Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
This information should be read in conjunction with the
financial statements and notes to financial statements included with this report. The discussion and analysis that follows may
contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified
by terminology such as “may,” “will,” “should,” “could,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential”
or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included
in this Report that address activities, events or developments that may occur in the future, including such matters as changes
in commodity prices and market conditions (for ethereum and the Shares), the operations of the Trust, the plans of the Sponsor
and references to the Trust’s future success and other similar matters are forward-looking statements. These statements are
only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses
made by the Sponsor on the basis of its perception of historical trends, current conditions and expected future developments, as
well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform
to the Sponsor’s expectations and predictions is subject to a number of risks and uncertainties, including the special considerations
discussed in this Report, general economic, market and business conditions, changes in laws or regulations, including those concerning
taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. Consequently,
all the forward-looking statements made in this Report are qualified by these cautionary statements, and there can be no assurance
that the actual results or developments the Sponsor anticipates will be realized or, even if substantially realized, will result
in the expected consequences to, or have the expected effects on, the Trust’s operations or the value of the Shares issued
by the Trust. Moreover, neither the Sponsor nor any other person assumes responsibility for the accuracy or completeness of the
forward-looking statements. Neither the Trust nor the Sponsor undertakes an obligation to publicly update or conform to actual
results any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required
by law.
Introduction
The Trust is a Delaware statutory trust. The Trust does not
have directors, officers or employees. The creation and operation of the Trust has been arranged by the Sponsor. The Trust is administered
by the Trust Agreement, among the
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Sponsor, the Trustee and the Delaware Trustee. The Trust is managed and controlled by the Sponsor,
a wholly-owned subsidiary of VanEck. The Sponsor is not governed by a board of directors.
The Trust’s investment objective is to reflect the performance
of ETH less the operating expenses of the Trust. The Trust is a passive investment vehicle that does not seek to pursue any investment
strategy beyond tracking the price of ETH. The Trust does not engage in any activities designed to obtain a profit from, or ameliorate
losses caused by, changes in the price of ETH.
The Trust issues and redeems Shares only in aggregations of
25,000 Shares, a Basket, or integral multiples thereof, and only in transactions with Authorized Participants.
Shares of the Trust trade on the Exchange under the ticker
symbol “ETHV.”
Computation of Net Asset Value
The Trust’s NAV is calculated based on the Trust’s
net asset holdings as reconciled to the ETH Custodians’ accounts on a market approach, determined on a daily basis in accordance
with the MarketVector Ethereum Benchmark Rate price at 4:00 p.m. ET. The Trust’s NAV per Share is calculated
by taking the current market value of its total assets, subtracting any liabilities, and then dividing that total by the total
number of outstanding Shares. The Trust Agreement gives the Sponsor the exclusive authority to determine the Trust’s NAV
and the Trust’s NAV per Share, which it has delegated to the Administrator.
Liquidity
The Trust is not aware of any trends, demands, conditions
or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has
agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period
covered by this Report was the Sponsor’s Fee. The Trust’s only source of liquidity is its sales of ethereum.
Significant Accounting Policies
In preparing financial statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ
from these estimates. In addition, please refer to Note 2 to the Financial Statements included in this Report for further discussion
of the Trust’s accounting policies.
Results of Operations
The Year Ended December 31, 2025
The Trust’s NAV increased from $146,428,902 at December
31, 2024 to $157,578,941 at December 31, 2025, a 7.61% increase. The increase in the Trust’s NAV resulted primarily from
an increase in the number of outstanding Shares, which increased from 3,000,000 Shares at December 31, 2024 to 3,625,000 Shares
at December 31, 2025. This is the net result of 3,225,000 Shares (129 Baskets) being created 2,600,000 Shares (104 Baskets) being
redeemed during the period, partially offset by a decrease in the price of ETH, which contracted 10.86% from $3,333 at December
31, 2024 to $2,971 at December 31, 2025.
The 10.94% decrease in the NAV per Share from $48.81 at December
31, 2024 to $43.47 at December 31, 2025 is directly related to the 10.86% decrease in the price of ETH during this period.
The NAV per Share of $70.58 on August 22, 2025, was the highest
during the period, compared with a low during the period of $21.45 on April 8, 2025.
Net decrease in net assets resulting from operations for the
twelve-month period ended December 31, 2025, was $ 33,759,054 resulting from an net unrealized depreciation on investment in ethereum
of $34,062,356, a net realized gain of $492,055 on ethereum sold for the redemption of Shares, a net realized gain of $16,597 from
ethereum sold to pay expenses during the twelve-month period, and a net investment loss of $205,350. Other than the Sponsor Fee
of $205,350, the Trust had no other expenses during the twelve-month period.
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Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.
Not applicable.
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