What changed in this filing

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Item 1A. Risk Factors

2024-08-09 compared with 2024-05-13 · 171 added, 4 removed, 6 unchanged (97% of the section changed)

3 unchanged sentences

period ended December 31, 2023, which could materially affect our business, financial condition or future results.

There have been no

material changes in our risk factors from those disclosed in our 2023 Annual Report on Form 10-K.

than as described herein, there have been no material changes in our risk factors from those disclosed in our 2023 Annual Report

on Form 10-K.

The risks described in our

Annual Report on Form 10-K are not the only risks facing the Trust.

Additional risks and uncertainties not currently known to us or that

we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

You should also consider any

risks and uncertainties described under the caption “Risk Factors” in any applicable prospectus, prospectus supplement, registration

statement or other document that we file with the SEC before or after the date of this prospectus that is incorporated by reference herein.

risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our

business, financial condition and/or operating results.

Limits on bitcoin supply.

Under the 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 3.125

bitcoin per block.

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.

As of November 2023, approximately 19 million bitcoin were outstanding and the date

when the 21 million Bitcoin limitation will be reached is estimated to be the year 2140.

The trading prices of

many digital assets, including bitcoin, have experienced extreme volatility in recent periods and may continue to do so.

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 trading prices of many

digital assets, including bitcoin, have experienced extreme volatility in recent periods and may continue to do so.

For instance, there

were steep increases in the value of certain digital assets, including bitcoin, over 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 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 in 2011, 2013-2014, and 2017-2018, before repeating again in 2021-2022.

Over the course of 2023-2024, bitcoin prices continued to exhibit extreme volatility.

Extreme volatility may persist,

and the value of the Shares may significantly decline in the future without recovery.

The digital asset 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

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, 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 has increased,

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 continuing to develop, and the 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.

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.

The Bitcoin network

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

Many digital asset networks

face significant scaling challenges due to the fact that public blockchains generally face a tradeoff between security and scalability.

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.

An increasing number of wallets

and digital asset intermediaries, such as bitcoin spot markets, have begun supporting segregated witness and the Lightning Network, or

similar technology.

The Lightning Network is an open-source decentralized network that enables instant off-Bitcoin blockchain

transfers of the ownership of bitcoin without the need of a trusted third party.

The system utilizes bidirectional payment channels that

consist of multi-signature addresses.

One on-blockchain transaction is needed to open a channel and another on-blockchain transaction

can close the channel.

Once a channel is open, value can be transferred instantly between counterparties, who are engaging in real bitcoin

transactions without broadcasting them to the Bitcoin network.

New transactions will replace previous transactions and the counterparties

will store everything locally as long as the channel stays open to increase transaction throughput and reduce computational burden on

the Bitcoin network.

Liquidity risk

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.

Shares of the Trust are listed

and traded on the Exchange.

There is no certainty that there will be liquidity available on the Exchange or that the market price will

be in line with the NAV or the Principal Market NAV at any given time.

There is also no guarantee that the Shares of the Trust will remain

listed or traded on the Exchange.

As the use of digital asset

networks increases without a corresponding increase in transaction processing speed of the 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.

the period from January 1, 2017, to January 31, 2021, average bitcoin transaction fees increased from $0.39 per transaction

to $11.56 per transaction, with a high of $54.83 per transaction on December 12, 2017.

Increased fees and decreased

settlement speeds could preclude certain use cases for bitcoin (e.g., micropayments), and can reduce demand for and the price of bitcoin,

which could adversely impact the value of the Shares.

There is no guarantee that any of the mechanisms in place or being explored for

increasing the scale of settlement of transactions in bitcoin will be effective, or how long these mechanisms will take to become effective,

which could adversely impact an investment in the Shares.

The lack of active trading

markets for the Shares may result in losses on Shareholders’ investments at the time of disposition of Shares.

Although Shares of the Trust

are publicly 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 development and

commercialization of the Trust is subject to competitive pressures.

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.

In January 2024, the SEC approved several exchange-traded bitcoin products, and many

of such products, including the Trust, could fail to acquire substantial assets, or fail to retain acquired assets due to competition

and/or market conditions.

The Sponsor’s competitors

may 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

may also charge a substantially lower fee than the Sponsor Fee in order to achieve initial market acceptance and scale.

Accordingly, the

Sponsor’s competitors may commercialize a competing 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 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 Trust.

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 the Trust to minimize the risk of operating events, errors, or other forms of losses to the Shareholders.

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.

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 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors