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
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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 bitcoin 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.
As of December 31, 2023, the Trust had no operations other than
a sale to Van Eck Associates Corporation, the Seed Capital Investor, of 2,000 Shares for $100,000 ($50.00 per Share) on December
21, 2023.
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 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 bitcoin 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 bitcoin. The Trust does not engage in any activities designed to obtain a profit
from, or ameliorate losses caused by, changes in the price of bitcoin.
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
“HODL.”
Computation of Net Asset Value
The Trust’s NAV is calculated based on the Trust’s
net asset holdings as reconciled to the Bitcoin Custodian’s accounts on a market approach, determined on a daily basis in
accordance with the MarketVector TM Bitcoin 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.
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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 bitcoin.
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, 2023
At December 31, 2023, the Trust had no operations other than
a sale to the Seed Capital Investor, the parent of the Sponsor, of 2,000 Shares at a per-Share price of $50.00. Delivery of the
Seed Shares was made on December 21, 2023. Total proceeds to the Trust from the sale of the Seed Shares were $100,000.
On January 4, 2024, the Seed Shares were redeemed for cash and
the Seed Capital Investor purchased the Seed Creation Baskets, comprising of 1,450,000 Shares at a per-Share price of $50.00. Total
proceeds to the Trust from the sale of the Seed Creation Baskets were $72,500,000, which resulted in the Trust receiving 1,640.92489329
bitcoin. Delivery of the Seed Creation Baskets was made on January 5, 2024. The Seed Capital Investor acted as a statutory underwriter
in connection with this purchase.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.
Not applicable.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.