What changed in this filing

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Item 1. Business

2025-03-28 compared with 2024-03-27 · 554 added, 1186 removed, 110 unchanged (94% of the section changed)

Valkyrie Bitcoin Fund (the “Trust”) is a Delaware statutory trust formed on January 20, 2021.

The Trust issues common units

of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of

The Shares of the Trust are listed on The Nasdaq Stock Market, LLC (“Nasdaq” or the “Exchange”).

Digital Assets LLC is the sponsor of the Trust (the “Sponsor”), Delaware Trust Company is the trustee of the Trust (the “Trustee”),

Bancorp Fund Services, LLC is the transfer agent of the Trust (in such capacity, the “Transfer Agent”) and the administrator

of the Trust (in such capacity, the “Administrator”), Paralel Distributors LLC is the marketing agent of the Trust (the “Marketing

Agent”), Coinbase Custody Trust Company, LLC and BitGo Trust Company are the custodians of the Trust’s bitcoin (each a “Custodian”

and collectively, the “Custodians”), Coinbase, Inc., an affiliate of the Custodian, is the prime broker of the Trust (the

“Coinbase Prime Broker”), and U.S.

Bank, N.A., an affiliate of the Transfer Agent and Administrator, is the cash custodian

of the Trust (the “Cash Custodian”).

The operations of the Trust are governed by the Amended and Restated Trust Agreement

of the Trust, dated December 28, 2023, among the Trustee, the Sponsor, and the shareholders from time to time thereunder (the “Shareholders”),

as may be amended from time to time (the “Trust Agreement”).

The Trust is an exchange-traded product.

When the Trust sells

or redeems its Shares, it will do so in blocks of 5,000 Shares (a “Basket”) based on the quantity of bitcoin attributable

to each Share of the Trust (net of accrued but unpaid expenses and liabilities).

Valkyrie Bitcoin Fund (the “Trust”) was organized as a Delaware statutory trust on January 20, 2021.

The Trust issues

common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and

ownership of the Trust.

The Shares of the Trust are listed on The Nasdaq Stock Market, LLC (“Nasdaq” or the

CoinShares Co., a Delaware corporation, is the sponsor of the Trust (the “Sponsor”), CSC

Delaware Trust Company f/k/a Delaware Trust Company is the trustee of the Trust (the “Trustee”), U.S.

Services, LLC is the transfer agent of the Trust (in such capacity, the “Transfer Agent”) and the administrator of the

Trust (in such capacity, the “Administrator”), Paralel Distributors LLC is the marketing agent of the Trust (the

“Marketing Agent”), Coinbase Custody Trust Company, LLC (the “Coinbase Custodian”), BitGo Trust Company,

(“BitGo”), and Komainu (Jersey) Limited (“Komainu” and

collectively with BitGo and the Coinbase Custodian, the “Custodians”) are the custodians of the Trust’s bitcoin,

Coinbase, Inc., an affiliate of the Coinbase Custodian, is the prime broker of the Trust (the “Prime Broker”), and U.S.

Bank, N.A., an affiliate of the Transfer Agent and Administrator, is the cash custodian of the Trust (the “Cash

The operations of the Trust are governed by the provisions of the Amended and Restated Trust Agreement of the

Trust, dated December 28, 2023, among the Trustee, the Sponsor, and the shareholders from time to time thereunder (the

“Shareholders”), as may be amended from time to time (the “Trust Agreement”).

The Trust is an

exchange-traded product.

The Trust sells or redeems its Shares in blocks of 5,000 Shares (a “Basket”) based on the

quantity of bitcoin attributable to each Share of the Trust (net of accrued but unpaid expenses and liabilities).

Trust’s inception of operation was January 11, 2024.

The Trust has not had any operations prior to January 11, 2024, other than

matters relating to its organization and the registration of the Shares under the Securities Act of 1933 (the “1933 Act”).

The Trust had no operations prior to January 11, 2024, other than matters

relating to its organization and the registration of the Shares under the Securities Act of 1933 (the “1933 Act”).

March 15, 2024, CoinShares Co.

was appointed as the co-sponsor of the Trust (the “Co-Sponsor”).

The Co-Sponsor serves in

an advisory capacity to the Trust and the Sponsor.

The Trust does not compensate the Co-Sponsor for its services.

In the event the Sponsor

withdraws as sponsor to the Trust, the Co-Sponsor will automatically and without further action by the Sponsor, the Trustee or the Shareholders

become the successor Sponsor and shall have all the powers, rights and obligations of the Sponsor under the Trust Agreement.

Sponsor maintains a website www.valkyrieinvest.com/BRRR, through which the Trust’s Annual Report on Form 10-K, Quarterly Reports

on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the

Securities Exchange Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon as reasonably practicable

after such material is electronically file with, or furnished to, the U.S.

Securities and Exchange Commission (the “SEC”).

was appointed as the co-sponsor of the Trust.

As co-sponsor, CoinShares Co.

served in an advisory

capacity to the Trust and Valkyrie Digital Assets, LLC, a Delaware limited liability company (the “Initial Sponsor”).

The Trust did not compensate CoinShares Co.

for services performed as co-sponsor.

On June 14, 2024, CoinShares Co.

succeeded the

Initial Sponsor as the sponsor of the Trust.

Sponsor maintains a website https://coinshares.com/us/etf/brrr/, through which the Trust’s Annual Report on Form 10-K, Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)

or 15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon

as reasonably practicable after such material is electronically file with, or furnished to, the U.S.

Securities and Exchange Commission

Additional information regarding the Trust may also be found on the SEC’s EDGAR database at www.sec.gov.

Objectives and Principal Investment Strategies

investment objective of the Trust is for the Shares to reflect the performance of the value of a bitcoin as represented by the CME CF

Bitcoin Reference Rate – New York Variant (the “Index”), less the Trust’s liabilities and expenses.

investment objective of the Trust is for the Shares to reflect the performance of the value of a bitcoin as represented by the

CME CF Bitcoin Reference Rate – New York Variant (the “Index”), less the Trust’s liabilities and expenses.

Investment Strategies

seeking to achieve its investment objective, the Trust will hold bitcoin and will value its Shares daily based on the value of bitcoin

as reflected by the Index, which is an independently calculated value based on an aggregation of executed trade flow of major bitcoin

spot exchanges.

The Index currently uses substantially the same methodology as the CME CF Bitcoin Reference Rate (“BRR”),

including utilizing the same six bitcoin exchanges, which is the underlying rate to determine settlement of CME bitcoin futures contracts,

except that the Index is calculated as of 4:00 p.m.

ET, whereas the BRR is calculated as of 4:00 p.m.

There can be no assurance

that the Trust will achieve its investment objective.

The Sponsor is authorized under the Trust Agreement to substitute an alternative

index, reference rate, or other methodology for valuing bitcoin for the Index for purposes of the Trust’s investment objective

and valuation policies at its sole discretion and without Shareholder approval.

The Shares are designed to provide investors with a cost-effective

and convenient way to invest in bitcoin.

seeking to achieve its investment objective, the Trust holds bitcoin and values its Shares daily based on the value of bitcoin

as reflected by the Index, which is an independently calculated value based on an aggregation of executed trade flow of major

bitcoin spot exchanges.

The Sponsor is authorized under the Trust Agreement to substitute an alternative index, reference rate,

or other methodology for valuing bitcoin for the Index for purposes of the Trust’s investment objective and valuation policies

at its sole discretion and without Shareholder approval.

The Shares are designed to provide investors with a cost-effective and

convenient way to invest in bitcoin.

About Bitcoin, Bitcoin Markets and Regulation of Bitcoin

section of the Annual Report provides a more detailed description of bitcoin, including information about the historical development

of bitcoin, how a person holds bitcoin, how to use bitcoin in transactions, how to trade bitcoin, the “exchange” market where

bitcoin can be bought, held and sold, the bitcoin OTC market and bitcoin mining.

is the digital asset that is native to, and created and transmitted through the operations of, the peer-to-peer Bitcoin Network, a decentralized

network of computers that operates on cryptographic protocols.

No single entity owns or operates the Bitcoin Network, the infrastructure

of which is collectively maintained by a decentralized user base.

The Bitcoin Network allows people to exchange tokens of value, called

bitcoin, which are recorded on a public transaction ledger known as the Blockchain.

Bitcoin can be used to pay for goods and services,

or it can be converted to fiat currencies, such as the U.S.

dollar, at rates determined on bitcoin trading platforms or in individual

end-user-to-end-user transactions under a barter system.

Although nascent in use, bitcoin may be used as a medium of exchange, unit of

account or store of value.

Bitcoin Network is decentralized and does not require governmental authorities or financial institution intermediaries to create, transmit

or determine the value of bitcoin.

of bitcoin, how a person holds bitcoin, how to use bitcoin in transactions, how to trade bitcoin, the “exchange” market

where bitcoin can be bought, held and sold, the bitcoin OTC market and bitcoin mining.

is the digital asset that is native to, and created and transmitted through the operations of, the peer-to-peer Bitcoin Network,

a decentralized network of computers that operates on cryptographic protocols.

No single entity owns or operates the Bitcoin Network,

the infrastructure of which is collectively maintained by a decentralized user base.

The Bitcoin Network allows people to exchange

tokens of value, called bitcoin, which are recorded on a public transaction ledger known as the Blockchain.

Bitcoin can be used

to pay for goods and services, or it can be converted to fiat currencies, such as the U.S.

dollar, at rates determined on bitcoin

trading platforms or in individual end-user-to-end-user transactions under a barter system.

Although nascent in use, bitcoin may

be used as a medium of exchange, unit of account or store of value.

Bitcoin Network is decentralized and does not require governmental authorities or financial institution intermediaries to create,

transmit or determine the value of bitcoin.

In addition, no party may easily censor transactions on the Bitcoin Network.

As a result, the Bitcoin

Network is often referred to as decentralized and censorship resistant.

result, the Bitcoin Network is often referred to as decentralized and censorship resistant.

value of bitcoin is determined by the supply of and demand for bitcoin.

New bitcoins are created and rewarded to the parties providing

the Bitcoin Network’s infrastructure (“miners”) in exchange for their having expended computational power to verifying

transactions and adding them to the Blockchain.

The Blockchain is effectively a decentralized database that includes all blocks that

have been solved by miners and it is updated to include new blocks as they are solved.

Each bitcoin transaction is broadcast to the Bitcoin

Network and, when included in a block, recorded in the Blockchain.

As each new block records outstanding bitcoin transactions, and outstanding

transactions are settled and validated through such recording, the Blockchain represents a complete, transparent and unbroken history

of all transactions of the Bitcoin Network.

New bitcoin are created and rewarded to the parties providing

the Bitcoin Network’s infrastructure (“miners”) in exchange for their having expended computational power to

verifying transactions and adding them to the Blockchain.

The Blockchain is effectively a decentralized database that includes

all blocks that have been solved by miners and it is updated to include new blocks as they are solved.

Each bitcoin transaction

is broadcast to the Bitcoin Network and, when included in a block, recorded in the Blockchain.

As each new block records outstanding

bitcoin transactions, and outstanding transactions are settled and validated through such recording, the Blockchain represents

a complete, transparent and unbroken history of all transactions of the Bitcoin Network.

was first described in a white paper released in 2008 and published under the pseudonym “Satoshi Nakamoto.” The protocol

underlying Bitcoin was subsequently released in 2009 as open-source software and currently operates on a worldwide network of computers.

underlying Bitcoin was subsequently released in 2009 as open-source software and currently operates on a worldwide network of

first step in directly using the Bitcoin Network for transactions is to download specialized software referred to as a “bitcoin

wallet.” A user’s bitcoin wallet can run on a computer or smartphone and can be used both to send and to receive bitcoin.

Within a bitcoin wallet, a user can generate one or more unique “bitcoin addresses,” which are conceptually similar to bank

account numbers.

After establishing a bitcoin address, a user can send or receive bitcoin from his or her bitcoin address to another

user’s address.

Sending bitcoin from one bitcoin address to another is similar in concept to sending a bank wire from one person’s

bank account to another person’s bank account;

provided, however, that such transactions are not managed by an intermediary and

erroneous transactions generally may not be reversed or remedied once sent.

Within a bitcoin wallet, a user can generate one or more unique “bitcoin addresses,” which are conceptually similar

to bank account numbers.

After establishing a bitcoin address, a user can send or receive bitcoin from his or her bitcoin address

to another user’s address.

Sending bitcoin from one bitcoin address to another is similar in concept to sending a bank wire

from one person’s bank account to another person’s bank account;

provided, however, that such transactions are not

managed by an intermediary and erroneous transactions generally may not be reversed or remedied once sent.

amount of bitcoin associated with each bitcoin address, as well as each bitcoin transaction to or from such address, is transparently

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exist on thousands of computers on the Bitcoin Network.

A user’s bitcoin wallet will either contain a copy of the Blockchain or

be able to connect with another computer that holds a copy of the Blockchain.

The innovative design of the Bitcoin Network protocol allows

each Bitcoin user to trust that their copy of the Blockchain will generally be updated consistent with each other user’s copy.

A user’s bitcoin wallet will either contain a copy of the Blockchain

or be able to connect with another computer that holds a copy of the Blockchain.

The innovative design of the Bitcoin Network

protocol allows each Bitcoin user to trust that their copy of the Blockchain will generally be updated consistent with each other

a Bitcoin user wishes to transfer bitcoin to another user, the sender must first have the recipient’s Bitcoin address.

then uses his or her Bitcoin wallet software to create a proposed transaction to be added to the Blockchain.

The proposal would reduce

the amount of bitcoin allocated to the sender’s address and increase the amount allocated recipient’s address, in each case

by the amount of bitcoin desired to be transferred.

The proposal is completely digital in nature, similar to a file on a computer, and

it can be sent to other computers participating in the Bitcoin Network;

however, the use of “unspent transaction outputs”

that are verified cryptographically prevents the ability to duplicate or counterfeit bitcoin.

sender then uses his or her Bitcoin wallet software to create a proposed transaction to be added to the Blockchain.

would reduce the amount of bitcoin allocated to the sender’s address and increase the amount allocated recipient’s

address, in each case by the amount of bitcoin desired to be transferred.

The proposal is completely digital in nature, similar

to a file on a computer, and it can be sent to other computers participating in the Bitcoin Network;

however, the use of “unspent

transaction outputs” that are verified cryptographically prevents the ability to duplicate or counterfeit bitcoin.

Bitcoin protocol is open-source software, meaning any developer can review the underlying code and suggest changes.

There is no official

company or group that is responsible for making modifications to Bitcoin.

There are, however, a number of individual developers that

regularly contribute to a specific distribution of Bitcoin software known as the “Bitcoin Core,” which is maintained in an

open-source repository on the website Github.

There are many other compatible versions of Bitcoin software, but Bitcoin Core provides

the de-facto standard for the Bitcoin protocol, also known as the “reference software.” The core developers for Bitcoin Core

operate on a volunteer basis and without strict hierarchical administration.

official company or group that is responsible for making modifications to Bitcoin.

There are, however, a number of individual

developers that regularly contribute to a specific distribution of Bitcoin software known as the “Bitcoin Core,” which

is maintained in an open-source repository on the website Github.

There are many other compatible versions of Bitcoin software,

but Bitcoin Core provides the de-facto standard for the Bitcoin protocol, also known as the “reference software.”

The core developers for Bitcoin Core operate on a volunteer basis and without strict hierarchical administration.

changes to the Bitcoin protocol are typically accomplished through a so-called “Bitcoin Improvement Proposal” or BIP.

proposals are generally posted on websites, and the proposals explain technical requirements for the protocol change as well as reasons

why the change should be accepted.

Upon its inclusion in the most recent version of Bitcoin Core, a new BIP becomes part of the reference

software’s Bitcoin protocol.

Several BIPs have been implemented since 2011 and have provided various new features and scaling improvements.

Bitcoin has no central authority, updating the reference software’s Bitcoin protocol will not immediately change the Bitcoin Network’s

Instead, the implementation of a change is achieved by users and miners downloading and running updated versions of Bitcoin

Core or other Bitcoin software that abides by the new Bitcoin protocol.

Users and miners must accept any changes made to the Bitcoin

source code by downloading a version of their Bitcoin software that incorporates the proposed modification of the Bitcoin Network’s

A modification of the Bitcoin Network’s source code is only effective with respect to the Bitcoin users and miners

that download it.

If an incompatible modification is accepted only by a percentage of users and miners, a division in the Bitcoin Network

will occur such that one network will run the pre-modification source code and the other network will run the modified source code.

a division is known as a “fork” in the Bitcoin Network.

a fork in the Bitcoin Network occurred on August 1, 2017, when a group of developers and miners accepted certain changes to the Bitcoin

Network software intended to increase transaction capacity.

Blocks mined on this network now diverge from blocks mined on the Bitcoin

Network, which has resulted in the creation of a new Blockchain whose digital asset is referred to as “bitcoin cash.” Bitcoin

and bitcoin cash now operate as separate, independent networks, and have distinct related assets (bitcoin and bitcoin cash).

forks have followed the Bitcoin Cash fork, including those for Bitcoin Gold and Bitcoin SegWit2X, in the months after the creation of

Bitcoin Cash.

It is possible that additional “forks” will occur in the future.

bitcoin transaction contains the sender’s bitcoin address, the recipient’s bitcoin address, the amount of bitcoin to be sent,

a transaction fee and the sender’s digital signature.

Bitcoin transactions are secured by cryptography known as public-private

key cryptography, represented by the bitcoin addresses and digital signature in a transaction’s data file.

Each Bitcoin Network

address, or wallet, is associated with a unique “public key” and “private key” pair, both of which are lengthy

alphanumeric codes, derived together and possessing a unique relationship.

Such proposals are generally posted on websites, and the proposals explain technical requirements for the protocol change as well

as reasons why the change should be accepted.

Upon its inclusion in the most recent version of Bitcoin Core, a new BIP becomes

part of the reference software’s Bitcoin protocol.

Several BIPs have been implemented since 2011 and have provided various

new features and scaling improvements.

Bitcoin has no central authority, updating the reference software’s Bitcoin protocol will not immediately change the Bitcoin

Network’s operations.

Instead, the implementation of a change is achieved by users and miners downloading and running updated

versions of Bitcoin Core or other Bitcoin software that abides by the new Bitcoin protocol.

Users and miners must accept any changes

made to the Bitcoin source code by downloading a version of their Bitcoin software that incorporates the proposed modification

of the Bitcoin Network’s source code.

A modification of the Bitcoin Network’s source code is only effective with respect

to the Bitcoin users and miners that download it.

If an incompatible modification is accepted only by a percentage of users and

miners, a division in the Bitcoin Network will occur such that one network will run the pre-modification source code and the other

network will run the modified source code.

Such a division is known as a “fork” in the Bitcoin Network.

bitcoin transaction contains the sender’s bitcoin address, the recipient’s bitcoin address, the amount of bitcoin

to be sent, a transaction fee and the sender’s digital signature.

Bitcoin transactions are secured by cryptography known

as public-private key cryptography, represented by the bitcoin addresses and digital signature in a transaction’s data file.

Each Bitcoin Network address, or wallet, is associated with a unique “public key” and “private key” pair,

both of which are lengthy alphanumeric codes, derived together and possessing a unique relationship.

public key is visible to the public and analogous to the Bitcoin Network address.

The private key is a secret and may be used to digitally

sign a transaction in a way that proves the transaction has been signed by the holder of the public-private key pair, without having

to reveal the private key.

A user’s private key must be kept in accordance with appropriate controls and procedures to ensure it

is used only for legitimate and intended transactions.

If an unauthorized third person learns of a user’s private key, that third

person could forge the user’s digital signature and send the user’s bitcoin to any arbitrary bitcoin address, thereby stealing

the user’s bitcoin.

Similarly, if a user loses his private key and cannot restore such access (e.g., through a backup), the user

may permanently lose access to the bitcoin contained in the associated address.

The private key is a secret and may be used

to digitally sign a transaction in a way that proves the transaction has been signed by the holder of the public-private key pair,

without having to reveal the private key.

A user’s private key must be kept in accordance with appropriate controls and

procedures to ensure it is used only for legitimate and intended transactions.

If an unauthorized third person learns of a user’s

private key, that third person could forge the user’s digital signature and send the user’s bitcoin to any arbitrary

bitcoin address, thereby stealing the user’s bitcoin.

Similarly, if a user loses his private key and cannot restore such

access (e.g., through a backup), the user may permanently lose access to the bitcoin contained in the associated address.

Bitcoin Network incorporates a system to prevent double-spending of a single bitcoin.

To prevent the possibility of double-spending a

single bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a “block” in the Blockchain,

which is publicly available.

Thus, the Bitcoin Network provides confirmation against double-spending by memorializing every transaction

in the Blockchain, which is publicly accessible and downloaded in part or in whole by all users of the Bitcoin Network software program.

Any user may validate, through their Bitcoin wallet or a Blockchain explorer, that each transaction in the Bitcoin Network was authorized

by the holder of the applicable private key, and Bitcoin Network mining software consistent with reference software requirements typically

validates each such transaction before including it in the Blockchain.

This cryptographic security ensures that bitcoin transactions

may not generally be counterfeited, although it does not protect against the “real world” theft or coercion of use of a Bitcoin

user’s private key, including the hacking of a Bitcoin user’s computer or a service provider’s systems.

To prevent the possibility of double-spending

a single bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a “block” in the

Blockchain, which is publicly available.

Thus, the Bitcoin Network provides confirmation against double-spending by memorializing

every transaction in the Blockchain, which is publicly accessible and downloaded in part or in whole by all users of the Bitcoin

Network software program.

Any user may validate, through their Bitcoin wallet or a Blockchain explorer, that each transaction

in the Bitcoin Network was authorized by the holder of the applicable private key, and Bitcoin Network mining software consistent

with reference software requirements typically validates each such transaction before including it in the Blockchain.

This cryptographic

security ensures that bitcoin transactions may not generally be counterfeited, although it does not protect against the “real

world” theft or coercion of use of a Bitcoin user’s private key, including the hacking of a Bitcoin user’s computer

or a service provider’s systems.

Bitcoin transaction between two parties is settled when recorded in a block added to the Blockchain.

Validation of a block is achieved

by confirming the cryptographic hash value included in the block’s solution and by the block’s addition to the longest confirmed

Blockchain on the Bitcoin Network.

For a transaction, inclusion in a block on the Blockchain constitutes a “confirmation”

of a Bitcoin transaction.

As each block contains a reference to the immediately preceding block, additional blocks appended to and incorporated

into the Blockchain constitute additional confirmations of the transactions in such prior blocks, and a transaction included in a block

for the first time is confirmed once against double-spending.

The layered confirmation process makes changing historical blocks (and

reversing transactions) exponentially more difficult the further back one goes in the Blockchain.

undo past transactions in a block recorded on the Blockchain, a malicious actor would have to exert tremendous computer power in re-solving

each block in the Blockchain starting with and after the target block and broadcasting all such blocks to the Bitcoin Network.

Network is generally programmed to consider the longest Blockchain containing solved and valid blocks to be the most accurate Blockchain.

In order to undo multiple layers of confirmation and alter the Blockchain, a malicious actor must re-solve all of the old blocks sought

to be regenerated and be able to continuously add new blocks to the Blockchain at a speed that would have to outpace that of all of the

other miners on the Bitcoin Network, who would be continuously solving for and adding new blocks to the Blockchain.

Validation of a block is

achieved by confirming the cryptographic hash value included in the block’s solution and by the block’s addition to

the longest confirmed Blockchain on the Bitcoin Network.

For a transaction, inclusion in a block on the Blockchain constitutes

a “confirmation” of a Bitcoin transaction.

As each block contains a reference to the immediately preceding block,

additional blocks appended to and incorporated into the Blockchain constitute additional confirmations of the transactions in

such prior blocks, and a transaction included in a block for the first time is confirmed once against double-spending.

confirmation process makes changing historical blocks (and reversing transactions) exponentially more difficult the further back

one goes in the Blockchain.

undo past transactions in a block recorded on the Blockchain, a malicious actor would have to exert tremendous computer power

in re-solving each block in the Blockchain starting with and after the target block and broadcasting all such blocks to the Bitcoin

The Bitcoin Network is generally programmed to consider the longest Blockchain containing solved and valid blocks to

be the most accurate Blockchain.

In order to undo multiple layers of confirmation and alter the Blockchain, a malicious actor

must re-solve all of the old blocks sought to be regenerated and be able to continuously add new blocks to the Blockchain at a

speed that would have to outpace that of all of the other miners on the Bitcoin Network, who would be continuously solving for

and adding new blocks to the Blockchain.

Mining – Creation of New Bitcoins

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This reward system is the method by which new bitcoins enter into circulation to the public.

Over time, the size of the fixed

reward of new bitcoin decreases, and miners increasingly rely on transaction fees to compensate them for exerting computational power

in solving blocks.

block contains the details of some or all of the most recent transactions that are not memorialized in prior blocks, as well as a record

of the award of bitcoins to the miner who solved the new block.

In order to add blocks to the Blockchain, a miner must map an input data

set (i.e., the Blockchain, plus a block of the most recent Bitcoin Network transactions and an arbitrary number called a “nonce”)

to a desired output data set of a predetermined length (the “hash value”) using the SHA-256 cryptographic hash algorithm.

Over time, the size of the

fixed reward of new bitcoin decreases, and miners increasingly rely on transaction fees to compensate them for exerting computational

power in solving blocks.

block contains the details of some or all of the most recent transactions that are not memorialized in prior blocks, as well as

a record of the award of bitcoins to the miner who solved the new block.

In order to add blocks to the Blockchain, a miner must

map an input data set (i.e., the Blockchain, plus a block of the most recent Bitcoin Network transactions and an arbitrary number

called a “nonce”) to a desired output data set of a predetermined length (the “hash value”) using the

SHA-256 cryptographic hash algorithm.

Each unique block can only be solved and added to the Blockchain by one miner;

therefore, all individual miners and mining pools on the

Bitcoin Network are engaged in a competitive process of constantly increasing their computing power to improve their likelihood of solving

for new blocks.

As more miners join the Bitcoin Network and its processing power increases, the Bitcoin Network adjusts the complexity

of the block-solving equation to maintain a predetermined pace of adding a new block to the Blockchain approximately every ten minutes.

all individual miners and mining pools on the Bitcoin Network are engaged in a competitive process of constantly increasing their

computing power to improve their likelihood of solving for new blocks.

As more miners join the Bitcoin Network and its processing

power increases, the Bitcoin Network adjusts the complexity of the block-solving equation to maintain a predetermined pace of

adding a new block to the Blockchain approximately every ten minutes.

Mathematically

Controlled Supply

method for creating new bitcoin is mathematically controlled in a manner so that the supply of bitcoin grows at a limited rate pursuant

to a pre-set schedule.

method for creating new bitcoin is mathematically controlled in a manner so that the supply of bitcoin grows at a limited rate

pursuant to a pre-set schedule.

The number of bitcoin awarded for solving a new block is automatically halved every 210,000 blocks.

current fixed reward for solving a new block is 6.25 bitcoin per block;

the reward decreased from twenty-five (25) bitcoin in July 2016

and 12.5 in May 2020.

It is estimated to halve again at the start of 2024.

Thus, the current fixed reward for solving a new block is 3.125 bitcoin per block;

the reward halved in November 2012, July 2016,

May 2020, and April 2024.

It is estimated to halve again in 2028.

This deliberately controlled rate of bitcoin creation means

that the number of bitcoin in existence will never exceed twenty-one (21) million and that bitcoin cannot be devalued through excessive

production unless the Bitcoin Network’s source code (and the underlying protocol for bitcoin issuance) is altered.

As of February

29, 2024, approximately 19.64 million bitcoin have been mined.

that the number of bitcoin in existence will never exceed twenty-one (21) million and that bitcoin cannot be devalued through

excessive production unless the Bitcoin Network’s source code (and the underlying protocol for bitcoin issuance) is altered.

As of February 28, 2024, approximately 19.8 million bitcoin have been mined.

of Attack Against the Bitcoin Network

networked systems are vulnerable to various kinds of attacks.

As with any computer network, the Bitcoin Network contains certain flaws.

For example, the Bitcoin Network is currently vulnerable to a “51% attack” where, if a mining pool were to gain control of

more than 50% of the hash rate for a digital asset, a malicious actor would be able to gain full control of the network and the ability

to manipulate the Blockchain.

addition, many digital asset networks have been subjected to a number of denial of service attacks, which has led to temporary delays

in block creation and in the transfer of bitcoin.

Any similar attacks on the Bitcoin Network that impact the ability to transfer bitcoin

could have a material adverse effect on the price of bitcoin and the value of the Shares.

As with any computer network, the Bitcoin Network contains certain

For example, the Bitcoin Network is currently vulnerable to a “51% attack” where, if a mining pool were to

gain control of more than 50% of the hash rate for a digital asset, a malicious actor would be able to gain full control of the

network and the ability to manipulate the Blockchain.

addition, many digital asset networks have been subjected to a number of denial of service attacks, which has led to temporary

delays in block creation and in the transfer of native tokens.

Any similar attacks on the Bitcoin Network that impact the ability

to transfer bitcoin could have a material adverse effect on the price of bitcoin and the value of the Shares.

Market and Bitcoin Trading Platforms

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most common means of determining a reference value is by surveying trading platforms where secondary markets for bitcoin exist.

prominent bitcoin trading platforms are often referred to as “exchanges,” although they are not regulated and do not report

trade information in the same way as a national securities exchange.

As such, there is some difference in the form, transparency and

reliability of trading data from bitcoin trading platforms.

Generally speaking, bitcoin data is available from these trading platforms

with publicly disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S.

dollar or Euro or

another digital asset such as ether or tether.

OTC dealers or market makers do not typically disclose their trade data.

there are several digital asset trading platforms operating worldwide and trading platforms represent a substantial percentage of bitcoin

buying and selling activity and provide the most data with respect to prevailing valuations of bitcoin.

A bitcoin trading platform provides

investors with a way to purchase and sell bitcoin, similar to stock exchanges like the New York Stock Exchange or Nasdaq, which provide

ways for investors to buy stocks and bonds in the so-called “secondary market.” Unlike stock exchanges regulated to monitor

securities trading activity, bitcoin trading platforms are largely regulated as money services businesses (or a foreign regulatory equivalent)

that monitor against money laundering and other illicit financing.

Bitcoin trading platforms operate websites designed to permit investors

to open accounts with the trading platform and then purchase and sell bitcoin.

bitcoin was the first cryptocurrency, since 2009, the number of digital assets, market participants and companies in the space has increased

dramatically.

In addition to bitcoin, other well-known digital assets include ether, XRP, bitcoin cash, and litecoin.

The digital asset

marketplace is still being defined and evolving, including the practices of exchanges, behavior of investors, and the protocols and prominence

of particular digital assets.

Prior to 2017, bitcoin accounted for approximately 85% or more of the total market capitalization of all

digital assets.

By April 2021, this figure had dropped to around 50% as other digital assets launched and/or grew faster than bitcoin.

Participants will have the option of purchasing and selling bitcoin used in Basket transactions with the Trust either on bitcoin trading

platforms, in the OTC markets or in direct bilateral transactions.

OTC trading and direct transactions of bitcoin are generally accomplished

via bilateral agreements on a principal-to-principal basis.

All risks and issues related to creditworthiness are between the parties

directly involved in the transaction.

The most prominent bitcoin trading platforms are often referred to as “exchanges,” although they are not regulated

and do not report trade information in the same way as a national securities exchange.

As such, there is some difference in the

form, transparency and reliability of trading data from bitcoin trading platforms.

Generally speaking, bitcoin data is available

from these trading platforms with publicly disclosed valuations for each executed trade, measured by one or more fiat currencies

such as the U.S.

dollar or Euro or another digital asset such as ether or tether.

OTC dealers or market makers do not typically

disclose their trade data.

there are several digital asset trading platforms operating worldwide and trading platforms represent a substantial percentage

of bitcoin buying and selling activity and provide the most data with respect to prevailing valuations of bitcoin.

A bitcoin trading

platform provides investors with a way to purchase and sell bitcoin, similar to stock exchanges like the New York Stock Exchange

or Nasdaq, which provide ways for investors to buy stocks and bonds in the so-called “secondary market.” Unlike stock

exchanges regulated to monitor securities trading activity, bitcoin trading platforms are largely regulated as money services

businesses (or a foreign regulatory equivalent) that monitor against money laundering and other illicit financing.

Bitcoin trading

platforms operate websites designed to permit investors to open accounts with the trading platform and then purchase and sell

range from Bitcoin enthusiasts to professional mining operations that design and build dedicated machines and data centers, including

mining pools, which are groups of miners that act cohesively and combine their processing to solve blocks.

When a pool solves a new block,

the pool operator receives the bitcoin and, after taking a nominal fee, splits the resulting reward among the pool participants based

on the processing power each of them contributed to solve for such block.

Mining pools provide participants with access to smaller, but

steadier and more frequent, bitcoin payouts.

When a pool solves

a new block, the pool operator receives the bitcoin and, after taking a nominal fee, distributes the resulting reward among the

pool participants.

Mining pools may provide participants with access to smaller, but steadier and more frequent, bitcoin payouts.

and Speculative Sector

sector includes the investment and trading activities of both private and professional investors and speculators.

Historically, larger

financial services institutions are publicly reported to have limited involvement in investment and trading in digital assets, although

the participation landscape is beginning to change and large corporations, financial institutions and investment firms are taking positions

providing exposure to bitcoin and other digital assets.

retail sector includes users transacting in direct peer-to-peer Bitcoin transactions through the direct sending of bitcoin over the Bitcoin

The retail sector also includes transactions in which consumers pay for goods or services from commercial or service businesses

through direct transactions or third-party service providers.

sector includes companies that provide a variety of services including the buying, selling, payment processing and storing of Bitcoin.

Coinbase, Bitstamp, Gemini, Kraken, LMAX Digital and itBit are some of the largest trading platforms by volume traded.

Coinbase Custody

Trust Company, LLC and BitGo Trust Company, Inc.

the Custodians for the Trust, are digital asset custodians that provide custodial accounts

that store bitcoin for users.

As the Bitcoin Network continues to grow in acceptance, it is anticipated that service providers will expand

the currently available range of services and that additional parties will enter the service sector for the Bitcoin Network.

than 5,000 other digital assets have been developed since the inception of Bitcoin, currently the most developed digital asset because

of the length of time it has been in existence, the investment in the infrastructure that supports it, and the network of individuals

and entities that are using Bitcoin.

Some industry groups are also creating private, permissioned Blockchains that may or may not feature

cryptocurrencies or other digital assets.

In addition, private enterprises and governments are exploring the use of stablecoins including

central bank-backed digital currencies.

Historically,

larger financial services institutions are publicly reported to have limited involvement in investment and trading in digital

assets, although the participation landscape is beginning to change and large corporations, financial institutions and investment

firms are taking positions providing exposure to bitcoin and other digital assets.

retail sector includes users transacting in direct peer-to-peer Bitcoin transactions through the direct sending of bitcoin over

the Bitcoin Network.

The retail sector also includes transactions in which consumers pay for goods or services from commercial

or service businesses through direct transactions or third-party service providers.

sector includes companies that provide a variety of services including the buying, selling, payment processing and storing of

As the Bitcoin Network continues to grow in acceptance, it is anticipated that service providers will expand the currently

available range of services and that additional parties will enter the service sector for the Bitcoin Network.

of other digital assets have been developed since the inception of Bitcoin, currently considered the most developed digital asset

because of the length of time it has been in existence, the investment in the infrastructure that supports it, and the network

of individuals and entities that are using Bitcoin.

Some industry groups are also creating private, permissioned Blockchains that

may or may not feature cryptocurrencies or other digital assets.

In addition, private enterprises and governments are exploring

the use of stablecoins including central bank-backed digital currencies.

and other digital assets have increasingly attracted attention from U.S.

and foreign regulators.

Such regulatory attention has included

enforcement actions for violations of securities and commodities laws, as well as the release of regulatory guidance explaining how existing

regulatory regimes apply to digital assets, and orders approving certain digital asset-related products.

In more limited cases, new legislation

or regulations have been proposed or adopted to govern the use of digital assets and their networks.

federal and state agencies have been examining the operations of digital asset networks, digital asset users and digital asset trading

platforms, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund

criminal or terrorist enterprises and the safety and soundness of trading platforms or other service-providers that hold digital assets

Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors.

In addition, federal and state agencies, and other countries have issued rules or guidance about the treatment of digital asset transactions

or requirements for businesses engaged in digital asset activity.

addition, the SEC, U.S.

state securities regulators and several foreign governments have issued warnings that digital assets sold in

initial coin offerings (“ICOs”) may be classified as securities and that both those digital assets and ICOs may be subject

to securities regulations.

Generally speaking, ICOs are offered and conducted on the Ethereum network or similar “smart contract”

platforms, rather than the Bitcoin Network;

however, bitcoin has been used for consideration in ICOs on multiple networks and ICOs may

be conducted using the Bitcoin Network.

and future regulatory actions may alter, perhaps to a materially adverse extent, the nature of an investment in the Shares or the ability

of the Trust to continue to operate.

Such regulatory attention has

included enforcement actions for violations of securities and commodities laws, as well as the release of regulatory guidance

explaining how existing regulatory regimes apply to digital assets, and orders approving certain digital asset-related products.

In more limited cases, new legislation or regulations have been proposed or adopted to govern the use of digital assets and their

federal and state agencies have been examining the operations of digital asset networks, digital asset users and digital asset

trading platforms, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal

activities or fund criminal or terrorist enterprises and the safety and soundness of trading platforms or other service-providers

that hold digital assets for users.

Many of these state and federal agencies have issued consumer advisories regarding the risks

posed by digital assets to investors.

In addition, federal and state agencies, and other countries have issued rules or guidance

about the treatment of digital asset transactions or requirements for businesses engaged in digital asset activity.

and future regulatory actions may alter, perhaps to a materially adverse extent, the nature of an investment in the Shares or

the ability of the Trust to continue to operate.

Additionally, U.S.

state and federal, and foreign regulators and legislatures have taken action

against digital asset businesses or enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or

criminal activity stemming from digital asset activity.

federal and state and foreign jurisdictions have adopted, and may continue in the near future to adopt, laws, regulations or directives

that affect the Bitcoin Network, the bitcoin markets, and their users, particularly digital asset trading platforms and service providers

that fall within such jurisdictions’ regulatory scope.

There remains significant uncertainty regarding the U.S.

and foreign government

and quasi-governmental regulatory actions with respect to digital assets and digital asset exchanges.

Foreign laws, regulations or directives

may conflict with those of the U.S.

and may negatively impact the acceptance of bitcoin by users, merchants and service providers and

may therefore impede the growth or sustainability of the Bitcoin economy in the European Union, China, South Korea, India and the U.S.

state and federal, and foreign regulators and legislatures

have taken action against digital asset businesses or enacted restrictive regimes in response to adverse publicity arising from

hacks, consumer harm, or criminal activity stemming from digital asset activity.

federal and state and foreign jurisdictions have adopted, and may continue in the near future to adopt, laws, regulations

or directives that affect the Bitcoin Network, the bitcoin markets, and their users, particularly digital asset trading platforms

and service providers that fall within such jurisdictions’ regulatory scope.

There remains significant uncertainty regarding

and foreign government and quasi-governmental regulatory actions with respect to digital assets and digital asset exchanges.

Foreign laws, regulations or directives may conflict with those of the U.S.

and may negatively impact the acceptance of bitcoin

by users, merchants and service providers and may therefore impede the growth or sustainability of the Bitcoin economy in the

European Union, China, South Korea, India and the U.S.

and globally, or otherwise negatively affect the value of bitcoin.

effect of any future regulatory change on the Trust or Bitcoin is impossible to predict, but such change could be substantial and adverse

to the Trust and the value of the Shares.

effect of any future regulatory change on the Trust or Bitcoin is impossible to predict, but such change could be substantial

and adverse to the Trust and the value of the Shares.

value of bitcoin is determined by the value that various market participants place on bitcoin through their transactions.

The most common

means of determining the value of a bitcoin is by surveying one or more bitcoin exchanges where bitcoin is traded publicly and transparently

(e.g., Coinbase, Bitstamp, Kraken, itBit, LMAX Digital and Gemini).

exchanges, bitcoin is traded with publicly disclosed valuations for each executed trade, measured by one or more fiat currencies such

most common means of determining the value of a bitcoin is by surveying one or more bitcoin exchanges where bitcoin is traded

publicly and transparently.

exchanges, bitcoin is traded with publicly disclosed valuations for each executed trade, measured by one or more fiat currencies

such as the U.S.

dollar or Euro.

OTC dealers or market makers do not typically disclose their trade data.

there are many exchanges operating worldwide, representing a substantial percentage of bitcoin buying and selling activity, and providing

the most data with respect to prevailing valuations of bitcoins.

Historically, a large percentage of the global Bitcoin trading volume

occurred on self-reported, unregulated bitcoin exchanges located in China.

Throughout 2017, however, the Chinese government took several

steps to tighten controls on bitcoin exchanges, culminating in a ban on domestic cryptocurrency exchanges in November 2017, which forced

such exchanges to cease their operations or relocate.

As a result, reported Bitcoin trading volume on Chinese exchanges is now substantially

lower, representing a de minimis share of the global trade volume.

time to time, there may be intra-day price fluctuations across bitcoin exchanges.

However, they are generally relatively immaterial.

For example, the variance of prices on bitcoin exchanges with the highest transaction volumes on average is lower than 2%.

These variances

usually stem from small changes in the fee structures on different bitcoin exchanges or differences in administrative procedures required

to deposit and withdraw fiat currency in exchange for Bitcoins and vice versa.

The greatest variances are found at (i) smaller exchanges

with relatively low transaction volumes where even small trades can be large relative to an exchange’s transaction volume and as

a result impact the trading price on those exchanges and (ii) exchanges that are inaccessible to the Trust because they do not meet

the Trust’s regulatory requirements, and as a result are accessed and used by a captured market or by parties that do not have

regulatory or compliance requirements.

These variances usually stem from small changes in the fee structures on different bitcoin exchanges or differences in administrative

procedures required to deposit and withdraw fiat currency in exchange for Bitcoins and vice versa.

The greatest variances are

found at (i) smaller exchanges with relatively low transaction volumes where even small trades can be large relative to an exchange’s

transaction volume and as a result impact the trading price on those exchanges and (ii) exchanges that are inaccessible to the

Trust because they do not meet the Trust’s regulatory requirements, and as a result are accessed and used by a captured

market or by parties that do not have regulatory or compliance requirements.

of the Trust’s Assets

Custody Trust Company, LLC (the “Coinbase Custodian”) and BitGo Trust Company, Inc.

(“BitGo” and collectively

with Coinbase Custody, the “Custodians”) will custody of all of the Trust’s bitcoin, other than that which may be maintained

in a trading account (the “Trading Account”) with Coinbase, Inc.

(the “Coinbase Prime Broker,” which is an affiliate

of the Coinbase Custodian), in accounts that are required to be segregated from the assets held by the Custodians as principal and the

assets of its other customers (the “Vault Accounts”).

The Custodians will keep all of the private keys associated with the

Trust’s bitcoin held by the Custodians in the Vault Accounts in “cold storage,” which refers to a safeguarding method

by which the private keys corresponding to the Trust’s bitcoins are generated and stored in an offline manner using computers or

devices that are not connected to the Internet, which is intended to make them more resistant to hacking.

portion of the Trust’s bitcoin holdings and cash holdings may be held with the Coinbase Prime Broker in the Trading Account to

pay the Sponsor’s Fee and in connection with the purchase and sale of bitcoin related to creations and redemptions of Baskets and

Trust expenses not assumed by the Sponsor.

Within the Trust’s Trading Account, the Coinbase Prime Broker Agreement provides that

the Trust does not have an identifiable claim to any particular bitcoin (and cash).

Instead, the Trust’s Trading Account represents

an entitlement to a pro rata share of the bitcoin (and cash) the Coinbase Prime Broker holds on behalf of customers who hold similar

entitlements against the Coinbase Prime Broker.

In this way, the Trust’s Trading Account represents an omnibus claim on the Coinbase

Prime Broker’s bitcoins (and cash) held on behalf of the Coinbase Prime Broker’s customers.

The Coinbase Prime Broker holds

the bitcoin associated with customer entitlements across a combination of omnibus cold wallets, omnibus “hot wallets” (meaning

wallets whose private keys are generated and stored online, in Internet-connected computers or devices) or in omnibus accounts in the

Coinbase Prime Broker’s name on a trading venue (including third-party venues and the Coinbase Prime Broker’s own execution

venue) where the Coinbase Prime Broker executes orders to buy and sell bitcoin on behalf of its clients.

Within such omnibus hot and

cold wallets and accounts, the Coinbase Prime Broker has represented to the Sponsor that it keeps the majority of assets in cold wallets,

to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals.

However, the Sponsor has no

control over, and for security reasons the Coinbase Prime Broker does not disclose to the Sponsor, the percentage of bitcoin that the

Coinbase Prime Broker holds for customers holding similar entitlements as the Trust which are kept in omnibus cold wallets, as compared

to omnibus hot wallets or omnibus accounts in the Coinbase Prime Broker’s name on a trading venue.

The Coinbase Prime Broker has

represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing risk analysis

and market dynamics, in which the Coinbase Prime Broker attempts to balance anticipated liquidity needs for its customers as a class

against the anticipated greater security of cold storage.

than the bitcoin held with the Coinbase Prime Broker in the Trading Account, the Sponsor will allocate the Trust’s bitcoin between

Vault Accounts at the Coinbase Custodian and BitGo.

In determining the amount and percentage of the Trust’s bitcoin to allocate

to each Vault Account, the Sponsor will consider (i) the concentration of the Trust’s bitcoin at each Custodian, (ii) the Sponsor’s

assessment of the safety and security policies and procedures of each Custodian, (iii) the insurance policies of each Custodian, (iv)

the fees and expenses associated with the storage of the Trust’s bitcoin at each Custodian, (v) the fees and expenses associated

with the transfer to or from the Vault Account at each Custodian, (vi) any other factor the Sponsor deems relevant in making the allocation

determination.

The Sponsor does not intend to disclose the amount or percentage of the Trust’s bitcoin held at either The Coinbase

Custodian or BitGo, and the Sponsor may change the allocation between the Custodians at any time and without notice to Shareholders.

The fees and expenses associated with the transfer of bitcoin between the Vault Accounts at each Custodian will be borne by the Sponsor,

not the Trust or the Shareholders.

Any transfer of bitcoin between the Vault Accounts at each Custodian will occur “on-chain”

over the Bitcoin Network.

On-chain transactions are subject to all of the risks of the Bitcoin Network, including the risk that transactions

will be made erroneously and are generally irreversible.

Custodians custody all of the Trust’s bitcoin, other than that which may be maintained in a trading account (the “Trading

Account”) with the Prime Broker in accounts that are required to be segregated from the assets held by the Custodians as

principal and the assets of its other customers (the “Vault Accounts”).

portion of the Trust’s bitcoin holdings and cash holdings from time to time may be held with the Prime Broker in the Trading

Account in connection with creations and redemptions of Baskets utilizing the Prime Broker as Bitcoin Trading Counterparty and

any sales of bitcoin to pay the Sponsor’s Fee and Trust expenses not assumed by the Sponsor.

Within the Trust’s Trading

Account, the Prime Broker Agreement provides that the Trust does not have an identifiable claim to any particular bitcoin (and

Instead, the Trust’s Trading Account represents an entitlement to a pro rata share of the bitcoin (and cash) the

Prime Broker holds on behalf of customers who hold similar entitlements against the Prime Broker.

In this way, the Trust’s

Trading Account represents an omnibus claim on the Prime Broker’s bitcoins (and cash) held on behalf of the Prime Broker’s

Generally, the Trust will only hold bitcoin in the Trading Account to the extent the Sponsor reasonably expects is

necessary in connection with the redemption of Shares by Authorized Participants or necessary to pay the Trust’s expenses.

than the bitcoin held with the Prime Broker in the Trading Account, the Sponsor will allocate the Trust’s bitcoin between

Vault Accounts at the Custodians.

In determining the amount and percentage of the Trust’s bitcoin to allocate to each Vault

Account, the Sponsor will consider (i) the concentration of the Trust’s bitcoin at each Custodian, (ii) the Sponsor’s

assessment of the safety and security policies and procedures of each Custodian, (iii) the insurance policies of each Custodian,

(iv) the fees and expenses associated with the storage of the Trust’s bitcoin at each Custodian, (v) the fees and expenses

associated with the transfer to or from the Vault Account at each Custodian, and (vi) any other factor the Sponsor deems relevant

in making the allocation determination.

The Sponsor does not intend to disclose the amount or percentage of the Trust’s

bitcoin held at the Coinbase Custodian, BitGo or Komainu, and the Sponsor may change the allocation between the Custodians at

any time and without notice to Shareholders.

The fees and expenses associated with the transfer of bitcoin between the Vault Accounts

at each Custodian will be borne by the Sponsor, not the Trust or the Shareholders.

Any transfer of bitcoin between the Vault Accounts

at each Custodian will occur “on-chain” over the Bitcoin Network.

On-chain transactions are subject to all of the

risks of the Bitcoin Network, including the risk that transactions will be made erroneously and are generally irreversible.

and Sales of Bitcoin

the Trust will conduct creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin in connection

with those creation and redemption orders.

The Trust may also be required to sell bitcoin to pay certain extraordinary, non-recurring

expenses that are not assumed by the Sponsor.

Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin from a bitcoin trading counterparty that has been approved by the

Sponsor (each, a “Bitcoin Trading Counterparty”).

Coinbase Inc.

(the “Coinbase Prime Broker”) is the Trust’s

initial Bitcoin Trading Counterparty.

The Bitcoin Trading Counterparties with which the Sponsor will engage in bitcoin transactions are

unaffiliated third parties and all transactions will be done on an arm’s-length basis.

to the Trust’s creation and redemption processes, Authorized Participants and the Trust do not settle the cash for creation or

redemption orders until the day after the order is placed, while the Trust makes purchases and sales of bitcoin in connection with creations

and redemption orders on the day of the order.

To facilitate this settlement of creation and redemption orders, the Trust will borrow

bitcoin or cash as trade credit (“Trade Credit”) from Coinbase Credit, Inc.

(the “Trade Credit Lender”), an affiliate

of Coinbase, on a short-term basis pursuant to the Coinbase Post-Trade Financing Agreement (the “Trade Financing Agreement”)

to cover the short-term transactional needs of the Trust.

Pursuant to the Authorized Participant Agreement, the Trust does not bear the

ultimate cost of the Trade Credits or the Trade Financing Agreement, as those expenses are borne by the Authorized Participants during

the order process.

Due to the timing of creation and redemption procedures of the Trust, the Sponsor anticipates that any agreements

with subsequent Bitcoin Trading Counterparties will require similar trade financing arrangements to settle bitcoin and cash transactions

on the day of order placement.

The Sponsor, on behalf of the Trust, may engage additional Bitcoin Trading Counterparties at any time.

As of February 29, 2024, the Bitcoin Trading Counterparties approved by the Sponsor are BitGo Prime LLC, Coinbase Inc., CoinShares Capital

Markets (Jersey) Limited, Cumberland DRW LLC, JSCT LLC, Payward Inc.

dba Kraken, Virtu Financial Singapore PTE.

the Trust will conduct creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin

in connection with those creation and redemption orders.

The Trust may also be required to sell bitcoin to pay certain extraordinary,

non-recurring expenses that are not assumed by the Sponsor.

Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin from a bitcoin trading counterparty that has been approved

by the Sponsor (each, a “Bitcoin Trading Counterparty”).

The Prime Broker was the Trust’s initial Bitcoin Trading

Counterparty.

The Bitcoin Trading Counterparties with which the Sponsor engage in bitcoin transactions are unaffiliated third

parties and all transactions are done on an arm’s-length basis.

Sponsor, on behalf of the Trust, may engage additional Bitcoin Trading Counterparties at any time.

As of February 28, 2025, the

Bitcoin Trading Counterparties approved by the Sponsor are BitGo Prime LLC, Coinbase Inc., Cumberland DRW LLC, JSCT LLC, and Payward

of the CME CF Bitcoin Reference Rate – New York Variant

Trust will determine the Bitcoin Index Price and value its Shares daily based on the value of bitcoin as reflected by the Index.

Index is calculated daily and aggregates the notional value of bitcoin trading activity across major bitcoin spot exchanges.

currently uses substantially the same methodology as the BRR, including utilizing the same constituent bitcoin exchanges, which is the

underlying rate to determine the settlement of CME bitcoin futures contracts, except that the Index is calculated as of 4:00 p.m.

whereas the BRR is calculated as of 4:00 p.m.

The Index is calculated daily and aggregates the notional value of bitcoin trading activity across major bitcoin spot exchanges.

The Index currently uses substantially the same methodology as the CME CF Bitcoin Reference Rate (“BRR”), including

utilizing the same constituent bitcoin exchanges, which is the underlying rate to determine the settlement of CME bitcoin futures

contracts, except that the Index is calculated as of 4:00 p.m.

ET, whereas the BRR is calculated as of 4:00 p.m.

The Index is designed based on the IOSCO Principals for Financial Benchmarks.

The administrator of the Index is CF Benchmarks Ltd.

The administrator of the Index is CF Benchmarks

(the “Benchmark Administrator”).

The Trust also uses the Bitcoin Index

Price to calculate its “Bitcoin Holdings,” which is the aggregate U.S.

dollar value of bitcoins in the Trust, based on the

Bitcoin Index Price, less its liabilities and expenses.

“Bitcoin Holdings per Share” is calculated by dividing Bitcoin Holdings

by the number of Shares currently outstanding.

Bitcoin Holdings and Bitcoin Holdings per Share are not measures calculated in accordance

Bitcoin Holdings is not intended to be a substitute for the Trust’s NAV calculated in accordance with GAAP, and Bitcoin

Holdings per Share is not intended to be a substitute for the Trust’s NAV per Share calculated in accordance with GAAP.

The Trust also uses the Bitcoin Index Price to calculate its “Bitcoin

Holdings,” which is the aggregate U.S.

dollar value of bitcoins in the Trust, based on the Bitcoin Index Price, less its

liabilities and expenses.

“Bitcoin Holdings per Share” is calculated by dividing Bitcoin Holdings by the number of

Shares currently outstanding.

Bitcoin Holdings and Bitcoin Holdings per Share are not measures calculated in accordance with US

Generally Accepted Accounting Principles (“US GAAP”).

Bitcoin Holdings is not intended to be a substitute for the

Trust’s NAV calculated in accordance with US GAAP, and Bitcoin Holdings per Share is not intended to be a substitute for

the Trust’s NAV per Share calculated in accordance with US GAAP.

Index was created to facilitate financial products based on bitcoin.

It serves as a once-a-day benchmark rate of the U.S.

of bitcoin (BTC-USD), calculated as of 4 p.m.

The Index, which has been calculated and published since February 28, 2022, aggregates

the trade flow of several bitcoin exchanges, during an observation window between 3:00 p.m.

price of bitcoin (BTC-USD), calculated as of 4 p.m.

The Index, which has been calculated and published since February 28,

2022, aggregates the trade flow of several bitcoin exchanges, during an observation window between 3:00 p.m.

and 4:00 p.m.

ET into the U.S.

of one bitcoin at 4:00 p.m.

Specifically, the Index is calculated based on the “Relevant Transactions” (as defined below)

of all of its constituent bitcoin exchanges, which are currently Coinbase, Bitstamp, Kraken, itBit, LMAX Digital and Gemini (the “Constituent

Platforms”), as follows:

Relevant Transactions are added to a joint list, recording the time of execution, trade price

and size for each transaction.

into the U.S.

dollar price of one bitcoin at 4:00 p.m.

Specifically, the Index is calculated based on the “Relevant

Transactions” (as defined below) of all of its constituent bitcoin exchanges as follows:

Relevant Transactions are added to a joint list, recording the time of execution, trade

price and size for each transaction.

list is partitioned by timestamp into 12 equally sized time intervals of five (5) minutes’

each partition separately, the volume-weighted median trade price is calculated from the

trade prices and sizes of all Relevant Transactions, i.e., across all Constituent Platforms.

A volume-weighted median differs from a standard median in that a weighting factor, in this

case trade size, is factored into the calculation.

Index is then determined by the equally weighted average of the volume medians of all partitions.

each partition separately, the volume-weighted median trade price is calculated from

the trade prices and sizes of all Relevant Transactions, i.e., across all Constituent

A volume-weighted median differs from a standard median in that a weighting

factor, in this case trade size, is factored into the calculation.

Index is then determined by the equally weighted average of the volume medians of all

Index does not include any futures prices in its methodology.

A “Relevant Transaction” is any cryptocurrency versus U.S.

A “Relevant Transaction” is any cryptocurrency versus

dollar spot trade that occurs during the observation window between 3:00 p.m.

and 4:00 p.m.

ET on a Constituent Platform in the BTC-USD

pair that is reported and disseminated by a Constituent Platform through its publicly available API and observed by the Benchmark Administrator.

An oversight function is implemented by the Benchmark Administrator in seeking to ensure that the Index is administered through the Benchmark

Administrator’s codified policies for Index integrity.

data and missing data are treated according to the following rules:

Relevant Transaction for a given Calculation Day that is not available from a Constituent Platform API by 16:01 ET is disregarded

in the calculation of the Index for that Calculation Day.

no Relevant Transaction occurs on a Constituent Platform on a given Calculation Day or one or more Relevant Transactions occur but

for any reason cannot be retrieved by CF Benchmarks the Constituent Platform is disregarded in the calculation of the Index for that

Calculation Day.

for any reason, any of the twelve (12) partitions for any Calculation Day, no Relevant Transaction occurs on any Constituent Platform

or one or more Relevant Transactions occur but for any reason cannot be retrieved by CF Benchmarks, the partition remains empty and

will be disregarded in the calculation of the Index.

The denominator utilized in calculating the average of all volume-weighted medians

will then be decremented by the number of empty partitions.

one or more Relevant Transactions occur but for any reason no Relevant Transaction can be retrieved from any Constituent Platform

API by the Calculation Agent, a CME CF Cryptocurrency Reference Rate calculation failure occurs for that Calculation Day.

no Relevant Transactions occur on any Constituent Exchange on a given Calculation Day then a CME CF Cryptocurrency Reference Rate

Market Failure Event will be deemed to have occurred.

of December 31, 2023, the Constituent Platforms included in the Index are Coinbase, Bitstamp, itBit, Kraken, Gemini, and LMAX Digital.

A U.S.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency

business under the NYDFS BitLicense as well as a money transmitter in various U.S.

Subsidiaries operating internationally are further regulated as an e-money provider (Republic

of Ireland, Central Bank of Ireland) and Major Payment Institution (Singapore, Monetary Authority

of Singapore).

A U.K.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency

business under the NYDFS BitLicense as well as a money transmitter in various U.S.

It is also regulated as a Payments Institution within the European Union and is registered

as a Crypto Asset business with the U.K.

A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.

It is also registered FinCEN as an MSB and is licensed as a money transmitter in various

A U.S.-based exchange that is registered as an MSB with FinCEN in various U.S.

states, Kraken

is registered with the FCA as a Crypto Asset Business and is authorized by the Central Bank

of Ireland as a Virtual Asset Service Provider (“VASP”).

Kraken also holds a

variety of other licenses and regulatory approvals, including from the Canadian Securities

Administrators (“CSA”).

A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.

It is also registered with FinCEN as an MSB and is licensed as a money transmitter in various

It is also registered with the FCA as a Crypto Asset Business.

A Gibraltar-based exchange regulated by the Gibraltar Financial Services Commission

(‟GFSCˮ) as a DLT provider for execution and custody services.

LMAX Digital does

not hold a BitLicense and is part of LMAX Group, a U.K.-based operator of an FCA-regulated

Multilateral Trading Facility and Broker-Dealer.

oversight function is implemented by the Benchmark Administrator in seeking to ensure that the Index is administered through the Benchmark

Provider’s codified policies for Index integrity.

The Index is administered through the Benchmark Provider’s codified policies

for index integrity, including a conflicts-of-interest policy, a control framework, an accountability framework, and an input data policy.

It is also subject to the U.K.

BMR regulations, compliance with which regulations has been subject to a Limited Assurance Audit under

the ISAE 3000 standard as of September 12, 2022, which is publicly available.

Index is subject to oversight by the CME CF Oversight Committee.

The CME CF Oversight Committee shall be comprised of at least five members,

including at least:

(i) two who are representatives of CME (“CME Members”);

(ii) one who is a representative of CF Benchmarks

and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations.

CF Oversight Committee meets no less frequently than quarterly.

The CME CF Oversight Committee’s Founding Charter and quarterly

meeting minutes are publicly available.

the creation of the Index, there have been several changes to Constituent Platforms comprising the Index, most recently in May 2022.

trading venue is eligible as a “Constituent Platform” in any of the CME CF Cryptocurrency Pricing Products if it offers a

market that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including markets

where the quote asset is made fungible with Accepted Assets (the “Relevant Pair”) and makes trade data and order data available

through an Automatic Programming Interface (“API”) with sufficient reliability, detail and timeliness.

The CME CF Oversight

Committee considers a trading venue to offer sufficiently reliable, detailed and timely trade data and order data through an API when:

(i) the API for the “Constituent Platform” does not fall or become unavailable to a degree that impacts the integrity of

the Index given the frequency of calculation;

(ii) the data published is at the resolution required so that the benchmark can be calculated,

with the frequency and dissemination precision required;

and (iii) the data is broadcast and available for retrieval at the required

frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.

it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:

venue’s Relevant Pair spot trading volume for an index must meet the minimum thresholds

as detailed below for it to be admitted as a Constituent Platform:

The average daily volume

the venue would have contributed during the observation window for the Reference Rate of

the Relevant Pair exceeds 3% for two consecutive calendar quarters.

venue has policies to ensure fair and transparent market conditions at all times and has

processes in place to identify and impede illegal, unfair or manipulative trading practices.

venue does not impose undue barriers to entry or restrictions on market participants, and

utilizing the venue does not expose market participants to undue credit risk, operational

risk, legal risk or other risks.

venue complies with applicable laws and regulations, including, but not limited to, capital

markets regulations, money transmission regulations, client money custody regulations, KYC

and AML regulations.

venue cooperates with inquiries and investigations of regulators and the Administrator upon

request and must execute data-sharing agreements with CME Group.

Once admitted, a Constituent

Platform must demonstrate that it continues to fulfill criteria 2 to 5 inclusive.

the average daily contribution of a Constituent Platform fall below 3% for any Reference

Rate, then the continued inclusion of the venue as a Constituent Platform to the Relevant

Pair shall be assessed by the CME CF Oversight Committee.

Additionally,

a trading venue may be nominated for addition to the list of Constituent Platforms by any member of the public, exchange or the Oversight

data and the description of the Index are based on information made publicly available by the Benchmark Administrator on its website

at https://www.cfbenchmarks.com.

None of the information on the Benchmark Provider’s website is incorporated by reference into

this Annual Report.

Benchmark Administrator has adopted certain policies for the event of a fork of the Bitcoin Network or airdrop to holders of bitcoin.

Generally, in the event of the fork of the Bitcoin Network, the Benchmark Administrator will make a determination whether the new asset

received in the fork is “significant.” If a forked asset is deemed significant, the Benchmark Administrator will initiate

the calculation and dissemination of an index on the forked asset.

If a forked asset is not deemed significant, such step is at the Benchmark

Administrator’s discretion.

In either event, the forked asset will not be included in the Index.

Similarly, airdrops are not taken

into account in the calculation of the Index.

Index methodology and constituent digital asset trading platforms may be changed from time to time at the discretion of the Index Provider

without Shareholder approval.

For example, if the Index Provider determines that there have been material efforts to manipulate the price

of bitcoin on a constituent digital asset trading platform or that the data feeds from such trading platform are unreliable, the Index

Provider may remove such trading platform for the Index methodology.

To the extent that such changes to the methodology result in a more

limited set of constituent digital asset trading platforms, there is an increased risk that the price of bitcoin used in Trust’s

calculation of NAV would deviate from the price quoted on digital asset trading platforms not included within the Index methodology.

Shareholders will be notified of changes to the Index methodology only if the Sponsor determines that such changes are material with

respect to an investment decision regarding the Shares.

Once it has actual knowledge of material changes to the Index methodology, the

Trust will notify Shareholders in a prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.

ET on a constituent bitcoin exchange

in the BTC-USD pair that is reported and disseminated by a constituent bitcoin exchange through its publicly available API and

observed by the Benchmark Administrator.

An oversight function is implemented by the Benchmark Administrator in seeking to ensure

that the Index is administered through the Benchmark Administrator’s codified policies for Index integrity.

Index methodology and constituent digital asset trading platforms may be changed from time to time at the discretion of the Index

Provider without Shareholder approval.

For example, if the Index Provider determines that there have been material efforts to

manipulate the price of bitcoin on a constituent digital asset trading platform or that the data feeds from such trading platform

are unreliable, the Index Provider may remove such trading platform for the Index methodology.

To the extent that such changes

to the methodology result in a more limited set of constituent digital asset trading platforms, there is an increased risk that

the price of bitcoin used in Trust’s calculation of NAV would deviate from the price quoted on digital asset trading platforms

not included within the Index methodology.

Shareholders will be notified of changes to the Index methodology only if the Sponsor

determines that such changes are material with respect to an investment decision regarding the Shares.

Once it has actual knowledge

of material changes to the Index methodology, the Trust will notify Shareholders in a prospectus supplement and/or a current report

on Form 8-K or in its annual or quarterly reports.

Shares are valued on a daily basis as of 4:00 p.m.

The value of bitcoin held by the Trust is determined based on the fair market

value price for bitcoin determined by the Benchmark Administrator.

The value of bitcoin held by the Trust is determined based on the fair

market value price for bitcoin determined by the Benchmark Administrator.

Trust’s NAV is calculated by:

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● subtracting

any liabilities (including accrued but unpaid expenses).

any liabilities (including accrued by unpaid expenses).

Trust’s NAV per Share is calculated by taking the Trust’s NAV and dividing it by the total amount of Shares outstanding.

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dollars (the “Bitcoin Index Price”).

The bitcoin held by the

Trust will typically be valued based on the Bitcoin Index Price.

The Administrator calculates the NAV of the Trust once each business

The bitcoin held

by the Trust will typically be valued based on the Bitcoin Index Price.

The Administrator calculates the NAV of the Trust once

each business day.

The end-of-day bitcoin price is calculated using the Bitcoin Index Price as of 4:00 p.m.

However, NAVs are not officially struck

until later in the day (often by 5:30 p.m.

However, NAVs

are not officially struck until later in the day (often by 5:30 p.m.

ET and almost always by 8:00 p.m.

The pause after 4:00 p.m.

ET provides an opportunity

for the Sponsor to detect, flag, investigate, and correct unusual pricing should it occur.

If the Sponsor determines in good faith that

the Index does not reflect an accurate bitcoin price, then the Sponsor will instruct the Benchmark Administrator to employ an alternative

method to determine the fair value of the Trust’s assets.

The CME CF Bitcoin Reference Rate - New York Variant shall constitute

the Index, but if the Index is not available or the Sponsor at its sole discretion determines the Index is unreliable (together a “Fair

Value Event”), the Trust’s holdings may be fair valued in accordance with the fair value policies approved by the Sponsor.

Fair Value Event value determination will be based on all available factors that the Sponsor deems relevant at the time of the determination,

and may be based on analytical values determined by the Sponsor using third-party valuation models.

The pause after 4:00

ET provides an opportunity for the Sponsor to detect, flag, investigate, and correct unusual pricing should it occur.

the Sponsor determines in good faith that the Index does not reflect an accurate bitcoin price, then the Sponsor will instruct

the Benchmark Administrator to employ an alternative method to determine the fair value of the Trust’s assets.

Bitcoin Reference Rate - New York Variant shall constitute the Index, but if the Index is not available or the Sponsor at its

sole discretion determines the Index is unreliable (together a “Fair Value Event”), the Trust’s holdings may

be fair valued in accordance with the fair value policies approved by the Sponsor.

Fair Value Event value determination will be based on all available factors that the Sponsor deems relevant at the time of the

determination, and may be based on analytical values determined by the Sponsor using third-party valuation models.

value policies approved by the Sponsor will seek to determine the fair value price that the Trust might reasonably expect to receive

from the current sale of that asset or liability in an arm’s-length transaction on the date on which the asset or liability is

being valued.

In the instance of a Fair Value Event, the Trust and the Sponsor have licensed of use of the Lukka Prime Reference Rate

as the initial secondary index (the “Secondary Index”).

If the Secondary Index is not available or the Sponsor at its sole

discretion determines the Secondary Index is unreliable, the price set by the Trust’s principal market as of 4:00 p.m.

valuation date would be utilized.

In the event the principal market price is not available or the Sponsor at its sole discretion determines

the principal market valuation is unreliable the Sponsor will use its best judgement to determine a good faith estimate of fair value.

from the current sale of that asset or liability in an arm’s-length transaction on the date on which the asset or liability

is being valued.

In the instance of a Fair Value Event, the price set by the Trust’s principal market as of 4:00 p.m.

on the valuation date would be utilized.

In the event the principal market price is not available or the Sponsor at its sole discretion

determines the principal market valuation is unreliable the Sponsor will use its best judgement to determine a good faith estimate

of fair value.

bitcoin markets are generally open on days when U.S.

markets are closed, which means that the value of the bitcoin owned by the Trust

could change on days when Shares cannot be bought or sold.

Secondary Index

Secondary Index is designed to provide an estimated fair market value for bitcoin, in a manner that aligns with U.S.

Generally Accepted

Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”) accounting guidelines

regarding fair market value measurements.

In this regard, the index provider for the Secondary Index seeks to identify a “principal

market” for bitcoin, by evaluating eligible bitcoin exchanges across a variety of different criteria, including the exchanges’

oversight and governance frameworks, microstructure efficiency, trading volume, data transparency and data integrity.

As of December

2023, the following trading platforms are considered to be eligible trading platforms by the Secondary Index:

Binance, Bitfinex, Bitflyer,

Bitstamp, Coinbase, Crypto.com, Gemini, HitBTC, Huobi, Kraken, KuCoin, OKEx, Poloniex.

The index provider for the Secondary Index reviews

trading platforms eligible for inclusion in the index quarterly.

In determining which trading platforms to include, the index provider

for the Secondary Index evaluates each trading platform using proprietary ratings criteria.

The index provider for the Secondary Index

periodically reassesses the eligible trading platforms used by the Secondary Index, and makes adjustments as needed.

The Secondary Index

was launched in January 2020, and the Secondary Index has been back-populated to January 2014.

determining the value of bitcoin, the index provider for the Secondary Index applies a five-step weighting process for identifying the

principal exchange for bitcoin and the last price on that exchange.

A Base Exchange Score (“BES”) that takes into account

the criteria above is assigned to each index pricing source in order to select the most appropriate primary exchange and then an executed

exchange price is determined at 4:00 p.m.

Assign each exchange for bitcoin and U.S.

Dollars a BES reflecting static exchange characteristics such as oversight, microstructure

and technology.

Adjust the BES based on the relative monthly volume each exchange services.

This new score is the Volume Adjusted Score (“VAS”).

Decay the adjusted score based on the time passed since last trade on exchange, assessing the level of activity in the market by considering

the frequency (volume) of trades.

The decay factor reflects the time since the last trade on the exchange.

This is the final Decayed

Volume Adjusted Score (DVAS), which reflects the freshness of data by tracking most recent trades.

The DVAS is algorithmically determined

based on time since the last trade in the market.

Rank the exchanges by the DVAS score and designate the highest-ranking exchange as the principal market for that point in time –

the principal market is the exchange with highest DVAS.

Designate the price of the last transaction on the principal market as of 4:00 p.m.

ET as the “executed exchange price.”

An executed exchange price is used to represent the fair market value at 4:00 p.m.

characteristics of each exchange are weighted as follows for their BES:

This score reflects the rules in place to protect and to give access to investors and is a function of a variety of factors.

score assigned for exchange oversight will depend on parameters such as jurisdiction, regulation, “Know Your Customer and Anti-Money

Laundering Compliance” (KYC/AML), etc.

Exchanges will receive a higher score if they are subject to more stringent regulation,

including comprehensive KYC/AML screening, and the level of currency oversight and regulation in their home jurisdiction.

Microstructure

Efficiency (30%):

The second exchange characteristic is microstructure efficiency.

The Secondary Index takes the effective bid-ask spread

as a proxy for efficiency.

For each exchange and currency pair, the Secondary Index takes an estimate of the “effective spread,”

which is a common approach to measuring trade execution costs.

Integrity (25%):

Data Integrity provides a metric of how consistent an exchange’s trading activity is with its underlying market

microstructure.

This is done by aligning an exchange’s trade data for a given product with quotes data pertaining to the same market.

Exchanges whose traded prices deviate outside the spreads indicated by the quotes data are penalized.

This would potentially expose nefarious

actions such as wash trading or other potential manipulation of data.

The metric is computed by joining a sample of trades with quotes

by trading platform, product and time.

With this, the Secondary Index computes the maximum observed ask price and the minimum observed

bid price over a rolling window in time.

This serves to define a range of possible trade prices that would be expected based on the quotes

The Secondary Index then aggregates this dataset by exchange, computing the fraction of transactions where the trade price was

within the expected range as computed in the prior step.

This fraction is multiplied by 100 to give the data integrity score.

Transparency (10%):

Transparency is the term used for a quality score that is determined by the level of detail of the data offered by

Similar to the jurisdiction hierarchy, Level 1, the highest level in the transparency hierarchy, is assigned 100 points

and is reduced by 20 points for each subsequent lower level.

The most transparent (Level 1) exchanges offer order-level data, followed

by order book (Level 2), trade-level (Level 3), candles (Level 4), and then no data (Level 5).

the event that the index provider for the Secondary Index changes the methodology of the Secondary Index, the index provider for the

Secondary Index will inform the Sponsor of the nature of the change and the timeline for implementation.

The Sponsor will notify Shareholders

of material changes to the Secondary Index through some combination of press release, website disclosure, Current Report on Form 8-K

or prospectus supplement, in addition to any notice to the listing exchange required under applicable listing rules.

markets are closed, which means that the value of the bitcoin owned by the

Trust could change on days when Shares cannot be bought or sold.

to Be Paid by the Sponsor

Sponsor has agreed to assume the following fees and expenses incurred by the Trust (in each case as defined in the Trust Agreement):

the Marketing Fee, the Administrator Fee, the Custodian Fee, the Cash Custodian Fee, the Prime Broker Fee, the Transfer Agent Fee, the

Trustee’s fee, applicable license fees, including the licensing fees related to the Index License Agreement, fees and expenses

related to public trading of the Shares on Nasdaq (including marketing, legal and audit fees and expenses), ordinary legal expenses,

audit fees, regulatory fees, including any fees relating to the registration of the Shares with the SEC, printing and mailing costs and

costs of maintaining the Trust’s website (the “Sponsor-paid Expenses”).

There is no cap on the amount of Sponsor-paid

At the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may be redesignated as an Additional Trust

The Sponsor will provide Shareholders with notice of any such redesignation in a prospectus supplement and/or through a current

report on Form 8-K or in the Trust’s annual or quarterly reports.

the Marketing Fee, the Administrator Fee, the Custodian Fee, the Cash Custodian Fee, the Prime Broker Fee, the Transfer Agent

Fee, the Trustee’s fee, applicable license fees, including the licensing fees related to the Index License Agreement, fees

and expenses related to public trading of the Shares on Nasdaq (including marketing, legal and audit fees and expenses), ordinary

legal expenses, audit fees, regulatory fees, including any fees relating to the registration of the Shares with the SEC, printing

and mailing costs and costs of maintaining the Trust’s website (the “Sponsor-paid Expenses”).

There is no cap

on the amount of Sponsor-paid Expenses.

At the Sponsor’s sole discretion, all or any portion of a Sponsor-paid Expense may

be redesignated as an Additional Trust Expense.

The Sponsor will provide Shareholders with notice of any such redesignation in

a prospectus supplement and/or through a current report on Form 8-K or in the Trust’s annual or quarterly reports.

Extraordinary

and Other Expenses

certain extraordinary circumstances, the Trust may pay expenses in addition to the Sponsor’s Fee, including, but not limited to,

any expenses of the Trust that are not assumed by the Sponsor, taxes and governmental charges, expenses and costs of any extraordinary

certain extraordinary circumstances, the Trust may pay expenses in addition to the Sponsor’s Fee, including, but not limited

to, any expenses of the Trust that are not assumed by the Sponsor, taxes and governmental charges, expenses and costs of any extraordinary

services performed by the Sponsor (or any other Service Provider) on behalf of the Trust, indemnification expenses of the Custodians,

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“Additional Trust Expenses”).

If the Trust incurs any Additional Trust Expenses, the Sponsor or its delegate will cause the

Trust (or its delegate) to convert bitcoin into U.S.

dollars at the price available through the Coinbase Prime Broker’s Coinbase

Prime service (less applicable trading fees) through the Trading Platform which the Sponsor is able to obtain using commercially reasonable

The number of bitcoins represented by a Share will decline each time the Trust pays Additional Trust Expenses by transferring

or selling bitcoins.

Although the Sponsor cannot definitively state the frequency or magnitude of the Additional Trust Expenses, the

Sponsor expects that they may occur infrequently, if at all.

If the Trust incurs any Additional Trust Expenses, the Sponsor or its delegate will

cause the Trust (or its delegate) to convert bitcoin into U.S.

dollars at the price available through the Prime Broker’s

Coinbase Prime service (less applicable trading fees) through the Trading Platform which the Sponsor is able to obtain using commercially

reasonable efforts.

The number of bitcoins represented by a Share will decline each time the Trust pays Additional Trust Expenses

by transferring or selling bitcoins.

Although the Sponsor cannot definitively state the frequency or magnitude of the Additional

Trust Expenses, the Sponsor expects that they may occur infrequently, if at all.

of Creation and Redemption of Shares

Trust creates and redeems Shares from time to time, but only in one or more Baskets.

Baskets are only made in exchange for delivery to

the Trust or the distribution by the Trust of the amount of cash represented by the Baskets being created or redeemed (the “Basket

The amount of cash required in a Basket Deposit (the “Basket Cash Deposit”) is based on the quantity or

value of the quantity, as applicable, of bitcoin and cash attributable to each Share of the Trust (net of accrued but unpaid Sponsor’s

Fees and any accrued but unpaid Extraordinary Expenses) being created or redeemed determined as of 4:00 p.m.

ET on the day the order

to create or redeem Baskets is properly received.

will only made in exchange for delivery to the Trust or the distribution by the Trust of the amount of cash represented by the Shares

being created or redeemed, the amount of which is based on the value of the bitcoin attributable to each Share of the Trust (net of accrued

but unpaid Sponsor’s Fees and any accrued but unpaid expenses or liabilities) being created or redeemed determined as of 4:00 p.m.

Baskets are only made in exchange for delivery

to the Trust or the distribution by the Trust of the amount of cash represented by the Baskets being created or redeemed (the

“Basket Deposit”).

The amount of cash required in a Basket Deposit (the “Basket Cash Deposit”) is based

on the quantity or value of the quantity, as applicable, of bitcoin and cash attributable to each Share of the Trust (net of accrued

but unpaid Sponsor’s Fees and any accrued but unpaid Extraordinary Expenses) being created or redeemed determined as of

ET on the day the order to create or redeem Baskets is properly received.

The Trust will engage in bitcoin transactions for converting

cash into bitcoin (in association with purchase orders) and bitcoin into cash (in association with redemption orders).

The Trust will

conduct its bitcoin purchase and sale transactions as described above under the heading “Activities of the Trust – Purchases

and Sales of Bitcoin.”

are only made in exchange for delivery to the Trust or the distribution by the Trust of the amount of cash represented by the

Shares being created or redeemed, the amount of which is based on the value of the bitcoin attributable to each Share of the Trust

(net of accrued but unpaid Sponsor’s Fees and any accrued but unpaid expenses or liabilities) being created or redeemed

determined as of 4:00 p.m.

ET on the day the order to create or redeem Baskets is properly received.

The Trust will engage in

bitcoin transactions for converting cash into bitcoin (in association with purchase orders) and bitcoin into cash (in association

with redemption orders).

The Trust will conduct its bitcoin purchase and sale transactions as described above under the heading

“Purchases and Sales of Bitcoin.”

Participants are the only persons that may place orders to create and redeem Baskets.

Authorized Participants must be (1) registered

broker-dealers or other securities market participants, such as banks or other financial institutions, that are not required to register

as broker-dealers to engage in securities transactions as described below, and (2) DTC Participants.

To become an Authorized Participant,

a person must enter into an Authorized Participant Agreement.

The Authorized Participant Agreement provides the procedures for the creation

and redemption of Shares and for the delivery of the cash required for such creation and redemptions.

The Authorized Participant Agreement

and the related procedures attached thereto may be amended by the Trust and the Sponsor, without the consent of any Shareholder or Authorized

Authorized Participants pay the Transfer Agent a fee for each order they place to create or redeem one or more Baskets (the

“Transfer Agent Fee”).

In addition, an Authorized Participant is responsible for any operational processing and brokerage

costs, transfer fees, financing fees, network fees and stamp taxes incurred in connection with the satisfaction of any creation or redemption

orders (the “Execution Charges,” and collectively with the Transfer Agent Fee, the “Transaction Fees”).

The Transaction

Fees may be reduced, increased or otherwise changed by the Sponsor.

Authorized Participants (or their designees) who make deposits of

cash with the Trust in exchange for Shares receive no fees, commissions or other form of compensation or inducement of any kind from

either the Trust or the Sponsor, and no such person will have any obligation or responsibility to the Sponsor or the Trust to effect

any sale or resale of Shares.

The Authorized Participants will deliver only cash to create Shares and will receive only cash when redeeming

Further, Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation

or redemption process or otherwise direct the Trust or a third party with respect to purchasing, holding, delivering, or receiving bitcoin

as part of the creation or redemption process.

broker-dealers or other securities market participants, such as banks or other financial institutions, that are not required to

To become an Authorized

Participant, a person must enter into an Authorized Participant Agreement.

The Authorized Participant Agreement provides the procedures

for the creation and redemption of Shares and for the delivery of the cash required for such creation and redemptions.

The Authorized

Participant Agreement and the related procedures attached thereto may be amended by the Trust and the Sponsor, without the consent

of any Shareholder or Authorized Participant.

Authorized Participants pay the Transfer Agent a fee for each order they place to

create or redeem one or more Baskets (the “Transfer Agent Fee”).

In addition, an Authorized Participant is responsible

for any operational processing and brokerage costs, transfer fees, financing fees, network fees and stamp taxes incurred in connection

with the satisfaction of any creation or redemption orders (the “Execution Charges,” and collectively with the Transfer

Agent Fee, the “Transaction Fees”).

The Transaction Fees may be reduced, increased or otherwise changed by the Sponsor.

Authorized Participants (or their designees) who make deposits of cash with the Trust in exchange for Shares receive no fees,

commissions or other form of compensation or inducement of any kind from either the Trust or the Sponsor, and no such person will

have any obligation or responsibility to the Sponsor or the Trust to effect any sale or resale of Shares.

The Authorized Participants

deliver only cash to create Shares and receive only cash when redeeming Shares.

Further, Authorized Participants do not directly

or indirectly purchase, hold, deliver, or receive bitcoin as part of the creation or redemption process or otherwise direct the

Trust or a third party with respect to purchasing, holding, delivering, or receiving bitcoin as part of the creation or redemption

Authorized Participants are expected to be capable of participating directly in the spot bitcoin markets.

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or their affiliates may from time to time buy or sell bitcoin and may profit in these instances.

To the extent that the activities of

Authorized Participants have a meaningful effect on the bitcoin market, it could affect the price of bitcoin and impact the ability of

the Authorized Participants to effectively arbitrage the difference between the price at which the shares trade and the net asset value

of the Trust.

While the Sponsor currently expects that Authorized Participants’ direct activities in the bitcoin or securities

markets in connection with the creation and redemption activities of the Trust will not significantly affect the price of bitcoin or

the Shares, the impact of the activities of the Trust and its Authorized Participants on bitcoin or securities markets is unknown and

beyond the control of the Sponsor.

Authorized Participant will be required to be registered as a broker-dealer under the Exchange Act and a member in good standing with

FINRA or exempt from being or otherwise not required to be licensed as a broker-dealer or a member of FINRA, and will be qualified to

act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires.

Certain Authorized Participants

may also be regulated under federal and state banking laws and regulations.

Each Authorized Participant has its own set of rules and

procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime.

following description of the procedures for the creation and redemption of Baskets is only a summary and a Shareholder should refer to

the relevant provisions of the Trust Agreement and the form of Authorized Participant Agreement for more detail.

The Trust Agreement

and the form of Authorized Participant Agreement are filed as exhibits to this Annual Report.

Participants will place orders through the Transfer Agent.

The Transfer Agent will coordinate with the Trust’s Cash Custodian in

order to facilitate settlement of the Shares and cash as described in more detail in the “—Creation Procedures” and

“—Redemption Procedures” sections below.

To the extent that the activities

of Authorized Participants have a meaningful effect on the bitcoin market, it could affect the price of bitcoin and impact the

ability of the Authorized Participants to effectively arbitrage the difference between the price at which the shares trade and

the net asset value of the Trust.

While the Sponsor currently expects that Authorized Participants’ direct activities in

the bitcoin or securities markets in connection with the creation and redemption activities of the Trust will not significantly

affect the price of bitcoin or the Shares, the impact of the activities of the Trust and its Authorized Participants on bitcoin

or securities markets is unknown and beyond the control of the Sponsor.

Authorized Participant is required to be registered as a broker-dealer under the Exchange Act and a member in good standing with

FINRA or exempt from being or otherwise not required to be licensed as a broker-dealer or a member of FINRA, and is qualified

to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires.

Certain Authorized

Participants may also be regulated under federal and state banking laws and regulations.

Each Authorized Participant has its own

set of rules and procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory

following description of the procedures for the creation and redemption of Baskets is only a summary and a Shareholder should

refer to the relevant provisions of the Trust Agreement and the form of Authorized Participant Agreement for more detail.

Trust Agreement and the form of Authorized Participant Agreement are filed as exhibits to this Annual Report.

any business day, an Authorized Participant may place an order with the Transfer Agent to create one or more Baskets.

Purchase orders

must be placed by 1:00 p.m.

orders must be placed by 2:00 p.m.

ET or the close of regular trading on the Exchange, whichever is earlier.

The day on which a valid order

is received by the Transfer Agent is considered the “Purchase Order Date.”

The day on which

a valid order is received by the Transfer Agent is considered the “Purchase Order Date.”

manner by which creations are made is dictated by the terms of the Authorized Participant Agreement.

Creation orders may be denominated

Creation orders are denominated

and settled in cash (“Cash Creation Order”).

By placing a Cash Creation Order, an Authorized Participant agrees to facilitate

the deposit of cash with the Cash Custodian.

In either case, if an Authorized Participant fails to consummate the foregoing, the order

will be cancelled or delayed until the full cash deposit has been received.

An Authorized Participant may not withdraw a creation order

without the prior consent of the Sponsor at its discretion.

an Authorized Participant’s Cash Creation Order, the Trust’s account with the Cash Custodian (the “Cash Account”)

must be credited with the required cash by the end of the Purchase Order Date.

Upon receipt of the cash deposit amount in the Cash Account,

the Cash Custodian will notify the Transfer Agent, the Authorized Participant and the Sponsor that the cash has been deposited.

Agent will then direct DTC to credit the number of Shares created to the Authorized Participant’s DTC account.

the extent not held to facilitate redemption orders or pay the Trust’s expenses, the Sponsor will use cash proceeds received in

connection with Cash Creation Orders to purchase bitcoin and deposit it in the Vault Accounts with the Custodians.

Bitcoin held in the

Vault Accounts is the property of the Trust and is only transferred outside the Vault Accounts or sold in connection with creation and

redemption transactions or to pay the Trust’s expenses and liabilities.

The Trust’s bitcoin will not leased, loaned or used

as collateral for any loan, margin, rehypothecation or similar activities.

Expenses related to the acquisition of bitcoin in connection

with a creation order and transfer of acquired bitcoin to the Vault Accounts will not be the responsibility of the Trust.

By placing a Cash Creation Order, an Authorized Participant agrees to

facilitate the deposit of cash with the Cash Custodian.

In either case, if an Authorized Participant fails to consummate the foregoing,

the order will be cancelled or delayed until the full cash deposit has been received.

An Authorized Participant may not withdraw

a creation order without the prior consent of the Sponsor at its discretion.

an Authorized Participant’s Cash Creation Order, the settlement of both the cash amount required to purchase the Shares

and the number of Shares created will be credited to the Trust and Authorized Participant, respectively, by the end of the following

business day or such later time as may be agreed upon by the Authorized Participant and the Sponsor following the Purchase Order

The settlement of cash and Shares occurs trough net settlement between the Trust’s and Authorized Participant’s

the extent not held to facilitate redemption orders or pay the Trust’s expenses, the Sponsor will use cash proceeds received

in connection with Cash Creation Orders to purchase bitcoin and deposit it in the Vault Accounts with the Custodians.

held in the Vault Accounts is the property of the Trust and is only transferred outside the Vault Accounts or sold in connection

with creation and redemption transactions or to pay the Trust’s expenses and liabilities.

The Trust’s bitcoin are

not leased, loaned or used as collateral for any loan, margin, rehypothecation or similar activities.

Expenses related to the

acquisition of bitcoin in connection with a creation order and transfer of acquired bitcoin to the Vault Accounts are not the

responsibility of the Trust.

Determination

1 unchanged sentence

quantity of cash required to create each Basket Deposit changes from day to day.

On each day that the Exchange is open for regular trading,

the Administrator adjusts the quantity of cash constituting the Basket Deposit as appropriate to reflect the value of the Trust’s

bitcoin and cash less accrued expenses.

The computation is made by the Administrator as promptly as practicable after 4:00 p.m.

at a later time set forth in the Authorized Participant Agreement or otherwise provided to all Authorized Participants on the date such

order is placed in order for the creation of Baskets to be effected based on the NAV of Shares as next determined on such date after

receipt of the order in proper form.

the extent there is a difference between the price actually paid by the Trust to acquire a Basket worth of bitcoin in the creation process

compared to the cash value of the Basket (i.e., if there is a difference between the amount paid by the Trust to purchase the requisite

amount of bitcoin and the valuation of bitcoin as part of the Trust’s NAV calculation), that difference will also be charged to

the creating Authorized Participant.

Basket Cash Deposit is an amount of cash that is in the same proportion to the total assets of the Trust, net of accrued expenses and

other liabilities, on the Purchase Order Date, as the number of Shares constituting a Basket is in proportion to the total number of

Shares outstanding on the Purchase Order Date, plus the amount of any Transaction Fees.

The Authorized Participant is responsible for

all expenses related to the acquisition of bitcoin in connection with a creation order.

For a discussion of how the Trust determines

the value of bitcoin, see “Calculation of NAV” above.

The Basket Cash Deposit so determined is communicated via electronic

mail message to all Authorized Participants.

of Required Deposits

Authorized Participant who places a purchase order must follow the procedures outlined in the “Creation Procedures” section

of the Trust’s prospectus.

Upon receipt of the deposit amount by the Cash Custodian, as applicable, the Transfer Agent will direct

DTC to credit the number of Shares ordered to the Authorized Participant’s DTC account on the following business day or such later

time as may be agreed upon by the Authorized Participant and the Sponsor, following the Purchase Order Date.

In circumstances where purchase

orders are due before 4:00 p.m.

ET, Authorized Participants will not know the total Basket Deposit at the time they submit a purchase

order for the Basket.

The Trust’s NAV and the price of a Basket Deposit could rise or fall substantially between the time a purchase

order is submitted and the time the amount of the purchase price in respect thereof is determined, and the risk of such price movements

will be borne solely by the Authorized Participant.

of Purchase Orders

Sponsor or its designee has the absolute right, but does not have any obligation, to reject any purchase order or Basket Deposit if the

Sponsor determines that:

purchase order or Basket Deposit is not in proper form as described in the Authorized Participant

acceptance of the purchase order or Basket Deposit would not be in the best interest of the

acceptance of the purchase order or the Basket Deposit would have adverse tax consequences

for the Trust or its Shareholders;

acceptance of the Basket Deposit presents a security or regulatory risk to the Trust, the

Sponsor, the Transfer Agent, the Coinbase Prime Broker, the Custodians or the Cash Custodian;

acceptance or receipt of the purchase order or Basket Deposit would, in the opinion of counsel

to the Sponsor, be unlawful;

● circumstances

outside the control of the Trust, the Sponsor, the Coinbase Prime Broker, the Custodians

or the Cash Custodian make it impractical or not feasible to process Baskets.

of the Sponsor, the Transfer Agent, the Coinbase Prime Broker, the Custodians or the Cash Custodian will be liable for the rejection

of any purchase order or Basket Deposit.

On each day that the Exchange is open for regular

trading, the Administrator adjusts the quantity of cash constituting the Basket Deposit as appropriate to reflect the value of

the Trust’s bitcoin and cash less accrued expenses.

The computation is made by the Administrator as promptly as practicable

after 4:00 p.m.

ET or at a later time set forth in the Authorized Participant Agreement or otherwise provided to all Authorized

Participants on the date such order is placed in order for the creation of Baskets to be effected based on the NAV of Shares as

next determined on such date after receipt of the order in proper form.

the extent there is a difference between the price actually paid by the Trust to acquire a Basket worth of bitcoin in the creation

process compared to the cash value of the Basket (i.e., if there is a difference between the amount paid by the Trust to purchase

the requisite amount of bitcoin and the valuation of bitcoin as part of the Trust’s NAV calculation), that difference will

also be charged to the creating Authorized Participant.

Basket Deposit is an amount of cash that is in the same proportion to the total assets of the Trust, net of accrued expenses and

other liabilities, on the Purchase Order Date, as the number of Shares constituting a Basket is in proportion to the total number

of Shares outstanding on the Purchase Order Date, plus the amount of any Transaction Fees.

The Authorized Participant is responsible

for all expenses related to the acquisition of bitcoin in connection with a creation order.

For a discussion of how the Trust

determines the value of bitcoin, see “Calculation of NAV” above.

The Basket Deposit so determined is communicated

via electronic mail message to all Authorized Participants.

procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures for the creation of Baskets.

business day, an Authorized Participant may place an order with the Transfer Agent to redeem one or more Baskets.

Redemption orders must

be placed by the close of Regular Trading Hours on the Exchange or an earlier time as determined and communicated by the Sponsor and

A redemption order will be effective on the date it is received by the Transfer Agent (“Redemption Order Date”).

the case of a redemption order for cash (“Cash Redemption Order”), the redemption distribution from the Trust consists of

a transfer to the Authorized Participant of an amount of cash that is in the same proportion to the total assets of the Trust, net of

accrued expenses and other liabilities, on the Redemption Order Date, as the number of Shares to be redeemed under the purchase order

is in proportion to the total number of Shares outstanding on the Redemption Order Date.

With respect to either a Bitcoin Redemption

Order or Cash Redemption Order, the redemption distribution due from the Trust will be delivered once the Transfer Agent notifies the

Cash Custodian, the Marketing Agent and the Sponsor that the Authorized Participant has delivered the Shares represented by the Baskets

to be redeemed to the Transfer Agent’s DTC account.

If the Transfer Agent’s DTC account has not been credited with all of

the Shares of the Baskets to be redeemed, the redemption distribution will be cancelled or delayed until such time as the Transfer Agent

confirms receipt of all such Shares.

placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTC’s book-entry system

to the Trust by the end of the following business day or such later time as may be agreed upon by the Authorized Participant and the

Sponsor following the Redemption Order Date.

An Authorized Participant may not withdraw a redemption order without the prior consent

of the Sponsor at its discretion.

the extent there is a difference between the price actually received by the Trust to sell a Basket worth of bitcoin in the redemption

process compared to the cash value of the Basket (i.e., if there is a difference between the amount received by the Trust to sell the

requisite amount of bitcoin and the Trust’s NAV calculation), that difference will also be the responsibility of the redeeming

Authorized Participant.

Expenses related to the sale of bitcoin in connection with a redemption order and transfer of bitcoin from the

Vault Accounts will not be the responsibility of the Trust.

On any business day, an Authorized Participant may place an order with the Transfer Agent to redeem one or more Baskets.

orders must be placed by the close of Regular Trading Hours on the Exchange or an earlier time as determined and communicated

by the Sponsor and its agent.

A redemption order will be effective on the date it is received by the Transfer Agent (“Redemption

Order Date”).

the case of a redemption order for cash (“Cash Redemption Order”), the settlement of both the cash amount required

to redeem the Shares and the number of Shares redeemed will be credited to the Authorized Participant and Trust, respectively,

by the end of the following business day or such later time as may be agreed upon by the Authorized Participant and the Sponsor

following the Redemption Order Date.

The settlement of cash and Shares occurs through net settlement between the Trust’s

and Authorized Participant’s DTC account.

placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTC’s book-entry

system to the Trust by the end of the following business day or such later time as may be agreed upon by the Authorized Participant

and the Sponsor following the Redemption Order Date.

An Authorized Participant may not withdraw a redemption order without the

prior consent of the Sponsor at its discretion.

Determination

of Redemption Distribution

redemption distribution from the Trust will consist of a transfer to the redeeming Authorized Participant or its designee of an amount

of cash that is determined in the same manner as the determination of Basket Deposits discussed above.

The Authorized Participant is

responsible for all expenses related to the sale of bitcoin in connection with a redemption order.

of Redemption Distribution

the Transfer Agent notifies the Custodians, the Cash Custodian, the Marketing Agent and the Sponsor that the Shares have been received

in the Transfer Agent’s DTC account, the Administrator instructs the Coinbase Prime Broker to transfer the cash amount from the

Cash Account to the designee of the Authorized Participant.

For a Cash Redemption Order, the redemption distribution due from the Trust

will be sent by the Cash Custodian to the Authorized Participant or its designee on the following business day or such later time as

may be agreed upon by the Authorized Participant and the Sponsor, following the Redemption Order Date if, by 4:00 p.m.

ET, on such business

day, the Transfer Agent’s DTC account has been credited with the Baskets to be redeemed.

If the Transfer Agent’s DTC account

has not been credited with all of the Baskets to be redeemed by such time, the redemption distribution will be cancelled or delayed until

such time as the Transfer Agent confirms receipt of all such Shares.

of Creation and Redemption Orders

Sponsor may, in its discretion, suspend the right of creation or redemption, or postpone the creation or redemption settlement date,

(1) for any period during which the Exchange is closed other than customary weekend or holiday closings, or trading on the Exchange is

suspended or restricted, (2) for any period during which an emergency exists as a result of which delivery, disposal or evaluation of

bitcoin is not reasonably practicable (for example, as a result of a significant technical failure, power outage, or network error),

or (3) for such other period as the Sponsor determines to be necessary for the protection of the Trust or its Shareholders.

the Sponsor may determine that it is necessary to suspend redemptions to allow for the orderly liquidation of the Trust’s assets.

None of the Sponsor, the person authorized to take redemption orders in the manner provided in the Authorized Participant Agreement,

or the Custodians will be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.

If the Sponsor has difficulty liquidating the Trust’s positions, e.g., because of a market disruption event or an unanticipated

delay in the liquidation of a position in an over-the-counter contract, it may be appropriate to suspend redemptions until such time

as such circumstances are rectified.

The Sponsor will provide notice to Shareholders of any such suspensions in a prospectus supplement

and/or through a current report on Form 8-K.

of Redemption Orders

orders must be made in whole Baskets.

The Sponsor or its designee has the absolute right, but does not have any obligation, to reject

any redemption order if the Sponsor determines that:

redemption order is not in proper form as described in the Authorized Participant Agreement;

acceptance of the redemption order would not be in the best interest of the Trust;

acceptance of the redemption order would have adverse tax consequences to the Trust or its

Shareholders;

acceptance of the redemption order presents a security risk to the Trust, the Sponsor, the

Transfer Agent or the Cash Custodian;

acceptance of the redemption order would, in the opinion of counsel to the Sponsor, be unlawful;

● circumstances

outside the control of the Trust, the Sponsor, or the Cash Custodian make it impractical

or not feasible for the Shares to be delivered under the redemption order.

and Redemption Transaction Fees

compensate the Transfer Agent for expenses incurred in connection with the creation and redemption of Baskets, an Authorized Participant

is required to pay the Transfer Agent Fee to the Transfer Agent to create or redeem Baskets, which does not vary in accordance with the

number of Baskets in such order.

In addition, an Authorized Participant is required to pay the Execution Charges to the Trust or the

Sponsor, as applicable, to reimburse the operational processing and brokerage costs, transfer fees, network fees and stamp taxes.

Transaction Fees may be reduced, increased or otherwise changed by the Sponsor.

of bitcoin into the Trust’s Trading Account are off-chain transactions and transfers from the Trust’s Trading Account to

the Trust’s Vault Accounts are “on-chain” transactions represented on the bitcoin blockchain.

Any costs related to

transfers from the Trust’s Trading Account to the Trust’s Vault Accounts are borne by the Sponsor (and not the Trust or its

Shareholders).

Responsibility

Participants are responsible for any transfer tax, sales or use tax, stamp tax, recording tax, value added tax or similar tax or governmental

charge applicable to the creation or redemption of Baskets, regardless of whether or not such tax or charge is imposed directly on the

Authorized Participant, and agree to indemnify the Sponsor and the Trust if they are required by law to pay any such tax, together with

any applicable penalties, additions to tax and interest thereon.

Market Transactions

noted, the Trust will create and redeem Shares from time to time, but only in one or more Baskets.

The creation and redemption of Shares

are only made in exchange for delivery to the Trust or the distribution by the Trust of the amount of cash determined as described above.

discussed above, Authorized Participants are the only persons that may place orders to create and redeem Baskets.

Authorized Participants

must be registered broker-dealers or other securities market participants, such as banks and other financial institutions that are not

required to register as broker-dealers to engage in securities transactions.

An Authorized Participant is under no obligation to create

or redeem Baskets, and an Authorized Participant is under no obligation to offer to the public any Shares it does create.

Participants that do offer to the public Shares from the Baskets they create will do so at per-Share offering prices that reflect, among

other factors, the value of the Trust’s assets, supply of and demand for Shares and market conditions at the time of a transaction.

Baskets are generally redeemed when the market price per Share is at a discount to the NAV.

Shares initially constituting the same Basket

but offered by Authorized Participants to the public at different times may have different offering prices.

An order for one or more

Baskets may be placed by an Authorized Participant on behalf of multiple clients.

Authorized Participants who make deposits with the

Trust in exchange for Baskets receive no fees, commissions or other forms of compensation or inducement of any kind from either the Trust

or the Sponsor, and no such person has any obligation or responsibility to the Sponsor to effect any sale or resale of Shares.

trade in the secondary market on the Exchange.

are expected to trade in the secondary market on the Exchange.

Shares may trade in the secondary market at prices that are lower or higher

relative to their NAV.

The amount of the discount or premium in the trading price relative to the NAV may be influenced by various factors,

including the value of the Trust’s assets, supply and demand for the Shares and market conditions at the time of a transaction.

Trust has no employees.

Federal Income Tax Consequences

discussion summarizes the material U.S.

federal income tax consequences of the ownership of Shares.

This discussion does not describe

all of the tax consequences that may be relevant to a beneficial owner of Shares in light of the beneficial owner’s particular

circumstances, including tax consequences applicable to beneficial owners subject to special rules, such as:

institutions;

in securities;

in securities or commodities that have elected to apply a mark-to-market method of tax accounting

in respect thereof;

holding Shares as part of a hedge, “straddle,” integrated transaction or similar

holding Shares acquired by them as part of a Basket or redeeming Shares in exchange for the

underlying bitcoins represented by the redeemed Shares;

Holders (as defined below) whose functional currency is not the U.S.

or arrangements classified as partnerships for U.S.

federal income tax purposes;

estate investment trusts;

investment companies;

entities, including individual retirement accounts.

discussion applies only to Shares that are held as capital assets and does not address alternative minimum tax consequences or consequences

of the Medicare contribution tax on net investment income.

an entity or arrangement that is classified as a partnership for U.S.

federal income tax purposes holds Shares, the U.S.

federal income

tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.

Partnerships holding

Shares and partners in those partnerships are urged to consult their tax advisers about the particular U.S.

redemption distribution from the Trust will consist of a transfer to the redeeming Authorized Participant or its designee of an

amount of cash that is determined in the same manner as the determination of Basket Deposits discussed above.

The Authorized Participant

is responsible for all expenses related to the sale of bitcoin in connection with a redemption order.

Federal Income Tax Consequences

of owning Shares.

discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations

as of the date hereof, changes to any of which subsequent to the date hereof may affect the tax consequences described herein.

investors are urged to consult their tax advisers about the application of the U.S.

federal income tax laws to their particular

situations, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Treatment of the Trust

Sponsor intends to take the position that the Trust will be treated as a grantor trust for U.S.

federal income tax purposes.

that the Trust is a grantor trust, the Trust will not be subject to U.S.

federal income tax.

Rather, a pro rata portion of

the Trust’s income, gain, losses and deductions will “flow through” to each beneficial owner of Shares.

the IRS were successful in asserting that the Trust is not properly classified as a grantor trust, the Trust might be classified as a

partnership for U.S.

federal income tax purposes, although due to the uncertain treatment of bitcoins for U.S.

federal income tax

purposes (discussed below), there can be no assurance in this regard.

If the Trust were classified as a partnership for U.S.

income tax purposes, the tax consequences of owning Shares generally would not be materially different from the tax consequences described

herein, although there might be certain differences, including with respect to timing.

In addition, tax information reports provided

to Shareholders would be made in a different form.

If the Trust were not classified as either a grantor trust or a partnership for U.S.

federal income tax purposes, it would be classified as a corporation for such purposes.

In that event, the Trust would be subject to

entity-level U.S.

federal income tax (currently at a maximum rate of 21%) on its net taxable income and certain distributions made by

the Trust to Shareholders would be taxable as dividends to the extent of the Trust’s current and accumulated earnings and profits

(which, in the case of Non-U.S.

Holders (as defined below), generally would be subject to U.S.

federal withholding tax at a 30% rate

(or a lower rate provided by an applicable income tax treaty)).

remainder of this discussion is based on the assumption that the Trust will be treated as a grantor trust for U.S.

federal income

tax purposes.

Regarding the U.S.

Federal Income Tax Treatment of Bitcoins

discussed below, each beneficial owner of Shares generally will be treated for U.S.

federal income tax purposes as the owner of an undivided

interest in the bitcoins held in the Trust.

Many significant aspects of the U.S.

federal income tax treatment of bitcoins are uncertain,

and the Sponsor does not intend to request a ruling from the IRS on these issues.

On March 25, 2014, the IRS released a notice (the

“Notice”), which discusses certain aspects of the treatment of virtual currencies, such as bitcoins, for U.S.

federal income

tax purposes.

In the Notice, the IRS stated that, for U.S.

federal income tax purposes, (i) bitcoins are “property”

that is not currency and (ii) bitcoins may be held as capital assets.

There can be no assurance, however, that the IRS will not

alter its position with respect to bitcoins in the future or that a court would uphold the treatment set forth in the Notice.

legislation has been introduced that would, if enacted, cause bitcoins to be treated as currency for U.S.

federal income tax purposes.

If bitcoins were properly treated as currency for U.S.

federal income tax purposes, gain recognized on the disposition of bitcoins would

constitute ordinary income, and losses recognized on the disposition of bitcoin could be subject to special reporting requirements applicable

to “reportable transactions.” The remainder of this discussion assumes that bitcoins are properly treated for U.S.

income tax purposes as property that is not currency.

Special tax counsel to the Trust expresses no opinion regarding these aspects of

federal income tax treatment of bitcoins.

Notice does not address other significant aspects of the U.S.

federal income tax treatment of bitcoins, including:

(i) whether bitcoins

are properly treated as “commodities” for U.S.

federal income tax purposes;

(ii) whether bitcoins are properly treated

as “collectibles” for U.S.

Sponsor intends to take the position that the Trust is properly treated as a grantor trust for U.S.

federal income tax purposes.

(iii) the proper method of determining a holder’s holding

period and tax basis for bitcoins acquired at different times or at varying prices;

and (iv) whether and how a holder of bitcoins

acquired at different times or at varying prices may designate, for U.S.

federal income tax purposes, which of the bitcoins are transferred

in a subsequent sale, exchange or other disposition.

In 2019, the IRS issued a FAQ that addressed some but not all of these issues, but

the IRS has not confirmed the answers provided in the FAQ in a manner upon which taxpayers may rely.

investors are urged to consult their tax advisers regarding the substantial uncertainty regarding the tax consequences of an investment

Consequences to U.S.

used herein, the term “U.S.

Holder” means a beneficial owner of a Share for U.S.

federal income tax purposes that is:

individual who is a citizen or resident of the United States for U.S.

Assuming that the Trust is a grantor trust, the Trust will not be subject to U.S.

federal income tax.

corporation, or other entity treated as a corporation for U.S.

federal income tax purposes,

created or organized in or under the laws of the United States or of any political subdivision

estate or trust the income of which is subject to U.S.

federal income taxation regardless

of its source.

federal income tax purposes, each U.S.

Holder will be treated as the owner of an undivided interest in the bitcoins held in the

Trust and will be treated as directly realizing its pro rata share of the Trust’s income, gains, losses and deductions.

Holder purchases Shares for cash, the U.S.

Holder’s initial tax basis in its pro rata share of the bitcoins

held in the Trust will be equal to the amount paid for the Shares.

This discussion assumes that each U.S.

Holder will acquire all

of its Shares for cash on the same date and at the same price per Share.

Holders that acquire, or contemplate acquiring, multiple

lots of Shares at different times or prices are urged to consult their tax advisers regarding their tax bases and holding periods in

their pro rata shares of the bitcoins held in the Trust.

the Trust transfers bitcoins to the Sponsor as payment of the Sponsor’s Fee, or sells bitcoins to fund payment of any Additional

Trust Expenses or a redemption, each U.S.

Holder will be treated as having sold its pro rata share of those bitcoins for their

fair market value at that time (which, in the case of bitcoins sold by the Trust, generally will be equal to the cash proceeds received

by the Trust in respect thereof).

As a result, each U.S.

Holder will recognize gain or loss in an amount equal to the difference between

(i) the fair market value of the U.S.

Holder’s pro rata share of the bitcoins that were transferred and (ii) the

Holder’s tax basis for its pro rata share of the bitcoins that were transferred , subject

to some specialized allocation rules for widely held fixed investment trusts (“WHFITs”).

some purposes, the WHFIT rules generally allocate Trust items based on distributions.

For some purposes, redemptions are treated as distributions

and may result in gain recognized by the Trust to generate proceeds for the redemption being disproportionately allocated to the Shareholder

making the redemption.

The application of the WHFIT rules to a trust holding bitcoin is uncertain.

Assuming that bitcoins

are not treated as currency for U.S.

federal income tax purposes, any such gain or loss will generally be short-term capital gain or

loss if the U.S.

Holder has held its Shares for one year or less and long-term capital gain or loss if the U.S.

Holder has held its Shares

for more than one year.

The deductibility of capital losses may be subject to significant limitations.

The Shareholder’s

tax basis and holding period for the Shareholder’s pro rata share of the bitcoin held in the Trust will be based on the

amount and cash contributed and the time the Trust purchased the bitcoin with the cash.

Holder’s tax basis in its

pro rata share of any bitcoins transferred by the Trust generally will be determined by multiplying the tax basis of the U.S.

Holder’s pro rata share of all of the bitcoins held in the Trust immediately prior to the transfer by a fraction the numerator

of which is the amount of bitcoins transferred and the denominator of which is the total amount of bitcoins held in the Trust immediately

prior to the transfer.

Immediately after the transfer, the U.S.

Holder’s tax basis in its pro rata share of the bitcoins

remaining in the Trust will be equal to the tax basis in its pro rata share of the bitcoins held in the Trust immediately prior

to the transfer, less the portion of that tax basis allocable to its pro rata share of the bitcoins transferred.

Holders may deduct their respective pro rata shares of the expenses incurred by the Trust to the same extent as if the expenses

were directly incurred by the U.S.

Holders’ pro rata shares of the expenses incurred by the Trust will be

treated as “miscellaneous itemized deductions” for U.S.

federal income tax purposes.

Holder is an individual, trust

or estate, the U.S.

Holder’s share of these expenses will be deductible for regular U.S.

federal income tax purposes only to the

extent that the U.S.

Holder’s share of the expenses, when combined with other “miscellaneous itemized deductions,”

exceeds 2% of the U.S.

Holder’s adjusted gross income for the particular year, will not be deductible for U.S.

federal alternative

minimum tax purposes and will be subject to certain other limitations on deductibility.

a sale or other disposition of Shares, a U.S.

Holder will be treated as having sold the bitcoins underlying such Shares.

the Shareholder generally will recognize gain or loss in an amount equal to the difference between (i) the amount realized on the

sale of the Shares and (ii) the portion of the U.S.

Holder’s tax basis in its pro rata share of the bitcoins held in

the Trust that is attributable to the Shares disposed of.

The Shareholder’s tax basis and holding

period for the Shareholder’s pro rata share of the bitcoin held in the Trust will be based on the amount and cash contributed

and the time the Trust purchased the bitcoin with the cash.

Such tax basis generally will be determined by multiplying the tax

basis of the U.S.

Holder’s pro rata share of all of the bitcoins held by the Trust immediately prior to such sale or other

disposition by a fraction the numerator of which is the number of Shares disposed of and the denominator of which is the total number

of Shares held by such U.S.

Holder immediately prior to such sale or other disposition.

Assuming that bitcoins are not treated as currency

federal income tax purposes, that gain or loss will generally be short-term capital gain or loss if the U.S.

Holder has held

its Shares for one year or less and long-term capital gain or loss if the U.S.

Holder has held its Shares for more than one year.

any sale (or other disposition) of fewer than all of a U.S.

Holder’s Shares, the U.S.

Holder’s tax basis in its pro rata

share of the bitcoins held in the Trust immediately after the sale (or other disposition) generally will equal the tax basis in its

pro rata share of the total amount of the bitcoins held in the Trust immediately prior to the sale, less the portion of that tax

basis that is taken into account in determining the amount of gain or loss recognized by the U.S.

Holder upon the sale (or other disposition)

(or, in the case of a redemption, which is treated as the basis of the bitcoins received by the Shareholder in the redemption).

brokerage or other transaction fee incurred by a U.S.

Holder in purchasing Shares will be added to the U.S.

Holder’s tax basis

in the underlying assets of the Trust.

Similarly, any brokerage fee or other transaction fee incurred by a U.S.

Holder in selling Shares

will reduce the amount realized by the U.S.

Holder with respect to the sale.

Consequences to Non-U.S.

used herein, the term “non-U.S.

Holder” means a beneficial owner of a Share for U.S.

federal income tax purposes that is,

for such purposes:

nonresident alien individual;

foreign corporation;

foreign estate or trust.

term “non-U.S.

Holder” does not include (i) nonresident alien individuals present in the United States for 183 days

or more in a taxable year, (ii) former U.S.

citizens and certain expatriated entities or (iii) persons whose Shares are effectively

connected with the conduct of a trade or business in the United States.

Prospective investors described in the preceding sentence should

consult their tax advisers regarding the U.S.

federal income tax consequences of owning Shares.

Trust does not expect to generate taxable income other than gain (if any) that will be recognized on the transfer of bitcoins in payment

of the Sponsor’s Fee and the sale of bitcoins in connection with the payment of any Additional Trust Expenses.

generally will not be subject to U.S.

federal income or withholding tax with respect to any such gain or with respect to any gain the

Holder recognizes upon a sale of Shares.

However, if the income from the trust is effectively connected to a U.S.

trade or business

or, in the case of an individual, the individual is in the United States for more than 180 days, the gains may be subject to U.S.

Information Reporting and Backup Withholding

Trust or the appropriate broker will file certain information returns with the IRS and provide holders of Shares with information regarding

their shares of the Trust’s annual income (if any) and expenses in accordance with applicable Treasury regulations.

Holder may be subject to backup withholding in certain circumstances if it fails to provide its taxpayer identification number or

to comply with certain certification procedures.

In order to avoid the information reporting and backup withholding requirements, a non-U.S.

Holder may have to comply with certification procedures to establish that it is not a U.S.

The amount of any backup withholding

will be allowed as a credit against the holder’s U.S.

federal income tax liability and may entitle the holder to a refund, provided

that the required information is furnished to the IRS.

Rather, if the Trust is

a grantor trust, each beneficial owner of Shares is treated as directly owning its pro rata share of the Trust’s

assets and a pro rata portion of the Trust’s income, gain, losses and deductions will “flow through”

to each beneficial owner of Shares.

If the Trust sells bitcoin (for example, to pay fees or expenses), such a sale is a taxable

event to Shareholders.

Upon a Shareholder’s sale of its Shares, the Shareholder will be treated as having sold the pro rata

share of the bitcoin held in the Trust at the time of the sale and may recognize gain or loss on such sale.

Risk Factors.

1 unchanged sentence

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What changed 10-K

Item 1. Business