able ~~Reed,~~to ~~Mark~~create ~~Warner,~~or ~~and~~redeem ~~Jon~~a ~~Tester~~Basket ~~introduced~~at ~~the~~a ~~Digital~~discount ~~Asset~~or ~~Sanctions~~a ~~Compliance~~premium ~~Enhancement~~to ~~Act~~the inpublic antrading ~~attempt to~~price ~~ensure~~per ~~blacklisted~~Share ~~Russian~~and ~~individuals~~the ~~and~~Trust ~~businesses~~will dotherefore maintain ~~not~~its ~~use~~intended ~~cryptocurrency~~fractional exposure to ~~evade~~a ~~economic~~specific ~~sanctions~~amount of bitcoin per Share.

OnShareholders ~~March~~also 9,should ~~2022, President~~note ~~Biden~~that ~~signed an Executive Order on Ensuring Responsible Development of Digital Assets (~~the ~~“Executive~~size ~~Order”), which outlined a unified federal regulatory approach to addressing the risks and benefits~~ of digital assets. The Executive Order articulated various policy objectives related to digital assets, including investor protections, financial and national security risks, and responsible development and use of digital assets. The Executive Order directed federal government departments and agencies to produce various reports, frameworks, analyses, and regulatory and legislative recommendations to the ~~Biden~~Trust ~~Administration.~~in ~~The~~terms ~~policies and objectives~~ of ~~the~~total ~~Executive~~bitcoin ~~Order are~~held ~~very~~may ~~broad,~~change ~~and,~~substantially atover ~~this~~ time, ~~it is unclear what impact it may have on the regulation of bitcoin~~ and ~~other~~as ~~digital~~Baskets ~~assets.~~are ~~The~~created ~~consequences of increased federal regulation of digital assets~~ and ~~digital asset activities could have a material adverse effect on the Trust and the Shares~~redeemed.

OnIn ~~March 28, 2022, Representative Stephen Lynch, along with co-sponsors Jesús G. García, Rashida Tlaib, Ayanna Pressley, and Alma Adams, introduced H.R. 7231,~~ the ~~Electronic~~event ~~Currency~~that ~~and Secure Hardware Act (“ECASH Act”), which would direct~~ the ~~Secretary~~ value of the ~~U.S.~~Trust’s ~~Treasury~~bitcoin ~~Department (not~~holdings ~~the~~or ~~Federal~~bitcoin ~~Reserve)~~holdings toper ~~develop~~Share ~~and~~is ~~issue~~incorrectly ~~a digital analogue to the U.S. dollar~~calculated, orneither ~~“e-cash,” which is intended to “replicate and preserve~~ the ~~privacy,~~Sponsor ~~anonymity-respecting,~~nor ~~and minimal transactional data-generating properties of physical currency instruments such as coins and notes to~~ the ~~greatest extent technically and practically possible,” all without requiring a bank account. E-cash~~Administrator ~~would~~will be ~~legal~~liable ~~tender,~~for ~~payable~~any toerror ~~the bearer~~ and ~~functionally~~such ~~identical~~misreporting ~~to physical U.S. coins and notes, “capable~~ of ~~instantaneous, final,~~valuation ~~direct,~~data ~~peer-to-peer,~~could ~~offline~~adversely ~~transactions~~affect ~~using~~the ~~secured~~value ~~hardware~~of ~~devices that do not involve or require subsequent or final settlement on or via a common or distributed ledger, or any other additional approval or validation by~~ the United States Government or any other third party payments processing intermediary,” including fully anonymous transactions, and “interoperable with all existing financial institutions and payment systems and generally accepted payments standards and network protocols, as well as other public payments programsShares.”

OnRegulatory April 6, 2022, Senator Pat Toomey released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act. The draft bill contemplates a “payment stablecoin,” which is convertible directly to fiat currency by the issuer. Only an insured depositary institution, a money transmitting business (authorized by its respective state authority) or a new “national limited payment stablecoin issuer” would be eligible to issue payment stablecoins. Additionally, payment stablecoins would be exempt from the federal securities requirements, including the Securities Act of 1933 (“1933 Act”), the Securities Exchange Act of 1934 (“Exchange Act”), and the Investment Company Act of 1940 (“1940 Act”).Risk

OnThere ~~June~~is 7,a ~~2022,~~lack ~~Senators~~of consensus ~~Kirsten~~regarding ~~Gillibrand~~the ~~and~~regulation ~~Cynthia~~of ~~Lummis~~digital ~~introduced~~assets, ~~the~~including ~~“Responsible~~bitcoin. ~~Financial~~Regulation ~~Innovation~~of ~~Act~~digital assets continues to evolve across different jurisdictions worldwide,” which ~~was~~may ~~drafted~~cause uncertainty and insecurity as to ~~“create a~~the ~~complete~~legal ~~regulatory~~and ~~framework~~tax ~~for~~status of a given digital asset. As bitcoin and digital assets ~~that~~have ~~encourages~~grown ~~responsible~~in ~~financial~~both ~~innovation,~~popularity ~~flexibility~~and market size, ~~transparency~~the U.S. Congress and ~~robust~~a number of U.S. federal and state agencies (including FinCEN, ~~consumer~~SEC, ~~protections~~OCC, ~~while~~CFTC, ~~integrating~~FINRA, ~~digital~~the ~~assets~~Consumer ~~into~~Financial ~~existing~~Protection ~~law.”~~Bureau, ~~Importantly~~the Department of Justice, the ~~legislation~~Department ~~would~~of ~~assign~~Homeland ~~regulatory~~Security, ~~authority~~the Federal ~~over~~Bureau of Investigation, the IRS, state financial institution regulators, and others) have been examining the operations of digital asset networks, digital asset users and the digital asset spot ~~markets~~market. Many of these state and federal agencies have brought enforcement actions and issued advisories and rules relating to ~~the~~digital ~~CFTC~~asset markets. Ongoing and ~~codify~~future ~~that~~regulatory actions with respect to digital assets generally ~~that~~or ~~meet~~any ~~the~~single ~~definition~~digital ofasset in particular may alter, perhaps to a ~~commodity~~materially adverse extent, ~~such~~the asnature ~~bitcoin~~of ~~and~~an investment in ~~ether,~~the ~~would~~Shares beand/or ~~regulated~~the byability of the ~~CFTC~~Trust to continue to operate.

44For example, certain events in 2022, including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis, BlockFi and others, and other developments in the digital asset markets, have resulted in calls for heightened scrutiny and regulation of the digital asset industry, with a specific focus on intermediaries such as digital asset exchanges, platforms, and custodians. Federal and state legislatures and regulatory agencies may introduce and enact new laws and regulations to regulate crypto asset intermediaries, such as digital asset exchanges and custodians. The March 2023 collapses of Silicon Valley Bank, Silvergate Bank, and Signature Bank, which in some cases provided services to the digital assets industry, or similar future events, may amplify and/or accelerate these trends. On January 3, 2023, the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties, significant volatility, and contagion risk. Although banking organizations are not prohibited from crypto-asset related activities, the agencies have expressed significant safety and soundness concerns with business models that are concentrated in crypto-asset related activities or have concentrated exposures to the crypto-asset sector.

InU.S. ~~2023,~~federal ~~Congress~~and ~~continued~~state regulators tohave ~~consider~~issued ~~several~~reports ~~stand-alone~~and ~~digital~~releases ~~asset~~concerning ~~bills~~crypto assets, including aBitcoin ~~formal~~and ~~process~~crypto toasset ~~determine~~markets. ~~when~~Further, ~~digital~~in ~~assets~~2023 ~~will~~the beHouse ~~treated~~of ~~as either~~Representatives ~~securities~~formed totwo benew ~~regulated~~subcommittees: by the ~~SEC~~Digital orAssets, ~~commodities~~Financial ~~under~~Technology ~~the~~and ~~purview~~Inclusion ofSubcommittee and the ~~CFTC~~Commodity Markets, ~~what~~Digital ~~type~~Assets, and Rural Development Subcommittee, each of ~~federal/state~~which ~~regulatory~~were ~~regime~~formed ~~will exist~~in ~~for~~part ~~payment~~to ~~stablecoins~~analyze issues concerning crypto assets and ~~the~~demonstrate ~~how~~a legislative intent to develop and consider the ~~BSA~~adoption ~~will~~of ~~apply~~federal legislation designed to ~~cryptocurrency~~address ~~providers~~the perceived need for regulation of and concerns surrounding the crypto industry. ~~The~~However, ~~Financial~~the ~~Innovation~~extent and ~~Technology~~content ~~for~~of any forthcoming laws and regulations are not yet ascertainable with ~~the~~certainty, ~~21st~~and ~~Century~~it ~~Act~~may ~~(“FIT~~not ~~for~~be ascertainable in the ~~21st~~near ~~Century~~future. ~~Act”)~~It ~~advanced~~is ~~through~~difficult ~~the~~to ~~United~~predict ~~States~~how ~~House~~these ofand ~~Representatives~~other inrelated aevents ~~vote~~will affect ~~along~~us ~~bipartisan~~or ~~lines~~the crypto asset business.

~~The~~In ~~FIT~~August ~~for~~2021, the ~~21st~~chair of ~~Century~~the SEC stated that he believed investors using digital asset trading platforms are not adequately protected, and that activities on ~~Act~~the ~~would~~platforms ~~require~~can implicate the ~~SEC~~securities laws, commodities laws and ~~the~~banking ~~CFTC~~laws, raising a number of issues related to ~~jointly~~protecting ~~issue~~investors and ~~rules~~consumers, orguarding ~~guidance~~against ~~that~~illicit ~~would~~activity, ~~outline~~and ~~their~~ensuring ~~process~~financial instability. ~~delisting~~The chair expressed a ~~digital~~need ~~asset that~~for ~~they~~the ~~deem~~SEC ~~inconsistent~~to ~~with~~have ~~the~~additional authorities ~~Commodity~~to ~~Exchange~~prevent ~~Act~~transactions, ~~(the~~products, and platforms from “~~CEA”)~~falling between regulatory cracks,” ~~federal~~as ~~securities~~well ~~laws~~as for more resources to protect investors in “this growing and ~~the~~volatile ~~FIT~~sector.” The chair called for ~~the~~federal ~~21st~~legislation centering on ~~Century~~digital ~~Act.~~asset ~~The~~trading, ~~bill~~lending, inand ~~part~~decentralized finance (“DeFi”) platforms, ~~would~~seeking ~~also~~“additional ~~provide~~plenary aauthority” to ~~certification~~write ~~process~~rules for ~~blockchains~~digital asset trading and lending. It is not possible to bepredict ~~recognized~~whether asCongress ~~decentralized,~~will ~~which~~grant ~~would~~additional authorities ~~allow~~to the SEC or other regulators, what the nature of such additional authorities might be, how they might impact the ability of digital asset markets to ~~challenge~~function ~~claims~~or ~~made~~how any new regulations that may flow from such authorities might impact the value of digital assets generally and bitcoin held by ~~token~~the ~~issuers~~Trust ~~about~~specifically. ~~meeting~~The consequences of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the ~~outlined~~Trust ~~standards~~and the Shares.

Legislative efforts have also focused on setting criteria for stablecoin issuers and what rules will govern redeemability and collateral. The Clarity for Payment Stablecoins Act of 2023, as introduced by House Finance Committee Chair Patrick McHenry (the “McHenry bill”), would make it unlawful for any entity other than a permitted payment stablecoin issuer to issue a payment stablecoin. The McHenry bill would establish bank-like regulation and supervision for federal qualified nonbank payment stablecoin issuers. These requirements include capital, liquidity and risk management requirements, application of the BSA and the Gramm-Leach-Bliley Act’s customer privacy requirements, certain activities limits, and broad supervision and enforcement authority. The McHenry bill would grant state regulators primary supervision, examination and enforcement authority over state stablecoin issuers, leaving the Federal Reserve Board with secondary, backup enforcement authority for “exigent” circumstances. The McHenry bill would also amend the Investment Advisers Act of 1940 (the “Advisers Act”), the 1940 Act, the 1933 Act, the Exchange Act and the Securities Investor Protection Act of 1970 to specify that payment stablecoins are not securities for purposes of those federal securities laws.42

~~Several~~FinCEN ~~other~~requires ~~bills~~any ~~have advanced~~administrator ~~through~~or ~~Congress~~exchanger of convertible digital assets to ~~curb~~register ~~crypto~~with FinCEN as a ~~payment~~money ~~gateway~~transmitter ~~for~~and ~~illicit~~comply ~~activity~~with ~~and~~the anti-money laundering. ~~The~~regulations applicable ~~“Blockchain~~to ~~Regulatory~~money ~~Clarity Act”~~transmitters. ~~would~~In ~~provide~~2015, ~~clarity~~FinCEN toassessed ~~the~~a ~~regulatory~~$700,000 ~~classification~~fine ofagainst ~~digital~~a ~~assets,~~sponsor ~~providing~~of ~~market~~a ~~certainty~~digital asset for ~~innovators~~violating ~~and clear~~several ~~jurisdictional~~requirements ~~boundaries~~of ~~for~~the ~~regulators~~BSA by ~~affirming~~acting ~~that~~as ~~blockchain~~a ~~developers~~money services business and ~~other~~selling ~~related~~the ~~service~~digital ~~providers~~asset ~~that~~without doregistering ~~not~~with ~~custody~~FinCEN, and by failing ~~customer~~to ~~funds~~implement ~~are~~and ~~not~~maintain an adequate anti-money ~~transmitters~~laundering program. ~~The~~In ~~“Financial~~2017, ~~Technology~~FinCEN ~~Protection~~assessed ~~Act~~a $110 million fine against BTC-e,” ~~another~~a ~~bipartisan~~now defunct ~~measure~~digital asset exchange, ~~would~~for ~~set~~similar violations. The requirement that exchangers that do business in the U.S. register with FinCEN upand ancomply ~~independent~~with ~~Financial~~anti-money ~~Technology~~laundering ~~Working~~regulations ~~Group~~may toincrease ~~combat~~the ~~terrorism~~cost of buying and ~~illicit~~selling ~~financing~~bitcoin and therefore may adversely affect the price of bitcoin and an investment in ~~cryptocurrency~~the Shares. ~~The~~In ~~“Blockchain Regulatory~~a ~~Certainty~~March ~~Act”~~2018 ~~aims~~letter from FinCEN’s assistant secretary for legislative affairs to ~~protect~~U.S. ~~certain~~Senator ~~blockchain~~Ron ~~platforms~~Wyden, ~~from~~the ~~being~~assistant ~~designated~~secretary indicated that under current law both the developers and the exchanges involved in the sale of tokens in an initial coin offering may be required to register with FinCEN as money~~-services~~ ~~businesses.~~transmitters ~~Both acts~~and ~~advanced~~comply ~~through~~with the ~~House~~anti-money laundering ~~with~~regulations ~~bipartisan~~applicable ~~support~~to money transmitters.

InOFAC ahas ~~similar~~added ~~effort~~digital ~~to prevent~~currency ~~money~~addresses ~~laundering and stop crypto-facilitated crime and sanctions violations, bipartisan legislation was introduced~~ to ~~require DeFi services to meet~~ the ~~same~~list ~~anti-money~~of ~~laundering~~Specially ~~and~~Designated ~~economic~~Nationals ~~sanctions~~whose ~~compliance~~assets ~~obligations~~are asblocked, ~~other~~and ~~financial~~with ~~companies~~whom U.S. ~~DeFi~~persons are generally ~~refers~~prohibited tofrom ~~applications~~dealing. ~~that~~Such ~~facilitate~~actions ~~peer-to-peer~~by ~~financial~~OFAC, ~~transactions~~or ~~that~~by ~~are~~similar ~~recorded~~organizations onin ~~blockchains.~~other ~~By design~~jurisdictions, ~~DeFi~~may ~~provides~~introduce ~~anonymity, which~~uncertainty ~~can~~in ~~allow~~the ~~malicious~~market ~~and~~as ~~criminal actors~~ to whether ~~evade~~bitcoin ~~traditional financial regulatory tools. Noting~~ that ~~transparency~~has ~~and~~been ~~sensible~~associated ~~rules are~~with ~~vital~~such ~~for~~addresses ~~protecting~~in the ~~financial~~past ~~system~~can ~~from~~be ~~crime,~~easily ~~the~~sold. This “~~Crypto-Asset~~tainted” ~~National~~bitcoin ~~Security~~may ~~Enhancement and Enforcement (‘CANSEE’)~~trade ~~Act”~~at ~~was~~a ~~introduced.~~substantial ~~The~~discount ~~CANSEE~~to ~~Act~~untainted ~~would~~bitcoin. ~~end~~Reduced ~~special~~fungibility ~~treatment~~in ~~for DeFi by applying~~ the ~~same~~bitcoin ~~national~~markets ~~security~~may ~~laws~~reduce ~~that~~the ~~apply to~~liquidity ~~banks~~of ~~and~~bitcoin ~~securities brokers, casinos~~ and ~~pawn shops, and other cryptocurrency companies like centralized trading platforms. DeFi services~~therefore ~~would~~adversely beaffect ~~forced to meet basic obligations, most notably to maintain anti-money laundering programs, conduct due diligence on~~ their ~~customers, and report suspicious transactions to FinCEN~~price.

~~Under~~In ~~regulations~~February ~~from~~2020, ~~the~~then-U.S. ~~New~~Treasury ~~York~~Secretary ~~State~~Steven ~~Department~~Mnuchin ofstated ~~Financial~~that ~~Services~~digital (assets were a “~~NYDFS~~crucial area”), ~~businesses~~on ~~involved~~which inthe ~~digital~~U.S. ~~asset~~Treasury ~~business~~Department ~~activity~~has spent ~~for~~significant ~~third parties~~time. inSecretary orMnuchin ~~involving~~announced ~~New~~that ~~York,~~the ~~excluding~~U.S. ~~merchants~~Treasury ~~and~~Department ~~consumers,~~is ~~must~~preparing ~~apply~~significant ~~for~~new aregulations ~~license,~~governing digital ~~commonly~~asset ~~known~~activities asto aaddress ~~BitLicense,~~concerns ~~from~~regarding the ~~NYDFS~~ ~~and~~potential ~~must~~use ~~comply~~for ~~with~~facilitating ~~anti-~~money laundering, ~~cyber~~and ~~security,~~other ~~consumer~~illicit ~~protection,~~activities. In ~~and~~December ~~financial~~2020, ~~and reporting requirements~~FinCEN, ~~among others.~~a Asbureau anwithin ~~alternative~~the toU.S. aTreasury ~~BitLicense~~Department, proposed a ~~firm~~rule ~~can~~that ~~apply~~would ~~for~~require afinancial ~~charter~~institutions to ~~become~~submit reports, akeep ~~limited~~records, ~~purpose~~and ~~trust~~verify ~~company~~the ~~under~~identity ~~New~~of ~~York~~customers ~~law qualified~~for certain transactions to ~~engage~~or infrom ~~digital~~so-called ~~asset~~“unhosted” ~~business~~wallets, also ~~activity~~commonly referred to as self-hosted wallets. ~~Other~~In ~~states~~January ~~have~~2021, ~~considered~~U.S. orTreasury ~~approved~~Secretary ~~digital~~nominee ~~asset~~Janet ~~business~~Yellen ~~activity~~stated ~~statutes~~her belief that orregulators ~~rules,~~should ~~passing,~~“look ~~for~~closely ~~example,~~at ~~regulations~~how orto ~~guidance~~encourage ~~indicating~~the ~~that~~use ~~certain~~of digital ~~asset~~assets ~~business~~for legitimate activities ~~constitute~~while ~~money~~curtailing ~~transmission~~their use ~~requiring~~for ~~licensure~~malign and illegal activities.”

~~The~~On ~~inconsistency~~February in15, ~~applying~~2022, Representative ~~money~~Warren ~~transmitting~~Davidson ~~licensure~~introduced ~~requirements~~the to“Keep ~~certain~~Your ~~businesses~~Coins ~~may~~Act,” ~~make~~which itis ~~more~~intended ~~difficult~~“[t]o ~~for~~prohibit ~~these~~Federal ~~businesses~~agencies tofrom ~~provide services, which~~restricting ~~may~~the ~~affect~~use ~~consumer adoption~~ of ~~bitcoin~~convertible ~~and~~virtual ~~its~~currency ~~price.~~by Ina anperson ~~attempt~~ to ~~address~~purchase ~~these~~goods ~~issues,~~or ~~the~~services ~~Uniform~~for ~~Law~~the ~~Commission~~person’s ~~passed~~own ~~a model law in July 2017~~use, ~~the~~and ~~Uniform~~for ~~Regulation~~other ofpurposes.” That ~~Virtual~~same ~~Currency Businesses Act~~day, ~~which~~Congressman ~~has~~Josh ~~many~~Gottheimer ~~similarities~~also toannounced ~~the BitLicense and features~~ a ~~multistate~~discussion ~~reciprocity~~draft ~~licensure~~of ~~feature,~~the ~~wherein~~“Stablecoin aInnovation ~~business~~and ~~licensed~~Protection ~~in one state could apply for accelerated licensure procedures~~Act,” inwhich ~~other states. It~~ is ~~still~~intended ~~unclear,~~to ~~however,~~define ~~how~~“qualified ~~many~~stablecoins” ~~states,~~to ifdifferentiate ~~any,~~them ~~will~~from ~~adopt~~“more ~~some~~volatile ~~or all of the model legislation~~cryptocurrencies.”

45On March 9, 2022, former President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets (the “Executive Order”), which outlined a unified federal regulatory approach to addressing the risks and benefits of digital assets. The Executive Order articulated various policy objectives related to digital assets, including investor protections, financial and national security risks, and responsible development and use of digital assets. The Executive Order directed federal government departments and agencies to produce various reports, frameworks, analyses, and regulatory and legislative recommendations to the Biden Administration. The policies and objectives of the Executive Order are very broad, and, at this time, it is unclear what impact it may have on the regulation of bitcoin and other digital assets. The consequences of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the Trust and the Shares. On January 23, 2025, President Trump issued an executive order titled “Executive Order on Strengthening American Leadership in Digital Financial Technology” that outlined the administration’s commitment to strengthening U.S. leadership in the digital asset space and established an inter-agency working group for artificial intelligence and crypto that is tasked with proposing a regulatory framework governing the issuance and operation of digital assets, including stablecoins, in the United States.

~~The~~On ~~transparency~~March of17, ~~blockchains has in the past facilitated investigations by law enforcement agencies. However~~2022, ~~certain privacy-enhancing features have been or are expected~~Senators toElizabeth beWarren, ~~introduced~~Jack toReed, aMark ~~number of digital asset networks~~Warner, and ~~these~~Jon ~~features~~Tester ~~may~~introduced ~~provide~~the ~~law~~Digital ~~enforcement~~Asset ~~agencies~~Sanctions ~~with~~Compliance ~~less~~Enhancement ~~visibility~~Act ~~into transaction~~in ~~histories.~~an ~~Although~~attempt to noensure ~~regulatory~~blacklisted ~~action~~Russian ~~has~~individuals ~~been~~and ~~taken~~businesses todo ~~treat~~not ~~privacy-enhancing~~use ~~digital~~cryptocurrency ~~assets~~to ~~differently,~~evade ~~this~~economic ~~may change in the future~~sanctions.

~~Shareholders~~On doMarch 28, 2022, Representative Stephen Lynch, along with co-sponsors Jesús G. García, Rashida Tlaib, Ayanna Pressley, and Alma Adams, introduced H.R. 7231, the Electronic Currency and Secure Hardware Act (“ECASH Act”), which would direct the Secretary of the U.S. Treasury Department (not the Federal Reserve) to develop and issue a digital analogue to the U.S. dollar, or “e-cash,” which is intended to “replicate ~~have~~and preserve the ~~protections~~privacy, ~~associated~~anonymity-respecting, ~~with~~and ~~ownership~~minimal transactional data-generating properties of ~~shares~~physical incurrency aninstruments such ~~investment~~as ~~company~~coins ~~registered~~and ~~under~~notes to the ~~1940~~greatest ~~Act~~extent technically and practically possible,” all without requiring a bank account. E-cash would be legal tender, payable to the bearer and functionally identical to physical U.S. coins and notes, “capable of instantaneous, final, direct, peer-to-peer, offline transactions using secured hardware devices that do not involve or ~~commodity~~require ~~pools~~subsequent ~~under~~or final settlement on or via a common or distributed ledger, or any other additional approval or validation by the ~~Commodity~~United ~~Exchange~~States ~~Act~~Government or any other third party payments processing intermediary,” including fully anonymous transactions, and “interoperable with all existing financial institutions and payment systems and generally accepted payments standards and network protocols, as well as other public payments programs.”

The 1940 Act establishes a comprehensive federal regulatory framework for investment companies. Regulation of investment companies under the 1940 Act is designed to, among other things: prevent insiders from managing the companies to their benefit and to the detriment of public investors; prevent the inequitable or discriminate issuance of investment company securities and prevent the use of unsound or misleading methods of computing asset values. For example, registered investment companies subject to the 1940 Act must have a board of directors, a certain minimum percentage of whom must be independent (generally, at least a majority). Further, after an initial two-year period, such registered investment companies’ advisory and sub-advisory contracts must be annually reapproved by a majority of (1) the entire board of directors and (2) the independent directors. Additionally, such registered investment companies are subject to prohibitions and restrictions on transactions with their affiliates and required to maintain fund assets with special types of custodians (generally, banks or broker-dealers). Moreover, such registered investment companies are subject to significant limits on the use of leverage, as well as limits on the form of capital structure and the types of securities a registered fund can issue.43

~~The~~On ~~Trust~~April is6, ~~not~~2022, ~~registered~~Senator asPat anToomey ~~investment~~released ~~company~~a ~~under~~draft ~~the~~of ~~1940~~his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, ~~and~~or ~~the~~Stablecoin ~~Sponsor~~TRUST ~~believes~~Act. ~~that~~The draft ~~the~~bill ~~Trust~~contemplates a “payment stablecoin,” which is ~~not~~convertible ~~permitted~~directly to fiat currency by the issuer. Only an insured depositary institution, a money transmitting business (authorized by its respective state authority) or ~~required~~a new “national limited payment stablecoin issuer” would be eligible to ~~register~~issue ~~under~~payment ~~such act~~stablecoins. ~~Consequently~~Additionally, ~~Shareholders~~payment dostablecoins ~~not~~would ~~have~~be exempt from the ~~regulatory~~federal ~~protections~~securities ~~provided~~requirements, toincluding ~~investors~~the inSecurities ~~investment~~Act, ~~companies~~the Exchange Act, and the 1940 Act.

~~The~~On ~~Trust~~June ~~will~~7, ~~not~~2022, ~~hold or~~Senators ~~trade~~Kirsten inGillibrand ~~commodity~~and ~~interests~~Cynthia ~~regulated~~Lummis byintroduced the ~~CEA~~“Responsible Financial Innovation Act,” aswhich ~~administered~~was bydrafted ~~the~~to ~~CFTC.~~“create a ~~Furthermore,~~complete ~~the~~regulatory ~~Sponsor~~framework ~~believes~~for digital assets that ~~the~~encourages ~~Trust~~responsible isfinancial ~~not a~~innovation, ~~commodity~~flexibility, ~~pool~~transparency ~~for~~and ~~purposes~~robust consumer ofprotections ~~the~~while ~~CEA,~~integrating ~~and~~digital ~~that~~assets ~~neither~~into ~~the~~existing ~~Sponsor~~law.” ~~nor~~Importantly, the ~~Trustee~~legislation iswould ~~subject~~assign toregulatory ~~regulation~~authority over bydigital ~~the~~asset ~~CFTC~~spot asmarkets ato ~~commodity pool~~the ~~operator~~CFTC orand acodify ~~commodity~~that ~~trading~~digital ~~advisor~~assets inthat ~~connection~~meet ~~with~~ the ~~operation~~definition of ~~the~~a ~~Trust. Consequently~~commodity, ~~Shareholders~~such ~~will~~as ~~not~~bitcoin ~~have the~~and ~~regulatory~~ether, ~~protections~~would ~~provided~~be ~~to investors in CEA-~~regulated ~~instruments~~ orby ~~commodity~~the ~~pools~~CFTC.

~~Future~~In 2023 and ~~current~~2024, ~~laws~~Congress ~~and~~continued ~~regulations~~to byconsider several stand-alone digital asset bills, including a ~~United~~formal ~~States~~process orto ~~foreign~~determine ~~government~~when digital assets will be treated as either securities to be regulated by the SEC or ~~quasi-governmental~~commodities ~~agencies~~under ~~could~~the ~~have~~purview anof ~~adverse~~the ~~effect~~CFTC, onwhat antype ~~investment~~of federal/state regulatory regime inwill exist for payment stablecoins and the ~~Trust~~how the BSA will apply to cryptocurrency providers. In May 2024, the Financial Innovation and Technology for the 21st Century Act (“FIT for the 21st Century Act”) advanced through the United States House of Representatives in a vote along bipartisan lines.

The ~~regulation~~FIT offor ~~bitcoin and~~the ~~related~~21st ~~products~~Century Act ~~and~~would ~~services~~require ~~continues~~the toSEC ~~evolve, may take many different forms~~ and ~~will,~~the ~~therefore,~~CFTC ~~impact~~to ~~bitcoin~~jointly ~~and~~issue ~~its~~rules ~~usage in~~or aguidance ~~variety~~that ofwould ~~manners.~~outline ~~The~~their ~~inconsistent,~~process ~~unpredictable, and sometimes conflicting regulatory landscape may make it more difficult~~ for ~~bitcoin~~ ~~businesses~~removing tofrom ~~provide services, which may impede~~ the ~~growth of the bitcoin economy and have an adverse effect on consumer adoption~~SEC’s ~~of bitcoin. There is a possibility of future~~ regulatory ~~change~~jurisdiction ~~altering, perhaps to~~ a ~~material~~digital ~~extent,~~asset ~~the~~that ~~nature~~they ofdeem aninconsistent ~~investment~~with in the ~~Trust~~CEA orand ~~the~~federal ~~ability~~securities ~~of the Trust to continue to operate~~laws. ~~Additionally,~~The ~~changes to current regulatory determinations of bitcoin’s status as not being a security~~bill, ~~changes~~in ~~to regulations surrounding bitcoin futures or related products~~part, orwould also ~~actions~~provide by a ~~United~~certification ~~States or~~process ~~foreign~~for ~~government~~blockchains orto ~~quasi-governmental~~be ~~agencies~~recognized ~~exerting~~as ~~regulatory authority over bitcoin~~decentralized, ~~the~~which ~~Bitcoin~~would ~~network,~~allow ~~bitcoin trading, or related activities impacting other parts of~~ the ~~digital~~SEC ~~asset~~to ~~market,~~challenge ~~may adversely impact bitcoin and therefore may have an adverse~~claims ~~effect~~made onby ~~the~~token ~~value~~issuers ofabout ~~your~~meeting ~~investment in~~ the ~~Trust~~outlined standards.

ALegislative ~~number~~efforts ofhave ~~jurisdictions~~also ~~worldwide~~focused ~~have~~on ~~adopted~~setting ~~prohibitions~~criteria orfor ~~restrictions~~stablecoin onissuers ~~bitcoin~~and ~~trading~~what rules will govern redeemability and collateral. The Clarity for Payment Stablecoins Act of 2023, as introduced by House Finance Committee Chair Patrick McHenry (the “McHenry bill”), would make it unlawful for any entity other ~~activity~~than ~~relating~~a permitted payment stablecoin issuer to ~~virtual~~issue ~~currencies~~a payment stablecoin. The McHenry bill would establish bank-like regulation and ~~digital~~supervision ~~assets~~for federal qualified nonbank payment stablecoin issuers. These requirements include capital, liquidity and ~~which~~risk ~~could~~management ~~negatively~~requirements, ~~affect~~application ~~bitcoin~~of ~~prices~~the orBSA ~~demand~~and the Gramm-Leach-Bliley Act’s customer privacy requirements, certain activities limits, and broad supervision and enforcement authority. ~~For~~The ~~instance~~McHenry bill would grant state regulators primary supervision, ~~some~~examination and ~~observers~~enforcement ~~believe~~authority ~~that~~over ~~Chinese~~state ~~governmental~~stablecoin ~~regulatory~~issuers, ~~actions~~leaving the Federal Reserve Board with secondary, backup enforcement authority ~~regarding~~for ~~bitcoin~~“exigent” ~~mining~~circumstances. The McHenry bill would also amend the Investment Advisers Act of 1940 (the “Advisers Act”), the 1940 Act, the Securities Act, the Exchange Act and ~~trading~~the ~~activity~~Securities ~~were~~Investor ~~one~~Protection ~~factor~~Act ~~that~~of ~~contributed~~1970 to ~~the~~specify ~~drawdowns~~that inpayment ~~global~~stablecoins are ~~bitcoin~~not ~~prices~~securities infor ~~May~~purposes ~~2021~~of those federal securities laws.

~~Furthermore~~On February 4, ~~legal~~2025, ~~claims~~Sen. ~~have~~Bill ~~been~~Hagerty ~~filed~~introduced in the Guiding ~~United~~and ~~Kingdom~~Establishing byNational anInnovation ~~entity~~for ~~associated with an individual named Craig Wright~~U.S. ~~The~~Stablecoins ~~entity~~of ~~alleges~~2025 ~~that~~Act – the ~~private~~GENIUS ~~keys~~Act to– ~~bitcoin~~cosponsored ~~purportedly~~by ~~worth~~Senate ~~several~~Banking ~~billion~~Chair ~~dollars~~Tim ~~were~~Scott ~~rendered~~and ~~inaccessible~~Sens. toKirsten itGillibrand inand aCynthia ~~hack~~Lummis, ~~and~~which ~~advances~~would establish a ~~series of novel legal~~U.S. ~~theories~~regulatory inframework ~~support~~for ofpayment ~~its~~stablecoins. ~~request~~Like ~~that~~ the ~~court~~McHenry ~~compel~~bill, ~~certain core developers associated with~~ the ~~Bitcoin~~GENIUS ~~network~~Act tocontemplates ~~either somehow transfer the bitcoin out of the bitcoin address to which the entity no longer can access the private keys to~~ a ~~new~~regulatory ~~bitcoin~~framework ~~address~~where ~~that~~payment itstablecoin ~~currently~~issuers ~~does~~may ~~control,~~be oreither ~~alternatively amend the source code to the Bitcoin network itself to restore its access to the stranded bitcoin. If~~ a ~~court~~subsidiary ~~decides~~of toan ~~grant~~insured ~~the relief requested~~bank, ~~wide-ranging~~an ~~and~~uninsured ~~fundamental~~depository ~~changes~~institution toor ~~the~~trust ~~source code~~bank, ~~operations,~~or ~~and~~a ~~governance of~~nonbank, and primarily ~~basic~~regulated ~~principles~~at ~~underlying,~~either the ~~Bitcoin~~federal ~~network~~or ~~might~~state belevel. ~~required,~~It ~~and~~would aalso ~~loss~~prescribe ofstablecoin ~~public~~reserve ~~confidence~~requirements inand ~~the~~require ~~Bitcoin network could~~bank-like ~~result,~~regulation ~~leading~~for toboth abank ~~decrease~~and innonbank ~~the~~stablecoin ~~value of bitcoin, which could negatively impact the value of the Shares~~issuers.

~~The~~Several ~~legal~~other ~~status~~bills ofhave ~~bitcoin~~advanced ~~and~~through ~~other~~Congress ~~digital~~to ~~assets~~curb ~~varies~~crypto ~~substantially~~as ~~from~~a ~~country~~payment togateway ~~country.~~for Inillicit ~~many~~activity ~~countries,~~and ~~the~~money ~~legal~~laundering. ~~status~~The of“Blockchain ~~bitcoin~~Regulatory

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