CoinShares Bitcoin ETF 10-Q

Item 1A. Risk Factors. Except as set forth below, there have been no material changes from the Risk Factors as previously disclosed in response to Item 1A. to Part I of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2025. The open-source and decentralized nature of Bitcoin Network development reduces certainty in the development of Bitcoin Network protocols and software. In addition, the lack of direct compensation for core developers and general difficulty of achieving decentralized consensus around protocol upgrades may hinder the development of beneficial upgrades to the Bitcoin Network. Development uncertainty and inflexibility in respect of improving or proposing fixes to the Bitcoin Network could negatively impact the performance of the Trust. The Bitcoin Network is an open-source decentralized project without a controlling issuer or administrator of software development. As a result, core developers contribute their time and propose upgrades and improvements to the Bitcoin Network protocols and various software implementations thereof, often on the bitcoin repository on the website Github. Core developers’ roles evolve over time, largely based on self-determined participation. Core developers are not generally compensated for their work on the Bitcoin Network, and such developers may cease to provide services or migrate to alternate digital asset networks. In addition, a lack of resources may result in an inability of the Bitcoin Network community to address novel technical issues or to achieve consensus around solutions therefor. As with other digital asset networks, the Bitcoin Network faces significant scaling challenges due to the fact that public Blockchains generally face a tradeoff between security and scalability. One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. For example, a greater degree of decentralization generally means a given digital asset network is less susceptible to manipulation or capture. In practice, this typically means that every single node on a given digital asset network is responsible for securing the system by processing every transaction and maintaining a copy of the entire state of the network. As a result, a digital asset network may be limited in the number of transactions it can process by the capabilities of each single fully participating node. The Bitcoin Network community has failed to achieve consensus around the scaling of the Bitcoin Network to increase transaction throughput and reduce Blockchain bloat. In 2017, the scaling debate resulted in a material, contentious hard fork (as described below) and a variety of proposals for upgrades to the Bitcoin Network protocols to allow for more efficient transaction recording. Both hard forks and software upgrades to address scaling may cause confusion or may not result in needed improvements, each of which could have a negative impact on the value of an investment in the Shares. Moreover, in the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. The cryptography underlying bitcoin could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. On March 31, 2026, Google Quantum AI published research indicating that the computing power needed to break the encryption protecting bitcoin and other major cryptocurrencies may be significantly lower than previously believed, which could mean this threat arrives sooner than the industry had anticipated. In any of these circumstances, a malicious actor may be able to take the Trust’s bitcoin, which would adversely impact the value of the Shares. Moreover, functionality of the Bitcoin Network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for bitcoin. Even if a digital asset other than bitcoin were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely affect the value of the Shares. Finally, as there is no centralized party controlling the development of the Bitcoin Network, there can be no assurance that the community as a whole will not implement changes to the Bitcoin Network protocols that have an adverse impact on the Trust or an investment in the Shares. 16 Mathematical or technological advances could undermine the Bitcoin Network’s consensus mechanism. The Bitcoin Network is premised on multiple persons competing to solve cryptographic puzzles quickly. It is possible that mathematical or technological advances, such as the development of quantum computers with significantly more power than computers presently available, could undermine or vitiate the cryptographic consensus mechanism underpinning the bitcoin Blockchain. Quantum computing technology is an emerging phenomenon which, because it is still developing, makes it difficult to predict its ultimate effect on the future value of bitcoin and other digital assets. However, recent research has suggested that quantum computing technology may be advancing faster than previously anticipated. For example, in February 2025, Microsoft announced its Majorana 1 chip, which is claimed to have the potential to support a one-million-qubit quantum computer. More significantly, on March 31, 2026, Google Quantum AI published research concluding that breaking the elliptic curve cryptography underlying bitcoin and most major cryptocurrencies may require approximately a 20-fold fewer quantum computing resources than researchers had previously estimated-potentially as few as 500,000 physical qubits. Google stated that it published this research to “raise awareness” and urge the cryptocurrency community to begin transitioning to stronger, quantum-resistant security standards before such computers become a reality. Researchers affiliated with the Ethereum Foundation who co-authored the Google paper estimated at least a 10% chance that a quantum computer capable of breaking this encryption could exist by 2032. Google has itself set 2029 as a target for completing its own migration to quantum-resistant protections. Google’s research identified different types of potential quantum attacks on cryptocurrencies. One type would target a transaction while it is being sent, since sending a transaction briefly reveals information that a powerful enough quantum computer could use to steal the funds before the transaction is finalized. Another type would target wallets whose security information has already been made public in the past, for example, through bitcoin address reuse or certain older wallet formats, giving an attacker an extended window of time to attempt a theft. In either case, the decentralized nature of the Bitcoin Network means there is no central authority that can reverse or recover stolen funds, making any successful quantum attack potentially irreversible. If quantum computing technology is able to advance in that way, there is a risk that quantum computing could result in the cryptography underlying the Bitcoin Network becoming ineffective, which, if realized, could compromise the security of the Bitcoin Network, or allow a malicious actor to compromise the wallets holding bitcoin owned by the Trust or others on the Bitcoin Network, which would result in losses to Shareholders. Unlike proof-of-stake networks, the Bitcoin Network’s continued reliance on proof-of-work mining means that any quantum-driven attack on bitcoin’s consensus mechanism through SHA-256 could also disrupt block production and network security. While various actors in the bitcoin community are taking steps to enable the use of cryptographic algorithms that would be resistant to advanced quantum computers, there is no guarantee that new quantum-proof architectures will be built and appropriate transitions will be implemented across the network at scale in a timely manner; any such changes could require the achievement of broad consensus within the Bitcoin Network community and a fork (or multiple forks), and there can be no assurance that such consensus would be achieved or the changes implemented successfully. Additionally, even if the Bitcoin Network successfully upgrades its security, individual users and custodians, including those holding bitcoin on behalf of the Trust, would also need to migrate their wallets to benefit from any such upgrade. Wallets that are not migrated, or whose security information has previously been exposed, could remain vulnerable. If any of the foregoing were to occur, it could result in losses to Shareholders. In any of these circumstances, a malicious actor may be able to compromise the security of the Bitcoin Network or take the Trust’s bitcoin, which would adversely affect the value of the Shares. Moreover, the functionality of the Bitcoin Network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for bitcoin. Even if another digital asset other than bitcoin were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely affect the value of the Shares.