Ark 21Shares Bitcoin ETF 10-Q

Item 1. Financial Statements (Unaudited) ARK 21SHARES BITCOIN ETF STATEMENT OF ASSETS AND LIABILITIES (Amounts in thousands, except Share and per Share amounts) March 31, 2025 December 31, 2024 Assets (Unaudited) Investment in bitcoin, at fair value (cost $ 3,548,730 and $ 3,077,870 , respectively) $ 3,916,212 $ 4,352,648 Bitcoin sold receivable 23,180 11,227 Total assets 3,939,392 4,363,875 Liabilities Capital shares payable $ 23,180 $ 11,229 Sponsor fee payable 754 358 Total liabilities 23,934 11,587 Commitments and contingent liabilities (Note 9) Net assets $ 3,915,458 $ 4,352,288 Net assets consists of Paid-in-capital $ 2,611,357 $ 2,460,639 Accumulated earnings (loss) 1,304,101 1,891,649 $ 3,915,458 $ 4,352,288 Shares issued and outstanding, no par value, unlimited amount authorized 47,605,000 46,690,000 Net asset value per share $ 82.25 $ 93.22 The accompanying notes are an integral part of the financial statements. 1 ARK 21SHARES BITCOIN ETF SCHEDULES OF INVESTMENT (Amounts in thousands, except quantity of bitcoin and percentages) March 31, 2025 (Unaudited) Quantity of Bitcoin Cost Fair Value % of Net Assets Investment in bitcoin 47,501.0671 $ 3,548,730 $ 3,916,212 100.02 % Total investments 47,501.0671 $ 3,548,730 $ 3,916,212 100.02 % Liabilities in excess of other assets ( 754 ) ( 0.02 )% Net assets $ 3,915,458 100.00 % December 31, 2024 Quantity of Bitcoin Cost Fair Value % of Net Assets Investment in bitcoin 46,607.1028 $ 3,077,870 $ 4,352,648 100.01 % Total investments 46,607.1028 $ 3,077,870 $ 4,352,648 100.01 % Liabilities in excess of other assets ( 360 ) ( 0.01 )% Net assets $ 4,352,288 100.00 % The accompanying notes are an integral part of the financial statements. 2 ARK 21SHARES BITCOIN ETF STATEMENTS OF OPERATIONS (Amounts in thousands) For the three months ended March 31, 2025 For the three months ended March 31, 2024 (Unaudited) (Unaudited) Expenses Sponsor fee $ 2,367 $ 721 Total expenses 2,367 721 Less waiver and reimbursement – ( 93 ) Net expenses 2,367 628 Net investment loss ( 2,367 ) ( 628 ) Realized and change in unrealized gain (loss) Net realized gain on investment in bitcoin sold to pay Sponsor fee 497 – Net realized gain (loss) on investment in bitcoin sold for redemptions 321,579 ( 85 ) Net change in unrealized appreciation (depreciation) on investment in bitcoin ( 907,296 ) 845,323 Net change in unrealized gain on Sponsor fee payable 39 – Net realized and change in unrealized gain (loss) ( 585,181 ) 845,238 Net increase (decrease) in net assets resulting from operations $ ( 587,548 ) $ 844,610 The accompanying notes are an integral part of the financial statements. 3 ARK 21SHARES BITCOIN ETF STATEMENTS OF CHANGES IN NET ASSETS (Amounts in thousands, except change in Shares issued and redeemed) For the three months ended March 31, 2025 For the three months ended March 31, 2024 (Unaudited) (Unaudited) Net assets, beginning of period $ 4,352,288 $ – 1 Contributions for Shares issued 1,693,160 2,315,842 Distributions for Shares redeemed ( 1,542,442 ) ( 419 ) Net investment loss ( 2,367 ) ( 628 ) Net realized gain on investment in bitcoin sold to pay Sponsor fee 497 – Net realized gain (loss) on investment in bitcoin sold for redemptions 321,579 ( 85 ) Net change in unrealized appreciation (depreciation) on investment in bitcoin ( 907,296 ) 845,323 Net change in unrealized gain on Sponsor fee payable 39 – Net assets, end of period $ 3,915,458 $ 3,160,033 Shares issued and redeemed Shares issued 17,855,000 44,680,000 Shares redeemed ( 16,940,000 ) ( 10,002 ) Net increase in Shares issued 915,000 44,669,998 1 Amount rounds to less than $1,000. See Note 1 to the Unaudited Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 4 ARK 21Shares Bitcoin ETF Notes to Financial Statements (Unaudited) 1. Organization The ARK 21Shares Bitcoin ETF (the “Trust”) is a Delaware statutory trust, formed on June 22, 2021, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust operates pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”). Delaware Trust Company, a Delaware trust company, is the trustee of the Trust (the “Trustee”). The Trust is managed and controlled by 21Shares US LLC (the “Sponsor”). The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is 21co Holdings Limited (formerly known as Amun Holdings Limited). Coinbase Custody Trust Company, LLC (“Coinbase”), BitGo New York Trust Company, LLC (“BitGo”), and Anchorage Digital Bank N.A. (“Anchorage”, and, together with Coinbase and BitGo, as the context may require, the “Custodian”, “Custodians” and each a “Custodian”) are the custodians for the Trust and hold all of the Trust’s bitcoin on the Trust’s behalf. The transfer agent (the “Transfer Agent”), the administrator for the Trust (the “Administrator”), and the cash custodian (the “Cash Custodian”), is Bank of New York Mellon. The Trust is an exchange-traded fund that issues units of beneficial interest (the “Shares”) representing fractional undivided beneficial interests in its net assets that trade on Cboe BZX Exchange, Inc. (the “Exchange”). The Shares were listed for trading on the Exchange on January 11, 2024, under the ticker 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. CF Benchmarks Ltd. is the administrator for the Index (the “Index Provider”). The Index is designed to reflect the performance of bitcoin in U.S. dollars. In seeking to achieve its investment objective, the Trust holds bitcoin at its Custodians and values its Shares daily based on the Index. ARK Investment Management LLC (the “Sub-Adviser”) is the sub-adviser of the Trust and provides assistance in the marketing of the Shares. The Trust’s Shares are neither interests in nor obligations of the Sponsor, the Sub-Adviser, or the Trustee. The Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such, the Trust may elect to comply with certain reduced public company reporting requirements. On December 12, 2023, the Sponsor, in its capacity as Seed Capital Investor, subject to conditions, purchased the initial Seed Creation Baskets comprising 2 Shares at a per-Share price of $ 50.00 , as described in “Seed Capital Investor.” Total proceeds to the Trust from the sale of these Initial Seed Shares were $ 100 . Delivery of the Seed Shares was made on December 12, 2023. These Seed Shares were redeemed for cash on or about January 5, 2024. On January 9, 2024 (the “Seed Capital Purchase Date”), the Seed Capital Investor purchased Seed Creation Baskets comprising 10,000 Shares (the “Initial Seed Creation Baskets”) at a per-share price of $ 46.88 . Total proceeds to the Trust from the sale of the Seed Creation Baskets were $ 468,806.44 . On January 9, 2024, the Trust purchased 10 bitcoins with the proceeds of the Seed Creation Baskets by transacting with a Bitcoin Counterparty to acquire bitcoin on behalf of the Trust in exchange for cash provided by the Sponsor in its capacity as Seed Capital Investor. These Seed Creation Baskets were redeemed for cash on or about January 19, 2024. The statements of assets and liabilities and schedule of investments on March 31, 2025, and the statements of operations and changes in net assets for the three months ended March 31, 2025 and 2024, have been prepared on behalf of the Trust and are unaudited. In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position and results of operations for the three months ended March 31, 2025 and 2024, and for all interim periods presented have been made. In addition, interim period results are not necessarily indicative of results for a full-year period. The fiscal year of the Trust is December 31st. 2. Significant Accounting Policies Basis of Accounting The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP” or “GAAP”). 5 The Trust qualifies as an investment company solely for accounting purposes and not for any other purpose and follows the accounting and reporting guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies, but is not registered, and is not required to be registered, as an investment company under the Investment Company Act of 1940, as amended. The Trust uses fair value as its method of accounting for bitcoin in accordance with its classification as an investment company for accounting purposes. The preparation of the financial statements in conformity with US GAAP requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from such estimates as additional information becomes available or actual amounts may become determinable. Should actual results differ from those previously recognized, the recorded estimates will be revised accordingly with the impact reflected in the operating results of the Trust in the reporting period in which they become known. Cash Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits. Investment Valuation US GAAP defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trust’s policy is to value investments held at fair value. The Trust identifies and determines the bitcoin principal market (or in the absence of a principal market, the most advantageous market) for GAAP purposes consistent with the application of the fair value measurement framework in FASB ASC 820 – Fair Value Measurement. A principal market is the market with the greatest volume and activity level for the asset or liability. The determination of the principal market will be based on the market with the greatest volume and level of activity that can be accessed. The Trust obtains relevant volume and level of activity information and based on initial analysis will select an exchange market as the Trust’s principal market. The net asset value (“NAV”) and NAV per Share will be calculated using the fair value of bitcoin based on the price provided by this exchange market, as of 4:00 p.m. ET on the measurement date for GAAP purposes. The Trust will update its principal market analysis periodically and as needed to the extent that events have occurred, or activities have changed in a manner that could change the Trust’s determination of the principal market. Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and Level 3: Unobservable inputs, including the Trust’s assumptions used in determining the fair value of investments, where there is little or no market activity for the asset or liability at the measurement date. Amount at Fair Value Measurement Using (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 March 31, 2025 (Unaudited) Assets Investment in bitcoin $ 3,916,212 $ 3,916,212 $ – $ – Amount at Fair Value Measurement Using (Amounts in thousands) Fair Value Level 1 Level 2 Level 3 December 31, 2024 Assets Investment in bitcoin $ 4,352,648 $ 4,352,648 $ – $ – 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 purchase. 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. 6 Investment Transactions The Trust considers investment transactions to be the receipt of bitcoin for Share creations and the delivery of bitcoin for Share redemptions or for payment of expenses in bitcoin. The Trust records its investments transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in bitcoin. Calculation of Net Asset Value “NAV” and NAV per Share On each day other than when the Exchange is closed for regular trading (a “Business Day”), as soon as practicable after 4:00 p.m. (Eastern Time), the net asset value of the Trust is obtained by subtracting all accrued fees, expenses and other liabilities of the Trust from the fair value of the bitcoin and other assets held by the Trust using the index price. The Trustee computes the NAV per Share by dividing the NAV of the Trust by the number of Shares outstanding on the date the computation is made. Federal Income Taxes The Sponsor and the Trustee will treat the Trust as a “grantor trust” for U.S. federal income tax purposes. Although not free from doubt due to the lack of directly governing authority, if the Trust operates as expected, the Trust should be classified as a “grantor trust” for U.S. federal income tax purposes and the Trust itself should not be subject to U.S. federal income tax. Each beneficial owner of Shares will be 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 “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. The Sponsor has reviewed the tax positions as of March 31, 2025, and has determined that no provision for income tax is required in the Trust’s financial statements. Segment Reporting The Trust operates in one segment. The segment derives its revenues from Trust investments made in accordance with the defined investment strategy of the Trust, as prescribed in the Trust’s prospectus. The Chief Operating Decision Maker (“CODM”) is the Sponsor. The CODM monitors the operating results of the Trust. The financial information that the CODM leverages to assess the segment’s performance and to make decisions for the Trust’s single segment is consistent with the financial information that is presented within the Trust’s financial statements. Segment assets are reflected on the accompanying Statements of Assets and Liabilities as Total assets and the only significant segment expense, the Sponsor fee, is included in the accompanying Statements of Operations. 7 3. Fair Value of Bitcoin The following represents the changes in quantity of bitcoin and the respective fair value on March 31, 2025 (Unaudited) and December 31, 2024 (Amounts in thousands, except Quantity of bitcoin) Quantity of bitcoin Fair Value Beginning balance as of January 1, 2025 46,607.1028 $ 4,352,648 Bitcoin purchased 17,818.1765 1,693,160 Bitcoin sold ( 16,924.2374 ) ( 1,544,376 ) Net realized gain on investment in bitcoin sold to pay Sponsor fee – 497 Net realized gain on investment in bitcoin sold for redemptions – 321,579 Change in unrealized appreciation on investment in bitcoin – ( 907,296 ) Ending balance as of March 31, 2025 47,501.0671 $ 3,916,212 (Amounts in thousands, except Quantity of bitcoin) Quantity of bitcoin Fair Value Beginning balance as of January 1, 2024 – – Bitcoin purchased 95,498.6291 5,903,861 Bitcoin sold ( 48,891.5263 ) ( 3,448,694 ) Net realized gain on investment in bitcoin sold to pay Sponsor fee – 825 Net realized gain on investment in bitcoin sold for redemptions – 621,878 Change in unrealized appreciation on investment in bitcoin – 1,274,778 Ending balance as of December 31, 2024 46,607.1028 $ 4,352,648 4. Trust Expenses 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 agreed to waive the entire Sponsor Fee for (i) a nine-month period which commenced on 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 came first. The Trust assets exceeded $ 1 billion in February 2024, at which time the waiver period ended. Except for during periods during which the Sponsor Fee has been waived, the Sponsor Fee accrues daily and is payable in bitcoin weekly in arrears. 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 Trust incurred Sponsor Fees for the quarters ended March 31, 2025 and 2024 of $ 2,367,167 and $ 627,659 net of Sponsor Fee waived of $ 93,111 , respectively. The accrued liability at March 31, 2025 and December 31, 2024 was $ 753,353 and $ 357,613 . The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee. The Sponsor has agreed to pay all operating expenses (except for litigation expenses and other extraordinary expenses) out of the Sponsor Fee. Operating expenses assumed by the Sponsor include (i) fees to the Sub-Adviser; (ii) the fee payable to marketing agents for services provided to the Trust (the “Marketing Fee”), (iii) fees to the Administrator, if any, (iv) fees to the bitcoin Custodians, (v) fees to the Transfer Agent, (vi) fees to the Trustee, (vii) the fees and expenses related to any future listing, trading or quotation of the Shares on any listing exchange or quotation system (including legal, marketing and audit 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 Exchange Act, (xi) printing and mailing costs; (xii) costs of maintaining the 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 will not, however, assume certain extraordinary, non-recurring expenses that are not Sponsor-paid Expenses, 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 Custodians, Administrator or other agents, service providers or counter-parties 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 shall be subject to a cap of $ 100,000 per annum. In the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may be re-designated as an Additional Trust Expense. To the extent that the Sponsor does not voluntarily assume expenses, they will be the responsibility of the Trust. The Sponsor also pays the costs of the Trust’s organization and offering. The Trust is not obligated to repay any such costs related to the Trust’s organization and offering paid by the Sponsor. 8 5. Creation and Redemption of Shares The Trust creates and redeems Shares at the NAV of date of the creation and redemption on a continuous basis but only in Creation Baskets consisting of 5,000 Shares or multiples thereof. Only Authorized Participants, which are registered broker-dealers who have entered into written agreements with the Sponsor and the Administrator, can place orders. The Trust engages in bitcoin transactions for converting cash into bitcoin (in association with purchase orders) and bitcoin into cash (in association with redemption orders). The Trust conducts its bitcoin purchase and sale transactions by, in its sole discretion, choosing to trade directly with third parties (each, a “bitcoin Trading Counterparty”), who are not registered broker-dealers pursuant to written agreements between such bitcoin Trading Counterparties and the Trust, or choosing to trade through the Prime Broker acting in an agency capacity with third parties through its Coinbase Prime service pursuant to the Prime Broker Agreement. A bitcoin Trading Counterparty may be an affiliate of an Authorized Participant. The Authorized Participants deliver only cash to create Shares and 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 third-party with respect to purchasing, holding, delivering, or receiving bitcoin as part of the creation or redemption process. The Trust creates Shares by receiving bitcoin from a third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to deliver the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the delivery of the bitcoin to the Trust or acting 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 third-party that is not the Authorized Participant and the Trust—not the Authorized Participant—is responsible for selecting the third-party to receive the bitcoin. Further, the third-party will not be acting as an agent of the Authorized Participant with respect to the receipt of the bitcoin from the Trust or acting at the direction of the Authorized Participant with respect to the receipt of the bitcoin from the Trust. The third-party is unaffiliated with the Trust and the Sponsor. For the three months ended March 31, 2025 For the three months ended March 31, 2024 Activity in Capital Transactions Issued and Redeemed: Shares issued $ 17,855,000 $ 44,680,000 Shares redeemed ( 16,940,000 ) ( 10,002 ) Net Change in Capital Transactions Issued and Redeemed $ 915,000 $ 44,669,998 For the three months ended March 31, 2025 For the three months ended March 31, 2024 (Amounts in thousands) Shares issued $ 1,693,160 $ 2,315,842 Shares redeemed ( 1,542,442 ) ( 419 ) Net Change in Capital Transactions Issued and Redeemed $ 150,718 $ 2,315,423 9 Bitcoin purchased payable represents the quantity of bitcoin purchased for the creation of Shares where the bitcoin has not yet settled. Generally, bitcoin is transferred within two Business Days of the trade date. (Amounts in thousands) March 31, 2025 December 31, 2024 (Unaudited) Bitcoin purchased payable $ – $ – Bitcoin sold receivable represents the quantity of bitcoin sold for the redemption of Shares where the bitcoin has not yet been settled. Generally, bitcoin is transferred within two Business Days of the trade date. (Amounts in thousands) March 31, 2025 December 31, 2024 (Unaudited) Bitcoin sold receivable $ 23,180 $ 11,227 6. Related Parties The Sponsor is a related party to the Trust. The Trust’s operations are supported by its Sponsor, who is in turn supported by its parent company and affiliated companies and external service providers. As of March 31, 2025, the Sponsor did not own any Shares of the Trust. 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. 7. Financial Highlights Per Share Performance (for a Share outstanding throughout the periods presented) For the three months ended March 31, 2025 For the three months ended March 31, 2024 (Unaudited) (Unaudited) Net asset value per Share, beginning of period $ 93.22 $ 50.00 Net investment income (loss) on investment in bitcoin (1) ( 0.05 ) ( 0.02 ) Net realized and change in unrealized gain(loss) on investment in bitcoin (2) ( 10.92 ) 20.76 Net change in net assets from operations ( 10.97 ) 20.74 Net asset value per Share, end of period $ 82.25 $ 70.74 Total return, at net asset value (3)(5) ( 11.77 )% 41.48 % Ratio to average net assets (4) Net investment income (loss) ( 0.21 )% ( 0.18 )% Gross expenses 0.21 % 0.21 % Net expenses 0.21 % 0.18 % (1) Calculated using average Shares outstanding. (2) The amount shown for a share outstanding throughout the year may not agree with the change in the aggregate gains and losses for the year because of the timing of sales and repurchases of the Trust’s shares in relation to fluctuating market values for the Trust. (3) Total return is calculated based on the change in value during the period and is not annualized. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from the Trust. (4) Annualized. (5) Not Annualized. 10 8. Commitments and Contingent Liabilities In the normal course of business, the Trust may enter into contracts that contain a variety of general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust which have not yet occurred and cannot be predicted with any certainty. However, the Sponsor believes the risk of loss under these arrangements to be remote. 9. Concentration Risk Unlike other funds that may invest in diversified assets, the Trust’s investment strategy is concentrated in a single asset within a single asset class. This concentration maximizes the degree of the Trust’s exposure to a variety of market risks associated with bitcoin and digital assets. By concentrating its investment strategy solely in bitcoin, any losses suffered as a result of a decrease in the value of ether can be expected to reduce the value of an interest in the Trust and will not be offset by other gains if the Trust were to invest in underlying assets that were diversified. 10. Indemnification The Sponsor will not be liable to the Trust, the Trustee or any Shareholder for any action taken or for refraining from taking any action in good faith, or for errors in judgment or for depreciation or loss incurred by reason of the sale of any bitcoin or other assets of the Trust. However, the preceding liability exclusion will not protect the Sponsor against any liability resulting from its own gross negligence, bad faith, or willful misconduct. The Sponsor and each of its shareholders, members, directors, officers, employees, affiliates, and subsidiaries will be indemnified by the Trust and held harmless against any losses, liabilities or expenses incurred in the performance of its duties under the Trust Agreement without gross negligence, bad faith, or 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 under the Trust Agreement. The Sponsor shall 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 in the Trust Agreement. Such indemnity includes payment from the Trust of the costs and expenses incurred in defending against any indemnified claim or liability under the Trust Agreement. The Trustee will not be liable or accountable to the Trust or any other person or under any agreement to which the Trust or any series of the Trust is a party, except for the Trustee’s breach of its obligations pursuant to the Trust Agreement or its own willful misconduct, bad faith or gross negligence. The Trustee and each of the Trustee’s officers, affiliates, directors, employees, and agents will be indemnified by the Trust from and against any losses, claims, taxes, damages, reasonable expenses, and liabilities incurred with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Trust Agreement or the transactions contemplated thereby; provided that the indemnified party acted without willful misconduct, bad faith or gross negligence. 11. Subsequent Events The Trust has evaluated subsequent events and transactions for potential recognition or disclosure through the date the financial statements were issued and has determined that there are no material events that would require disclosure in the financial statements. 11