What changed in this filing

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Item 1A. Risk Factors

2024-11-12 compared with 2024-08-09 · 260 added, 12 removed, 165 unchanged (62% of the section changed)

You should carefully consider

the factors discussed in Part I, Item 1A.

“Risk Factors” in our Annual Report on Form 10-K filed on March 26, 2024, for the

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

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.

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.

the risk factors discussed below as well as the risk factors discussed in Part I, Item 1A.

“Risk Factors” in our Annual Report,

which could materially affect our business, financial condition or future results.

Other than as described herein, there have been no

material changes in our risk factors from those disclosed in our Annual Report on.

The risks described below

and in our Annual Report are not the only risks facing the Trust.

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.

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.

Limits on bitcoin supply.

162 unchanged sentences

structure relative to those of competitive products.

An investment in the Trust is not a deposit

and is not FDIC-insured.

Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Prime

Broker and Custodians expose the Trust and its Shareholders to the risk of loss of the Trust’s bitcoin for which no person or entity

The Trust is not a banking institution or otherwise

a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation (“SIPC”)

and, therefore, deposits held with or assets held by the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC

member institutions.

In addition, neither the Trust nor the Sponsor insure the Trust’s bitcoin.

On September 11, 2024, the Trust entered into

separate custodial services agreements (each, a “Custodial Services Agreement” and, collectively, including the agreement

with Coinbase Custody Trust Company, LLC (“Coinbase Custodian”) entered into between the Trust and the Coinbase Custodian

(the “Coinbase Custody Agreement”), the “Custodial Services Agreements”) with each of (i) BitGo New York Trust

Company, LLC , a New York Trust Company (“BitGo Custodian”) (the “BitGo Custody Agreement”) and (ii) Anchorage

Digital Bank N.A., a South Dakota chartered Trust Company and a federally chartered crypto bank (“Anchorage Custodian” and

together with Coinbase Custodian and BitGo Custodian, the Custodians) (the “Anchorage Custody Agreement”).

While the Custodians

have advised the Sponsor that they have insurance coverage, that covers losses of the digital assets it custodies on behalf of its clients,

including the Trust’s bitcoin, resulting from theft, Shareholders cannot be assured that the Custodians will maintain adequate insurance,

that such coverage will cover losses with respect to the Trust’s bitcoin, or that sufficient insurance proceeds will be available

to cover the Trust’s losses in full.

The Custodians’ insurance may not cover the type of losses experienced by the Trust.

Alternatively, the Trust may be forced to share such insurance proceeds with other clients or customers of the Custodians, which could

reduce the amount of such proceeds that are available to the Trust.

In addition, the bitcoin insurance market is limited, and the level

of insurance maintained by the Custodians may be substantially lower than the assets of the Trust.

While the 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 Custodians will maintain capital reserves sufficient to cover actual or potential losses

with respect to the Trust’s digital assets.

The insurance maintained by the Custodians is shared among all of the Custodians’

customers, is not specific to the Trust or to customers holding bitcoin with the Custodians, and may not be available or sufficient to

protect the Trust from all possible losses or sources of losses.

Furthermore, under each of the Custodial Services

Agreements, the respective 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, or fraud

or willful misconduct, 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.

With respect to the BitGo Custody Agreement, BitGo

and its affiliates, including their officers, directors, agents, and employees, are not liable for any lost profits, special, incidental,

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.

With respect to the Anchorage Custody Agreement,

except for Anchorage’s bad acts, confidentiality obligations under the Anchorage Custody Agreement, indemnification obligations

under Anchorage Custody Agreement, or obligations with respect to rights to or limits on use under the Anchorage Custody Agreement, Anchorage

is not liable for any losses, whether in contract, tort or otherwise, for any amount in excess of fees paid by the Trust in the twelve

(12) months prior to when the liability arises.

Moreover, Anchorage is not liable for (i) losses which arise from its compliance with

applicable laws, including sanctions laws administered by OFAC;

or (ii) special, indirect or consequential damages, or lost profits or

loss of business arising in connection with Anchorage Custody Agreement.

In addition, Anchorage is not be liable for any losses which

arise as a result of the non-return of digital assets that the Trust has delegated to Anchorage or a third party for on-chain services,

such as staking, voting, vesting, and signaling, unless such losses occur as a result of Anchorage’s fraud or intentional misconduct.

Similarly, 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, or 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 (as defined below) (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 Coinbase

Custodian) 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 a trading account (the “Trading Balance”)) or the Custodians (in the case of segregated

accounts in which the Custodians will custody all of the Trust’s bitcoin from time to time (the “Vault Balances”)) 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 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 Custodians (in the case of the 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 Coinbase Custodial Services Agreement contains

an agreement by the parties to treat the bitcoin credited to the Trust’s Vault Balance at the Coinbase Custodian as financial assets

under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition to stating that the Coinbase Custodian

will serve as fiduciary and custodian on the Trust’s behalf.

The Coinbase 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 Coinbase 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 Coinbase Custodian became subject to insolvency proceedings and a court were to rule that the custodied bitcoin were part of the

Coinbase Custodian’s general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor

in the Coinbase Custodian’s insolvency proceedings and the Trust could be subject to the loss of all or a significant portion of

Moreover, in the event of the bankruptcy of the Coinbase Custodian, an automatic stay could go into effect and protracted

litigation could be required in order to recover the assets held with the Coinbase 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.

The Prime Broker is not required to hold any of

the bitcoin or cash in the Trust’s Trading Balance in segregation.

Within the 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 has allocated to the omnibus wallets the Prime Broker holds,

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, rather than segregated, basis).

If the Prime Broker suffers an insolvency

event, there is a risk that the Trust’s assets held in the Trading Balance could be considered part of the Prime Broker’s

bankruptcy estate and the Trust could be treated as a general unsecured creditor of the Prime Broker, which could result in losses for

the Trust and Shareholders.

Moreover, in the event 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 Shares.

Under 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 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 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 Custodians and Prime Broker.

The Prime Broker Agreement and Coinbase Custodial Services Agreement 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 or any transaction thereunder.

Consequently, a loss may be suffered with respect

to the Trust’s bitcoin that is not covered by the Coinbase Custodian’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.

Lack of recourse.

The 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.

the Custodians may not be liable for any delay in performance of any of their custodial obligations by reason of any cause beyond its

reasonable control, including force majeure events, war or terrorism, and may not be liable for any system failure or third-party penetration

of its systems.

As a result, the recourse of the Trust to the Custodians may be limited.

Under the Coinbase Custody Agreement, the Coinbase

Custodian’s liability is limited to the greater of (i) the market value of the Trust’s bitcoin held by the Coinbase 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 Coinbase

Custodian at the time that the Coinbase 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.

Under the Trust Agreement, the Trustee and the

Sponsor will not be liable for any liability or expense incurred absent gross negligence or willful misconduct on the part of the Trustee

or the Sponsor or breach by the Sponsor of the Trust Agreement, as they case may be.

As a result, the recourse of the Trust or the Shareholder

to Trustee or the Sponsor may be limited.

The Index Provider has limited liability relating

to 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.

Under the BitGo Custody Agreement, BitGo and its

affiliates, including their officers, directors, agents, and employees, are not liable for any lost profits, special, incidental, indirect,

intangible, or consequential damages resulting from authorized or unauthorized use of the Trust or Sponsor’s site or services.

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.

In addition, BitGo shall 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 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.

Under the Anchorage Custody Agreement, except

for Anchorage’s bad acts, confidentiality obligations under the Anchorage Custody Agreement, indemnification obligations under Anchorage

Custody Agreement, or obligations with respect to rights to or limits on use under the Anchorage Custody Agreement, Anchorage is not liable

for any losses, whether in contract, tort or otherwise, for any amount in excess of fees paid by the Trust in the twelve (12) months prior

to when the liability arises.

Moreover, Anchorage is not liable for (i) losses which arise from its compliance with applicable laws, including

sanctions laws administered by OFAC;

or (ii) special, indirect or consequential damages, or lost profits or loss of business arising in

connection with Anchorage Custody Agreement.

In addition, Anchorage is not be liable for any losses which arise as a result of the non-return

of digital assets that the Trust has delegated to Anchorage or a third party for on-chain services, such as staking, voting, vesting,

and signaling, unless such losses occur as a result of Anchorage’s fraud or intentional misconduct.

In addition, Anchorage shall not be liable for

the failure to perform or 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), cyberattack or malfunction on the blockchain network

or protocol, or governmental action rendering performance illegal or impossible.

Anchorage Custody Agreement shall not be held liable

by the Trust for such non-performance or delay.

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