What changed in this filing

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Item 1A. Risk Factors

2026-03-02 compared with 2025-03-26 · 1162 added, 1021 removed, 1785 unchanged (55% of the section changed)

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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,

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As of December 31, 2025, the price of bitcoin was $87,515.28 (source:

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.

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The amount of bitcoin represented by the Shares will decline over tim e.

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 Associated with the Regulatory Environment

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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.

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aware of or that we currently deem not to be material but may become material in the future.

Risks Associated

with Bitcoin and the Bitcoin Network

Risks Associated with

Bitcoin and the Bitcoin Network

Bitcoin is a relatively

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and Genesis Global Capital, LLC (“Genesis”).

In response to these events (collectively, the “2022 Events”), the digital asset markets have experienced extreme price volatility

In response to these 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

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otherwise diverge from NAV.

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.

The use of cash creations

and redemptions, as opposed to in-kind creations 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 the originally contemplated in-kind creation and redemption model, or the potential unavailability or exhaustion of the Trust’s

ability to borrow bitcoin or cash as trade credit (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.

Participants must be registered broker-dealers.

Registered broker-dealers are subject to various requirements of the federal securities

laws and rules, including, financial responsibility rules such as the customer protection rule, the net capital rule and recordkeeping

requirements.

On May 15, 2025, the staff of the SEC’s Division of Trading and Markets stated that broker-dealers are permitted

to facilitate in-kind creations and redemptions in connection with spot exchange-traded products;

however, there is as yet no definitive

regulatory guidance on the specific details of how registered broker-dealers can comply with SEC rules with regard to transacting in

or holding spot bitcoin.

Absent further regulatory clarity regarding whether and how registered broker-dealers can hold and deal in bitcoin

under applicable broker-dealer financial responsibility and other rules, there is a risk that registered broker-dealers participating

in the in-kind creation or redemption of Shares for bitcoin may be unable to demonstrate compliance with such rules.

While compliance

with rules such as the customer protection rule, the net capital rule and recordkeeping requirements are primarily the broker-dealer’s

responsibility, a national securities exchange is required to enforce compliance by its member broker-dealers with applicable federal

securities law and rules.

Only certain Authorized Participants at present have the ability (either acting themselves or through their

affiliates) to support in-kind creation and redemption activity.

with the SEC Staff’s recent statement clarifying that in-kind creations and redemptions are permitted, the Trust’s limited

ability 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, Authorized Participants will be limited in their ability to redeem

or create Shares, in which case the arbitrage mechanism may not function as efficiently.

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.

addition, the Trust’s limited ability to facilitate in-kind creations and redemptions, and resulting relative 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.

Further, there can be no assurance that broker-dealers would be willing to serve as Authorized

Participants with respect to the in-kind creation and redemption of Shares.

Any of these factors could adversely affect the performance

of the Trust and the value of the Shares.

The use of cash creations and redemptions, as opposed to in-kind creations

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 the originally contemplated in-kind creation

and redemption model, or the potential unavailability or exhaustion of the Trust’s ability to borrow bitcoin or cash as trade credit

(the “Trade Credits”), which the Trust would not be able to use in connection with in-kind creations and redemptions.

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 Participants are 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.

To the knowledge of the Sponsor,

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and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

Momentum pricing.

The market value of

bitcoin is subject to momentum pricing.

The market value of bitcoin

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A decline in the adoption

of bitcoin could negatively impact the Trust.

of bitcoin or the Bitcoin network could negatively impact the Trust.

The Sponsor will not have

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bitcoin will also require an accommodating regulatory environment.

The use of bitcoin to, among

other things, buy and sell goods and services is part of a new and rapidly evolving industry that employs digital assets based upon computer-generated

mathematical and/or cryptographic protocols.

The use of digital assets such as bitcoin to, among other things, buy

and sell goods and services or facilitate cross-border payments, is part of a new and rapidly evolving industry that employs digital assets

based upon computer-generated mathematical and/or cryptographic protocols.

Bitcoin is a prominent, but not unique, part of this industry.

The growth of this industry

is subject to a high degree of uncertainty, as new assets and technological innovations continue to develop and evolve.

Currently, there

is relatively limited use of bitcoin in the retail and commercial marketplace in comparison to relatively extensive use as a store of

value, thus contributing to price volatility that could adversely affect an investment in the Shares.

However, bitcoin may not be suited

for a number of commercial uses, including those requiring real time payments, partially due to the amount of time that bitcoin transactions

may potentially require in order to clear.

This could result in decreasing usage of the network, to the extent that bitcoin does not otherwise

become a store of asset value or meet the needs of another commercial use.

The growth of this industry is subject to a high degree of uncertainty, as new assets and technological innovations continue to develop

Currently, there is relatively limited use of bitcoin in the retail and commercial marketplace in comparison to relatively

extensive use as a store of value, thus contributing to price volatility that could adversely affect an investment in the Shares.

bitcoin may not be suited for a number of commercial uses, including those requiring real time payments, partially due to the amount of

time that bitcoin transactions may potentially require in order to clear.

This could result in decreasing usage of the network, to the

extent that bitcoin does not otherwise become a store of asset value or meet the needs of another commercial use.

Today, there is limited use

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the value of Shares.

The failure or poor

performance of, or perceptions of risk or negative publicity around one or more of the protocols based on the Bitcoin network or that

make use of bitcoin may adversely affect demand for bitcoin, the price of bitcoin, or the price of the Shares.

Several decentralized protocols

or decentralized applications operate on the bitcoin network or use bitcoin.

These may include decentralized exchanges, lending or borrowing

protocols, or liquid staking protocols, among others.

The failure, poor performance of, any errors in the functioning of these protocols,

or other negative events associated with these protocols may result in negative publicity and may limit the adoption of bitcoin, resulting

in adverse consequences for the demand for bitcoin, the Trust and the Shares.

Irrevocable nature of

blockchain-recorded transactions.

Bitcoin transactions recorded

on the Bitcoin network are not, from an administrative perspective, reversible without the consent and active participation of the recipient

of the transaction or, in theory, control or consent of a majority of the Bitcoin network’s aggregate hash rate.

Once a transaction

has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of a bitcoin or a theft of bitcoin generally

will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer or theft.

It is possible that,

through computer or human error, or through theft or criminal action, the Trust’s bitcoin could be transferred from custody accounts

in incorrect quantities or to unauthorized third parties.

To the 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, the

Trust will be 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.

Bitcoin transactions recorded on the Bitcoin network are not, from

an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory,

control or consent of a majority of the Bitcoin network’s aggregate hash rate.

Once a transaction has been verified and recorded

in a block that is added to the blockchain, an incorrect transfer of a bitcoin or a theft of bitcoin generally will not be reversible,

and the Trust may not be capable of seeking compensation for any such transfer or theft.

Although the Trust’s transfers of bitcoin

will regularly be made to or from the Trust’s accounts with the Bitcoin Custodians, it is possible that, through computer or human

error, or through theft or criminal action, the Trust’s bitcoin could be transferred from the Trust’s accounts with the Bitcoin

Custodians in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.

To the extent that the Trust is unable

to successfully seek redress for such error or theft, such loss could adversely affect an investment in the Trust.

The loss or destruction

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In addition, neither the Trust nor the Sponsor insures 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 Custodian entered into between the Trust and Coinbase Custodian on May 8, 2024 (the “Coinbase Custody

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

and (ii) Anchorage (the “Anchorage Custody Agreement”).

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, including the Trust’s

bitcoin, resulting 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 that sufficient insurance proceeds will be available to cover

the Trust’s losses in full.

The Bitcoin 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 Bitcoin 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 Bitcoin Custodians may be substantially lower than the assets of the Trust.

While the Bitcoin 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 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.

Furthermore, 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;

While the Bitcoin Custodians

have advised the Sponsor that they collectively have insurance coverage up to $685 million in the aggregate that covers losses of the

digital assets they custody on behalf of their clients, including the Trust’s bitcoin, resulting 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 that sufficient insurance proceeds will be available to cover the Trust’s losses in full.

The Bitcoin 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 Bitcoin 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 Bitcoin Custodians may be substantially

lower than the assets of the Trust.

While the Bitcoin 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 digital

The insurance maintained by each Bitcoin Custodian is shared among all of such Bitcoin Custodian’s customers, is not specific

to the Trust or to customers holding bitcoin with such Bitcoin Custodian, and may not be available or sufficient to protect the Trust

from all possible losses or sources of losses.

On September 11, 2024, the Trust entered into separate custodial services

agreements (each, a “Custodial Services Agreement” and, collectively, including the agreement with Coinbase Custodian entered

into between the Trust and Coinbase Custodian on May 8, 2024 (the “Coinbase Custody Agreement”), and the agreement with BitGo

entered into between the Trust and BitGo on December 12, 2025 (the “BitGo Custody Agreement”), the “Custodial Services

Agreements”) with each of (i) BitGo New York (the “BitGo New York Custody Agreement”) and (ii) Anchorage (the “Anchorage

Custody Agreement”).

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, including the Trust’s bitcoin, resulting 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 that sufficient insurance proceeds will be available to cover the Trust’s losses in full.

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 Bitcoin 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 Bitcoin

Custodians may be substantially lower than the assets of the Trust.

While the Bitcoin 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 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 bitcoin with the Bitcoin Custodians, and may not be available or sufficient

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

On December 12, 2025, the

Trust entered into the BitGo Custody Agreement with BitGo Bank & Trust, N.A., a federally chartered national trust bank.

to the BitGo Custody Agreement , BitGo will establish and maintain one or more segregated custody accounts, controlled and secured by

BitGo, on its books for the receipt, safekeeping, and maintenance of the Trust’s bitcoin holdings.

The BitGo Custody Agreement also

requires BitGo to maintain reasonable insurance policies and coverage.

The BitGo Custody Agreement commenced on December 12, 2025, and

will continue for one year, unless earlier terminated in accordance with its terms or if either party notifies the other of its intention

not to renew at least 30 days prior to the expiration of the then-current term.

After the initial term, the BitGo Custody Agreement will

automatically renew for successive one-year periods, unless either party notifies the other of its intention not to renew with prior notice.

Furthermore, under the Custodial

Services Agreements, the Bitcoin Custodians’ liability is limited.

With respect to the Coinbase Custody Agreement, the Coinbase

Custodian’s liability is as follows, among others:

(i) the Coinbase Custodian’s aggregate liability with respect to any breach

of its obligations under the Coinbase Custody Agreement shall not exceed the aggregate amount of fees paid by the Trust to the Coinbase

Custodian in respect of the services relating to custody, trade execution, lending or post-trade credit (if applicable), and other services

(collectively, the “Prime Broker Services”) in the 12 months prior to the event giving rise to such 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.

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

Custodian’s aggregate liability under the Coinbase Custody Agreement shall not exceed the greater of (A) the aggregate fees paid

by the Trust to the Coinbase Custodian in respect of the custodial services in the 12 months prior to the event giving rise to the Coinbase

Custodian’s liability, and (B) the value of the supported bitcoin on deposit in the Trust’s custodial account(s) giving rise

to the Coinbase Custodian’s liability at the time of the event giving rise to the Coinbase Custodian’s liability;

Coinbase Custodian’s aggregate liability in respect of each cold storage address shall not exceed $100 million;

(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 of or should have known of the possibility thereof;

and (v) in no event shall the Coinbase Custodian

or its affiliates have any liability to the Trust or any third party with respect to any breach of its obligations under the Coinbase

Custody Agreement, express or implied, which does not result solely from its gross negligence, fraud or willful misconduct.

Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service which result directly

or indirectly from any 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, the BitGo Custodian 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 the BitGo Custodian

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 the BitGo Custodian’s fraud, willful misconduct, or gross negligence.

In situations of gross negligence,

the BitGo Custodian’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 the BitGo Custodian for direct damages is capped at the fees paid or payable to them

under the BitGo Custody Agreement during the twelve-month period immediately preceding the first incident that caused the liability.

With respect to the Anchorage Custody Agreement, except for the Anchorage

Custodian’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, the Anchorage Custodian

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, the Anchorage Custodian is not liable for (i) losses which arise from its compliance

with applicable laws, including sanctions laws administered by the Office of Foreign Assets Control (“OFAC”) of the U.S.

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of business arising in connection with the Anchorage Custody Agreement.

In addition, Anchorage is not 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, the Anchorage Custodian is not liable for any losses

which arise as a result of the non-return of digital assets that the Trust has delegated to the Anchorage Custodian or a third party for

on-chain services, such as staking, voting, vesting, and signaling, unless such losses occur as a result of the Anchorage Custodian’s

fraud or intentional misconduct.

Under the BitGo New York Custody

Agreement, the BitGo New York Custodian 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 the BitGo New York Custodian 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 the BitGo New York Custodian’s fraud, willful

misconduct, or gross negligence.

In situations of gross negligence, the BitGo New York Custodian’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 the BitGo

New York Custodian for direct damages is capped at the fees paid or payable to them under the BitGo New York Custody Agreement during

the twelve-month period immediately preceding the first incident that caused the liability.

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, 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.

(i) the Prime Broker’s aggregate liability

shall not exceed the aggregate fees paid by the Trust to the Prime Broker in respect of the Prime Broker Services in the 12 months prior

to the event giving rise to the Prime Broker’s liability;

and (ii) 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 of or should have known of the

possibility thereof.

In general, with limited exceptions, the Prime Broker is not liable under the Prime Broker Agreement unless in the

event of its gross negligence, fraud, or willful misconduct.

The Prime Broker is not liable for delays, suspension of operations, failure

in performance, or interruption of service which result directly or indirectly from any 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.

Moreover, in the event of

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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 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 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 Coinbase Custody Agreement

contains an agreement by the parties to treat the bitcoin credited to the 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 Custodians will serve as fiduciaries

and custodians on the Trust’s behalf.

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

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 a Bitcoin Custodian

became subject to insolvency proceedings and a court were to rule that the custodied bitcoin were part of 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 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 a Bitcoin Custodian, an automatic stay could go into effect and protracted litigation could be required in order

to recover the assets held with such Bitcoin Custodian, all of which could significantly and negatively impact the Trust’s operations

and the value of the Shares.

on their behalf by third parties are relatively untested in a bankruptcy of entities such as the Bitcoin Custodians or Prime Broker in

the digital asset 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 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 Coinbase Custody Agreement contains an agreement by the parties

thereto to treat the bitcoin credited to the Trust’s Cold Vault Balance with Coinbase 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.

(“Coinbase Global”),

has stated in 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.

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.

Bitcoin Custodians become subject to insolvency proceedings and a court were to rule that the custodied bitcoin were part of such Bitcoin

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

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

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

could be required in order to recover the assets held with 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

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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 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

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 Custodians and Prime Broker.

The Prime Broker Agreement and Custodial Services

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 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 Custodians’ 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.

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 Bitcoin Custodians

or the Prime Broker, absent willful misconduct, gross negligence, or bad faith on the part of the Trustee or the Sponsor, fraud of the

Sponsor or material 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 the 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 Custodians and the Prime Broker.

The Prime Broker Agreement and Custodial Services 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 of the Trust’s obligations, agreements, representations or warranties under the Prime Broker Agreement

or Custodial Services Agreements or any transactions thereunder.

Consequently, a loss may be suffered with respect to the Trust’s

bitcoin that is not covered by the Bitcoin Custodians’ insurance policies and for which no person is liable in damages.

the recourse of the Trust or the Shareholders, under applicable law, is limited.

Loss of a critical banking

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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.

To the extent that the Trust or the Prime Broker faces difficulty establishing

or maintaining banking relationships, the loss of the Trust or the 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.

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 U.S.

Treasury Department, the Federal 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 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.

Treasury Department, the Federal 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 DFPI, which appointed the FDIC as receiver.

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

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If any of the Custodial

Services Agreements or Prime Broker Agreement is terminated or any of the Bitcoin Custodians or Prime Broker fails to provide services

as required, the Trustee may need to find and appoint a replacement Bitcoin Custodian or Prime Broker, which could pose a challenge to

the safekeeping of the Trust’s bitcoin, and the Trust’s ability to continue to operate may be adversely affected.

The 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.

On March 22, 2023, the 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 the SEC staff made a “preliminary

determination” to 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 SEC staff, the Relevant Coinbase Entities believe these potential enforcement actions

would relate to aspects of the Relevant Coinbase Entities’ Coinbase Prime service, spot market, staking service Coinbase Earn, and

Coinbase Wallet, and the potential civil action may seek injunctive relief, disgorgement, and civil penalties.

On June 6, 2023, the SEC

filed a complaint against the Relevant Coinbase Entities in federal district court in the Southern District of New York, alleging, inter

Services Agreements or the Prime Broker Agreement are terminated or the Bitcoin Custodians or the Prime Broker fail to provide services

as required, the Trustee may need to find and appoint a replacement custodian or prime broker, which could pose a challenge to the safekeeping

of the Trust’s bitcoin, and the Trust’s ability to continue to operate may be adversely affected.

The Trust is dependent on the Bitcoin Custodians as well as 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 the Prime Broker

fail 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.

In March 2023, the Prime Broker and Coinbase Global (together with

Coinbase Inc., the “Relevant Coinbase Entities”) received a “Wells Notice” from the SEC staff stating that the

SEC staff made a “preliminary determination” to 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 SEC staff, the Relevant Coinbase Entities believe these

potential enforcement actions would relate to aspects of the Relevant Coinbase Entities’ Coinbase Prime service, spot market, staking

service Coinbase Earn, and Coinbase Wallet, and the potential civil action may seek injunctive relief, disgorgement, and civil penalties.

In June 2023, the SEC filed a complaint against the Relevant Coinbase Entities in federal district court in the Southern District of New

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 that the SEC’s complaint alleges

are securities, (ii) that Coinbase Inc.

has violated the Securities Act by failing to register with the SEC the offer and sale 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 the same extent as Coinbase Inc.

On February 27, 2025, the SEC announced that it had filed

a joint stipulation with Coinbase Inc.

and Coinbase Global Inc.

to dismiss the 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 governmental, regulatory or other enforcement action or litigation, Coinbase Inc., as Prime Broker,

could be required, as a result of a judicial determination, or could choose, to restrict or curtail the services it offers, or its financial

condition and ability to provide services to the Trust could be affected.

If the Prime Broker were to be required or choose, as a result

of a regulatory action or litigation, 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

While Coinbase Custodian was not named in the complaint, if Coinbase Global, as the parent of Coinbase Custody, 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.

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 that the SEC’s

complaint alleges are securities, (ii) that Coinbase Inc.

has violated the Securities Act by failing to register with the SEC the offer

and sale 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 the same extent as Coinbase Inc.

In February 2025, the SEC announced that

it had filed a joint stipulation with Coinbase Inc.

and Coinbase Global to dismiss the ongoing civil enforcement action against the two

The SEC’s complaint against the Relevant Coinbase Entities did not allege that bitcoin is offered or sold as a security

nor did it allege that Coinbase Inc’s activities involving bitcoin caused the alleged registration violations, and the Coinbase

Custodian was not named as a defendant.

In the event of any future SEC or other governmental, regulatory or other enforcement action or

litigation, Coinbase Inc., as Prime Broker, could be required, as a result of a judicial determination, or could choose, to restrict or

curtail the services it offers, or its financial condition and ability to provide services to the Trust could be affected.

Broker were to be required or choose, as a result of a regulatory action or litigation, 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 the Coinbase Custodian was not named in the complaint, if Coinbase

Global, as the parent of the Coinbase Custodian, 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.

Alternatively, the Trust could

replace Coinbase Custodian as a custodian with custody of the Trust’s bitcoin, pursuant to the Coinbase Custody Agreement.

Coinbase Custodian 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 defined below).

Transferring maintenance responsibilities of the Trust’s

account at Coinbase Custodian to another custodian will likely be complex and could subject the Trust’s bitcoin to the risk of loss

during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the Trust’s assets.

replace the Coinbase Custodian as a Bitcoin Custodian pursuant to the Coinbase Custody Agreement.

Similarly, Coinbase Custodian or Coinbase

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 such term is defined in the Prime Broker Agreement).

Transferring maintenance responsibilities of

the Trust’s accounts with the Bitcoin Custodians to another custodian would likely be complex and could subject the Trust’s

bitcoin to the risk of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss

of the Trust’s assets.

As Prime Broker, Coinbase Inc.

does not guarantee uninterrupted access to the Trading Platform or the services it provides to the Trust

as Prime Broker.

does not guarantee uninterrupted access to the Trading Platform or the services

it provides to the Trust as Prime Broker.

Under certain circumstances, Coinbase Inc.

is permitted to halt or suspend trading on its trading platform, or impose

limits on the amount or size of, or reject, the Trust’s orders, including in the event of, among others, (a) delays, suspension

of operations, failure in performance, or interruption of service that are directly due to a cause or condition beyond the reasonable

control of Coinbase Inc, (b) the Trust has engaged in unlawful or abusive activities or fraud, (c) the acceptance of the Trust’s

order would cause the amount of Trade Credits extended to exceed the maximum amount of Trade Credit that the Trust’s agreement with

the Trade Credit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is continuing that

results in Coinbase Inc.

being unable to provide trading services or accept the Trust’s order, in each case, subject to certain

protections for the Trust.

Also, if Coinbase Custodian or Coinbase Inc.

become insolvent, suffer business failure, cease business operations,

default on or fail to perform their obligations under their contractual agreements with the Trust, or abruptly discontinue the services

they provide to the Trust for any reason, the Trust’s operations would be adversely affected.

The Trustee may not be able

to find a party willing to serve as a bitcoin custodian of the Trust’s bitcoin or as the Trust’s prime broker under the same

terms as the current Custodial Service Agreements or Prime Broker Agreement or at all.

To the extent that Trustee is not able to find

a suitable party willing to serve as the custodian or prime broker, the Trustee may be required to terminate the Trust and liquidate the

Trust’s bitcoin.

In addition, to the extent that the Trustee finds a suitable party but must enter into a new custodian agreement

or prime broker agreement that is less favorable for the Trust or Trustee, the value of the Shares could be adversely affected.

Trust is unable to find a replacement prime broker, its operations could be adversely affected.

is permitted to halt or suspend trading on its trading

platform, or impose limits on the amount or size of, or reject, the Trust’s orders, including in the event of, among others, (a)

delays, suspension of operations, failure in performance, or interruption of service that are directly due to a cause or condition beyond

the reasonable control of Coinbase Inc, (b) the Trust has engaged in unlawful or abusive activities or fraud, (c) the acceptance of the

Trust’s order would cause the amount of Trade Credits extended to exceed the maximum amount of Trade Credit that the Trust’s

agreement with the Trade Credit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is

continuing that results in Coinbase Inc.

being unable to provide trading services or accept the Trust’s order, in each case, subject

to certain protections for the Trust.

Also, if the Coinbase Custodian or Coinbase Inc.

become insolvent, suffer business failure, cease

business operations, default on or fail to perform their obligations under their contractual agreements with the Trust, or abruptly discontinue

the services they provide to the Trust for any reason, the Trust’s operations would be adversely affected.

The Trustee may not be able to find a party willing to serve as a custodian

of the Trust’s bitcoin or as the Trust’s prime broker under the same terms as the current Custodial Services Agreements or

Prime Broker Agreement or at all.

To the extent that the Trustee is not able to find a suitable party willing to serve as the custodian

or prime broker, the Trustee may be required to terminate the Trust and liquidate the Trust’s bitcoin.

In addition, to the extent

that the Trustee finds a suitable party but must enter into a modified custodial services agreement or prime broker agreement that is

less favorable for the Trust or Trustee, the value of the Shares could be adversely affected.

If the Trust is unable to find a replacement

prime broker, its operations could be adversely affected.

The Bitcoin Custodians

and Prime Broker may act in the same or similar capacity for other competing products.

Currently, the number of digital

assets intermediaries with the reputation and operational capability to serve as custodian and/or prime broker to the Trust or other competing

products is limited.

The Bitcoin Custodians and Prime Broker 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 service providers for bitcoin custodial and prime brokerage services.

and the Prime Broker may act in the same or similar capacity for other competing products.

Currently, the number of digital assets intermediaries with the reputation

and operational capability to serve as custodian and/or prime broker to the Trust or other competing products is limited.

Custodians and the Prime Broker 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 service providers for bitcoin custodial and prime brokerage services.

To the extent that exchange-traded

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the Sponsor deems such action necessary.

This industry concentration

also may have the effect of magnifying the risks associated with the Bitcoin Custodians and Prime Broker, as operational disruptions or

adverse developments impacting the Bitcoin Custodians 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.

This industry concentration also may have the effect of magnifying

the risks associated with the Bitcoin Custodians and Prime Broker, as operational disruptions or adverse developments impacting the Bitcoin

Custodians or the Prime Broker may be felt on an industry-wide basis.

A loss of confidence in or breach of a Bitcoin Custodian or the

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 Prime Broker routes

127 unchanged sentences

the Trust’s ability to operate or cause losses in value of the Shares.

The 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.

The 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

Authorized Participants, as broker-dealers, and the Bitcoin Custodians, as limited purpose trust companies subject to New

York Banking Law, in the case of the Coinbase Custodian and BitGo New York Custodian, and the National Bank Act of 1864, in the case of

the BitGo Custodian and Anchorage Custodian, 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.

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

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screening to ensure that the origins of that bitcoin are not illicit.

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 Custodians.

Any of the foregoing could result in losses to the Shareholders

or negatively affect the Trust’s ability to operate.

In accordance with their regulatory

obligations, the Authorized Participants conduct customer due diligence and enhanced due diligence on their counterparties, which enable

them to determine each counterparty’s AML and other risks and assign an appropriate risk rating.

As part of their counterparty

onboarding processes, the Authorized Participants use third-party services to screen prospective counterparties against various watch

lists, including the Specially Designated Nationals List of the OFAC and countries and territories identified as non-cooperative by the

Financial Action Task Force.

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 Coinbase Custodian.

Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust’s

ability to operate.

The actual or perceived

use of bitcoin and other digital assets in illicit transactions, which may adversely affect the bitcoin industry and an investment in

use of bitcoin and other digital assets in illicit transactions may adversely affect the bitcoin industry and an investment in the Trust.

Recent years have seen digital

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an investment fraud currency.

Although the number of cases involving cryptocurrencies for the financing of terrorism remains limited,

criminals have nonetheless become more sophisticated in their use of digital assets.

Although Bitcoin transaction

details are logged on the blockchain, a buyer or seller of Bitcoin may never know to whom the public key belongs or the true identity

of the party with whom it is transacting, as public key addresses are randomized sequences of alphanumeric characters that, standing alone,

do not provide sufficient information to identify users.

Further, identifying users can be made even more difficult where a user utilizes

a tumbling or mixing services (e.g., Tornado Cash) to further obfuscate transaction details.

Although the number of cases involving digital assets for the financing of terrorism remains limited, criminals

have nonetheless become more sophisticated in their use of digital assets.

Although Bitcoin transaction details are logged on the blockchain,

a buyer or seller of Bitcoin may never know to whom the public key belongs or the true identity of the party with whom it is transacting,

as public key addresses are randomized sequences of alphanumeric characters that, standing alone, do not provide sufficient information

to identify users.

Further, identifying users can be made even more difficult where a user utilizes a tumbling or mixing service (e.g.,

Tornado Cash) to further obfuscate transaction details.

The bitcoin industry and an

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be held by the Trust will be bitcoin.

From time to time, the Trust

may be entitled to or come into possession of rights to acquire, or otherwise establish dominion and control over, any virtual currency

or other asset or right, which rights are incident to the Trust’s ownership of bitcoin and arise without any action of the Trust,

or of the Sponsor or Sub-Adviser on behalf of the Trust (“Incidental Rights”) and/or virtual currency tokens, or other asset

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 to holders of bitcoin or other similar event.

Pursuant to the Trust 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 Rights or any IR Virtual

Under the terms of the Trust Agreement, the 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 the 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.

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.

From time to time, the Trust may be entitled to or come into possession

of rights to acquire, or otherwise establish dominion and control over, any virtual currency or other asset or right, which rights are

incident to the Trust’s ownership of bitcoin and arise without any action of the Trust, or of the Sponsor or Sub-Adviser on behalf

of the Trust (“Incidental Rights”) and/or virtual currency tokens, or other asset 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 to holders of bitcoin or

other similar event.

In an airdrop, the promoters of a new digital asset announce to holders of another digital asset that they will be

entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital asset.

in March 2017, the promoters of Stellar Lumens announced that anyone that owned bitcoin as of June 26, 2017, could claim, until August

27, 2017, a certain amount of Stellar Lumens.

Airdrops are not included in the Index under its current methodology.

Pursuant to the Trust

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 Rights or any IR Digital Assets.

Under the terms of the Trust Agreement, the Trust may take any lawful action

necessary or desirable in connection with the Trust’s ownership of Incidental Rights, including the acquisition of IR Digital Assets,

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 the 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 Digital Assets.

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.

If such regulatory approval

is received, the Trust will notify the owners of the beneficial interests of Shares in a prospectus supplement, in its periodic Exchange

Act reports, as applicable, and on the Sponsor’s website.

Investors should be aware

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performed after the update.

Forks occur for a variety

A fork could occur after a significant security breach.

Participants on the network could elect to “fork” the

network to its state before the hack, effectively reversing the hack.

A fork could also be introduced by an unintentional, unanticipated

software flaw in the multiple versions of otherwise compatible software users run.

Such a fork could adversely affect bitcoin’s

It is possible, however, that a substantial number of users and miners could adopt an incompatible version of the digital asset

while resisting community-led efforts to merge the two chains.

Forks occur for a variety of reasons.

A fork could occur after a significant

security breach.

Participants on the network could elect to “fork” the network to its state before the hack, effectively reversing

A fork could also be introduced by an unintentional, unanticipated software flaw in the multiple versions of otherwise compatible

software users run.

Such a fork could adversely affect bitcoin’s viability.

It is possible, however, that a substantial number of

users and miners could adopt an incompatible version of the digital asset while resisting community-led efforts to merge the two 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 a significant security breach in which an anonymous hacker exploited a smart contract running on the Ethereum network to syphon approximately

$60 million of ETH held by the DAO, a distributed autonomous organization, into a segregated account.

In response to the hack, most participants

in the Ethereum community elected to adopt a “fork” that effectively reversed the hack.

However, a minority of users continued

to develop the original blockchain, now referred to as “Ethereum Classic” with the digital asset on that blockchain now referred

to as Ethereum Classic, or ETC.

For example, in July 2016, Ethereum “forked” into Ethereum Classic, the original blockchain,

and a new digital asset, Ethereum, as a result of the Ethereum network community’s response to a significant security breach in

which an anonymous hacker exploited a smart contract running on the Ethereum network to syphon approximately $60 million of ETH held by

the DAO, a distributed autonomous organization, into a segregated account.

In response to the hack, most participants in the Ethereum

community elected to adopt a “fork” that effectively reversed the hack.

However, a minority of users continued to develop

the original blockchain, now referred to as “Ethereum Classic” with the digital asset on that blockchain now referred to as

Ethereum Classic, or ETC.

ETC now trades on several digital asset exchanges.

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.

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.

Significant forks are typically

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or for how long any resulting disruption may exist.

Forks may have a detrimental

effect on 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.

Forks may have a detrimental effect on the value of bitcoin, including

by negatively affecting digital asset allocations or by failing to capture of the full value of the newly-forked bitcoin if it is excluded

from the Index.

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 other 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 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 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.

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.

For example, forks may result in “replay attacks,” or attacks

in which transactions from one network were rebroadcast to nefarious effect on the other 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 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 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.

A hard fork may adversely

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hold the same number of bitcoin.

Bitcoin may become subject

to an occurrence similar to a fork, which is known as an “airdrop.” In an airdrop, the promotors of a new digital asset announce

to holders of another digital asset that they will be entitled to claim a certain amount of the new digital asset for free, based on the

fact that they hold such other digital asset.

For example, in March 2017, the promoters of Stellar Lumens announced that anyone that owned

bitcoin as of June 26, 2017, could claim, until August 27, 2017, a certain amount of Stellar Lumens.

The Index does not include airdrops

under its current methodology or track airdrops involving bitcoin.

Accordingly, the Trust will not participate in airdrops.

Bitcoin may become subject to an occurrence similar to a fork, which

is known as an “airdrop.” In an airdrop, the promoters of a new digital asset announce to holders of another digital asset

that they will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital

Airdrops are not included in the Pricing Benchmark under its current methodology.

For example, in March 2017, the promoters of

Stellar Lumens announced that anyone that owned bitcoin as of June 26, 2017, could claim, until August 27, 2017, a certain amount of Stellar

The Index does not include airdrops under its current methodology or track airdrops involving bitcoin.

Accordingly, the Trust

will not participate in airdrops.

The Index currently does not

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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.

Through investment in the Trust, investors would

be indirectly exposed to the risk and potential impact of a cyber-attack.

A loss associated with a cyber-attack, including a total loss,

While the Sponsor and the Bitcoin Custodians 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.

Thefts and cyber-attacks can have a negative impact on the reputation,

market price, value, or liquidity of bitcoin.

Through investment in the Trust, investors would be indirectly exposed to the risk and potential

impact of a cyberattack.

A loss associated with a cyber-attack, including a total loss, is possible.

While the Sponsor and the Bitcoin

Custodians 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

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hardware is also becoming increasingly centralized and concentrated among a few key players such as Bitmain.

A 51% attack is more likely

to happen in the context of digital assets with smaller market capitalizations due to the reduced computing power threshold required to

control a majority of a given network.

Nevertheless, it is theoretically possible, albeit computationally expensive, to mount a similar

51% attack on bitcoin or other digital assets with large market capitalization.

If the feasibility of a bad actor gaining control of the

processing power on the Bitcoin network increases, there may be a negative effect on an investment in the Trust.

A 51% attack is more likely to happen in the context of digital assets

with both smaller market capitalizations due to the reduced computing power threshold required to control a majority of a given network.

Nevertheless, it is theoretically possible, albeit computationally expensive, to mount a similar 51% attack on bitcoin or other digital

assets with large market capitalization.

If the feasibility of a bad actor gaining control of the processing power on the Bitcoin network

increases, there may be a negative effect on an investment in the Trust.

A malicious actor may also

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

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.

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 transaction fees were $- per transaction, on average, over a one-year

trailing basis.

Increased fees and decreased

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There is no guarantee that bitcoin will become a dominant form of payments, store of value or method of exchange.

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 Bitcoin network evolving into the most well-developed network of any digital asset.

The Bitcoin network enjoys the largest user base

and has more mining power in use to secure the Bitcoin network than any other digital asset.

However, despite the first-mover advantage

of 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 decline in popularity and acceptance of bitcoin and the Bitcoin network, and other

digital currencies 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, which may cause the Trust to incur unforeseen expenses or liquidate.

Regulatory changes

or guidance that result in other virtual currencies not meeting the 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.

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 Bitcoin network evolving into the most well-developed

network of any digital asset.

The Bitcoin network enjoys the largest user base and has more mining power in use to secure the Bitcoin

network than any other digital asset.

However, despite the first-mover advantage of 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 decline in popularity and acceptance of bitcoin and the Bitcoin network, and other digital assets and trading systems could become

more widely accepted and used than the Bitcoin network.

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.

Competition from central

bank digital currencies (“CBDCs”) could adversely affect the value of bitcoin and other digital assets.

Central 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.

result of any of the foregoing factors, the value of bitcoin could decrease, which could adversely affect an investment in the Trust.

Central banks have introduced digital forms of legal tender.

CBDC project, known as Digital Currency Electronic Payment, has reportedly been tested in a live pilot program conducted in multiple cities

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 digital assets

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.

Prices of bitcoin may

be affected due to stablecoins, the activities of stablecoin issuers and their regulatory treatment.

While the Trust does not invest

in stablecoins, it may nonetheless be exposed to these and other risks that stablecoins pose for the bitcoin market through its investment

Stablecoins are digital assets designed to have a stable value over time as compared to typically volatile digital assets

and are typically marketed as being pegged to a fiat currency, such as the U.S.

Although the prices of stablecoins are intended

to be stable, in many cases their prices fluctuate, sometimes significantly.

This volatility has in the past apparently impacted the price

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.

In addition, some have 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 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 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 with

Tether’s operators in which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims

that it 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.

While the Trust does not invest in stablecoins, 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 to typically volatile digital assets and are typically marketed as being

pegged to a fiat currency, such as the U.S.

Although the prices of stablecoins are intended to be stable, in many cases their

prices fluctuate, sometimes significantly.

This volatility has in the past apparently impacted the price of 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.

addition, some have 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 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 into 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.

In October 2021, the CFTC announced a settlement with Tether’s operators in

which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims that it maintained sufficient

dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency”

held by Tether were untrue.

Stablecoins are reliant on

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the market for bitcoin.

Volatility in stablecoins,

operational issues with stablecoins (for example, technical issues that prevent settlement), 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 individuals’ willingness to trade on trading venues that rely on stablecoins and could impact the price

of bitcoin, and in turn, an investment in the Shares.

Volatility in stablecoins, operational issues with stablecoins (for

example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins, or regulatory

concerns about stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, could impact individuals’ willingness

to trade on trading venues that rely on stablecoins and could impact the price of bitcoin, and in turn, an investment in the Shares.

Operational cost may

exceed the award for solving blocks or transaction fees.

Increased transaction fees may adversely affect the usage of the Bitcoin network.

exceed the award for solving blocks or transaction fees, and increased transaction fees may adversely affect the usage of the Bitcoin

Miners generate revenue from

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that miners will need to be better compensated with higher transaction fees to ensure that there is adequate incentive for them to continue

If transaction confirmation

fees become too high, the marketplace may be reluctant to use bitcoin.

This may result in decreased usage and limit expansion of the Bitcoin

network in the retail, commercial and payments space, adversely impacting investment in the Trust.

Conversely, if the reward for miners

or the value of the transaction fees is insufficient to motivate miners, they may cease expending processing power for any blockchain

to solve blocks and confirm transactions.

If transaction confirmation fees become too high, the marketplace may

be reluctant to use the Bitcoin network.

This may result in decreased usage and limit expansion of the Bitcoin network in the retail,

commercial and payments space, adversely impacting investment in the Trust.

Conversely, if the reward for miners or the value of the transaction

fees is insufficient to motivate miners, they may cease expending processing power for any blockchain to solve blocks and confirm transactions.

Ultimately, if the awards

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Investing in the Trust

Investment Related Risks.

Investment related

Investing in bitcoin and,

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NAV may not always correspond to the market price of bitcoin.

The NAV 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.

An Authorized Participant

may be able to create or redeem a Basket at a discount or a premium to the public trading price per share, and the Trust will therefore

maintain its intended fractional exposure to a specific amount of bitcoin per share.

The NAV 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.

An Authorized Participant may be able to create or redeem a Basket

at a discount or a premium to the public trading price per Share, and the Trust will therefore maintain its intended fractional exposure

to a specific amount of bitcoin per share.

Deviations between the

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Owning Shares is different

than directly owning bitcoin.

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.

performance of the Trust will not reflect the specific return an investor would realize if the investor actually held or purchased bitcoin

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.

“Risk Factors — The inability to recognize the economic benefit of a ‘fork’ or an ‘airdrop’ could

adversely impact an investment in the Trust.”

from directly owning bitcoin.

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”.

Index tracking risk.

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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.

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.

also possible that a bitcoin spot market or regulatory 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

Shares of the Trust are intended

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Counterparty risk.

The Sponsor, Trust, Bitcoin

Counterparty, and Authorized Participants are subject to 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, 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 Sponsor, Trust, Bitcoin Counterparty, and Authorized Participants

are subject to counterparty risk.

A Bitcoin Counterparty may fail to deliver to the Trust’s account with the Bitcoin Custodians

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 Participants

at settlement the cash proceeds from the sale of bitcoin associated with a redemption order.

The value of the Shares

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Counterparties to hedge their bitcoin exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares.

Authorized Participants and

market makers will generally want to hedge their exposure in connection with Basket creation and redemption orders.

To the extent Authorized

Participants and market makers are unable to hedge their exposure due to market conditions (e.g., insufficient bitcoin liquidity in the

market, inability to locate an appropriate hedge counterparty, etc.), such conditions may make it difficult for Authorized Participants

to create or redeem Baskets (or cause them to not create or redeem Baskets).

In addition, the hedging mechanisms employed by Bitcoin Counterparties

to hedge their exposure to bitcoin may not function as intended, which may make it more difficult for them to enter into such transactions.

Such events could negatively impact the market price of Shares and the spread at which Shares trade on the open market.

To the extent

Bitcoin Counterparties wish to use futures to hedge their exposure, note that while growing in recent years, the market for exchange-traded

bitcoin futures has a limited trading history and operational experience and may be less liquid, more volatile and more vulnerable to

economic, market and industry changes than more established futures markets.

The liquidity of the market will depend on, among other things,

the adoption of bitcoin and the commercial and speculative interest in the market.

Authorized Participants and market makers will generally want to hedge

their exposure in connection with Basket creation and redemption orders.

To the extent Authorized Participants and market makers are unable

to hedge their exposure due to market conditions (e.g., insufficient bitcoin liquidity in the market, inability to locate an appropriate

hedge counterparty, etc.), such conditions may make it difficult for Authorized Participants to create or redeem Baskets (or cause them

to not create or redeem Baskets).

In addition, the hedging mechanisms employed by Bitcoin Counterparties to hedge their exposure to bitcoin

may not function as intended, which may make it more difficult for them to enter into such transactions.

Such events could negatively

impact the market price of Shares and the spread at which Shares trade on the open market.

The liquidity of the market will depend on,

among other things, the adoption of bitcoin and the commercial and speculative interest in the market.

Arbitrage transactions

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of which could result in a reduction in the price of the Shares.

Security 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

malware distributors seeking to destroy, damage or steal the Trust’s bitcoin or private keys and will only become 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.

Security 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.

For example, an attack in April of 2025 reportedly syphoned approximately 1,200 SOL from the Loopscale decentralized

finance protocol housed on the Solana blockchain.

In another example, in February of 2022, a vulnerability in a smart

contract for Wormhole, a bridge between the Ethereum and Solana blockchain led to a $320 million theft of Ether.

Because of the decentralized

process for transferring bitcoin, thefts can be difficult to trace, which may make bitcoin a particularly attractive target for theft.

Cyber security 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 appealing targets to hackers or malware distributors seeking to destroy, damage or steal the

Trust’s bitcoin or private keys and will only become 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 Sponsor has evaluated

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these techniques or implement adequate preventative measures.

An actual or perceived breach

of the Trust’s account with the Bitcoin Custodians could harm the Trust’s operations, result in partial or total loss of the

Trust’s assets, damage the Trust’s reputation and negatively affect the market perception of the effectiveness of the Trust,

all of which could in turn reduce demand for the Shares, resulting in a reduction in the price of the Shares.

The Trust may also cease

operations, the occurrence of which could similarly result in a reduction in the price of the Shares.

An actual or perceived breach of one of the Trust’s accounts

with the Bitcoin Custodians could harm the Trust’s operations, result in partial or total loss of the Trust’s assets, damage

the Trust’s reputation and negatively affect the market perception of the effectiveness of the Trust, all of which could in turn

reduce demand for the Shares, resulting in a reduction in the price of the Shares.

The Trust may also cease operations, the occurrence

of which could similarly result in a reduction in the price of the Shares.

While the Sponsor has established

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have limited indemnification obligations to the Trust, which could be negatively impacted as a result.

If the Trust’s holdings

of bitcoin are lost, stolen or destroyed under circumstances rendering a party liable to the Trust, the responsible party may not have

the financial resources, including insurance coverage, sufficient to satisfy the Trust’s claim.

For example, as to a particular

event of loss, the only source of recovery for the Trust may be limited to the relevant custodian or, to the extent identifiable, other

responsible third parties (for example, a thief or terrorist), any of which may not have the financial resources (including liability

insurance coverage) to satisfy a valid claim of the Trust.

Similarly, as noted below, the Bitcoin Custodians have extraordinarily limited

liability to the Trust, which will adversely affect the Trust’s ability to seek recovery from them, even when they are at fault.

If the Trust’s holdings of bitcoin are lost, stolen or destroyed

under circumstances rendering a party liable to the Trust, the responsible party may not have the financial resources, including insurance

coverage, sufficient to satisfy the Trust’s claim.

For example, as to a particular event of loss, the only source of recovery for

the Trust may be limited to the relevant custodian or, to the extent identifiable, other responsible third parties (for example, a thief

or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim of

Similarly, as noted below, the Bitcoin Custodians have extraordinarily limited liability to the Trust, which may adversely

affect the Trust’s ability to seek recovery from them, even when they are at fault.

It may not be possible, either

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could become insolvent.

The Trust’s assets are

held in accounts maintained for the Trust by the Bitcoin Custodians and may 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.

risks are applicable to the Trust’s use of Coinbase Custody.

The Trust may change the custodial

arrangements described in this report at any time without notice to Shareholders.

The Trust’s assets are held in accounts maintained for the Trust

by the Bitcoin Custodians and may in the future be held at other custodian banks which may be located in other jurisdictions.

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.

The Trust may change the custodial arrangements described in this report

at any time without prior notice to Shareholders.

The Trust is subject

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A loss of confidence

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

Custody and security services

for the Trust’s bitcoin are provided by the Bitcoin Custodians, although the Trust may retain other custodians at a later date.

Bitcoin held by the Trust may be custodied or secured in different ways.

Over time, the Trust may change the custody or security arrangement

for all or a portion of its holdings.

The Sponsor will decide the appropriate custody and arrangements based on, among other factors,

the availability of experienced bitcoin custodians and the Trust’s ability to securely safeguard the bitcoin.

The Trust expects that the

Bitcoin Custodians will custody most or all of the Trust’s bitcoin holdings.

A loss of confidence or breach of the Bitcoin Custodians

may adversely affect the Trust and the value of an investment in the Shares.

in or breach of a Bitcoin Custodian may adversely affect the Trust and the value of an investment in the Shares.

Custody and security services for the Trust’s bitcoin are provided

by the Bitcoin Custodians, although the Trust may retain one or more additional bitcoin custodians at a later date.

Bitcoin held by the

Trust may be custodied or secured in different ways (for example, a portion of the Trust’s bitcoin holdings may be custodied by

the Bitcoin Custodians and another portion by another third-party custodian).

Over time, the Trust may change the custody or security

arrangement for all or a portion of its holdings.

The Sponsor will decide the appropriate custody and arrangements based on, among other

factors, the availability of experienced bitcoin custodians and the Trust’s ability to securely safeguard the bitcoin.

The Trust expects that the Bitcoin Custodians will custody most or

all of the Trust’s bitcoin holdings.

A loss of confidence in or breach of a Bitcoin Custodian may adversely affect the Trust and

the value of an investment in the Shares.

The Sponsor may need

to find and appoint a replacement bitcoin custodian or prime broker quickly, which could pose a challenge to the safekeeping of the Trust’s

to find and appoint a replacement custodian or prime broker quickly, which could pose a challenge to the safekeeping of the Trust’s

The Sponsor could decide to

replace one or more of the Bitcoin Custodians as a custodian of the Trust’s bitcoin or the Prime Broker as the provider of prime

brokerages to the Trust.

Transferring maintenance responsibilities of the Trust’s accounts with the Bitcoin Custodians and the Prime

Broker to another party will likely be complex and could subject the Trust’s bitcoin to the risk of loss during the transfer, which

could have a negative impact on the performance of the Shares or result in loss of the Trust’s assets.

The Sponsor may not be able

to 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 be 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.

replace any of the Bitcoin Custodians as custodians of the Trust’s bitcoin or the Prime Broker as the provider of prime brokerages

to the Trust.

Transferring maintenance responsibilities of the Trust’s accounts with the Bitcoin Custodians and the Prime Broker

to another party will likely be complex and could subject the Trust’s bitcoin to the risk of loss during the transfer, which could

have a negative impact on the performance of the Shares or result in loss of the Trust’s assets.

The Sponsor may not be able to find a party willing to serve as a Bitcoin

Custodian under the same terms as the current Custodial Services Agreements, or as the 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 the

Prime Broker, as applicable, the Sponsor may be required to terminate the Trust and liquidate the Trust’s bitcoin.

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.

Lack of recourse.

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As a result, the recourse of the Trust to the Bitcoin 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 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.

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 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.

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.

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.

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.

the BitGo Custodian 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

the BitGo Custodian 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 the BitGo Custodian’s fraud, willful misconduct, or gross negligence.

In situations of

gross negligence, the BitGo Custodian’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 the BitGo Custodian 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

In addition, the BitGo Custodian 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 the BitGo Custodian, 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 the BitGo Custodian.

Under the Anchorage Custody

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by the Trust for such non-performance or delay.

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.

Under the BitGo New York Custody

Agreement, the BitGo New York Custodian 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 the BitGo New York Custodian 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 the BitGo New York Custodian’s fraud, willful

misconduct, or gross negligence.

In situations of gross negligence, the BitGo New York Custodian’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 the BitGo

New York Custodian for direct damages is capped at the fees paid or payable to them under the BitGo New York Custody Agreement during

the twelve-month period immediately preceding the first incident that caused the liability.

In addition, the BitGo New York Custodian 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 the BitGo New York Custodian, 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 the BitGo New York Custodian.

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 the 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

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the Trust could adversely affect the value of the Shares.

Amendment of Trust Agreement

without shareholder consent.

Subject to certain exceptions

set forth in the Trust Agreement, the Trust Agreement can be amended by the Sponsor in its sole discretion and without the shareholders’

consent by making an amendment, an agreement supplemental to the Trust Agreement, or an amended and restated trust agreement, which amendments

may materially adversely affect the interests of the Shareholders.

Potential conflicts

of interest may arise among the Sponsor or its affiliates and the Trust.

The Sponsor and its affiliates have no fiduciary duties to the

Trust and its shareholders other than as provided in the Trust Agreement, which may permit them to favor their own interests to the detriment

of the Trust and its shareholders.

The Sponsor will manage the

affairs of the Trust.

Conflicts of interest may arise among the Sponsor and its affiliates, on the one hand, and the Trust and its shareholders,

on the other hand.

As a result of these conflicts, the Sponsor may favor its own interests and the interests of its affiliates over the

Trust and its shareholders.

These potential conflicts include, among others, the following:

● The Sponsor has no fiduciary

duties to, and is allowed to take into account the interests of parties other than, the Trust and its shareholders in resolving conflicts

of interest, provided the Sponsor does not act in bad faith;

● The Trust has agreed to indemnify

the Sponsor and its affiliates pursuant to the Trust Agreement;

● The Sponsor is responsible for

allocating its own limited resources among different clients and potential future business ventures, to each of which it owes fiduciary

● The Sponsor and its staff also

service affiliates of the Sponsor, including several other digital asset investment vehicles, and their respective clients and cannot

devote all of its, or their, respective time or resources to the management of the affairs of the Trust;

● The Sponsor, its affiliates

and their respective officers and employees are not prohibited from engaging in other businesses or activities, including those that

might be in direct competition with the Trust;

● Affiliates of the Sponsor have

substantial direct investments in bitcoin that they are permitted to manage taking into account their own interests without regard to

the interests of the Trust or its shareholders, and any increases, decreases or other changes in such investments could affect the value

of the Shares.

By purchasing the Shares,

shareholders agree and consent to the provisions set forth in the Trust Agreement.

Further, the Sponsor may

have a conflict with respect to any future transactions that may be entered into with either the Sponsor’s ultimate parent company,

FalconX, a leading institutional digital asset prime brokerage, or with any of the other affiliates of FalconX.

Unforeseeable risks.

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The Index has a limited

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

A trading venue is eligible as a “Constituent Exchange” in any of the CME CF Cryptocurrency Pricing Products if

it offers a market that facilitates the spot trading of the relevant base digital asset against the corresponding quote asset, including

markets where the quote asset is made fungible with the accepted digital asset and makes trade data and order data available through an

application programming interface with sufficient reliability, detail and timeliness.

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.

The Index was developed by the Index Provider and has a limited performance

Although the Index is based on materially the same methodology (except calculation time) as the Index Provider’s Bitcoin

Reference Rate, 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 trading venue is eligible as a “Constituent

Exchange” in any of the CME CF Cryptocurrency Pricing Products if it offers a market that facilitates the spot trading of the relevant

base digital asset against the corresponding quote asset, including markets where the quote asset is made fungible with the accepted digital

asset and makes trade data and order data available through an application programming interface with sufficient reliability, detail and

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.

Pricing sources used by the

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Regulatory Risk

There is a lack of consensus

regarding the regulation of digital assets, including bitcoin.

Bitcoin’s status

as being offered or sold as a “security” under U.S.

federal securities laws remains unsettled.

The SEC has asserted its belief

that a number of digital assets are properly classified as “securities” under U.S.

federal securities laws in a number of

complaints against the issuers of such assets, or against platforms trading or transacting in such assets.

Courts have agreed that such

assets may have been offered or sold in transactions that constituted securities, or have agreed that the SEC has a plausible case that

such assets may have been offered or sold in transactions that constituted securities.

In future litigation, other courts might disagree

with the assessment that these or other digital assets, such as bitcoin, are offered or sold as securities depending on the characteristics

of the transaction.

To the extent that a court were to find that the Trust had engaged in unregistered sales of securities, the Trust

would be subject to penalties, disgorgement and other sanctions, which would significantly negatively impact the Trust and the value of

In accordance with the Sponsor’s

internal policies and procedures, the Sponsor engaged in a review process to determine whether bitcoin has been offered or sold as a security

and based off the review it has determined it has not.

The Sponsor has reviewed publicly available materials relating to bitcoin.

other things, the Sponsor has reviewed publicly available materials relating to the circumstances around the creation of bitcoin, the

market and technological needs that the Bitcoin network was intended to address, the Bitcoin network’s role in enabling blockchain

interoperability and cross-blockchain communications, and the Bitcoin network’s consensus mechanism.

Based on the Sponsor’s

review of these materials, the Sponsor believes there is a reasonable basis to conclude that at this time offers and sales of bitcoin

would not constitute offers and sales of a “security” as that term is defined under Section 2(a)(1) of the Securities Act.

This determination is a risk-based judgement by the Sponsor that is attendant with legal risk as it is possible regulatory agencies or

courts could disagree with this determination.

If bitcoin is determined to

be offered or sold as a security by a federal court or transactions in bitcoin are determined to be securities transactions by a federal

court, the Trust could be considered an unregistered “investment company” under the 1940 Act, which could necessitate the

Trust’s liquidation.

In this case, the Trust and the Sponsor may be deemed to have participated in an illegal offering of investment

company securities and there is no guarantee that the Sponsor will be able to register the Trust under the 1940 Act at such time or take

such other actions as may be necessary to ensure the Trust’s activities comply with applicable law, which could force the Sponsor

to liquidate the Trust.

It may also become more difficult

for bitcoin to be traded, cleared and custodied as compared to other digital assets that are not considered to be offered or sold as securities,

which could in turn negatively affect the liquidity and general acceptance of bitcoin and cause users to migrate to other digital assets.

Further, if any other digital asset with widespread markets is determined to be offered or sold as a “security” under federal

or state securities laws by the SEC or any other agency, or in a proceeding in a court of law or otherwise, it may have material adverse

consequences for bitcoin as a digital asset due to negative publicity or a decline in the general acceptance of digital assets.

digital asset trading platforms that feature digital assets that are determined to be offered or sold as securities may face penalties

or be required to shut down if they do not have the licenses required to facilitate electronic markets in securities, which could result

in a reduction of the liquidity of bitcoin markets.

As such, any determination that bitcoin or any other digital asset is offered or sold

as a security under federal or state securities laws may adversely affect the price of bitcoin and, as a result, the value of the Shares.

To the extent that bitcoin is deemed to fall within the definition

of being offered or sold as a security under U.S.

federal securities laws, the Trust and the Sponsor may be subject to additional requirements

under the 1940 Act and the Advisers Act.

The Sponsor or the Trust may be required to register as an investment adviser under the Advisers

Such additional registration may result in extraordinary, recurring and/or non-recurring expenses of the Trust, thereby materially

and adversely impacting the Shares.

If the Sponsor and/or the Trust determines not to comply with such additional regulatory and registration

requirements, the Sponsor may terminate the Trust.

Any such termination could result in the liquidation of the Trust’s bitcoin at

a time that is disadvantageous to Shareholders.

There is a lack of

consensus regarding the regulation of digital assets, including bitcoin.

Regulation of digital assets continues to evolve across different jurisdictions

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the Shares and/or the ability of the Trust to continue to operate.

For 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.

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.

For 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 digital-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 digital-asset risks to banking organizations following events which exposed vulnerabilities in the digital-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 digital-asset related activities or have concentrated exposures to the digital-asset sector.

federal and state regulators

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us or the crypto asset business.

In August 2021, the chair

of the SEC stated that he believed investors using digital asset trading platforms are not adequately protected, and that activities on

the platforms can implicate the securities laws, commodities laws and banking laws, raising a number of issues related to protecting investors

and consumers, guarding against illicit activity, and ensuring financial stability.

The chair expressed a need for the SEC to have additional

authorities to prevent 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 or other regulators, what the nature of such additional authorities might be, how they might impact 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.

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 2015, FinCEN assessed a $700,000 fine against a sponsor of a digital asset for violating several

requirements of the BSA by acting as a money services business and selling the digital asset without registering with FinCEN, and by failing

to implement and maintain 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 U.S.

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

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 may be required to register with FinCEN as money transmitters and comply with the anti-money

It is not possible to predict whether Congress will grant additional

authorities 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 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.

OFAC has added digital currency

addresses to the list of Specially Designated Nationals whose assets are blocked, and with whom U.S.

persons 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 bitcoin that has been associated with such addresses in the past can be easily sold.

This “tainted” bitcoin may trade

at a substantial discount to untainted bitcoin.

Reduced fungibility in the bitcoin markets may reduce the liquidity of bitcoin and therefore

adversely affect their price.

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 may be required to register with FinCEN as money transmitters and comply with the anti-money

laundering regulations applicable to money transmitters.

OFAC has added digital asset addresses to the list of Specially Designated

Nationals whose assets are blocked, and with whom U.S.

persons 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 bitcoin that has been associated with such

addresses in the past can be easily sold.

This “tainted” bitcoin may trade at a substantial discount to untainted bitcoin.

Reduced fungibility in the bitcoin markets may reduce the liquidity of bitcoin and therefore adversely affect their price.

In February 2020, then-U.S.

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for malign and illegal activities.”

On February 15, 2022, Representative

In February 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.”

On 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

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.

On March 17, 2022, Senators

Elizabeth Warren, Jack Reed, Mark Warner, and Jon Tester introduced the Digital Asset Sanctions Compliance Enhancement Act in an attempt

to ensure blacklisted Russian individuals and businesses do not use cryptocurrency to evade economic sanctions.

On March 28, 2022, Representative

In March 2022, Senators Elizabeth

Warren, Jack Reed, Mark Warner, and Jon Tester introduced the Digital Asset Sanctions Compliance Enhancement Act in an attempt to ensure

blacklisted Russian individuals and businesses do not use digital assets to evade economic sanctions.

In January 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 digital assets that is tasked with proposing a regulatory framework governing the issuance

and operation of digital assets, including stablecoins, in the United States.

In March 2022, Representative

Stephen Lynch, along with co-sponsors Jesús G.

García, Rashida Tlaib, Ayanna Pressley, and Alma Adams, introduced H.R.

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

and preserve the privacy, anonymity-respecting, 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.

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 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

On April 6, 2022, Senator

Pat Toomey released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act.

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, the Exchange Act, and the 1940 Act.

On June 7, 2022, Senators

Kirsten Gillibrand and Cynthia Lummis introduced the “Responsible Financial Innovation Act,” which was drafted to “create

a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust

the Electronic Currency and Secure Hardware 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 and preserve

the privacy, anonymity-respecting, 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 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 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 programs.”

In April 2022, Senator Pat

Toomey released a draft of his Stablecoin Transparency of Reserves and Uniform Safe Transactions Act, or Stablecoin TRUST Act.

bill contemplates a “payment stablecoin,” which is convertible directly to fiat currency by the issuer.

Only an insured depository

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, the Exchange Act and the 1940 Act.

In June 2022, Senators Kirsten

Gillibrand and Cynthia Lummis introduced the “Responsible Financial Innovation Act,” which was drafted to “create a

complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust

consumer protections while integrating digital assets into existing law.” Importantly, the legislation would assign regulatory authority

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ether, would be regulated by the CFTC.

In 2023 and 2024, Congress

continued to consider several stand-alone digital asset bills, including a formal process to determine when digital assets will be treated

as either securities to be regulated by the SEC or commodities under the purview of the CFTC, what type of federal/state regulatory regime

will exist for payment stablecoins and the 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 FIT for the 21st Century

Act would require the SEC and the CFTC to jointly issue rules or guidance that would outline their process for removing from the SEC’s

regulatory jurisdiction a digital asset that they deem inconsistent with the CEA and federal securities laws.

The bill, in part, would

also provide a certification process for blockchains to be recognized as decentralized, which would allow the SEC to challenge claims

made by token issuers about meeting the outlined standards.

In 2023, Congress continued

to consider several stand-alone digital asset bills, including a formal process to determine when digital assets will be treated as either

securities to be regulated by the SEC or commodities under the purview of the CFTC, what type of federal/state regulatory regime will

exist for payment stablecoins and how the BSA will apply to digital asset providers.

The Financial Innovation and Technology for the 21st

Century Act (“FIT21”) advanced through the United States House of Representatives in a vote along bipartisan lines.

FIT21would require the SEC

and the CFTC to jointly issue rules or guidance that would outline their process in delisting a digital asset that they deem inconsistent

with the CEA, federal securities laws and FIT21.

The bill, in part, would also provide a certification process for blockchains to be recognized

as decentralized, which would allow the SEC to challenge claims made by token issuers about meeting the outlined standards.

Legislative efforts have also

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are not securities for purposes of those federal securities laws.

On February 4, 2025, Sen.

Bill Hagerty introduced the Guiding and Establishing National Innovation for U.S.

Stablecoins of 2025 Act – the GENIUS

Act – cosponsored by Senate Banking Chair Tim Scott and Sens.

In February 2025, Sen.

Bill Hagerty introduced the Guiding and

Establishing National Innovation for U.S.

Stablecoins of 2025 Act – the GENIUS Act – cosponsored by Senate Banking Chair

Tim Scott and Sens.

Kirsten Gillibrand and Cynthia Lummis, which would establish a U.S.

regulatory framework for payment stablecoins.

Like the McHenry bill, the GENIUS Act contemplates a regulatory framework where payment

stablecoin issuers may be either a subsidiary of an insured bank, an uninsured depository institution or trust bank, or a nonbank, and

primarily regulated at either the federal or state level.

It would also prescribe stablecoin reserve requirements and require bank-like

regulation for both bank and nonbank stablecoin issuers.

The GENIUS Act was passed by the U.S.

Senate in June 2025 and by the U.S.

House of Representatives in July 2025.

It was signed into law

by President Trump in July 2025.

Like the McHenry Bill, the GENIUS Act provides for a regulatory framework where payment stablecoin issuers

may be either a subsidiary of an insured bank, an uninsured depository institution or trust bank, or a nonbank, and primarily regulated

at either the federal or state level.

It also provides for stablecoin reserve requirements and require bank-like regulation for both bank

and nonbank stablecoin issuers.

Several other bills have advanced

through Congress to curb crypto as a payment gateway for illicit activity and money laundering.

The “Blockchain Regulatory Clarity

Act” would provide clarity to the regulatory classification of digital assets, providing market certainty for innovators and clear

jurisdictional boundaries for regulators by affirming that blockchain developers and other related service providers that do not custody

customer funds are not money transmitters.

The “Financial Technology Protection Act,” another bipartisan measure, would set

up an independent Financial Technology Working Group to combat terrorism and illicit financing in cryptocurrency.

through Congress to curb digital assets as a payment gateway for illicit activity and money laundering.

The “Blockchain Regulatory

Clarity Act” would provide clarity to the regulatory classification of digital assets, providing market certainty for innovators

and clear jurisdictional boundaries for regulators by affirming that blockchain developers and other related service providers that do

not custody customer funds are not money transmitters.

The “Financial Technology Protection Act,” another bipartisan measure,

would set up an independent Financial Technology Working Group to combat terrorism and illicit financing in digital assets.

The “Blockchain

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In a similar effort to prevent

money laundering and stop crypto-facilitated crime and sanctions violations, bipartisan legislation was introduced to require DeFi services

to meet the same anti-money laundering and economic sanctions compliance obligations as other financial companies.

DeFi generally refers

to applications that facilitate peer-to-peer financial transactions that are recorded on blockchains.

By design, DeFi provides anonymity,

which can allow malicious and criminal actors to evade traditional financial regulatory tools.

Noting that transparency and sensible rules

are vital for protecting the financial system from crime, the “Crypto-Asset National Security Enhancement and Enforcement (‘CANSEE’)

Act” was introduced.

The CANSEE Act would end special treatment for DeFi by applying the same national security laws that apply

to banks and securities brokers, casinos and pawn shops, and other cryptocurrency companies like centralized trading platforms.

DeFi services

would be 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.

money laundering and stop digital asset-facilitated crime and sanctions violations, bipartisan legislation was introduced to require DeFi

services to meet the same anti-money laundering and economic sanctions compliance obligations as other financial companies.

DeFi generally

refers to applications that facilitate peer-to-peer financial transactions that are recorded on blockchains.

By design, DeFi provides

anonymity, which can allow malicious and criminal actors to evade traditional financial regulatory tools.

Noting that transparency and

sensible rules are vital for protecting the financial system from crime, the “Crypto-Asset National Security Enhancement and Enforcement

(‘CANSEE’) Act” was introduced.

The CANSEE Act would end special treatment for DeFi by applying the same national security

laws that apply to banks and securities brokers, casinos and pawn shops, and other digital asset companies like centralized trading platforms.

DeFi services would be 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.

Under regulations from the

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in the future.

In addition, a determination

that bitcoin is offered and sold as a security under U.S.

In addition, a determination that bitcoin is offered or sold as a security

or foreign law could adversely affect an investment in the Trust.

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in the Trust.

The regulation of bitcoin

and related products and services continues to evolve, may take many different forms and will, therefore, impact bitcoin and its usage

in a variety of manners.

The inconsistent, unpredictable, and sometimes conflicting regulatory landscape may make it more difficult for

bitcoin businesses to provide services, which may impede the growth of the bitcoin economy and have an adverse effect on consumer adoption

There is a possibility of future regulatory change altering, perhaps to a material extent, the nature of an investment in

the Trust or the ability of the Trust to continue to operate.

Additionally, changes to current regulatory determinations of bitcoin’s

status as not being a security, changes to regulations surrounding bitcoin futures or related products, or actions by a United States

or foreign government or quasi-governmental agencies exerting regulatory authority over bitcoin, the Bitcoin network, bitcoin trading,

or related activities impacting other parts of the digital asset market, may adversely impact bitcoin and therefore may have an adverse

effect on the value of your investment in the Trust.

The regulation of bitcoin and related products and services continues

to evolve, may take many different forms and will, therefore, impact bitcoin and its usage in a variety of manners.

The inconsistent,

unpredictable, and sometimes conflicting regulatory landscape may make it more difficult for bitcoin businesses to provide services, which

may impede the growth of the bitcoin economy and have an adverse effect on consumer adoption of bitcoin.

There is a possibility of future

regulatory change altering, perhaps to a material extent, the nature of an investment in the Trust or the ability of the Trust to continue

Additionally, changes to current regulatory determinations that bitcoin is not offered or sold as a security, changes to regulations

surrounding digital asset futures or derivatives or other related products, or actions by a United States or foreign government or quasi-governmental

agencies exerting regulatory authority over bitcoin, the Bitcoin network, bitcoin trading, or related activities impacting other parts

of the digital asset market, may adversely impact bitcoin and therefore may have an adverse effect on the value of your investment in

A number of jurisdictions

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For instance, some observers believe that Chinese governmental regulatory actions

regarding bitcoin mining and trading activity were one factor that contributed to the drawdowns in global bitcoin prices in May 2021.

Furthermore, legal claims

have been filed in the United Kingdom by an entity associated with an individual named Craig Wright.

The entity alleges that the private

keys to bitcoin purportedly worth several billion dollars were rendered inaccessible to it in a hack, and advances a series of novel legal

theories in support of its request that the court compel certain core developers associated with the Bitcoin network to either somehow

transfer the bitcoin out of the bitcoin address to which the entity no longer can access the private keys to a new bitcoin address that

it currently does control, or alternatively amend the source code to the Bitcoin network itself to restore its access to the stranded

If a court decides to grant the relief requested, wide-ranging and fundamental changes to the source code, operations, and governance

of, and basic principles underlying, the Bitcoin network might be required, and a loss of public confidence in the Bitcoin network could

result, leading to a decrease in the value of bitcoin, which could negatively impact the value of the Shares.

The legal status of bitcoin

and other digital assets varies substantially from country to country.

In many countries, the legal status of bitcoin is still undefined

Some countries have deemed the usage of certain digital assets illegal.

Other countries have banned digital assets or securities

or derivatives in respect to them (including for certain categories of investors), banned the local banks from working with digital assets

or have restricted digital assets in other ways.

For example, bitcoin and other digital assets currently face an uncertain regulatory

landscape in many foreign jurisdictions, such as the European Union, China, the United Kingdom, Australia, Russia, Israel, Poland, India

In some countries, such as the United States, different government agencies define digital assets differently, leading to

further regulatory conflict and uncertainty.

regarding digital asset mining and trading activity were one factor that contributed to the drawdowns in global bitcoin prices in May

During that time, the price of bitcoin dropped approximately 48% from $58,607 to $30,682.

The legal status of bitcoin and other digital assets varies substantially

from country to country.

In many countries, the legal status of bitcoin is still undefined or changing.

Some countries have deemed the

usage of certain digital assets illegal.

Other countries have banned digital assets or securities or derivatives in respect to them (including

for certain categories of investors), banned the local banks from working with digital assets or have restricted digital assets in other

For example, bitcoin and other digital assets currently face an uncertain regulatory landscape in many foreign jurisdictions, such

as the European Union, China, the United Kingdom, Australia, Russia, Israel, Poland, India and Canada.

In some countries, such as the

United States, different government agencies define digital assets differently, leading to further regulatory conflict and uncertainty.

In addition, cybersecurity

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the value of the Shares.

If the CFTC determines that

bitcoin is a “commodity” under the CEA and the rules thereunder, it may have jurisdiction to prosecute fraud and market manipulation

in the cash, or spot, market for bitcoin.

The CFTC may pursue enforcement actions relating to fraud and market manipulation involving

bitcoin and bitcoin markets.

Beyond instances of fraud or manipulation, the CFTC generally would not oversee cash or spot market exchanges

or transactions involving bitcoin that do not use collateral, leverage, or financing.

Various foreign jurisdictions

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which may cause the Trust to incur unforeseen expenses or liquidate.

Current and future legislation,

SEC and CFTC rulemaking, and other regulatory developments may impact the manner in which bitcoin are treated for classification and clearing

In particular, although bitcoin is currently understood to be a commodity when transacted on a spot basis, bitcoin itself in

the future might be classified by the CFTC as a “commodity interest” under the CEA, subjecting all transactions in bitcoin

to full CFTC regulatory jurisdiction.

Alternatively, in the future bitcoin might be classified by the SEC as a “security”

Current and future legislation, SEC and CFTC rulemaking, and other

regulatory developments may impact the manner in which bitcoin are treated for classification and clearing purposes.

In particular, although

bitcoin is currently understood to be a commodity when transacted on a spot basis, bitcoin itself in the future might be classified by

the CFTC as a “commodity interest” under the CEA, subjecting all transactions in bitcoin to full CFTC regulatory jurisdiction.

Alternatively, in the future bitcoin might be classified by the SEC or one or more federal courts as being offered or sold as a “security”

federal securities laws.

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In particular, the Trust may be required to rapidly unwind its entire position in bitcoin at potentially

unfavorable prices and potentially terminate, in the event that bitcoin were determined to fall under the definition of a security under

unfavorable prices and potentially terminate, in the event that transactions of bitcoin were determined to fall under the definition of

being offered or sold as securities under U.S.

securities laws.

If the Sponsor decides to terminate the Trust in response to the changed regulatory circumstances, the Trust may

be dissolved or liquidated at a time that is disadvantageous to Shareholders.

As of the date of this report, the Sponsor is not aware

of any rules that have been proposed to regulate bitcoin as a commodity interest or a security.

If the Sponsor decides to terminate the Trust in response to the changed

regulatory circumstances, the Trust may be dissolved or liquidated at a time that is disadvantageous to Shareholders.

As of the date of

this report, the Sponsor is not aware of any rules that have been proposed to regulate bitcoin as a commodity interest or as being offered

or sold as a security.

To the extent that bitcoin

is determined to be a security, the Trust and the Sponsor may also be subject to additional regulatory requirements, including under the

1940 Act, and the Sponsor may be required to register as an investment adviser under the Advisers Act.

If the Sponsor determines not to

comply with such additional regulatory and registration requirements, the Sponsor will terminate the Trust.

Any such termination could

result in the liquidation of the Trust’s bitcoin at a time that is disadvantageous to Shareholders.

Alternatively, compliance with

these requirements could result in additional expenses to the Trust or significantly limit the ability of the Trust to pursue its investment

is determined to be offered or sold as a security, the Trust and the Sponsor may also be subject to additional regulatory requirements,

including under the 1940 Act, and the Sponsor may be required to register as an investment adviser under the Advisers Act.

If the Sponsor

determines not to comply with such additional regulatory and registration requirements, the Sponsor will terminate the Trust.

termination could result in the liquidation of the Trust’s bitcoin at a time that is disadvantageous to Shareholders.

Alternatively,

compliance with these requirements could result in additional expenses to the Trust or significantly limit the ability of the Trust to

pursue its investment objective.

To the extent that bitcoin

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The Sponsor may be required to register as a commodity pool operator or commodity

trading advisor with the CFTC and become a member of the NFA and may be subject to additional regulatory requirements with respect to

the Trust, including disclosure and reporting requirements.

These additional requirements may result in extraordinary, recurring and/or

nonrecurring expenses of the Trust, thereby materially and adversely impacting the Shares.

If the Sponsor and/or the Trust determines

not to comply with such additional regulatory and registration requirements, the Sponsor may terminate the Trust.

Any such termination

could result in the liquidation of the Trust’s bitcoin at a time that is disadvantageous to Shareholders.

The SEC has recently proposed

rule changes amending and redesignating rule 206(4)-2 under the Advisers Act (the “Custody Rule”).

The proposed “Safeguarding

Rule” would amend the definition of a “qualified custodian” under the Custody Rule and expand the scope of the Custody

Rule to cover all digital assets, including bitcoin, and related advisory activities.

If enacted as proposed, these rule changes would

likely impose additional regulatory requirements with respect to the custody and storage of digital assets, including bitcoin.

is studying the impact that such amendments may have on the Trust and its arrangements with the Bitcoin Custodian.

It is possible that

such amendments, if adopted, could prevent the Bitcoin Custodian from serving as service providers to the Trust, or require potentially

significant modifications to existing arrangements, which could cause the Trust to bear potentially significant increased costs.

Sponsor is unable to make such modifications or appoint successor service providers to fill the roles that the Bitcoin Custodians currently

play, the Trust’s operations (including in relation to creations and redemptions of Baskets and the holding of bitcoin) could be

negatively affected, the Trust could dissolve (including at a time that is potentially disadvantageous to Shareholders), and the value

of the Shares or an investment in the Trust could be affected.

Further, the proposed amendments could have a severe negative impact on

the price of bitcoin and therefore the value of the Shares if enacted, by, among other things, making it more difficult for investors

to gain access to bitcoin, or causing certain holders of bitcoin to sell their holdings.

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 FinCEN under the

authority of the U.S.

Bank Secrecy Act or as a money transmitter or digital asset business under state regimes for the licensing of such

businesses, 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 to the Authorized Participant, Trust or Sponsor or increased commissions

for the Authorized Participant’s clients, thereby reducing the liquidity of the Shares.

trading advisor with the CFTC and become a member of the National Futures Association and may be subject to additional regulatory requirements

with respect to the Trust, including disclosure and reporting requirements.

These additional requirements may result in extraordinary,

recurring and/or nonrecurring expenses of the Trust, thereby materially and adversely impacting the Shares.

If the Sponsor and/or the

Trust determines not to comply with such additional regulatory and registration requirements, the Sponsor may terminate the Trust.

such termination could result in the liquidation of the Trust’s bitcoin at a time that is disadvantageous to Shareholders.

The SEC has recently proposed rule changes amending and redesignating

rule 206(4)-2 under the Advisers Act (the “Custody Rule”).

The proposed “Safeguarding Rule” would amend the definition

of a “qualified custodian” under the Custody Rule and expand the scope of the Custody Rule to cover all digital assets, including

bitcoin, and related advisory activities.

If enacted as proposed, these rule changes would likely impose additional regulatory requirements

with respect to the custody and storage of digital assets, including bitcoin.

The Sponsor is studying the impact that such amendments

may have on the Trust and its arrangements with the Bitcoin Custodians.

It is possible that such amendments, if adopted, could prevent

the Bitcoin Custodian from serving as service providers to the Trust, or require potentially significant modifications to existing arrangements,

which could cause the Trust to bear potentially significant increased costs.

If the Sponsor is unable to make such modifications or appoint

successor service providers to fill the roles that the Bitcoin Custodians currently play, the Trust’s operations (including in relation

to creations and redemptions of Baskets and the holding of bitcoin) could be negatively affected, the Trust could dissolve (including

at a time that is potentially disadvantageous to Shareholders), and the value of the Shares or an investment in the Trust could be affected.

Further, the proposed amendments could have a severe negative impact on the price of bitcoin and therefore the value of the Shares if

enacted, by, among other things, making it more difficult for investors to gain access to bitcoin, or causing certain holders of bitcoin

to sell their holdings.

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 FinCEN under the authority of the U.S.

Bank Secrecy Act or as a money transmitter

or digital asset business under state regimes for the licensing of such businesses, 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

to the Authorized Participant, Trust or Sponsor or increased commissions for an Authorized Participant’s clients, thereby reducing

the liquidity of the Shares.

To the extent that the activities

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promulgated by FinCEN under the authority of the BSA, such Authorized Participant, the Trust or the Sponsor may be required to comply

with FinCEN regulations, including those that would mandate the Authorized Participant to implement anti-money laundering programs, make

with FinCEN regulations, including those that would mandate such Authorized Participant to implement anti-money laundering programs, make

certain reports to FinCEN and maintain certain records.

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Such additional regulatory

obligations may cause the Authorized Participant, the Trust or the Sponsor to incur extraordinary expenses.

If the Authorized Participant,

obligations may cause an Authorized Participant, the Trust or the Sponsor to incur extraordinary expenses.

If an Authorized Participant,

the Trust or the Sponsor decide to seek the required licenses, there is no guarantee that they will receive them in a timely manner.

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licenses, it may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties,

all of which could harm the reputation of the Authorized Participant, the Trust or the Sponsor and affect the value of the Shares.

all of which could harm the reputation of an Authorized Participant, the Trust or the Sponsor and affect the value of the Shares.

an Authorized Participant, the Trust, or the Sponsor may not be able to acquire necessary state licenses or be capable of complying with

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digital asset activity in a timely manner.

The Authorized Participant may also instead decide to terminate its role as Authorized Participant

An Authorized Participant may also instead decide to terminate its role as an Authorized Participant

of the Trust, or the Sponsor may decide to terminate the Trust.

Termination by the Authorized Participant may decrease the liquidity of

Termination by an Authorized Participant may decrease the liquidity of

the Shares, which may adversely affect the value of the Shares, and any termination of the Trust in response to the changed regulatory

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of the Trust may generate tax liabilities for Shareholders.

It is expected that each Shareholder

will include in the computation of their taxable income their proportionate share of the taxable income and expenses of the Trust, including

gains and losses realized in connection with the use of bitcoin to pay Trust expenses.

The Trust does not anticipate making distributions

to Shareholders, so any tax liability that a Shareholder incurs as a result of holding Shares will need to be satisfied from some other

source of funds.

If a Shareholder sells Shares in order to raise funds to satisfy such a tax liability, the sale itself may generate additional

taxable gain or loss.

It is expected that each Shareholder will include in the computation

of their taxable income their proportionate share of the taxable income and expenses of the Trust, including gains and losses realized

in connection with the use or sale of bitcoin to pay Trust expenses or facilitate redemption transactions, as applicable.

The Trust does

not anticipate making distributions to Shareholders, so any tax liability that a Shareholder incurs as a result of holding Shares will

need to be satisfied from some other source of funds.

If a Shareholder sells Shares in order to raise funds to satisfy such a tax liability,

the sale itself may generate additional taxable gain or loss.

The tax treatment of

bitcoin and transactions involving bitcoin for United States federal income tax purposes may change.

Under current Internal Revenue

Service (the “IRS”) guidance, bitcoin is treated as property, not as currency, for U.S.

federal income tax purposes and transactions

involving payment in bitcoin in return for goods and services are treated as barter exchanges.

Such exchanges result in capital gain or

loss measured by the difference between the price at which bitcoin is exchanged and the taxpayer’s basis in the bitcoin.

because bitcoin is a new technological innovation, because IRS guidance has taken the form of administrative pronouncements that may be

modified without prior notice and comment, and because there is as yet little case law on the subject, the U.S.

federal income tax treatment

of an investment in bitcoin or in transactions relating to investments in bitcoin may change from that described in this report, possibly

with retroactive effect.

Any such change in the U.S.

federal income tax treatment of bitcoin may have a negative effect on prices of bitcoin

and may adversely affect the value of the Shares.

In this regard, the IRS has indicated that it has made it a priority to issue additional

guidance related to the taxation of virtual currency transactions, such as transactions involving bitcoin.

Under current Internal Revenue Service (the “IRS”) guidance,

bitcoin is treated as property, not as currency, for U.S.

federal income tax purposes and transactions involving payment in bitcoin in

return for goods and services are treated as barter exchanges.

Such exchanges result in capital gain or loss measured by the difference

between the price at which bitcoin is exchanged and the taxpayer’s basis in the bitcoin.

However, because bitcoin is a new technological

innovation, because IRS guidance has taken the form of administrative pronouncements that may be modified without prior notice and comment,

and because there is as yet little case law on the subject, the U.S.

federal income tax treatment of an investment in bitcoin or in transactions

relating to investments in bitcoin may change from that described in this report, possibly with retroactive effect.

Any such change in

federal income tax treatment of bitcoin may have a negative effect on prices of bitcoin and may adversely affect the value of

In this regard, the IRS has indicated that it has made it a priority to issue additional guidance related to the taxation

of digital asset transactions, such as transactions involving bitcoin.

In addition, the IRS and U.S.

Treasury Department have promulgated final Treasury regulations regarding the tax information reporting rules for crypto currency transactions.

Treasury Department have promulgated

final Treasury regulations regarding the tax information reporting rules for digital asset transactions.

While the U.S.

Treasury Department and the IRS have started to issue such additional guidance, whether any future guidance will adversely

affect the U.S.

federal income tax treatment of an investment in bitcoin or in transactions relating to investments in bitcoin is unknown.

Moreover, future developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment

of digital currencies for U.S.

federal income tax purposes.

Investors should consult their

personal tax advisors before making any decision to purchase the Shares of the Trust.

Additionally, the tax considerations contained herein

are in summary form and may not be used as the sole basis for the decision to invest in the Shares from a tax perspective, since the individual

situation of each investor must also be taken into account.

Accordingly, the considerations regarding taxation contained herein any sort

of material information or tax advice nor are they in any way to be construed as a representation or warranty with respect to specific

tax consequences.

Treasury Department

and the IRS have started to issue such additional guidance, whether any future guidance will adversely affect the U.S.

federal income

tax treatment of an investment in bitcoin or in transactions relating to investments in bitcoin is unknown.

Moreover, future developments

that may arise with respect to digital assets may increase the uncertainty with respect to the treatment of digital assets for U.S.

income tax purposes.

Investors should consult their personal tax advisors before making

any decision to purchase the Shares of the Trust.

Additionally, the tax considerations contained herein are in summary form and may not

be used as the sole basis for the decision to invest in the Shares from a tax perspective, since the individual situation of each investor

must also be taken into account.

Accordingly, the considerations regarding taxation contained herein do not constitute any sort of material

information or tax advice nor are they in any way to be construed as a representation or warranty with respect to specific tax consequences.

The tax treatment of

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Bitcoin blockchain and the Trust claims the new forked asset, the Trust could hold both the original bitcoin and the new “forked”

Under current IRS guidance, a hard fork resulting in the receipt of new units of cryptocurrency is a taxable event giving rise

to ordinary income equal to the value of the new cryptocurrency.

The Trust Agreement will require that, if such a transaction occurs,

the Trust will as soon as possible direct the Bitcoin Custodians to distribute the new forked asset in-kind to the Sponsor,

as agent for the Shareholders, and the Sponsor will arrange to sell the new forked asset and for the proceeds to be distributed to the

Shareholders.

Under current IRS guidance, a hard fork resulting in the receipt of new units of digital assets is a taxable event giving rise

to ordinary income equal to the value of the new digital asset.

The Trust Agreement will require that, if such a transaction occurs, the

Trust will as soon as possible direct the Bitcoin Custodians to distribute the new forked asset in-kind to the Sponsor, as agent

for the Shareholders, and the Sponsor will arrange to sell the new forked asset and for the proceeds to be distributed to the Shareholders.

Such a sale will give rise to gain or loss, for U.S.

federal income tax purposes, if the amount realized on the sale differs

from the value of the new forked asset at the time it was received by the Trust.

A hard fork may therefore give rise to additional tax

liabilities for Shareholders.

federal income tax purposes, if the amount realized on the sale differs from the

value of the new forked asset at the time it was received by the Trust.

A hard fork may therefore give rise to additional tax liabilities

for Shareholders.

The intended tax treatment

of the Trust will limit the flexibility of the Trust’s investment decisions.

The Trust is intended to be a grantor trust for U.S.

federal income

tax purposes.

A grantor trust is not permitted to vary the investment portfolio of the Shareholders to take advantage of market fluctuations.

Thus, the Sponsor may allow the Trust to hold when an actively managed fund would sell.

The Sponsor may distribute proceeds when an actively

managed fund would reinvest the proceeds.

In addition, a fund treated as a grantor trust may not participate in trading or lending activity

without raising a risk of change in status.

This means that the returns of the Trust may be less than a successfully actively managed

The Exchange on which

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that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware will be the exclusive jurisdiction for

any claims, suits, actions or proceedings, provided that causes of actions for violations of the Exchange Act or the Securities Act will

not be governed by the exclusive jurisdiction provision of the Trust Agreement.

By purchasing Shares in the Trust, Shareholders waive

certain claims that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware is an inconvenient venue

or is otherwise inappropriate.

As such, Shareholder could be required to litigate a matter relating to the Trust in a Delaware court,

even if that court may otherwise be inconvenient for the Shareholder.

any claims, suits, actions or proceedings.

However, pursuant to the Trust Agreement, this shall not apply to causes of actions for violations

federal or state securities laws.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts

over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations promulgated thereunder.

Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

By purchasing Shares in the

Trust, Shareholders waive certain claims that the courts of the state of Delaware and any federal courts located in Wilmington, Delaware

is an inconvenient venue or is otherwise inappropriate.

As such, Shareholders could be required to litigate a matter relating to the Trust

in a Delaware court, even if that court may otherwise be inconvenient for such Shareholders.

The Trust Agreement also waives

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may limit a Shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Trust.

Section 22 of the Securities

Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the

Securities Act or the rules and regulations thereunder.

Investors cannot waive compliance with the federal securities laws and the rules

and regulations thereunder.

Further, there is uncertainty as to whether a court would enforce the exclusive forum jurisdiction for actions

arising under the Securities Act or Exchange Act.

Shareholders may be

adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.

The Trust may, in its discretion,

suspend the right of creation or redemption or may postpone the redemption or purchase settlement date, for (1) any period during

which an emergency exists as a result of which the fulfilment of a purchase order or the redemption distribution is not reasonably practicable

(for example, as a result of a significant technical failure, power outage, or network error) or (2) such other period as the Sponsor

determines to be necessary for the protection of the Shareholders of the Trust (for example, where acceptance of the total deposit required

to create each Basket would have certain adverse tax consequences to the Trust or its Shareholders).

In addition, the Trust may reject

a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the fulfilment of the

order might be unlawful.

The Trust may, in its discretion, suspend the right of creation or

redemption or may postpone the redemption or purchase settlement date, for (1) any period during which an emergency exists as a result

of which the fulfillment of a purchase order or the redemption distribution is not reasonably practicable (for example, as a result of

a significant technical failure, power outage, or network error) or (2) such other period as the Sponsor determines to be necessary

for the protection of the Shareholders of the Trust (for example, where acceptance of the total deposit required to create each Basket

would have certain adverse tax consequences to the Trust or its Shareholders).

In addition, the Trust may reject a redemption order if

the order is not in proper form as described in the Authorized Participant Agreement or if the fulfillment of the order might be unlawful.

Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant.

of creation privileges may adversely impact how the Shares are traded and arbitraged on the secondary market, which could cause them to

trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings.

Suspension of creation privileges

may adversely impact how the Shares are traded and arbitraged on the secondary market, which could cause them to trade at levels materially

different (premiums and discounts) from the fair value of their underlying holdings.

Shareholders may be

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those employed by the Index, including bitcoin investments that are “fair valued,” may differ from the value established by

may be adversely affected by the amendment of the Trust Agreement without shareholder consent.

to certain exceptions set forth in the Trust Agreement, the Trust Agreement can be amended by the Sponsor in its sole discretion and

without the shareholders’ consent by making an amendment, an agreement supplemental to the Trust Agreement, or an amended and restated

trust agreement, which amendments may materially adversely affect the interests of the Shareholders.

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-K

Item 1A. Risk Factors