What changed in this filing

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Item 1A. Risk Factors

2023-03-21 compared with 2022-03-30 · 1773 added, 1235 removed, 538 unchanged (85% of the section changed)

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Summary Risk Factors

The following is a summary of some of

the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations.

The following is a summary

of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of

You should read this summary together with the more detailed description of each risk factor contained below.

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Digital assets such as Bitcoin were only introduced within the past decade, and the medium-to-long term value of the Units is subject to a number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets.

Digital asset networks are developed by a diverse set of contributors and the perception that certain high-profile contributors will no longer contribute to the network could have an adverse effect on the market price of the related digital asset.

The Bitcoin Network is part of a new and rapidly evolving industry, and the value of the Units depends on the development and acceptance of the Bitcoin Network.

A determination that Bitcoin or any other digital asset is a “security” may adversely affect the value of Bitcoin and the value of the Units, and result in potentially extraordinary, nonrecurring expenses to, or termination of the Trust.

A determination that Bitcoin or any other digital asset is a “security” may adversely affect the value of Bitcoin and the value of the Units, and result in potentially extraordinary, non-recurring expenses to, or termination of the Trust.

Changes in the governance of a digital asset network may not receive sufficient support from users and miners, which may negatively affect that digital asset network’s ability to grow and respond to challenges.

Digital asset networks face significant scaling challenges and efforts to increase the volume of transactions may not be successful.

A temporary or permanent “fork” could adversely affect the value of the Units.

A temporary or permanent fork or a “clone” could adversely affect the value of the Units.

Unitholders may not receive the benefits of any forks or “airdrops.”

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If the digital asset award for solving blocks and transaction fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners, miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of Bitcoin and the value of the Units.

Risk Factors Related to the Bitcoin Markets

The value of the Units relates directly to the value of Bitcoins, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

Due to the unregulated nature and lack of transparency surrounding the operations of Bitcoin exchanges, they may experience fraud, security failures or operational problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Units.

The failure of several prominent crypto trading venues and lending platforms has impacted and may continue to impact the broader crypto economy, which could have an adverse impact on the Trust.

Risk Factors Related to the Bitcoin

The value of the Units relates directly

to the value of Bitcoins, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

Due to the unregulated nature and lack of transparency surrounding the operations of Bitcoin exchanges, they may experience fraud, business failures, security failures or operational problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Units.

Recent developments in the digital asset

economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital

asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.

Competition from the emergence or growth of other digital assets or methods of investing in Bitcoin could have a negative impact on the price of Bitcoin and adversely affect the value of the Units.

Failure of funds that hold digital assets or that have exposure to digital assets through derivatives to receive SEC approval to list their shares on exchanges could adversely affect the value of the Units.

NAV may not correspond to the weighted-average market price of Bitcoin and, as a result, Units may be purchased (or redeemed, if ever permitted) at a value that differs from the secondary market price of the Units.

NAV may not always correspond to the weighted-average market price of Bitcoin and, as a result, Units may be purchased (or redeemed, if ever permitted) at a value that differs from the secondary market price of the Units.

Suspension or disruptions of market trading may adversely affect the value of units.

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Momentum pricing of Bitcoin may subject the Bitcoin price to greater volatility and adversely affect an investment in the Units.

Risk Factors Related to the Trust and the Units

Related to the Trust and the Units

The Trust has only a limited performance history.

The Units are new securities and their value could decrease if unanticipated operational or trading problems arise.

Unitholders are bound by the fee-shifting provision contained in the subscription agreement,

which may discourage actions against us.

Substantial sales or dispositions by a large Unitholder could negatively impact the price

of our Units in the secondary market.

Fees and expenses are charged regardless of profitability and may result in depletion of assets.

The security of our Bitcoin Holdings cannot be assured, by the Trust, the Custodian or any other person.

The security of our Bitcoin Holdings cannot be assured by the Trust, the Custodian or any

other person.

The Custodian is not liable for any lost profits or any special, incidental, indirect, intangible,

or consequential damages arising out of or in connection with authorized or unauthorized use of the Coinbase Custody site

or the custodial services.

The Trust does not maintain audit or inspection rights under the Custodial Services Agreement,

and as such our Bitcoin Holdings held in the custodial account cannot be independently verified.

Possibility of termination of the Trust may adversely affect a Unitholder’s portfolio.

Any errors, discontinuance or changes in determining the value of the Bitcoin held by the Trust may have an adverse effect on the value of the Units.

The value of the Units will be adversely affected if the Trust is required to indemnify the Sponsor or the Custodian as contemplated in the Trust Agreement or the Custodial Services Agreement.

The Trust’s Bitcoin trading may subject the Trust to the risk of counterparty non-performance, potentially negatively affecting the market price of the Units.

The Trust’s Bitcoin Holdings could become illiquid, which could cause large losses to Unitholders at any time or from time to time.

Transactions in Bitcoin are irreversible, and the Trust may be unable to recover improperly transferred Bitcoin.

Any errors, discontinuance or changes in determining the value of the Bitcoin held by the

Trust may have an adverse effect on the value of the Units.

The value of the Units will be adversely affected if the Trust is required to indemnify the

Sponsor or the Custodian as contemplated in the Trust Agreement or the Custodial Services Agreement.

The Trust’s Bitcoin trading may subject the Trust to the risk of counterparty non-performance,

potentially negatively affecting the market price of the Units.

The Trust’s Bitcoin Holdings could become illiquid, which could cause large losses to

Unitholders at any time or from time to time.

Transactions in Bitcoin are irreversible, and the Trust may be unable to

recover improperly transferred Bitcoin.

The Trust’s Bitcoin may be lost, stolen, or subject to other inaccessibility.

Any disruptions to the computer technology used by the Trust or its service providers could adversely affect the Trust’s ability to function and an investment in the Units.

The Sponsor’s computer infrastructure may be vulnerable to security breaches.

Any such problems could cause interruptions in the Trust’s operations and adversely affect an investment in the Units.

Technology system failures could cause interruptions in the Trust’s ability to operate.

The lack of full insurance and Unitholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent and Custodian expose the Trust and its Unitholders to the risk of loss of the Trust’s Bitcoins for which no person or entity is liable.

Because the Units reflect the estimated accrued but unpaid expenses of the Trust, the number of Bitcoins represented by a Unit will gradually decrease over time as the Trust’s Bitcoins are used to pay the Trust’s expenses.

Risk Factors Related to the Regulation of the Trust and

Regulation of the Bitcoin industry continues to evolve and is subject to change;

Any disruptions to the computer technology used by the Trust or its service

providers could adversely affect the Trust’s ability to function and an investment in the Units.

The Sponsor’s computer infrastructure may be vulnerable to security

Any such problems could cause interruptions in the Trust’s operations and adversely affect an investment in

Technology system failures could cause interruptions in the Trust’s

ability to operate.

Because the Units reflect the estimated accrued but unpaid expenses of the

Trust, the number of Bitcoins represented by a Unit will gradually decrease over time as the Trust’s Bitcoins are used

to pay the Trust’s expenses.

Unitholders may not be able to withdraw or value his/her units upon death,

legal disability, bankruptcy, insolvency, dissolution or withdrawal from the Trust.

The Trust’s Bitcoin Holdings may be considered property of a bankruptcy

estate should our Custodian initiate bankruptcy proceedings and the Trust could be considered an unsecured creditor, and the

Custodian’s assets may not be adequate to satisfy a claim by the Trust.

Risks associated with the Index.

We concluded that certain of our previously issued financial statements should

not be relied upon and restated certain of our previously issued financial statements, which was time-consuming and expensive

and could expose us to additional risks that could have a negative effect on our Company.

If we fail to maintain an effective system of internal controls, we may not

be able to accurately report financial results or prevent fraud.

Any dispute regarding the subscription agreement will be resolved by arbitration,

which follows different procedures than in-court litigation and may be more restrictive to Unitholders asserting claims than

in-court litigation.

Pandemics, epidemics and other natural and man-made disasters could negatively

impact the value of the Trust’s holdings and/or significantly disrupt its affairs.

Related to the Regulation of the Trust and the Units

Regulation of the Bitcoin industry continues to evolve and is subject to

future regulatory developments are impossible to predict but may significantly and adversely affect the Trust.

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The Trust is not a registered investment company.

The Trust could be, or could become, subject to the CEA.

and foreign regulation of the Bitcoin market may impose other regulatory burdens, which could harm the Trust or even cause the Trust to liquidate.

Banks may not provide banking services, or may cut off banking services, to businesses that provide Bitcoin-related services or that accept Bitcoin as payment, which could directly impact the Trust’s operations, damage the public perception of Bitcoin and the utility of Bitcoin as a payment system and could decrease the price of Bitcoin and adversely affect an investment in the Units.

It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin in one or more countries, and ownership of, holding or trading in Units may also be considered illegal and subject to sanctions.

If regulatory changes or interpretations of the Trust’s or Sponsor’s activities require registration as money service businesses under the regulations promulgated by FinCEN under the authority of the U.S.

Bank Secrecy Act or as money transmitters or digital currency businesses under state regimes for the licensing of such businesses, the Trust and/or Sponsor could suffer reputational harm and also extraordinary, recurring and/or nonrecurring expenses, which would adversely impact an investment in the Units.

The Trust could be, or could become, subject to the Commodity Exchange Act

and foreign regulation of the Bitcoin market may impose other

regulatory burdens, which could harm the Trust or even cause the Trust to liquidate.

Banks may not provide banking services, or may cut off banking services,

to businesses that provide Bitcoin-related services or that accept Bitcoin as payment, which could directly impact the Trust’s

operations, damage the public perception of Bitcoin and the utility of Bitcoin as a payment system and could decrease the

price of Bitcoin and adversely affect an investment in the Units.

It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin in one

or more countries, and ownership of, holding or trading in Units may also be considered illegal and subject to sanctions.

If the Bitcoin Network is used to facilitate illicit activities, businesses that facilitate

transactions in Bitcoin could be at increased risk of criminal and civil lawsuits, or of having services cut off, which could

negatively affect the price of Bitcoin and the value of the Units.

If regulatory changes or interpretations of the Trust’s or Sponsor’s

activities require registration as money services businesses under the regulations promulgated by FinCEN under the authority

Bank Secrecy Act or as money transmitters or digital currency businesses under state regimes for the licensing

of such businesses, the Trust and/or Sponsor could suffer reputational harm and also extraordinary, recurring and/or non-recurring

expenses, which would adversely impact an investment in the Units.

The treatment of the Trust for U.S.

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federal income tax purposes could adversely affect the value of the Units.

Future developments in the treatment of digital currency for tax purposes other than U.S.

Future developments in the treatment of digital currency for tax purposes

other than U.S.

federal income tax purposes could adversely affect the value of the Units.

tax-exempt Unitholder may recognize “unrelated business taxable income” a consequence of an investment in Units.

tax-exempt Unitholder may recognize UBTI a consequence of an investment

Holders may be subject to U.S.

federal withholding tax on income derived from forks, airdrops and similar occurrences.

Risk Factors Related to Potential Conflicts of Interest

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

The Sponsor and its affiliates have no fiduciary duties to the Trust and its Unitholders other than as provided in the Trust Agreement, which may permit them to favor their own interests to the detriment of the Trust and its Unitholders.

Unitholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.

The Custodian could resign or be removed by the Sponsor, which would trigger early termination of the Trust.

Unitholders may be adversely affected by the lack of independent advisers representing investors in the Trust.

federal withholding tax on income

derived from forks, airdrops and similar occurrences.

Risk Factors Related to Potential Conflicts

Potential conflicts of interest may arise among the Sponsor or its affiliates

and the Trust.

The Sponsor and its affiliates have no fiduciary duties to the Trust and its Unitholders other than as provided

in the Trust Agreement, which may permit them to favor their own interests to the detriment of the Trust and its Unitholders.

Unitholders cannot be assured of the Sponsor’s continued services,

the discontinuance of which may be detrimental to the Trust.

If the Custodian resigns or is removed by the Sponsor or otherwise, without

replacement, it could trigger early termination of the Trust, or the Sponsor would need to find and appoint a replacement

custodian, which could pose a challenge to the safekeeping of the Trust’s Bitcoin.

Unitholders may be adversely affected by the lack of independent advisers

representing investors in the Trust.

Risk Factors Related to Digital Assets

Digital assets such as Bitcoin

were only introduced within the past decade, and the medium-to-long term value of the Units is subject to a number of factors relating

Digital assets such as Bitcoin were

only introduced within the past decade, and the medium-to-long term value of the Units is subject to a number of factors relating

to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of digital assets.

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value of the Units:

● The trading prices of many

digital assets, including Bitcoin, have experienced extreme volatility in recent periods and may continue to do so.

For instance,

there were steep increases in the value of certain digital assets, including Bitcoin, over the course of 2017, and multiple market

observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns

throughout 2018 in digital asset trading prices, including for Bitcoin.

These drawdowns notwithstanding, Bitcoin prices have increased

significantly again during 2019 and the Bitcoin markets may still be experiencing a bubble or may experience a bubble again in

Extreme volatility in the future, including further declines in the trading prices of Bitcoin, could have a material

adverse effect on the value of the Units and the Units could lose all or substantially all of their value.

● Digital asset networks and

the software used to operate them are in the early stages of development.

Digital assets have experienced, and we expect will experience

in the future, sharp fluctuations in value.

Given the infancy of the development of digital asset networks, parties may be unwilling

to transact in digital assets, which would dampen the growth, if any, of digital asset networks.

● Digital asset networks are

dependent upon the internet.

A disruption of the internet or a digital asset network, such as the Bitcoin Network, would affect

the ability to transfer digital assets, including Bitcoin, and, consequently, their value.

● The acceptance of software

patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in a digital asset network, such

as the Bitcoin Network, could result in a “fork” in such network’s blockchain, resulting in the operation of

multiple separate networks.

● Governance of the Bitcoin

Network is by voluntary consensus and open competition.

As a result, there may be a lack of consensus or clarity on the governance

of the Bitcoin Network, which may stymie the Bitcoin Network’s utility and ability to grow and face challenges.

In particular,

it may be difficult to find solutions or martial sufficient effort to overcome any future problems on the Bitcoin Network, especially

long-term problems.

● The foregoing notwithstanding,

the Bitcoin Network’s protocol is informally managed by a group of core developers that propose amendments to the Bitcoin

Network’s source code.

The trading prices of many digital assets, including Bitcoin, have experienced extreme volatility in recent periods and may continue to do so.

For instance, there were steep increases in the value of certain digital assets, including Bitcoin, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for Bitcoin.

These drawdowns notwithstanding, Bitcoin prices increased significantly again during 2019, decreased significantly again in the first quarter of 2020 amidst broader market declines as a result of the novel coronavirus outbreak and increased significantly again over the remainder of 2020 and the first quarter of 2021.

The price of Bitcoin continued to experience significant and sudden changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021 and throughout 2022.

The price of Bitcoin has continued to fluctuate to date in 2023.

In particular, digital asset prices have experienced extreme volatility since November 2022 when FTX Trading Ltd.

(“FTX”) halted customer withdrawals.

See “ — Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide decline in liquidity.

” Extreme volatility in the future, including further declines in the trading prices of Bitcoin, could have a material adverse effect on the value of the Units and the Units could lose all or substantially all of their value.

Furthermore, negative perception, a lack of stability and standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatility in the price of Bitcoin and other digital assets, including a depreciation in value.

Digital asset networks and the software used to operate them are in the early stages of development.

Digital assets have experienced, and we expect will experience in the future, sharp fluctuations in value.

Given the infancy of the development of digital asset networks, parties may be unwilling to transact in digital assets, which would dampen the growth, if any, of digital asset networks.

Digital asset networks are dependent upon the internet.

A disruption of the internet or a digital asset network, such as the Bitcoin Network, would affect the ability to transfer digital assets, including Bitcoin, and, consequently, their value.

The acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in a digital asset network, such as the Bitcoin Network, could result in a fork in such network’s blockchain, resulting in the operation of multiple separate networks.

Governance of the Bitcoin Network is by voluntary consensus and open competition.

As a result, there may be a lack of consensus or clarity on the governance of the Bitcoin Network, which may stymie the Bitcoin Network’s utility and ability to grow and face challenges.

In particular, it may be difficult to find solutions or marshal sufficient effort to overcome any future problems on the Bitcoin Network, especially long-term problems.

The foregoing notwithstanding, the Bitcoin Network’s protocol is informally managed by a group of core developers that propose amendments to the Bitcoin Network’s source code.

The core developers evolve over time, largely based on self-determined participation.

To the extent

that a significant majority of users and miners adopt amendments to the Bitcoin Network, the Bitcoin Network will be subject to

new protocols that may adversely affect the value of Bitcoin.

● The loss or destruction

of a private key required to access a digital asset such as Bitcoin may be irreversible.

If a private key is lost, destroyed or

otherwise compromised and no backup of the private key is accessible, the Trust will be unable to access the Bitcoin held in the

Bitcoin Account corresponding to that private key and the private key will not be capable of being restored by the Bitcoin Network.

● Bitcoins have only recently

become selectively accepted as a means of payment by retail and commercial outlets, and use of Bitcoins by consumers to pay such

retail and commercial outlets remains limited.

Banks and other established financial institutions may refuse to process funds for

Bitcoin transactions;

process wire transfers to or from Bitcoin exchanges, Bitcoin-related companies or service providers, or maintain

accounts for persons or entities transacting in Bitcoin.

As a result, the prices of Bitcoins are largely determined by speculators

and miners, thus contributing to price

volatility that makes retailers less likely to accept it as a form of payment in the future.

● Miners, developers and users

may switch to or adopt certain digital assets at the expense of their engagement with other digital asset networks, which may negatively

impact those networks, including the Bitcoin Network.

● Over the past several years,

digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and

first generation application specific integrated circuit machines to “professionalized” mining operations using proprietary

hardware or sophisticated machines.

If the profit margins of digital asset mining operations are not sufficiently high, digital

asset miners are more likely to immediately sell tokens earned by mining, resulting in an increase in liquid supply of that digital

asset, which would generally tend to reduce that digital asset’s market price.

● To the extent that any miners

cease to record transactions that do not include the payment of a transaction fee in solved blocks or do not record a transaction

because the transaction fee is too low, such transactions will not be recorded on the Blockchain until a block is solved by a miner

who does not require the payment of transaction fees or is willing to accept a lower fee.

Any widespread delays in the recording

of transactions could result in a loss of confidence in the digital asset network.

● Many digital asset networks

face significant scaling challenges and are being upgraded with various features to increase the speed and throughput of digital

asset transactions.

To the extent that a significant majority of users and miners adopt amendments to the Bitcoin Network, the Bitcoin Network will be subject to new protocols that may adversely affect the value of Bitcoin.

The loss or destruction of a private key required to access a digital asset such as Bitcoin may be irreversible.

If a private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, the Trust will be unable to access the Bitcoin held in the Custodial Account corresponding to that private key and the private key will not be capable of being restored by the Bitcoin Network.

Bitcoin is only selectively accepted as a means of payment by retail and commercial outlets, and use of Bitcoins by consumers to pay such retail and commercial outlets remains limited.

Banks and other established financial institutions may refuse to process funds for Bitcoin transactions;

process wire transfers to or from Bitcoin exchanges, Bitcoin-related companies or service providers;

or maintain accounts for persons or entities transacting in Bitcoin.

As a result, the prices of Bitcoins are largely determined by speculators and miners, thus contributing to price volatility that makes retailers less likely to accept it as a form of payment in the future.

Miners, developers and users may switch to or adopt certain digital assets at the expense of their engagement with other digital asset networks, which may negatively impact those networks, including the Bitcoin Network.

Over the past several years, digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation application specific integrated circuit machines to “professionalized” mining operations using proprietary hardware or sophisticated machines.

If the profit margins of digital asset mining operations are not sufficiently high, digital asset miners are more likely to immediately sell tokens earned by mining, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price.

To the extent that any miners cease to record transactions that do not include the payment of a transaction fee in solved blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Blockchain until a block is solved by a miner who does not require the payment of transaction fees or is willing to accept a lower fee.

Any widespread delays in the recording of transactions could result in a loss of confidence in the digital asset network.

Many digital asset networks face significant scaling challenges and are being upgraded with various features to increase the speed and throughput of digital asset transactions.

These attempts to increase the volume of transactions may not be effective.

● The open-source structure

of many digital asset network protocols, such as the protocol for the Bitcoin Network, means that developers and other contributors

are generally not directly compensated for their contributions in maintaining and developing such protocols.

As a result, the developers

and other contributors of a particular digital asset may lack a financial incentive to maintain or develop the network, or may

lack the resources to adequately address emerging issues.

Alternatively, some developers may be funded by companies whose interests

are at odds with other participants in a particular digital asset network.

A failure to properly monitor and upgrade the protocol

of the Bitcoin Network could damage that network.

● Banks may not provide banking

services, or may cut off banking services, to businesses that provide digital asset-related services or that accept digital assets

as payment, which could dampen liquidity in the market and damage the public perception of digital assets generally or any one

digital asset in particular, such as Bitcoin, and their or its utility as a payment system, which could decrease the price of digital

assets generally or individually.

Moreover, because

digital assets, including Bitcoin, have been in existence for a short period of time and are continuing to develop, there may be

additional risks in the future that are impossible to predict as of the date of this Annual Report.

The Bitcoin Network is part of

a new and rapidly evolving industry, and the value of the Units depends on the development and acceptance of the Bitcoin Network.

The open-source structure of many digital asset network protocols, such as the protocol for the Bitcoin Network, means that developers and other contributors are generally not directly compensated for their contributions in maintaining and developing such protocols.

As a result, the developers and other contributors of a particular digital asset may lack a financial incentive to maintain or develop the network, or may lack the resources to adequately address emerging issues.

Alternatively, some developers may be funded by companies whose interests are at odds with other participants in a particular digital asset network.

A failure to properly monitor and upgrade the protocol of the Bitcoin Network could damage that network.

Banks may not provide banking services, or may cut off banking services, to businesses that provide digital asset-related services or that accept digital assets as payment, which could dampen liquidity in the market and damage the public perception of digital assets generally or any one digital asset in particular, such as Bitcoin, and their or its utility as a payment system, which could decrease the price of digital assets generally or individually.

Moreover, because digital

assets, including Bitcoin, have been in existence for a short period of time and are continuing to develop, there may be additional

risks in the future that are impossible to predict as of the date of this Annual Report.

The Bitcoin Network

is part of a new and rapidly evolving industry, and the value of the Units depends on the development and acceptance of the Bitcoin

The Bitcoin Network

was first launched in 2009 and Bitcoins were the first cryptographic digital assets created to gain global adoption and critical

Although the Bitcoin Network is the most established digital asset network, the Bitcoin Network and other cryptographic and

Although the Bitcoin Network is the most established digital asset network, the Bitcoin Network and other

cryptographic and

algorithmic protocols governing the issuance of digital assets represent a new and rapidly evolving industry that is subject to

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adversely affect the value of the Units:

● As the Bitcoin Network continues

to develop and grow, certain technical issues might be uncovered, and the troubleshooting and resolution of such issues requires

the attention and efforts of Bitcoin’s global development community.

● In August 2017, the Bitcoin

Network underwent a hard fork that resulted in the creation of a new digital asset network called Bitcoin Cash.

This hard fork

was contentious, and as a result some users of the Bitcoin Cash network may harbor ill will toward the Bitcoin Network.

may attempt to negatively impact the use or adoption of the Bitcoin Network.

● Also in August 2017, the

Bitcoin Network was upgraded with a technical feature known as “Segregated Witness” that, among other things, potentially

doubles the transactions per second that can be handled on-chain and enables so-called second layer solutions, such as the Lightning

Network or payment channels, that have the potential to substantially increase transaction throughput (i.e., millions of transactions

As of the date of this Annual Report, wallets and intermediaries that support Segregated Witness or Lightning Network-like

technologies do not yet have material adoption.

This upgrade may fail to work as expected leading to a decline in support and price

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.

As the Bitcoin Network continues to develop and grow, certain technical issues

might be uncovered, and the troubleshooting and resolution of such issues requires the attention and efforts of Bitcoin’s

global development community.

In August 2017, the Bitcoin Network underwent a hard fork that resulted in

the creation of a new digital asset network called Bitcoin Cash.

This hard fork was contentious, and as a result some users

of the Bitcoin Cash network may harbor ill will toward the Bitcoin Network.

These users may attempt to negatively impact the

use or adoption of the Bitcoin Network.

Also in August 2017, the Bitcoin Network was upgraded with a technical feature

known as “Segregated Witness” that, among other things, potentially doubles the transactions per second that can

be handled on-chain and enables so-called second layer solutions, such as the Lightning Network or payment channels, that

have the potential to substantially increase transaction throughput (i.e., millions of transactions per second).

date of this Annual Report, digital wallets and intermediaries that support Segregated Witness or Lightning Network-like technologies

do not yet have material adoption.

This upgrade may fail to work as expected leading to a decline in support and price of

In 2021, the Bitcoin protocol implemented the Taproot upgrade to add enhanced support for complex transactions on the

network such as multi-signature transactions, which require two or more parties to execute a transaction on the Bitcoin Network.

Prior to the upgrade, multi-signature transactions were historically slow, expensive, and easily identifiable.

intended to reduce the amount of data written to a block and makes multi-signature transactions indistinguishable from regular

transactions, adding an enhanced layer of privacy.

This upgrade may fail to work as expected, which could lead to a decline

in support and price of Bitcoin.

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

digital computing, algebraic geometry

and quantum computing, could result in such cryptography becoming ineffective.

In any of these circumstances, a malicious actor

may be able to take the Trust’s Bitcoin, which would adversely affect the value of the Units.

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 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 Units.

The Trust is not

actively managed and will not have any formal strategy relating to the development of the Bitcoin Network.

in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective.

of these circumstances, a malicious actor may be able to take the Trust’s Bitcoin, which would adversely affect the value

of the Units.

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 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 Units.

The Trust is not actively

managed and will not have any formal strategy relating to the development of the Bitcoin Network.

Digital asset networks are

developed by a diverse set of contributors and the perception that certain high-profile contributors will no longer contribute

to the network could have an adverse effect on the market price of the related digital asset.

Digital asset

networks are often developed by a diverse set of contributors and the perception that high-profile contributors may no longer contribute

to the networks may have an adverse effect on the market price of any related digital assets.

For example, in June 2017, an unfounded

rumor circulated that Ethereum protocol developer Vitalik Buterin had died.

Following the rumor, the price of Ethereum decreased

approximately 20% before recovering after Buterin himself dispelled the rumor.

Some have speculated that the rumor led to the decrease

in the price of Ethereum.

In the event a high-profile contributor to the Bitcoin Network is perceived as no longer able to contribute

to the Bitcoin Network due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is valid,

it could negatively affect the price of Bitcoin, which could adversely impact the value of the Units.

Digital assets may have concentrated

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As of January

2022, the largest 100 Bitcoin wallets held approximately 13.49% of the Bitcoins in circulation and it is possible that some of

these wallets are controlled by the same person or entity.

Moreover, it is possible that other persons or entities control multiple

wallets that collectively hold a significant number of Bitcoin, even if they individually only hold a small amount.

of this concentration of ownership, large sales by such holders could have an adverse effect on the market price of Bitcoin.

A determination that Bitcoin

or any other digital asset is a “security” may adversely affect the value of Bitcoin and the value of the Units, and

result in potentially extraordinary, nonrecurring expenses to, or termination of the Trust

The SEC has stated

that certain digital assets may be considered “securities” under the federal securities laws.

The test for determining

whether a particular digital asset is a “security” is complex and the outcome is difficult to predict.

any other digital asset is determined to be a “security” under federal or state securities laws by the SEC or any other

agency, or in a proceeding in a court of law or otherwise, it may have material adverse consequences for Bitcoin as a digital asset

due to negative publicity or a decline in the general acceptance of digital assets.

As such, any determination that Bitcoin or

any other digital asset is a security under federal or state securities laws may adversely affect the value of Bitcoin and, as

a result, the value of the Units.

To the extent that

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

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

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

Any such termination could result in the liquidation of the Trust’s Bitcoin at a time that is disadvantageous

to Unitholders.

Changes in the governance of

a digital asset network may not receive sufficient support from users and miners, which may negatively affect that digital asset

network’s ability to grow and respond to challenges.

The governance of

decentralized networks, such as the Bitcoin and Ethereum networks, is by voluntary consensus and open competition.

there may be a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may

stymie such network’s utility and ability to grow and face challenges.

The foregoing notwithstanding, the protocols for some

decentralized networks, such as the Bitcoin network, are informally managed by a group of core developers that propose amendments

to the relevant network’s source code.

28, 2022, the largest 100 Bitcoin digital wallets held approximately 13.49% of the Bitcoins in circulation and it is possible that

some of these digital wallets are controlled by the same person or entity.

Moreover, it is possible that other persons or entities

control multiple digital wallets that collectively hold a significant number of Bitcoin, even if they individually only hold a

small amount.

As a result of this concentration of ownership, large sales by such holders could have an adverse effect on the market

price of Bitcoin.

A determination that Bitcoin or any

other digital asset is a “security” may adversely affect the value of Bitcoin and the value of the Units, and result

in potentially extraordinary, non-recurring expenses to, or termination of the Trust

The SEC has stated that

certain digital assets may be considered “securities” under the federal securities laws.

The test for determining whether

a particular digital asset is a “security” is complex and the outcome is difficult to predict.

Further, if any other

asset is determined to be a “security” under federal or state securities laws by the SEC or any other agency,

or in a proceeding in a court of law or otherwise, it may have material adverse consequences for Bitcoin as a digital asset due

to negative publicity or a decline in the general acceptance of digital assets.

As such, any determination that Bitcoin or any

other digital asset is a security under federal or state securities laws may adversely affect the value of Bitcoin and, as a result,

the value of the Units.

To the extent that Bitcoin

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

under the Investment Company Act of 1940 (the “Investment Company Act”), and the Sponsor may be required to register

as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

If the Sponsor

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

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

Changes in the governance of a digital

asset network may not receive sufficient support from users and miners, which may negatively affect that digital asset network’s

ability to grow and respond to challenges.

The governance of decentralized

networks, such as the Bitcoin and Ethereum networks, is by voluntary consensus and open competition.

As a result, there may be

a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network’s

utility and ability to grow and face challenges.

The foregoing notwithstanding, the protocols for some decentralized networks,

such as the Bitcoin network, are informally managed by a group of core developers that propose amendments to the relevant network’s

Core developers’ roles evolve over time, largely based on self-determined participation.

If a significant majority of users and miners adopt amendments to a decentralized network based on the proposals of such core developers,

such network will be subject to new protocols that may adversely affect the value of the relevant digital asset.

As a result of the

foregoing, it may be difficult to find solutions or marshal sufficient effort to overcome any future problems, especially long-term

problems, on digital asset networks.

If a significant majority

of users and miners adopt amendments to a decentralized network based on the proposals of such core developers, such network will

be subject to new protocols that may adversely affect the value of the relevant digital asset.

As a result of the foregoing,

it may be difficult to find solutions or marshal sufficient effort to overcome any future problems, especially long-term problems,

on digital asset networks.

Digital asset networks face significant

scaling challenges and efforts to increase the volume of transactions may not be successful.

Many digital asset

networks face significant scaling challenges due to the fact that public blockchains generally face a trade-off regarding 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.

As corresponding

increases in throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase

considerably.

Many digital asset networks

face significant scaling challenges due to the fact that public blockchains generally face a trade-off regarding 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.

As corresponding increases

in throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase considerably.

For example, the Bitcoin Network has been, at times, at capacity, which has led to increased transaction fees.

January 1, 2017, Bitcoin transaction fees have increased from $0.35 per Bitcoin transaction, on average, to a high of $55.16 per

transaction, on average, on December

As of December 31, 2021, Bitcoin transaction fees generally ranged from $1.11 to $3.31 per transaction.

Increased fees

and decreased settlement speeds could preclude certain uses for Bitcoin (e.g., micropayments), and could reduce demand for, and

the price of, Bitcoin, which could adversely impact the value of the Units.

Many developers

are actively researching and testing scalability solutions for public blockchains that do not necessarily result in lower levels

of security or decentralization (e.g., off-chain payment channels like the Lightning Network, sharding or off-chain computations).

However, there is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of

the Bitcoin Network transactions will be effective, or how long these mechanisms will take to become effective, which could adversely

impact the value of the Units.

If a malicious actor or botnet

obtains control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains control over the Bitcoin

Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely

affect the value of the Units or the ability of the Trust to operate.

Since January 1,

2017, Bitcoin transaction fees have increased from $0.35 per Bitcoin transaction, on average, to a high of $55.16 per transaction,

on average, on December 22, 2017.

As of December 2022, Bitcoin transaction fees stood around $1 per transaction, on average.

fees and decreased settlement speeds could preclude certain uses for Bitcoin (e.g., micropayments), and could reduce demand for,

and the price of, Bitcoin, which could adversely impact the value of the Units.

Many developers are actively researching

and testing scalability solutions for public blockchains that do not necessarily result in lower levels of security or decentralization

(e.g., off-chain payment channels like the Lightning Network, sharing, or off-chain computations).

However, there is no guarantee

that any of the mechanisms in place or being explored for increasing the scale of settlement of the Bitcoin Network transactions

will be effective, or how long these mechanisms will take to become effective, which could adversely impact the value of the Units.

If a malicious actor or botnet obtains

control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains control over the Bitcoin Network

through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely affect

the value of the Units or the ability of the Trust to operate.

If a malicious actor

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To the extent that such malicious actor or botnet did not yield its control of the processing

power on the Bitcoin Network, or the Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes

power on the Bitcoin Network or the

Bitcoin community did not reject the fraudulent blocks as malicious, reversing any changes

made to the Blockchain may not be possible.

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to slow down the Bitcoin Network.

Although there are

no known reports of malicious activity on, or control of, the Bitcoin Network, it is believed that certain mining pools may have

exceeded the 50% threshold on the Bitcoin Network.

The possible crossing of the 50% threshold indicates a greater risk that a single

mining pool could exert authority over the validation of Bitcoin transactions, and this risk is heightened if over 50% of the processing

Although there are no

known reports of malicious activity on, or control of, the Bitcoin Network, it is believed that certain mining pools may have exceeded

the 50% threshold on the Bitcoin Network.

The possible crossing of the 50% threshold indicates a greater risk that a single mining

pool could exert authority over the validation of Bitcoin transactions, and this risk is heightened if over 50% of the processing

power on the network falls within the jurisdiction of a single governmental authority.

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adversely affect the value of the Units.

A malicious actor

may also obtain control over the Bitcoin Network through its influence over core developers by gaining direct control over a core

developer or an otherwise influential programmer.

To the extent that the Bitcoin ecosystem does not grow, the possibility that

a malicious actor may be able obtain control of the processing power on the Bitcoin Network in this manner will remain heightened.

A temporary or permanent “fork”

could adversely affect the value of the Units.

A malicious actor may

also obtain control over the Bitcoin Network through its influence over core developers by gaining direct control over a core developer

or an otherwise influential programmer.

To the extent that the Bitcoin ecosystem does not grow, the possibility that a malicious

actor may be able obtain control of the processing power on the Bitcoin Network in this manner will remain heightened.

A temporary or permanent fork or

a “clone” could adversely affect the value of the Units.

The Bitcoin Network

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of two versions of Bitcoin running in parallel, yet lacking interchangeability.

For example, in August 2017, Bitcoin “forked”

into Bitcoin and a new digital asset, Bitcoin Cash, as a result of a several-year dispute over how to increase the rate of transactions

For example, in August 2017, Bitcoin forked into

Bitcoin and a new digital asset, Bitcoin Cash, as a result of a several-year dispute over how to increase the rate of transactions

that the Bitcoin Network can process.

A fork may also occur as a result of an unintentional or unanticipated software flaw in the

various versions of otherwise compatible software that users run.

Such a fork could lead to users and miners abandoning the digital

asset with the flawed software.

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

version of the digital asset while resisting community-led efforts to merge the two chains.

This could result in a permanent fork.

Forks may also occur

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a fork that effectively reversed the hack.

However, a minority of users continued to develop the original blockchain,

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

ETC now trades on several digital asset exchanges.

A fork may also occur as a result of an unintentional or unanticipated

software flaw in the various versions of otherwise compatible software that users run.

Such a fork could lead to users and miners

abandoning the digital asset with the flawed software.

It is possible, however, that a substantial number of users and miners could

adopt an incompatible version of the digital asset while resisting community-led efforts to merge the two chains.

This could result

in a permanent fork, as in the case of Ether and Ether Classic.

In addition, many

developers have previously initiated hard forks in the Blockchain to launch new digital assets, such as Bitcoin

Gold and Bitcoin Diamond.

To the extent

such digital assets compete with Bitcoin, such competition could impact demand for Bitcoin and could adversely impact the value

of the Units.

However, a minority of users continued to develop the original blockchain, now referred

to as “Ethereum Classic” with the digital asset on that blockchain now referred to as Ether Classic, or ETC.

trades on several digital asset exchanges.

A fork may also occur as a result of an unintentional or unanticipated software flaw

in the various versions of otherwise compatible software that users run.

Such a fork could lead to users and miners abandoning

the digital asset with the flawed software.

It is possible, however, that a substantial number of users and miners could adopt

an incompatible version of the digital asset while resisting community-led efforts to merge the two chains.

This could result in

a permanent fork, as in the case of Ether and Ether Classic.

In addition, many developers

have previously initiated hard forks in the Blockchain to launch new digital assets, such as Bitcoin Cash, Bitcoin Gold, Bitcoin

Silver and Bitcoin Diamond.

To the extent such digital assets compete with Bitcoin, such competition could impact demand for Bitcoin

and could adversely impact the value of the Units.

Furthermore, a hard

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through at least October 2016.

An Ethereum exchange announced in July 2016 that it had lost 40,000 Ether Classic, worth about $100,000

at that time, as a result of replay attacks.

Another possible result of a hard fork is an inherent decrease in the level of security

due to significant amounts of mining power remaining on one network or migrating instead to the new forked network.

fork, it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing power of

the digital asset network that retained or attracted less mining power, thereby making digital assets that rely on proof-of-work

An Ethereum exchange announced in July 2016 that it had lost 40,000 units of Ethereum Classic, worth

about $100,000 at that time, as a result of replay attacks.

Another possible result of a hard fork is an inherent decrease in the

level of security due to significant amounts of mining power remaining on one network or migrating instead to the new forked network.

After a hard fork, it may become easier for an individual miner or mining pool’s hashing power to exceed 50% of the processing

power of the digital asset network that retained or attracted less mining power, thereby making digital assets that rely on proof-of-work

more susceptible to attack.

A future fork in

the Bitcoin Network could adversely affect the value of the Units or the ability of the Trust to operate.

Unitholders may not receive the

benefits of any forks or “airdrops.”

Protocols may also be

Unlike a fork, which modified an existing blockchain, and results in two competing networks, each with the same genesis

block, a “clone” is a copy of a protocol’s codebase, but results in an entirely new blockchain and new genesis

Tokens are created solely from the new “clone” network and, in contrast to forks, holders of tokens of the existing

network that was cloned do not receive any tokens of the new network.

A “clone” results in a competing network that

has characteristics substantially similar to the network it was based on, subject to any changes as determined by the developer(s)

that initiated the clone.

A future fork in or

clone of the Bitcoin Network could adversely affect the value of the Units or the ability of the Trust to operate.

Unitholders may not receive the benefits

of any forks or “airdrops.”

In addition to forks,

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the new digital asset for free, based on the fact that they hold such other digital asset.

Unitholders may

not receive the benefits of any forks, the Trust may not choose, or be able, to participate in an airdrop and the timing of receiving

Unitholders may not

receive the benefits of any forks, the Trust may not choose, or be able, to participate in an airdrop, and the timing of receiving

any benefits from a fork, airdrop or similar event is uncertain.

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For instance,

the Custodian may not agree to provide access to the Additional Currency.

In addition, the Sponsor may determine that there is

no safe or practical way to custody the Additional Currency, or that trying to do so may pose an unacceptable risk to the Trust’s

holdings in Bitcoin, or that the costs of taking possession and/or maintaining ownership of the Additional Currency exceed the

benefits of owning the Additional Currency.

Additionally, laws, regulation or other factors may prevent Unitholders from benefiting

from the Additional Currency even if there is a safe and practical way to custody and secure the Additional Currency.

it may be illegal to sell or otherwise dispose of the Additional Currency, or there may not be a suitable market into which the

Additional Currency can be sold (immediately after the fork or airdrop, or ever).

The Sponsor may also determine, in consultation

with its legal advisors and tax consultants, that the Additional Currency is, or is likely to be deemed, a security under federal

or state securities laws.

In such a case, the Sponsor would irrevocably abandon, as of any date on which the Trust creates Units,

such Additional Currency if holding it would have an adverse effect on the Trust and it would not be practicable to avoid such

effect by disposing of the Additional Currency in a manner that would result in Unitholders receiving more than insignificant value

In making such a determination, the Sponsor expects to take into account a number of factors, including the definition

of a “security” under Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act, SEC v.

Howey Co., 328 U.S.

293 (1946) and the case law interpreting it, as well as reports, orders, press releases, public statements

and speeches by the SEC providing guidance on when a digital asset is a “security” for purposes of the federal securities

In the event of a hard fork of

the Bitcoin Network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion to determine which

network should be considered the appropriate network for the Trust’s purposes, and in doing so may adversely affect the value

of the Units.

In the event of

a hard fork of the Bitcoin Network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion to determine,

unless specifically announced, the Custodian does not support airdrops, metacoins, colored coins, side chains, or other derivative,

enhanced, or forked protocols, tokens, or coins which supplement or interact with a digital asset supported by the Custodian.

addition, the Sponsor may determine that there is no safe or practical way to custody the Additional Currency, or that trying to

do so may pose an unacceptable risk to the Trust’s holdings in Bitcoin, or that the costs of taking possession and/or maintaining

ownership of the Additional Currency exceed the benefits of owning the Additional Currency.

Additionally, laws, regulation or other

factors may prevent Unitholders from benefiting from the Additional Currency even if there is a safe and practical

way to custody and secure the Additional Currency.

For example, it may be illegal to sell or otherwise dispose of the Additional

Currency, or there may not be a suitable market into which the Additional Currency can be sold (immediately after the fork or airdrop,

The Sponsor may also determine, in consultation with its legal advisors and tax consultants, that the Additional Currency

is, or is likely to be deemed, a security under federal or state securities laws.

In such a case, the Sponsor would irrevocably

abandon, as of any date on which the Trust creates Units, such Additional Currency if holding it would have an adverse effect on

the Trust and it would not be practicable to avoid such effect by disposing of the Additional Currency in a manner that would result

in Unitholders receiving more than insignificant value thereof.

In making such a determination, the Sponsor expects to take into

account a number of factors, including the definition of a “security” under Section 2(a)(1) of the Securities Act and

Section 3(a)(10) of the Exchange Act, SEC v.

293 (1946) and the case law interpreting it, as well

as reports, orders, press releases, public statements and speeches by the SEC providing guidance on when a digital asset is a “security”

for purposes of the federal securities laws.

In the event of a hard fork of the

Bitcoin Network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion to determine which network

should be considered the appropriate network for the Trust’s purposes, and in doing so may adversely affect the value of

In the event of a hard

fork of the Bitcoin Network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion to determine,

in good faith, which peer-to-peer network, among a group of incompatible forks of the Bitcoin Network, is generally accepted as

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which may also adversely affect the value of the Units as a result.

If the digital asset award for

solving blocks and transaction fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize

miners, miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of

Bitcoin and the value of the Units.

If the digital asset award for solving

blocks and transaction fees for recording transactions on the Bitcoin Network are not sufficiently high to incentivize miners,

miners may cease expanding processing power or demand high transaction fees, which could negatively impact the value of Bitcoin

and the value of the Units.

If the digital asset

awards for solving blocks and the transaction fees for recording transactions on the Bitcoin Network are not sufficiently high

to incentivize miners, miners may cease expending processing power to solve blocks and confirmations of transactions

on the Blockchain could be slowed.

A reduction in the processing power expended by miners on the Bitcoin Network could increase the likelihood of a malicious actor

or botnet obtaining control.

to incentivize miners, miners may cease expending processing power to solve blocks and confirmations of transactions on the Blockchain

could be slowed.

A reduction in the processing power expended by miners on the Bitcoin Network could increase the likelihood of

a malicious actor or botnet obtaining control.

Miners have historically

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negatively impact the value of Bitcoin and the value of the Units.

From time to time,

digital assets may undergo name changes and associated rebranding initiatives.

For example, Bitcoin Cash may sometimes be referred

to as Bitcoin ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi’s Vision,

and in the third quarter of 2018, the team behind Zen rebranded and changed the name of ZenCash to “Horizen.” The Trust

From time to time, digital

assets may undergo name changes and associated rebranding initiatives.

For example, Bitcoin Cash may sometimes be referred to as

Bitcoin ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi’s Vision, and

in the third quarter of 2018, the team behind Zen rebranded and changed the name of ZenCash to “Horizen.” The Trust

cannot predict the impact of any name change and any associated rebranding initiative on Bitcoin.

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by the name change and associated rebranding initiative, and could negatively impact the value of Bitcoin and the value of the

The Bitcoin Network requires

significant electricity to mine and it is possible that certain jurisdictions will implement regulations regarding the energy consumption

of the Bitcoin Network, which could result in a significant reduction in mining activity and adversely affect the security of the

The Bitcoin Network requires significant

electricity to mine and it is possible that certain jurisdictions will implement regulations regarding the energy consumption of

the Bitcoin Network, which could result in a significant reduction in mining activity and adversely affect the security of the

Bitcoin Network.

have been raised about the electricity required to secure and maintain the Bitcoin Network.

On February 12, 2022 in connection

with the mining process, an all-time high of over 248 million tera hashing operations were performed every second, non-stop on

the Bitcoin Network, before falling back to 209 million per second by February 14, 2022.

Although measuring the electricity consumed

by this process is difficult because these operations are performed by various machines with varying levels of efficiency, the

process consumes a significant amount of energy.

Further, in addition to the direct energy costs of performing these calculations,

there are indirect costs that impact the Bitcoin Network’s total energy consumption, including the costs of cooling the machines

that perform these calculations.

In recent months, due to these concerns around energy consumption, particularly as such concerns

relate to public utilities companies, various states and cities have implemented, or are considering implementing, moratoriums

on Bitcoin mining in their jurisdictions.

A significant reduction in mining activity as a result of such actions could adversely

affect the security of the Bitcoin Network by making it easier for a malicious actor or botnet to manipulate the Blockchain, which

could adversely affect the value of the Units or the ability of the Trust to operate.

See “—If a malicious actor or

botnet obtains control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains control over the Bitcoin

Concerns have been raised

about the electricity required to secure and maintain the Bitcoin Network.

On January 3, 2023, in connection with the mining process,

an all-time high of over 271 million tera hashing operations were performed every second, non-stop on the Bitcoin Network.

measuring the electricity consumed by this process is difficult because these operations are performed by various machines with

varying levels of efficiency, the process consumes a significant amount of energy.

The operations of the Bitcoin Network and other

digital asset networks may also consume significant amounts of energy.

Further, in addition to the direct energy costs of performing

these calculations, there are indirect costs that impact the Bitcoin Network’s total energy consumption, including the costs

of cooling the machines that perform these

calculations.

In recent months, due to these concerns around energy consumption, particularly as such concerns relate to public

utilities companies, various states and cities have implemented, or are considering implementing, moratoriums on Bitcoin mining

in their jurisdictions.

For example, in November 2022, New York imposed a two-year moratorium on new proof-of-work mining permits

at fossil fuel plants in the state.

A significant reduction in mining activity as a result of such actions could adversely affect

the security of the Bitcoin Network by making it easier for a malicious actor or botnet to manipulate the Blockchain, which could

adversely affect the value of the Units or the ability of the Trust to operate.

See “—If a malicious actor or botnet

obtains control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains control over the Bitcoin

Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely

affect an investment in the Shares or the ability of the Trust to operate.”

The failure of several prominent

crypto trading venues and lending platforms has impacted and may continue to impact the broader crypto economy, which could have

an adverse impact on the Trust.

Although the Trust has

no direct exposure to any of the digital asset market participants that recently filed for Chapter 11 bankruptcy, such as Celsius

Network (other than as a significant investor in the Trust), FTX or BlockFi Inc.

(“BlockFi”), it may not be immune

to unfavorable investor sentiment resulting from these recent events or other developments in the broader digital asset market.

The Trust may also be negatively affected by further developments in the broader digital asset market, including, but not limited

to, through indirect exposure to third-party market participants that have:

for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit

of creditors, or have had a receiver appointed for them;

experienced excessive redemptions or suspended redemptions or withdrawals of digital

the digital assets of their customers unaccounted for;

experienced material corporate compliance failures.

As a result of any direct

or indirect exposure to adverse developments in the broader digital asset market, the Trust may be exposed to the risk of reputational

Risk Factors Related to the Bitcoin

The value of the Units relates

directly to the value of Bitcoins, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

The value of the

Units relates directly to the value of the Bitcoins held by the Trust and fluctuations in the price of Bitcoin could adversely

affect the value of the Units.

The value of the Units relates directly

to the value of Bitcoins, the value of which may be highly volatile and subject to fluctuations due to a number of factors.

The value of the Units

relates directly to the value of the Bitcoins held by the Trust and fluctuations in the price of Bitcoin could adversely affect

the value of the Units.

The market price of Bitcoin may be highly volatile, and subject to a number of factors, including:

1 unchanged sentence

Manipulative trading activity on Bitcoin exchanges, which are largely unregulated;

The adoption of Bitcoin as a medium of exchange, store-of-value or other consumptive asset and the maintenance and development of the open-source software protocol of the Bitcoin Network;

The adoption of Bitcoin as a medium of exchange, store-of-value or other

consumptive asset and the maintenance and development of the open-source software protocol of the Bitcoin Network;

Forks in the Bitcoin Network;

Investors’ expectations with respect to interest rates, the rates of inflation of fiat currencies or Bitcoin and digital asset exchange rates;

Investors’ expectations with respect to interest rates, the rates of inflation of fiat

currencies or Bitcoin, and digital asset exchange rates;

Consumer preferences and perceptions of Bitcoin specifically and digital assets generally;

1 unchanged sentence

The liquidity of Bitcoin markets;

Investment and trading activities of large investors that invest directly or indirectly in Bitcoin;

A “short squeeze” resulting from speculation on the price of Bitcoin, if aggregate short exposure exceeds the number of Units available for purchase;

Investment and trading activities of large investors that invest directly or indirectly in

A “short squeeze” resulting from speculation on the price of Bitcoin, if aggregate

short exposure exceeds the number of Units available for purchase;

An active derivatives market for Bitcoin or for digital assets generally;

Monetary policies of governments, trade restrictions, currency devaluations and revaluations and regulatory measures or enforcement actions, if any, that restrict the use of Bitcoin as a form of payment or the purchase of Bitcoin on the Bitcoin markets;

Monetary policies of governments, trade restrictions, currency devaluations and revaluations

and regulatory measures or enforcement actions, if any, that restrict the use of Bitcoin as a form of payment or the purchase

of Bitcoin on the Bitcoin markets;

Global or regional political, economic or financial conditions, events and situations;

Fees associated with processing a Bitcoin transaction and the speed at which Bitcoin transactions are settled;

Events involving limited liquidity, defaults, non-performance or other adverse developments

that impact financial institutions, counterparties or other companies in the financial services industry or the financial

services industry generally, or concerns about any events of these kinds or other similar risks, such as the recent events

involving the Federal Deposit Insurance Corporation’s (FDIC) decision to place Silicon Valley Bank and Signature Bank

into receivership;

Fees associated with processing a Bitcoin transaction and the speed at which Bitcoin transactions

Interruptions in service from or failures of major Bitcoin exchanges;

Decreased confidence in Bitcoin exchanges due to the unregulated nature and lack of transparency surrounding the operations of Bitcoin exchanges;

Decreased confidence in Bitcoin exchanges due to the unregulated nature and

lack of transparency surrounding the operations of Bitcoin exchanges, and the failure of several prominent crypto trading

venues and lending platforms, such as FTX, Celsius Networks, Voyager and Three Arrows Capital in 2022;

Increased competition from other forms of digital assets or payment services;

The Trust’s own acquisitions or dispositions of Bitcoin, since there is no limit on the number of Bitcoin that the Trust may acquire.

In addition, there

is no assurance that Bitcoin will maintain its value in the long or intermediate term.

Correlation between the prices of Bitcoin and other digital assets, a decrease

in the price of other digital assets, including as a result of a crash in one or more digital assets or platforms, such as

the May 2022 crash of the stablecoin Terra USD or widespread defaults on digital asset exchanges, trading venues or lending

platforms, such as the crash and subsequent filing for bankruptcy protection of the digital asset lending platform Celsius

The Trust’s own acquisitions or dispositions of Bitcoin, since there

is no limit on the number of Bitcoin that the Trust may acquire.

In addition, there is

no assurance that Bitcoin will maintain its value in the long or intermediate term.

In the event that the price of Bitcoin declines,

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The 30-day price volatility equals the annualized standard deviation of the relative price

change for the 30 most recent trading days closing price, expressed as a percentage.

change for the 30 most recent trading days closing price, expressed as a percentage (source:

Bitcoin has experienced

significant price fluctuations, such as its historic decline of over $19,000 to less than $3,200 from December 2017 to December

2018, and the price decline from over $59,000 to less than $34,000 during the period from May 7, 2021 to May 28, 2021.

2018, the price decline from over $59,000 to less than $34,000 during the period from May 7, 2021 to May 28, 2021, and the price

decline from over $47,000 to less than $19,000 during the period from January 1, 2022 to June 18, 2022.

As of December 31, 2022,

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Over the past five years, Bitcoin’s

rolling 30-day annualized volatility has averaged 65% with a maximum value of 160% on December 26, 2017 and a minimum value of

rolling 30-day annualized volatility has averaged 61% with a maximum value of 134.14% on April 2, 2020 and a minimum value of 18.99%

on July 26, 2020.

Bitcoin has and may continue to experience rapid changes in volatility depending

on market conditions.

For example, in May of 2021, Bitcoin’s volatility transitioned from a volatility range of 39% to over

100% by June of 2021, where it stayed for 23 consecutive days.

Due to the unregulated nature

and lack of transparency surrounding the operations of Bitcoin exchanges, they may experience fraud, security failures or operational

problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Units.

Bitcoin exchanges

are relatively new and, in some cases, unregulated.

Many trading platforms for digital assets are not subject to regulation to

the same extent or in the same manner as other regulated trading platforms, such as Listing Exchanges or designated contract markets

Bitcoin has and may continue to experience rapid changes in volatility depending on market

For example, in May of 2021, Bitcoin’s volatility transitioned from a volatility range of 39% to over 100% by

June of 2021, where it stayed for 23 consecutive days.

Due to the unregulated nature and

lack of transparency surrounding the operations of Bitcoin exchanges, they may experience fraud, business failures, security failures

or operational problems, which may adversely affect the value of Bitcoin and, consequently, the value of the Units.

Bitcoin exchanges are

relatively new and, in some cases, unregulated.

Many trading platforms for digital assets are not subject to regulation to the

same extent or in the same manner as other regulated trading platforms, such as Listing Exchanges or designated contract markets

that face a variety of federal standards for fair access, cybersecurity and other areas of regulation.

Bitcoin is susceptible to

dissemination of false or misleading

information regarding material non-public information related to:

the actions of regulators with respect to Bitcoin;

such as plans of market participants to significantly increase or decrease their holdings in Bitcoin;

new sources of demand, such

as new ETPs that would hold Bitcoin;

or the decision of a Bitcoin-based ETP, a Bitcoin trading venue, or a Bitcoin wallet service

provider with respect to how it would respond to a “fork” in the blockchain, which would create two different, non-interchangeable

types of Bitcoin.

Bitcoin trading activity is dispersed across markets and over-the-counter transactions worldwide, and there is

no centralized, regulatory data source for Bitcoin trading statistics.

Furthermore, while many prominent Bitcoin exchanges provide

the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory

compliance, many Bitcoin exchanges do not provide this information.

As a result, the marketplace may lose confidence in Bitcoin

exchanges, including prominent exchanges that handle a significant volume of Bitcoin trading.

the dissemination of false or misleading information regarding material non-public information related to:

the actions of regulators

with respect to Bitcoin;

order flow, such as plans of market participants to significantly increase or decrease their holdings

new sources of demand, such as new exchange-traded products (“ETPs”) that would hold Bitcoin;

or the decision

of a Bitcoin-based ETP, a Bitcoin trading venue, or a Bitcoin wallet service provider with respect to how it would respond to a

fork in the blockchain, which would create two different, non-interchangeable types of Bitcoin.

Bitcoin trading activity is dispersed

across markets and over-the-counter transactions worldwide, and there is no centralized, regulatory data source for Bitcoin trading

Furthermore, while many prominent Bitcoin exchanges provide the public with significant information regarding their

ownership structure, management teams, corporate practices and regulatory compliance, many Bitcoin exchanges do not provide this

The Trust is not in a position to determine the extent to which the Bitcoin exchanges included in the Index are in

compliance with regulatory requirements, as those exchanges are not affiliated with or managed by the Trust of the Sponsor.

a result, the marketplace may lose confidence in Bitcoin exchanges, including prominent exchanges that handle a significant volume

of Bitcoin trading.

For example, in 2019

2019 there were reports claiming that 80-95% of Bitcoin trading volume on Bitcoin exchanges was false or non-economic in nature,

with specific focus on unregulated exchanges located outside of the U.S.

there were reports claiming that 80%-95% of Bitcoin trading volume on Bitcoin exchanges was false or non-economic in nature, with

specific focus on unregulated exchanges located outside of the U.S.

Such reports may indicate that the Bitcoin exchange market

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or manipulative acts and practices, could adversely affect the value of Bitcoin and/or negatively affect the market perception

In addition, over

the past several years, some Bitcoin exchanges have been closed due to fraud and manipulative activity, business failure or security

In many of these instances, the customers of such Bitcoin exchanges were not compensated or made whole for the partial

or complete losses of their account balances in such Bitcoin exchanges.

While smaller Bitcoin exchanges are less likely to have

the infrastructure and capitalization that make larger Bitcoin exchanges more stable, larger Bitcoin exchanges are more likely

to be appealing targets for hackers and malware and may be more likely to be targets of regulatory enforcement action.

the collapse of Mt.

Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest

Bitcoin exchanges could be subject to abrupt failure with consequences for both users of Bitcoin exchanges and the Bitcoin industry

In particular, in the two weeks that followed the February 7, 2014 halt of Bitcoin withdrawals from Mt.

Gox, the value

of one Bitcoin fell on other exchanges from around $795 on February 6, 2014 to $578 on February 20, 2014.

Additionally, in January

2015, Bitstamp announced that approximately 19,000 Bitcoin had been stolen from its operational or “hot” wallets.

In addition, over the

past several years, some Bitcoin exchanges have been closed due to fraud and manipulative activity, business failure or security breaches.

these instances, the customers of such Bitcoin exchanges were not compensated or made whole for the partial or complete losses

of their account balances in such Bitcoin exchanges.

While smaller Bitcoin exchanges are less likely to have the infrastructure

and capitalization that make larger Bitcoin exchanges more stable, larger Bitcoin exchanges are more likely to be appealing targets

for hackers and malware and may be more likely to be targets of regulatory enforcement action.

For example, the collapse of Mt.

Gox, which filed for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest Bitcoin exchanges

could be subject to abrupt failure with consequences for both users of Bitcoin exchanges and the Bitcoin industry as a whole.

particular, in the two weeks that followed the February 7, 2014 halt of Bitcoin withdrawals from Mt.

Gox, the value of one Bitcoin

fell on other exchanges from around $795 on February 6, 2014 to $578 on February 20, 2014.

Additionally, in January 2015, BitStamp

announced that approximately 19,000 Bitcoin had been stolen from its operational or “hot” digital wallets.

in August 2016, it was reported that almost 120,000 Bitcoins worth around $78 million were stolen from Bitfinex, a large Bitcoin

The value of Bitcoin immediately decreased over 10% following reports of the theft at Bitfinex and the Units suffered

a corresponding decrease in value.

In July 2017, the Financial Crimes Enforcement Network (“FinCEN”) assessed a $110

million fine against BTC-E, a now defunct Bitcoin exchange, for facilitating crimes such as drug sales and ransomware attacks.

In addition, in December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading

and filed for bankruptcy following a hack that resulted in a loss of 17% of Yapian’s assets.

Following the hack, Youbit users

were allowed to withdraw approximately 75% of the digital assets in their exchange accounts, with any potential further distributions

to be made following Yapian’s pending bankruptcy proceedings.

In addition, in January 2018, the Japanese digital asset exchange,

Coincheck, was hacked, resulting in losses of approximately $535 million, and in February 2018, the Italian digital asset exchange,

Bitgrail, was hacked, resulting in approximately $170 million in losses.

Most recently in May 2019, one of the world’s largest

Bitcoin exchanges, Binance, was hacked, resulting in losses of approximately $40 million.

The value of Bitcoin

immediately decreased over 10% following reports of the theft at Bitfinex and the Units suffered a corresponding decrease in value.

In July 2017, the Financial Crimes Enforcement Network (“FinCEN”) assessed a $110 million fine against BTC-E, a now

defunct Bitcoin exchange, for facilitating crimes such as drug sales and ransomware attacks.

In addition, in December 2017, Yapian,

the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filed for bankruptcy following

a hack that resulted in a loss of 17% of Yapian’s assets.

Following the hack, Youbit users were allowed to withdraw approximately

75% of the digital assets in their exchange accounts, with any potential further distributions to be made following Yapian’s

pending bankruptcy proceedings.

In addition, in January 2018, the Japanese digital asset exchange, Coincheck, was hacked, resulting

in losses of approximately $535 million, and in February 2018, the Italian digital asset exchange, Bitgrail, was hacked, resulting

in approximately $170 million in losses.

Most recently in May 2019, one of the world’s largest Bitcoin exchanges, Binance,

was hacked, resulting in losses of approximately $40 million.

Negative perception,

a lack of stability in the Bitcoin markets and the closure or temporary shutdown of Bitcoin exchanges due to fraud, business failure,

hackers or malware, or government-mandated regulation may reduce confidence in the Bitcoin Network and result in greater volatility

in the prices of Bitcoin.

Furthermore, the closure or temporary shutdown of a Bitcoin exchange used in calculating the Bitcoin

Market Price may result in a loss of confidence in the Trust’s ability to determine its Bitcoin Holdings on a daily basis.

These potential consequences of such a Bitcoin exchange’s failure could adversely affect the value of the Units.

Competition from the emergence

or growth of other digital assets or methods of investing in Bitcoin could have a negative impact on the price of Bitcoin and adversely

a lack of stability, and standardized regulation in the Bitcoin markets and the closure or temporary shutdown of Bitcoin exchanges

due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the Bitcoin Network

and result in greater volatility in the prices of Bitcoin.

Furthermore, the closure or temporary shutdown of a Bitcoin exchange

used in calculating the Bitcoin Market Price may result in a loss of confidence in the Trust’s ability to determine its NAV

on a daily basis.

These potential consequences of such a Bitcoin exchange’s failure could adversely affect the value of the

Recent developments in the digital

asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the

digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.

Beginning in the fourth

quarter of 2021 and continuing throughout 2022, digital asset prices began falling precipitously.

This has led to volatility and

disruption in the digital asset markets and financial difficulties for several prominent industry participants, including

asset exchanges, hedge funds and lending platforms.

For example, in the first half of 2022, digital asset lenders Celsius Network

LLC and Voyager Digital Ltd.

and digital asset hedge fund Three Arrows Capital each declared bankruptcy.

This resulted in a loss

of confidence in participants in the digital asset ecosystem, negative publicity surrounding digital assets more broadly and market-wide

declines in digital asset trading prices and liquidity.

Thereafter, in November

2022, FTX, the third largest digital asset exchange by volume at the time, halted customer withdrawals amid rumors of the company’s

liquidity issues and likely insolvency.

Shortly thereafter, FTX’s CEO resigned and FTX and several affiliates of FTX filed

for bankruptcy.

Department of Justice (“DOJ”) subsequently brought criminal charges, including charges of

fraud, violations of federal securities laws, money laundering, and campaign finance offenses, against FTX’s former CEO and

FTX is also under investigation by the SEC, the DOJ, and the CFTC, as well as by various regulatory authorities in the

Bahamas, Europe and other jurisdictions.

In response to these events, the digital asset markets have experienced extreme price

volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the SEC, the

CFTC, the White House and Congress.

In addition, several other entities in the digital asset industry filed for bankruptcy following

FTX’s bankruptcy filing, such as BlockFi and Genesis Global Capital, LLC.

The SEC also brought charges against Genesis Global

Capital, LLC and Gemini Trust Company, LLC on January 12, 2023 for their alleged unregistered offer and sale of securities to retail

These events have led

to significant negative publicity around digital asset market participants.

This publicity could negatively impact the reputation

of the Sponsor and have an adverse effect on the trading price and/or the value of the Units.

Moreover, sales of a significant

number of Units of the Trust as a result of these events could have a negative impact on the trading of the Units.

These events are continuing

to develop at a rapid pace and it is not possible to predict at this time all of the risks that they may pose to the Sponsor, the

Trust, their affiliates and/or the Trust’s third-party service providers, or on the digital asset industry as a whole.

Continued disruption

and instability in the digital asset markets as these events develop, including further declines in the trading prices and liquidity

of Bitcoin, could have a material adverse effect on the value of the Units and the Units could lose all or substantially all of

Competition from the emergence or

growth of other digital assets or methods of investing in Bitcoin could have a negative impact on the price of Bitcoin and adversely

affect the value of the Units.

Bitcoin was the first digital asset

to gain global adoption and critical mass, and as a result, it has a “first to market” advantage over other digital

As of March 8, 2022, Bitcoin was the largest digital asset by market capitalization and had the largest user base and largest

combined mining power.

Despite this first to market advantage, as of as of March 8, 2022 there were over 9,000 alternative digital

assets tracked by CoinMarketCap.com, having a total market-capitalization of approximately $2 trillion (including the approximately

$800 billion market cap of Bitcoin), as calculated using market prices and total available supply of each digital asset.

many consortiums and financial institutions are also researching and investing resources into private or permissioned blockchain

platforms rather than open platforms like the Bitcoin Network.

Competition from the emergence or growth of alternative digital

assets could have a negative impact on the demand for, and price of, Bitcoin and thereby adversely affect the value of the Units.

Bitcoin was the first

digital asset to gain global adoption and critical mass, and as a result, it has a “first to market” advantage over

other digital assets.

As of January 6, 2023, Bitcoin was the largest digital asset by market capitalization and had the largest

user base and largest combined mining power.

Despite this first to market advantage, as of January 6, 2023, there were over 8,000

alternative digital assets tracked by CoinMarketCap.com, having a total market-capitalization of approximately $825 billion (including

the approximately $326 billion market cap of Bitcoin), as calculated using market prices and total available supply of each digital

In addition, many consortiums and financial institutions are also researching and investing resources into private or permissioned

blockchain platforms rather than open platforms like the Bitcoin Network.

Competition from the emergence or growth of alternative

digital assets could have a negative impact on the demand for, and price of, Bitcoin and thereby adversely affect the value of

Investors may invest

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financial vehicles or to invest in Bitcoin directly, which could limit the market for, and reduce the liquidity of, the Units.

In addition, to

the extent digital asset financial

vehicles other than the Trust tracking the price of Bitcoin are formed and represent a significant proportion of the demand for

Bitcoin, large purchases or redemptions of the securities of these digital asset financial vehicles, or private funds holding Bitcoin,

could negatively affect the Bitcoin Market Price, the Bitcoin Holdings, the price of the Units, the NAV and the NAV per Unit.

In addition, to the extent digital asset financial vehicles other than the Trust tracking the price of Bitcoin are formed and represent

a significant proportion of the demand for Bitcoin, large purchases or redemptions of the securities of these digital asset financial

vehicles, or private funds holding Bitcoin, could negatively affect the Bitcoin Market Price, the price of the Units, the NAV and

the NAV per Unit.

Failure of funds that hold digital

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adversely affect the value of the Units.

There have been

a growing a number of attempts to list on national securities exchanges the shares of funds that hold digital assets or that have

exposures to digital assets through derivatives.

These investment vehicles attempt to provide institutional and retail investors

exposure to markets for digital assets and related products.

There have been a growing

number of attempts to list on national securities exchanges the shares of funds that hold digital assets or that have exposures

to digital assets through derivatives.

These investment vehicles attempt to provide institutional and retail investors exposure

to markets for digital assets and related products.

The SEC has repeatedly denied such requests.

On January 18, 2018,

the SEC’s Division of Investment Management outlined several questions that sponsors would be expected to address before

the SEC will consider granting approval for funds holding “substantial amounts” of cryptocurrencies or “cryptocurrency-related

products.” The questions, which focus on specific requirements of the Investment Company Act, generally fall into one of

five key areas:

valuation, liquidity, custody, arbitrage and potential manipulation.

The SEC has not explicitly stated whether

each of the questions set forth would also need to be addressed by entities with similar products and investment strategies that

instead pursue registered offerings under the Securities Act, although such entities would need to comply with the registration

and prospectus disclosure requirements of the Securities Act.

On January 18, 2018, the SEC’s

Division of Investment Management outlined several questions that sponsors would be expected to address before the SEC will consider

granting approval for funds holding “substantial amounts” of cryptocurrencies or “cryptocurrency-related products.”

The questions, which focus on specific requirements of the Investment Company Act, generally fall into one of five key areas:

liquidity, custody, arbitrage and potential manipulation.

The SEC has not explicitly stated whether each of the questions set forth

would also need to be addressed by entities with similar products and investment strategies that instead pursue registered offerings

under the Securities Act, although such entities would need to comply with the registration and prospectus disclosure requirements

of the Securities Act.

Requests to list the shares of other funds on national securities exchanges have also been submitted to

Although the SEC approved several futures-based

Bitcoin ETFs in October 2021, it has not approved any requests to list

the shares of digital asset funds like the Trust to date.

The requests to list the shares of digital asset funds submitted by the

Chicago Board Options Exchange (“CBOE”) and the NYSE Arca in 2019 were withdrawn or received disapprovals.

Subsequently,

NYSE Arca and CBOE filed several new requests to list shares of various digital asset funds in 2021.

Several of those requests

were recently denied by the SEC in 2021 and to date in 2022.

The exchange listing of shares of digital asset funds would create

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If exchange-listing requests are

not approved by the SEC and the outstanding requests are ultimately denied by the SEC, increased investment interest by institutional

or retail investors could fail to materialize, which could reduce the demand for digital assets generally and therefore adversely

not approved by the SEC and further requests are ultimately denied by the SEC, increased investment interest by institutional or

retail investors could fail to materialize, which could reduce the demand for digital assets generally and therefore adversely

affect the value of the Units.

NAV may not correspond to the

weighted-average market price of Bitcoin and, as a result, Units may be purchased (or redeemed, if ever permitted) at a value that

differs from the secondary market price of the Units.

NAV may not always correspond to

the weighted-average market price of Bitcoin and, as a result, Units may be purchased (or redeemed, if ever permitted) at a value

that differs from the secondary market price of the Units.

The NAV of the Trust

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security breaches or otherwise.

Consequently, an investor may be able to purchase Units at a discount or a premium to the market

trading price per Unit (if and when Units trade on a secondary trading market).

This price difference may be due, in large part,

but not exclusively, to the fact that supply and demand forces at work in the secondary trading market for Units are related, but

not identical, to the supply and demand forces influencing the market price of Bitcoin.

Unitholders also should note that the size

of the Trust in terms of total Bitcoin held may change substantially over time and as Units are issued and redeemed (if ever permitted).

Suspension or disruptions of

market trading may adversely affect the value of units.

Consequently, an investor may be able to purchase Units from the Trust at a discount or a premium

to the market trading price per Unit (if and when Units trade on a secondary trading market).

This price difference may be due,

in large part, but not exclusively, to the fact that supply and demand forces at work in the secondary trading market for Units

are related, but not identical, to the supply and demand forces influencing the market price of Bitcoin.

Unitholders also should

note that the size of the Trust in terms of total Bitcoin held may change substantially over time and as Units are issued and redeemed

(if ever permitted).

Suspension or disruptions of market

trading may adversely affect the value of units.

On January 14, 2021,

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for the Units may result in losses on an investment in the Trust at the time of disposition of Units.

There can be no

guarantee that an active trading market for the Units will develop or will be maintained.

Even if an active trading market does

develop, it may not provide significant liquidity, and the Units may not trade at prices advantageous to Unitholders.

If a Unitholder

wishes to sell Units at a time when no active market for such Units exists, the price received for the Units (assuming that the

Unitholder is able to sell them) likely will be lower than the price a Unitholder would receive if an active market did exist and,

accordingly, the Unitholder may suffer significant losses.

The Trust’s acquisition

and sale of Bitcoin may impact the supply and demand of Bitcoin, which may have a negative impact on the price of the Units.

If the number of

Bitcoin acquired by the Trust is large enough relative to global Bitcoin supply and demand, further issuances and redemptions (if

any) of Units could have an impact on the supply of and demand for Bitcoin in a manner unrelated to other factors affecting the

global market for Bitcoin.

Such an impact could affect the Bitcoin Market Price, which would directly affect the price at which

Units are quoted on the OTCQX or the price of future Units issued or redeemed (if permitted) by the Trust.

There can be no guarantee

that an active trading market for the Units will develop or will be maintained.

Even if an active trading market does develop, it may not provide

significant liquidity, and the Units may not trade at prices advantageous to Unitholders.

If a Unitholder wishes to sell Units

at a time when no active market for such Units exists, the price received for the Units (assuming that the Unitholder is able to

sell them) likely will be lower than the price a Unitholder would receive if an active market did exist and, accordingly, the Unitholder

may suffer significant losses.

The Trust’s acquisition and

sale of Bitcoin may impact the supply and demand of Bitcoin, which may have a negative impact on the price of the Units.

If the number of Bitcoin

acquired by the Trust is large enough relative to global Bitcoin supply and demand, further issuances and redemptions (if any)

of Units could have an impact on the supply of and demand for Bitcoin in a manner unrelated to other factors affecting the global

market for Bitcoin.

Such an impact could affect the Bitcoin Market Price, which would directly affect the price at which Units

are quoted on the OTCQX or the price of future Units issued or redeemed (if permitted) by the Trust.

A possible “short squeeze”

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A short squeeze could lead to volatile price movements in the Units that are not directly correlated to the price of Bitcoin.

The Trust’s buying and

selling activity associated with the issuance and redemption (if any) of Units may adversely affect an investment in the Units.

The Trust’s purchase of Bitcoin in connection with Unit issuance orders may cause the price of Bitcoin

to increase, which will result in higher prices for the Units.

The Trust’s Bitcoin is stored in “cold” storage

with Coinbase Custody, and as a result any withdrawal and subsequent transaction request to Coinbase Custody by the Trust requires

twenty-four (24) hour notice to process.

Such time delay between the withdrawal request and processing of the withdrawal may negatively

impact the price of the Bitcoin.

Increases in the Bitcoin prices may also occur as a result of Bitcoin purchases by other market

participants who attempt to benefit from an increase in the market price of Bitcoin when Units are issued.

The market price of

Bitcoin may therefore decline immediately after Units are issued.

Selling activity associated with sales of Bitcoin from the Trust

in connection with redemption orders may decrease the Bitcoin prices, which will result in lower prices for the Units.

in Bitcoin prices may also occur as a result of selling activity by other market participants.

In addition to the effect that purchases

and sales of Bitcoin by the Trust may have on the price of Bitcoin, other exchange-traded products with similar investment objectives

could represent a substantial portion of demand for Bitcoin at any given time and the sales and purchases by such investment vehicles

may impact the price of Bitcoin.

The Trust’s buying and selling

activity associated with the issuance and redemption (if any) of Units may adversely affect an investment in the Units.

The Trust’s purchase

of Bitcoin in connection with Unit issuance orders may cause the price of Bitcoin to increase, which will result in higher prices

for the Units.

The Trust’s Bitcoin is stored in “cold” storage with Coinbase Custody, and as a result any withdrawal

subsequent transaction request to Coinbase Custody by the Trust requires twenty-four (24) hour notice to process.

delay between the withdrawal request and processing of the withdrawal may negatively impact the price of the Bitcoin.

in the Bitcoin prices may also occur as a result of Bitcoin purchases by other market participants who attempt to benefit from

an increase in the market price of Bitcoin when Units are issued.

The market price of Bitcoin may therefore decline immediately

after Units are issued.

Selling activity associated with sales of Bitcoin from the Trust in connection with redemption orders may

decrease the Bitcoin prices, which will result in lower prices for the Units.

Decreases in Bitcoin prices may also occur as a result

of selling activity by other market participants.

In addition to the effect that purchases and sales of Bitcoin by the Trust may

have on the price of Bitcoin, other exchange-traded products with similar investment objectives could represent a substantial portion

of demand for Bitcoin at any given time and the sales and purchases by such investment vehicles may impact the price of Bitcoin.

If the price of Bitcoin declines, the trading price of the Units will generally also decline.

Difficulties or limitations in

the processes of issuance and redemption (if any) of Units may interfere with opportunities for arbitrage transactions intended

to keep the price of the Units closely linked to the price of Bitcoin, which may adversely affect an investment in the Units.

If the processes

of issuance and trading of the Units encounter any unanticipated difficulties, potential market participants who would otherwise

be willing to purchase or redeem Units to take advantage of any arbitrage opportunity arising from discrepancies between the price

Difficulties or limitations in the

processes of issuance and redemption (if any) of Units may interfere with opportunities for arbitrage transactions intended to

keep the price of the Units closely linked to the price of Bitcoin, which may adversely affect an investment in the Units.

If the processes of

issuance and trading of the Units encounter any unanticipated difficulties, potential market participants who would otherwise be

willing to purchase or redeem Units to take advantage of any arbitrage opportunity arising from discrepancies between the price

of the Units and the price of the underlying Bitcoin may not take the risk that, as a result of those difficulties, they may not

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Information about the Trust’s historical trading prices,

including its premiums is located on page 50 under “Secondary Market Trading.”

including its premiums is located under “Secondary Market Trading.”

Disruptions at OTC trading desks

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and potential consequences of a Bitcoin exchange’s failure could adversely affect an investment in the Units.

Bitcoin exchanges

operate websites on which users can trade Bitcoin for U.S.

dollars, other government currencies and other cryptocurrencies.

Bitcoin exchanges operate

websites on which users can trade Bitcoin for U.S.

dollars, currencies of other governments and other cryptocurrencies.

on Bitcoin exchanges are unrelated to transfers of Bitcoin between users via the Bitcoin network.

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Bitcoin exchanges are an important part of the Bitcoin industry.

Bitcoin exchanges

have a limited history.

Since 2009, several Bitcoin exchanges have been closed or experienced disruptions due to fraud, failure,

security breaches or distributed denial of service attacks, a/k/a “DDoS Attacks.” In many of these instances, the customers

Bitcoin exchanges have

a limited history.

Since 2009, several Bitcoin exchanges have been closed or experienced disruptions due to fraud, failure, security

breaches or distributed denial of service attacks, a/k/a “DDoS Attacks.” In many of these instances, the customers

of such exchanges were not compensated or made whole for the partial or complete losses of their funds, Bitcoin or other cryptocurrencies

held at the exchanges.

largest Bitcoin exchange at the time, Mt.

Gox, filed for bankruptcy in Japan amid reports the exchange lost up to 850,000 Bitcoin,

valued then at over $450 million.

Bitcoin exchanges are also appealing targets for hackers and malware.

In August 2016, Bitfinex,

an exchange located in Hong Kong, reported a security breach that resulted in the theft of approximately 120,000 Bitcoin valued

at the time at approximately $72 million, a loss which was allocated to all Bitfinex account holders (rather than just specified

holders whose wallets were affected directly), regardless of whether the account holder held Bitcoin or cash in their account.

In February 2017 following a statement by the People’s Bank of China, China’s three largest exchanges (BTCC, Huobi

and OKCoin) suspended withdrawals of users’ Bitcoin.

Although withdrawals were permitted to resume in late May 2017, Chinese

regulators in September 2017 issued a directive to Chinese exchanges to cease operations with respect to Chinese users by September

In July 2017, the Financial Crimes Enforcement Network (“FinCEN”) and the U.S.

Department of Justice levied

a $110 million fine and an indictment against BTC-e, another Bitcoin exchange and one of its operators for financial crimes.

Department of Justice also seized the Internet domain of the exchange.

Similar to the outcome of the Bitfinex breach, losses due

to assets seized by FinCEN were allocated among exchange users.

In addition, it has been reported that Bitcoin exchange Coincheck

lost approximately $500 million to hackers in 2018 and that Bitcoin exchange Binance lost approximately $40 million to hackers

The potential for instability of Bitcoin exchanges and the closure or temporary shutdown of exchanges due to fraud, business

failure, hackers, DDoS or malware, or government-mandated regulation may reduce confidence in Bitcoin, which may result in greater

volatility in the Bitcoin Market Price.

Because the Trust

relies on the 4:00 p.m., New York time price of Bitcoin traded on Coinbase Pro to determine the Bitcoin Market Price, which is

the basis for both the Trust’s NAV and reference for evaluating whether the Trust is achieving its investment objective,

any disruption to Coinbase Pro’s operations affecting the ability to trade or the Trust’s ability to value Bitcoin

could negatively affect trading in the Trust’s Units and the ability to determine the Trust’s NAV per Unit, both during

the disruption and until the impact of the disruption is absorbed by the marketplace.

Moreover, because Coinbase Pro is not regulated

as a national securities exchange by the SEC or otherwise as an exchange by a federal regulator, there may be greater risk in relying

on Coinbase Pro as the reference for the Bitcoin Market Price which used for the Trust’s NAV.

For example, there may be greater

risk of price fluctuations, front running and price manipulation than if Coinbase Pro were regulated as an exchange, Coinbase Pro

is also a relatively new market, having started operations less than ten years ago, and it could be subject to more operational

problems than more established, more highly regulated markets, such as national securities exchanges.

Despite efforts

to ensure accurate pricing, the Bitcoin Market Price and the price of Bitcoin generally, remains subject to volatility.

Such volatility

can adversely affect an investment in the Units.

Momentum pricing of Bitcoin may

subject the Bitcoin price to greater volatility and adversely affect an investment in the Units.

Momentum pricing

typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for

anticipated future appreciation in value.

The Sponsor believes that momentum pricing of Bitcoin has resulted, and may continue

to result, in speculation regarding future appreciation in the value of Bitcoin, inflating and making more volatile the value of

As a result, Bitcoin may be more likely to fluctuate in value due to changing investor confidence in future appreciation

in the Bitcoin price, which could adversely affect an investment in the Units.

Risk Factors Related to the Trust

and the Units

In 2014, the largest Bitcoin exchange at the time, Mt.

Gox, filed for bankruptcy in Japan amid reports the

exchange lost up to 850,000 Bitcoin, valued then at over $450 million.

Bitcoin exchanges are also appealing targets for hackers

In August 2016, Bitfinex, an exchange located in Hong Kong, reported a security breach that resulted in the theft

of approximately 120,000 Bitcoin valued at the time at approximately $72 million, a loss which was allocated to all Bitfinex account

holders (rather than just specified holders whose digital wallets were affected directly), regardless of whether the account holder

held Bitcoin or cash in their account.

In February 2017 following a statement by the People’s Bank of China, China’s

three largest exchanges (BTCC, Huobi and OKCoin) suspended withdrawals of users’ Bitcoin.

Although withdrawals were permitted

to resume in late May 2017, Chinese regulators in September 2017 issued a directive to Chinese exchanges to cease operations with

respect to Chinese users by September 30, 2017.

In July 2017, FinCEN and the U.S.

Department of Justice levied a $110 million fine

and an indictment against BTC-e, another Bitcoin exchange and one of its operators for financial crimes.

The Department of Justice

also seized the Internet domain of the exchange.

Similar to the outcome of the Bitfinex breach, losses due to assets seized by

FinCEN were allocated among exchange users.

In addition, it has been reported that Bitcoin exchange Coincheck lost approximately

$500 million to hackers in 2018 and that Bitcoin exchange Binance lost approximately $40 million to hackers in 2019.

The potential

for instability of Bitcoin exchanges and the closure or temporary shutdown of exchanges due to fraud, business failure, hackers,

DDoS or malware, or government-mandated regulation may reduce confidence in Bitcoin, which may result in greater volatility in

the Bitcoin Market Price.

Because the Trust relies

on the 4:00 p.m., New York time price of Bitcoin traded on Coinbase Pro to determine the Bitcoin Market Price, which is the basis

for the Trust’s NAV, any disruption to Coinbase Pro’s operations affecting the Trust’s ability to value Bitcoin

could negatively affect the ability to determine the Trust’s NAV per Unit, both during the disruption and until the impact

of the disruption is absorbed by the marketplace.

Moreover, because Coinbase Pro is not regulated as a national securities exchange

by the SEC or otherwise as an exchange by a federal regulator, there may be greater risk in relying on Coinbase Pro as the reference

for the Bitcoin Market Price which used for the Trust’s NAV.

For example, there may be greater risk of price fluctuations,

front running and price manipulation than if Coinbase Pro were regulated as an exchange, Coinbase Pro is also a relatively new

market, having started operations fewer than ten years ago, and it could be subject to more operational problems than more established,

more highly regulated markets, such as national securities exchanges.

Despite efforts to ensure

accurate pricing, the Bitcoin Market Price and the price of Bitcoin generally, remains subject to volatility.

Such volatility can

adversely affect an investment in the Units.

Momentum pricing of Bitcoin may subject

the Bitcoin price to greater volatility and adversely affect an investment in the Units.

Momentum pricing typically

is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated

future appreciation in value.

The Sponsor believes that momentum pricing of Bitcoin has resulted, and may continue to result, in

speculation regarding future appreciation in the value of Bitcoin, inflating and making more volatile the value of a Bitcoin.

a result, Bitcoin may be more likely to fluctuate in value due to changing investor confidence in future appreciation in the Bitcoin

price, which could adversely affect an investment in the Units.

Risk Factors Related to the Trust and

As the Sponsor and its management

have little history of operating the Trust, their experience may be inadequate or unsuitable to manage the Trust.

The Sponsor has

only a limited history of past performance in managing the Trust.

Similarly, the Sponsor’s management has only a limited

history of past performance in managing the Trust.

The past performances of the Sponsor and management in other positions are no

indication of their ability to manage an investment vehicle such as the Trust.

If the experience of the Sponsor and its management

is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust may be adversely affected.

The Trust has only a limited

performance history.

The Trust has only

a limited operating history.

Therefore, a potential Unitholder has little performance history, aside from the historical price

of Bitcoin, to serve as a factor in evaluating an investment in the Trust.

The Units are new securities

and their value could decrease if unanticipated operational or trading problems arise.

The mechanisms and

procedures governing the issuance, redemption (if any) and offering of the Units have been developed specifically for the Trust.

Consequently, there may be unanticipated problems or issues with respect to the mechanisms of the operations of the Trust and the

trading of the Units, which could have a material adverse effect on an investment in the Units.

In addition, to the extent that

unanticipated operational or trading problems or issues arise, the Trust management’s past experience and qualifications

may not be suitable for solving these problems or issues.

Fees and expenses are charged

regardless of profitability.

Unitholders in the

Trust will pay fees and expenses in connection with their investment in Units, including the Management Fee at an annualized rate

of 0.49% of the average daily NAV of the Trust.

The Sponsor will bear the routine operational, administrative and other ordinary

fees and expenses of the Trust (the “Assumed Expenses”);

provided, however, that the Trust shall be responsible for

audit fees, index license fees, aggregate legal fees in excess of $50,000 per annum and the fees of the Custodian (the “Excluded

Expenses”) and certain extraordinary expenses of the Trust, including but not limited to taxes and governmental charges,

expenses and costs, expenses and indemnities related to any extraordinary services performed by the Sponsor (or any other Service

Provider, including the Trustee) on behalf of the Trust to protect the Trust or the interest of Unitholders, indemnification expenses,

fees and expenses related to public quotation on OTCQX (the “Extraordinary Expenses.”)

The Trust qualifies as a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting

companies may make the Units less desirable.

The Trust qualifies as a “smaller reporting company” under the rules of the SEC.

As a smaller reporting company, the Trust will be able to take advantage of certain reduced disclosure requirements, such as reduced financial statement disclosure requirements permitting only two years of audited financial statements.

Decreased disclosures in the Trust’s SEC filings due to its status as a smaller reporting company may make it harder for investors to analyze the Trust’s results of operations and financial prospects.

The Trust cannot predict if investors will find the Trust’s units less attractive because of its smaller reporting company status and reduced disclosure.

The Sponsor has only

a limited history of past performance in managing the Trust.

Similarly, the Sponsor’s management has only a limited history

of past performance in managing the Trust.

The past performances of the Sponsor and management in other positions are no indication

of their ability to manage an investment vehicle such as the Trust.

If the experience of the Sponsor and its management is inadequate

or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust may be adversely affected.

Because of the lack of an ongoing

redemption program for Unitholders that invest directly into the Trust (as opposed to Unitholders who acquire Units in the public

secondary trading market) there is no arbitrage mechanism to keep the price of the Units closely linked to the value of the underlying

Bitcoin holdings held by the Trust, less the Trust’s expenses and other liabilities, on any secondary trading market.

Because of the lack

of an ongoing redemption program for Unitholders that invest directly into the Trust, the Trust cannot rely on arbitrage opportunities

resulting from differences between the price of the Units and the price of Bitcoin.

As a result, the value of the Units may not

approximate, and the Units may trade at a substantial premium over, or discount to, the value of the Bitcoin holdings, less the

Trust’s expenses and other liabilities, on any secondary trading market.

Investors who purchase Units in the secondary market

that are trading at a substantial premium over, or discount to, the NAV per Unit may not be able to realize losses or gains if

the premium decreases, or discount increases, after the purchase of Units.

At times when the Units trade at a substantial premium

to the NAV per Unit, investors who purchase Units on OTCQX may pay substantially more for their Units than investors who purchase

Units in the private placements.

The Trust has only a limited performance

The Trust has only a

limited operating history.

Therefore, a potential Unitholder has little performance history, aside from the historical price of

Bitcoin, to serve as a factor in evaluating an investment in the Trust.

The value of the Units could decrease

if unanticipated operational or trading problems arise.

The mechanisms and procedures governing

the issuance, redemption (if any) and offering of the Units have been developed specifically for

Consequently, there

may be unanticipated problems or issues with respect to the mechanisms of the operations of the Trust and the trading of the Units,

which could have a material adverse effect on an investment in the Units.

In addition, to the extent that unanticipated operational

or trading problems or issues arise, the Trust management’s past experience and qualifications may not be suitable for solving

these problems or issues.

Substantial sales or dispositions

by a large Unitholder could negatively impact the price of our Units in the secondary market.

The market price of

our Units could decline as a result of substantial sales or dispositions of our Units by large Unitholders.

A large disposition

of Units may cause a negative perception of our Units in the market and could result in other Unitholders deciding to sell and

further disrupt the market price of our Units.

Fees and expenses are charged regardless

of profitability.

Unitholders in the Trust

will pay fees and expenses in connection with their investment in Units, including the Management Fee at an annualized rate of

0.49% of the average daily NAV of the Trust.

The Sponsor will bear the Assumed Expenses;

provided, however, that the Trust shall

be responsible for the Excluded Expenses and the Extraordinary Expenses.

The Trust qualifies as a “smaller

reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make the Units less

The Trust qualifies

as a “smaller reporting company” under the rules of the SEC.

As a smaller reporting company, the Trust will be able

to take advantage of certain reduced disclosure requirements, such as reduced financial statement disclosure requirements permitting

only two years of audited financial statements.

Decreased disclosures in the Trust’s SEC filings due to its status as a smaller

reporting company may make it harder for investors to analyze the Trust’s results of operations and financial prospects.

The Trust cannot predict if investors will find the Trust’s units less attractive because of its smaller reporting company

status and reduced disclosure.

The security of our Bitcoin Holdings

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The Trust’s Bitcoin

holdings are held by a custodian subject to security methods and procedures designed to ensure the Trust’s control over

those holdings and keep those holdings safe from unauthorized use, theft or other misuse.

However, no security measures can provide

assurance that the Trust’s Bitcoin holdings will not be affected by theft, misuse, cybersecurity breaches or other harms.

FDAS was engaged to keep in safe custody the Trust’s digital assets

for the period ended December 31, 2021 and until the Trust transferred its custodied digital assets to Coinbase Custody on March

The Trust provided notice of termination if the Custodial Services Agreement to FDAS on March 11, 2022, which will go

into effect on April 10, 2022.

The Custodial Services Agreement that the Trust entered into with FDAS indicated that the Custodian

was not liable for any loss that was caused, directly or indirectly, by any non-adherence by the Trust to the Custodian’s

policies and procedures, any action taken by the Custodian , which in its sole discretion, may be necessary or advisable to secure

the digital assets or accounts of the Trust or enhance the ability of the Custodian’s ability to secure the Trust’s

assets or other exceptions (e.g., force majeure events) under the Custodial Services Agreement.

In addition, although we may be

entitled to indemnification for certain breaches of the Custodial Services Agreement or the loss or theft of our assets, securing

recovery for any such losses may require us to devote substantial time and resources to the task, with no guarantee of success.

The terms of the New Custodial Services Agreement also limit the liability of the custodian.

In this respect, Coinbase Custody’s

liability with respect to the Trust will never exceed the value of the Bitcoins on deposit in the digital asset account at the

time of, and directly relating to, the events giving rise to the liability occurred, as determined in accordance with the New

Custodial Services Agreement.

In addition, the maximum liability with respect to each cold storage address is limited to $100,000,000.

While the Trust has taken and will continue to take steps to secure its assets, the Trust’s assets are continuously subject

to risks of theft, fraud and other security breaches, and some or all of the Trust’s assets may be lost or otherwise compromised

as a result of such security breaches.

FDAS held the Trust’s Bitcoin in an omnibus account, a portion of which is held in cold storage

(i.e., offline, not connected to the Internet), and a portion of which is held in “hot” storage to facilitate transfer

of the Bitcoin.

FDAS did not disclose the amount of Bitcoin it held in cold storage versus hot storage, and the Trust did not have

authority to direct the amount of Bitcoin the Custodian held in cold storage or hot storage.

Amounts of Bitcoin maintained in hot

storage are more vulnerable to loss and theft than Bitcoin maintained in cold storage.

To the extent significant amounts of Bitcoin

held on behalf of the Trust were in hot storage, the Trust’s risk of loss and theft may be greater than anticipated, as any

such losses may not be recoverable by the Trust.

Possibility of termination of

the Trust may adversely affect a Unitholder’s portfolio.

The Sponsor may

terminate the Trust in its sole discretion upon the occurrence of certain events, and shall terminate the Trust upon the occurrence

of certain other events.

If this power is so exercised, Unitholders who may wish to continue to invest in Bitcoin through the Trust

will have to find another vehicle, and may not be able to find another vehicle that offers the same features as the Trust.

detrimental developments could cause a Unitholder to liquidate its investments and upset the overall maturity and timing of its

investment portfolio.

Any errors, discontinuance or

changes in determining the value of the Bitcoin held by the Trust may have an adverse effect on the value of the Units.

The Administrator

will determine the NAV of the Trust and the NAV per Unit on a daily basis as soon as practicable after 4:00 p.m., New York time

on each Business Day.

holdings are held by a custodian subject to security methods and procedures designed to ensure the Trust’s control over those

holdings and keep those holdings safe from unauthorized use, theft or other misuse.

However, no security measures can provide assurance

that the Trust’s Bitcoin holdings will not be affected by theft, misuse, cybersecurity breaches or other harms.

engaged to keep in safe custody the Trust’s digital assets for the period ended December 31, 2021 and until the Trust transferred

its custodied digital assets to Coinbase Custody on March 10, 2022.

The Trust provided notice of termination of the custodial services

agreement with FDAS on March 11, 2022, which was effective on April 10, 2022.

The terms of the Custodial Services Agreement with

Coinbase Custody limit the liability of the custodian.

In this respect, Coinbase Custody’s liability with respect to the

Trust will never exceed the value of the Bitcoins on deposit in the digital asset account at the time of, and directly relating

to, the events giving rise to the liability occurred, as determined in accordance with the Custodial Services Agreement.

the maximum liability with respect to each cold storage address is limited to $100,000,000.

The Custodian is subject

to certain risks related and challenges, including cybersecurity risks such as ransomware, malicious code, destructive malware

and other hidden threats, fake antiviruses, spyware, phishing and other imposter style attacks.

The Custodian manages such risks through the Coinbase Global

Information Security Program Policy (“Information Security Policy”).

However, the Custodian may not be able to prevent

all illicit activity and may be the victim of a hack by illicit actors.

For example, between March and May 2021, illicit actors

gained unauthorized access to the accounts of Coinbase customers via an indeterminate method, where the illicit actors gained knowledge

of the email address, password, and phone number associated with certain Coinbase customer accounts.

With such information and

for customers who use SMS texts for two-factor authentication, the illicit actor took advantage of a flaw in Coinbase’s SMS

Account Recovery process in order to receive an SMS two-factor authentication token and gain access to the customer’s account.

At least 6,000 Coinbase customers had funds removed from their accounts.

The Custodian addresses such challenges by ensuring its

Information Security Policy is reviewed and updated at least annually, and which must be presented to the Board of Directors.

Custody’s cold storage solution has not had a publicly disclosed incident of, nor are we aware of any incident of, lost client

funds, to date.

While the Trust has taken and will continue to take steps to secure its assets, the Trust’s assets are continuously

subject to risks of theft, fraud and other security breaches, and some or all of the Trust’s assets may be lost or otherwise

compromised as a result of such security breaches.

The Custodian is not liable for any

lost profits or any special, incidental, indirect, intangible, or consequential damages arising out of or in connection with authorized

or unauthorized use of the Coinbase Custody site or the custodial services.

The Custodian and its

affiliates are not liable (a) for any amount greater than the value of Bitcoin on deposit in the Custodial Account at the time

of the events giving rise to the liability (the value of which shall be calculated at the average U.S.

dollar ask price, at the

time of the loss, of the three (3) largest exchanges (by trailing 30-day volume) which offer the relevant digital currency or digital

asset/USD trading pair, as relevant, subject to the per address limitation as described below) and/or (b) for any lost profits

or any special, incidental, indirect,

intangible, or consequential damages arising out of or in connection with authorized or unauthorized

use of the Coinbase Custody site or the custodial services.

The Custodian does not make any representations or warranties that

access to the site or any part of the custodial services will be continuous, uninterrupted, or timely;

be compatible or work with

any software, system or other services;

or be secure, complete, free of harmful code, or error-free.

The Custodian does not

bear any liability for any damage or interruptions caused by any computer viruses or other malware that may affect the Trust’s

computer or other equipment, or any phishing, spoofing or other attack, unless such damage or interruption directly resulted from

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

Such gross negligence, fraud, or willful misconduct will

be determined on a facts and circumstances basis and may include activity such as failing to timely react to a cybersecurity incident,

preventable fraudulent activity, and the willful misconduct of Coinbase Custody representative officers, directors, and employees.

In any case, the Custodian is not liable for any amount greater than the value of the Bitcoin holdings and its maximum liability

for each cold storage address is limited to $100,000,000.

The Trust does not maintain audit

or inspection rights under the Custodial Services Agreement, and as such our Bitcoin Holdings held in the custodial account cannot

be independently verified.

The Trust does not enjoy

audit or inspection rights under the Custodial Services Agreement and cannot independently verify the Bitcoin Holdings held in

the custodial account.

The Sponsor relies on the Custodian’s System and Organization Controls (“SOC”) reports

to provide assurances as to the existence of the Trust’s Bitcoin at the Custodian.

SOC reports are internal control evaluations

conducted by independent auditors.

SOC 1 reports broadly comment on controls and processes that impact financial statements and

SOC 2 reports comment on controls and processes that address the security, availability, processing integrity, confidentiality

SOC 1 and 2 reports can be subcategorized into Type I, which is an attestation of controls at a service organization

at specific point in time, and Type II, which is an attestation of controls as a service organization over a period of time.

Custodian engages an independent auditor to conduct both a SOC 1, Type II audit and a SOC 2, Type II audit.

Such reports cannot

specifically identify the existence of the Trust’s Bitcoin Holdings at the Custodian.

The Trust can use such reports to demonstrate

the existence of effective controls in place by the Custodian providing assurance and confidence in the Custodian’s service

delivery processes and controls for digital assets.

Possibility of termination of the

Trust may adversely affect a Unitholder’s portfolio.

The Sponsor may terminate

the Trust in its sole discretion upon the occurrence of certain events, and shall terminate the Trust upon the occurrence of certain

other events.

If this power is so exercised, Unitholders who may wish to continue to invest in Bitcoin through the Trust will have

to find another vehicle, and may not be able to find another vehicle that offers the same features as the Trust.

Such detrimental

developments could cause a Unitholder to liquidate its investments and upset the overall maturity and timing of its investment

Any errors, discontinuance or changes

in determining the value of the Bitcoin held by the Trust may have an adverse effect on the value of the Units.

The Administrator will

determine the NAV of the Trust and the NAV per Unit on a daily basis as soon as practicable after 4:00 p.m., New York time on each

Business Day.

The Administrator’s determination will be made based on the Bitcoin Market Price.

To the extent that

such NAV or NAV per Unit is incorrectly calculated, there may be no liability for any error, but such misreporting of valuation

data could adversely affect an investment in the Units.

Unitholders may be adversely

affected by redemption orders that are subject to postponement, suspension or rejection under certain circumstances.

If redemptions of

Units are ever permitted, the Sponsor may nevertheless, in its discretion, suspend the right of redemption or postpone the redemption

settlement date if (i) the order is not in proper form as determined by the Trust or Sponsor, (ii) during an emergency as a result

of which delivery, disposal or evaluation of Bitcoin is not reasonably practicable, or (iii) for such other period as the Sponsor

To the extent that such NAV

or NAV per Unit is incorrectly calculated, there may be no liability for any error, but such misreporting of valuation data could

adversely affect an investment in the Units.

Unitholders may be adversely affected

by redemption orders that are subject to postponement, suspension, or rejection under certain circumstances.

If redemptions of Units

are ever permitted, the Sponsor may nevertheless, in its discretion, suspend the right of redemption or postpone the redemption

settlement date if (1) the order is not in proper form as determined by the Trust or Sponsor, (2) during an emergency as a result

of which delivery, disposal or evaluation of Bitcoin is not reasonably practicable, or (3) for such other period as the Sponsor

determines to be necessary for the protection of Unitholders.

Any such postponement, suspension or rejection could adversely

affect a redeeming investor.

the resulting delay may adversely affect the value of the investor’s redemption proceeds if the NAV of the Trust declines

during the period of delay.

The Trust disclaims any liability for any loss or damage that may result from any such suspension or

postponement.

As a Unitholder, you will not

have the rights normally associated with ownership of other types of investment vehicles.

For example, in comparison to those of

securityholders in traditional operating companies, you will have no voting rights.

Any such postponement, suspension or rejection could adversely affect

a redeeming investor.

For example, the resulting delay may adversely affect the value of the investor’s redemption proceeds

if the NAV of the Trust declines during the period of delay.

The Trust disclaims any liability for any loss or damage that may

result from any such suspension or postponement.

As a Unitholder, you will not have

the rights normally associated with ownership of Units of other types of investment vehicles.

For example, in comparison to those

of securityholders in traditional operating companies, you will have no voting rights.

The Trust is a passive

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acquiring the right to elect directors, to vote on certain matters regarding the issuer of your Units or to take other actions

normally associated with the ownership of shares, such as the right to bring “oppression” or “derivative”

associated with the ownership of shares, such as the right to bring “oppression” or “derivative”

You will only have the extremely limited rights described under “Description of the Units.”

Your right to bring derivative

actions is limited and it might be difficult for minority Unitholders to locate other Unitholders to reach the ownership threshold

for derivative actions.

Under section 7.4

of the Trust Agreement, no Unitholder shall have the right to bring or maintain a derivative action, suit or other proceeding on

behalf of the Trust unless two or more Unitholders who (i) are not affiliates of one another and (ii) collectively hold at least

10% of the outstanding Units join in the bringing or maintaining of such action, suit or other proceeding.

A minority Unitholder

may have difficulties attempting to locate other Unitholders to reach the 10% threshold under this provision, further limiting

investors’ right to bring derivative actions on behalf of the Trust.

The value of the Units will be

adversely affected if the Trust is required to indemnify the Sponsor or the Custodian as contemplated in the Trust Agreement or

the Custodial Services Agreement.

Under the Trust

Agreement, each of the Sponsor and the Trustee has a right to be indemnified from the Trust for any liability or expense it incurs

without gross negligence, bad faith or willful misconduct on its part.

Your right to bring derivative actions

is limited and it might be difficult for minority Unitholders to locate other Unitholders to reach the ownership threshold for

derivative actions.

Under Section 7.4 of

the Trust Agreement, no Unitholder shall have the right to bring or maintain a derivative action, suit or other proceeding on behalf

of the Trust unless two or more Unitholders who (i) are not affiliates of one another and (ii) collectively hold at least 10% of

the outstanding Units join in the bringing or maintaining of such action, suit or other proceeding.

This provision applies to any

derivative actions brought in the name of the Trust other than claims under the federal securities laws and the rules and regulations

Due to this additional requirement, a Unitholder attempting to bring or maintain a derivative action in the name of

the Trust will be required to locate other Unitholders with which it is not affiliated and that have sufficient Units to meet the

10.0% threshold based on the number of Units outstanding on the date the claim is brought and thereafter throughout the duration

of the action, suit or proceeding.

A minority Unitholder may have difficulties attempting to locate other Unitholders to reach

the 10% threshold under this provision and may result in increased costs to a Unitholder attempting to seek redress in the name

of the Trust in court, further limiting investors’ right to bring derivative actions on behalf of the Trust.

The value of the Units will be adversely

affected if the Trust is required to indemnify the Sponsor or the Custodian as contemplated in the Trust Agreement or the Custodial

Services Agreement.

Under the Trust Agreement,

each of the Sponsor and the Trustee has a right to be indemnified from the Trust for any liability or expense it incurs without

gross negligence, bad faith or willful misconduct on its part.

Under the Trust Agreement, the Trust’s officers, directors,

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could become illiquid, which could cause large losses to Unitholders at any time or from time to time.

The Trust may not

always be able to liquidate its Bitcoin at a desired price, or at all.

It may become difficult to execute a trade at a specific

price when there is a relatively small volume of buy and sell orders in the marketplace, including on Bitcoin exchanges and with

OTC Bitcoin participants.

The Trust may not always

be able to liquidate its Bitcoin at a desired price, or at all.

It may become difficult to execute a trade at a specific price

when there is a relatively small volume of buy and sell orders in the marketplace, including on Bitcoin exchanges and with OTC

Bitcoin participants.

A market disruption,

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To the extent the Trust erroneously

transfers, whether accidental or otherwise, Bitcoin in incorrect amounts or to the wrong recipients, the Trust may be unable to

recover the Bitcoin, which could adversely affect an investment in the Units.

The Trust’s Bitcoin may

be lost, stolen or subject to other inaccessibility.

There is a risk

that part or all of the Trust’s Bitcoin could be lost, stolen or destroyed.

Although the Trust will secure the Trust’s

Bitcoin to seek to minimize the risk of loss, the Trust cannot guarantee that such a loss will be prevented.

Access to the Trust’s

Bitcoin could also be restricted by natural events (such as a hurricane, earthquake or pandemic) or human actions (such as a terrorist

Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Units.

the section below entitled “The Bitcoin Security System” for more information relating to the Trust’s security

Any disruptions to the computer

technology used by the Trust or its service providers could adversely affect the Trust’s ability to function and an investment

in the Units.

transfers, whether accidental or otherwise, Bitcoin in incorrect amounts or to the wrong recipients, the Trust may be unable to recover the Bitcoin, which could adversely

affect an investment in the Units.

The Trust’s Bitcoin may be

lost, stolen or subject to other inaccessibility.

There is a risk that

part or all of the Trust’s Bitcoin could be lost, stolen or destroyed.

Hackers or malicious actors may launch attacks to

steal or compromise cryptocurrencies, such as by attacking the network source code, exchange miners, third-party platforms, cold

and hot storage locations or software, or by other means.

Digital asset transactions and accounts are not insured by any type of

government program and cryptocurrency transactions generally are permanent by design of the networks.

Certain features of digital

asset networks, such as decentralization, the open-source protocols, and the reliance on peer-to-peer connectivity, may increase

the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response.

Although the Trust will

secure the Trust’s Bitcoin to seek to minimize the risk of loss, the Trust cannot guarantee that such a loss will be prevented.

Access to the Trust’s Bitcoin could also be restricted by natural events (such as a hurricane, earthquake or pandemic) or

human actions (such as a terrorist attack).

Any of these events may adversely affect the operations of the Trust and, consequently,

investment in the Units.

See the section below entitled “The Bitcoin Security System” for more information relating

to the Trust’s security measures.

Any disruptions to the computer technology

used by the Trust or its service providers could adversely affect the Trust’s ability to function and an investment in the

The Trust will monitor

6 unchanged sentences

in the Units.

The Trust may take

such steps as the Sponsor determines, in its sole judgment, to be required to maintain and upgrade its technology systems, in order

The Trust may take such

steps as the Sponsor determines, in its sole judgment, to be required to maintain and upgrade its technology systems, in order

to protect against failure, hacking, malware and general security threats, and it expects its service providers to take their own

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its Bitcoin may adversely affect an investment in the Units.

The Sponsor’s computer

infrastructure may be vulnerable to security breaches.

Any such problems could cause interruptions in the Trust’s operations

and adversely affect an investment in the Units.

The Sponsor’s computer infrastructure

may be vulnerable to security breaches.

Any such problems could cause interruptions in the Trust’s operations and adversely

affect an investment in the Units.

The Sponsor’s

17 unchanged sentences

the Trust’s Bitcoin with its technology system may adversely affect the Trust and the value of an investment in the Units.

The lack of full insurance and

Unitholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent and Custodian expose the

Trust and its Unitholders to the risk of loss of the Trust’s Bitcoins for which no person or entity is liable.

The Trust is not a

banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities

Investor Protection Corporation (“SIPC”) and, therefore, deposits held with or assets held by the Trust are not

subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

In addition, neither the Trust nor

the Sponsor directly insures the Trust’s Bitcoins.

While FDAS has insurance as a subsidiary under its parent company,

FMR LLC, such insurance is solely for the benefit of FDAS and does not guarantee or insure the Trust in any way.

The New Custodial Services

Agreement indicates that Coinbase Custody will obtain and maintain insurance

coverage of such types and amounts as are commercially reasonable for the custodial services provided, however, Unitholders cannot

be assured that Coinbase Custody will maintain adequate insurance or that such coverage will cover losses with respect to the

Trust’s assets.

Pursuant to the Custodial Services Agreement with FDAS, FDAS did not warrant or guarantee the form, authenticity,

value or validity of any Asset received by FDAS.

FDAS was not responsible for the services provided by the Bitcoin Network, such

as verifying and confirming transactions that are submitted to the Bitcoin Network.

Furthermore, FDAS could not cancel or reverse

a transaction that had been submitted to the Bitcoin Network, except by an instruction to halt a withdrawal of Digital Asset within

three hours immediately following receipt of a confirmation provided to the Trust by FDAS of a pending withdrawal transaction.

To the extent FDAS did not cause or contribute to a loss that the Trust or Sponsor suffered in connection with any Bitcoin transaction

initiated pursuant to FDAS’s services, FDAS would have no liability for such loss.

The Unitholders’

recourse against the Sponsor and the Trust’s other service providers for the services they provide to the Trust, including

those relating to the provision of instructions relating to the movement of Bitcoin, is limited.

Consequently, a loss may be suffered

with respect to the Trust’s Bitcoin

that is not covered by insurance and for which no person is liable in damages.

As a result, the recourse of the Trust or the Unitholders

Because the Units reflect the

estimated accrued but unpaid expenses of the Trust, the number of Bitcoins represented by a Unit will gradually decrease over time

as the Trust’s Bitcoins are used to pay the Trust’s expenses.

Each outstanding

Unit represents a fractional, undivided interest in the Bitcoins held by the Trust.

The Units reflect the estimated accrued but

unpaid expenses of the Trust.

Therefore, the number of Bitcoins represented by each Unit will gradually decrease over time as the

Because the Units reflect the estimated

accrued but unpaid expenses of the Trust, the number of Bitcoins represented by a Unit will gradually decrease over time as the

Trust’s Bitcoins are used to pay the Trust’s expenses.

This is also true with respect to Units that are issued in exchange

for additional deposits of Bitcoins into the Trust, as the number of Bitcoins required to create Units proportionately reflects

the number of Bitcoins represented by the Units outstanding at the time of creation.

Assuming a constant Bitcoin price, the trading

price of the Units is expected to gradually decrease relative to the price of Bitcoin as the number of Bitcoins represented by

the Units gradually decreases.

Investors should be aware that the gradual decrease in the number of Bitcoins represented by the

Units will occur regardless of whether the trading price of the Units rises or falls in response to changes in the price of Bitcoin.

Unitholders may not be able to

withdraw or value his/her units upon death, legal disability, bankruptcy, insolvency, dissolution or withdrawal from the Trust.

Under the Trust

Agreement, the death, legal disability, bankruptcy, insolvency, dissolution or withdrawal of any Unitholder (as long as such Unitholder

is not the sole Unitholder of the Trust) shall not result in the termination of the Trust, and such Unitholder, his/her estate,

custodian or personal representative shall have no right to withdrawal or value such Unitholder’s Units.

In addition, Unitholders

shall waive the furnishing of any inventory, accounting or appraisal of the assets of the Trust and any right to an audit or examination

Each outstanding Unit

represents a fractional, undivided interest in the Bitcoins held by the Trust.

The Units reflect the estimated accrued but unpaid

expenses of the Trust.

Therefore, the number of Bitcoins represented by each Unit will gradually decrease over time as the Trust’s

Bitcoins are used to pay the Trust’s expenses.

This is also true with respect to Units that are issued in exchange for additional

deposits of Bitcoins into the Trust, as the number of Bitcoins required to create Units proportionately reflects the number of

Bitcoins represented by the Units outstanding at the time of creation.

Assuming a constant Bitcoin price, the trading price of

the Units is expected to gradually decrease relative to the price of Bitcoin as the number of Bitcoins represented by the Units

gradually decreases.

Investors should be aware that the gradual decrease in the number of Bitcoins represented by the Units will

occur regardless of whether the trading price of the Units rises or falls in response to changes in the price of Bitcoin.

Unitholders may not be able to withdraw

or value his/her units upon death, legal disability, bankruptcy, insolvency, dissolution or withdrawal from the Trust.

Under the Trust Agreement,

the death, legal disability, bankruptcy, insolvency, dissolution or withdrawal of any Unitholder (as long as such Unitholder is

not the sole Unitholder of the Trust) shall not result in the termination of the Trust, and such Unitholder, his/her estate, custodian

or personal representative shall have no right to withdrawal or value such Unitholder’s Units.

In addition, Unitholders shall

waive the furnishing of any inventory, accounting or appraisal of the assets of the Trust and any right to an audit or examination

of the books of the Trust, except as otherwise provided in the Trust Agreement.

There are risks associated with

the Index because of its limited history, which could have an adverse effect on the Trust and the value of an investment in the

The Index has a

limited history and the methodology for determining the Index established by the Index Provider is relatively new and untested.

The failure of the Index methodology to measure the actual value of Bitcoin could have an adverse effect on the Trust and on the

value of an investment in the Trust.

In addition, the value of Bitcoin as calculated by the Index methodology may differ from the

value of Bitcoin calculated by other methodologies and the price of Bitcoin on any single spot market, including the principal

market used to determine NAV.

We have concluded that certain

of our previously issued financial statements should not be relied upon and have restated certain of our previously issued financial

statements which was time-consuming and expensive and could expose us to additional risks that could have a negative effect on

As previously announced,

we have concluded that certain of our previously issued financial statements should not be relied upon.

We restated our previously

issued audited financial statements as of and for the year ended December 31, 2020 and the interim period ended March 31, 2021.

The restatement process could continue to expose us to additional risks that could have a negative effect on the Trust.

In particular,

we incurred some unanticipated expenses and costs, including audit, legal and other professional fees, in connection with the restatement

of our previously issued financial statements and the ongoing remediation of a material weakness in our internal control over financial

reporting, including hiring new personnel and enhancing our policies and procedures.

To the extent these steps are not successful,

we could be forced to incur additional time and expense.

Our Sponsor’s management attention was also diverted from some aspects

of the operation of our business in connection with the restatement and these ongoing remediation efforts.

We have identified a material

weakness in our system of internal controls and are in the process of remediation.

If not remediated, this material weakness could

result in additional material misstatements in our financial statements.

We may be unable to develop, implement and maintain appropriate

controls in future periods.

We identified a material weakness in our internal control over financial reporting as a result of the restatement of previously

audited financial statements for the year ended December 31, 2020 and the interim period ended March 31, 2021 and we

have also concluded that our internal disclosure controls and procedures were not effective.

This material weakness resulted

in identified misstatements to the financial statements, and previously issued financial statements are restated in this filing.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there

is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or

detected on a timely basis.

As a public company,

we will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things,

the effectiveness of our internal control over financial reporting for each annual report on Form 10-K to be filed with the SEC

after our first annual report.

This assessment will require disclosure of any material weaknesses identified by our management

in our internal control over financial reporting.

We will be required to disclose changes made in our internal control and our

reporting procedures on a quarterly

To comply with the requirements of being a public company, we expect to need to undertake various actions, such as implementing

new internal controls and procedures and hiring accounting or internal audit staff.

Failure to comply with the Sarbanes-Oxley Act

could potentially subject us to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities, which would require

additional financial and management resources.

Although we are

working to remedy the ineffectiveness of our internal control over financial reporting and disclosure controls and procedures,

there can be no assurance as to when the remediation plan will be fully developed and implemented.

Until our remediation plan is

fully implemented, we will continue to devote time, attention and financial resources to these efforts.

If we do not complete our

remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk

that our future financial statements could contain errors that will be undetected.

Further and continued determinations that there

are one or more material weaknesses in the effectiveness of our internal control over financial reporting could adversely affect

our business, reputation, revenues, results of operations, financial condition and stock price and limit our ability to access

the capital markets through equity or debt issuances.

The Trust’s Bitcoin Holdings

may be considered property of a bankruptcy estate should our Custodian initiate bankruptcy proceedings and the Trust could be considered

an unsecured creditor, and the Custodian’s assets may not be adequate to satisfy a claim by the Trust.

The legal rights of

customers with respect to digital assets held on their behalf by a third-party custodian, such as the Custodian, in insolvency

proceedings are currently uncertain.

The Custody Agreement contains an agreement by the parties to treat the digital assets credited

to the Trust’s account as financial assets under Article 8 of the New York Uniform Commercial Code (“Article 8”),

in addition to stating that the Custodian will serve as fiduciary and custodian on the Trust’s behalf.

The Custodian’s

parent, Coinbase Global Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody

agreements of provisions relating to Article 8 it believes that a court would not treat custodied digital assets as part of its

general estate in the event the Custodian were to experience insolvency.

However, due to the novelty of digital asset custodial

arrangements courts have not yet considered this type of treatment for custodied digital assets and it is not possible to predict

with certainty how they would rule in such a scenario.

If the Custodian became subject to insolvency proceedings and a court were

to rule that the custodied digital assets were part of the Custodian’s general estate and not the property of the Trust,

then the Trust would be treated as a general unsecured creditor in the Custodian’s insolvency proceedings and the Custodian’s

assets may not be adequate to satisfy a claim by the Trust.

As such, the Trust could be subject to the loss of all or a significant

portion of its assets.

Risks Associated with the Index

The Index has a limited

history and the methodology for determining the Index established by the Index Provider is relatively new and untested.

of the Index methodology to measure the actual value of Bitcoin could have an adverse effect on the Trust and on the value of an

investment in the Trust.

In addition, the value of Bitcoin as calculated by the Index methodology may differ from the value of

Bitcoin calculated by other methodologies and the price of Bitcoin on any single spot market, including the principal market used

to determine NAV.

concluded that certain of our previously issued financial statements should not be relied upon and have restated certain of our

previously issued financial statements which was time-consuming and expensive and could expose us to additional risks that could

have a negative effect on our Company.

previously announced, we have concluded that certain of our previously issued financial statements should not be relied upon.

restated our previously issued audited financial statements as of and for the year ended December 31, 2020 and the interim period

ended March 31, 2021.

The restatement could continue to expose us to additional risks that could have a negative effect on the

In particular, we incurred some unanticipated expenses and costs, including audit, legal and other professional fees, in

connection with the restatement of our previously issued financial statements and the remediation of a material weakness in our

internal control over financial reporting, including hiring new personnel and enhancing our policies and procedures.

To the extent

these steps are not successful, we could be forced to incur additional time and expense.

Our Sponsor’s management attention

was also diverted from some aspects of the operation of our business in connection with the restatement and these ongoing remediation

We previously

identified a material weakness in our system of internal controls.

While we believe the material weakness has been fully remediated,

new material weaknesses could result in additional material misstatements in our financial statements.

We may be unable to develop,

implement and maintain appropriate controls in future periods.

identified a material weakness in our internal control over financial reporting as a result of the restatement of the previously

audited financial statements for the year ended December 31, 2020 and the interim period ended March 31, 2021, and we also concluded

that our internal controls and procedures were not effective as of December 31, 2021, March 31, 2022, June 30, 2022 and September

This material weakness resulted in identified misstatements to the financial statements, and previously issued financial

statements were restated.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial

reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements

will not be prevented or detected on a timely basis.

we believe that we have fully remedied the ineffectiveness of our internal control over financial reporting and disclosure controls

and procedures, there can be no assurance that additional material weakness could occur in the future.

Further and continued determinations

that there are one or more material weaknesses in the effectiveness of our internal control over financial reporting and/or our

disclosure controls and procedures could adversely affect our business, reputation, revenues, results of operations, financial

condition and stock price and limit our ability to access the capital markets through equity or debt issuances.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud.

As a public company, we are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on,

among other things, the effectiveness of our internal control over financial reporting for each annual report on Form 10-K to be

filed with the SEC.

This assessment will require disclosure of any material weaknesses identified by our management in our internal

control over financial reporting.

Any system of internal controls, however well designed and operated, is based in part on certain

assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

If we, or our

independent registered public accounting firm, determine that our internal control over financial reporting is not effective, discover

areas that need improvement in the future or discover a material weakness, these shortcomings could have an adverse effect on our

business and financial results, and the price of our units could be negatively affected.

Any dispute regarding the subscription

agreement will be resolved by arbitration, which follows different procedures than in-court litigation and may be more restrictive

to Unitholders asserting claims than in-court litigation.

The subscription agreement

that Unitholders enter into provides that the sole forum for any dispute arising thereunder will be arbitration conducted in New

York, New York in accordance with the rules of the American Arbitration Association.

As a result, Unitholders will not be able

to pursue litigation in state or federal court for any disputes pertaining to the subscription agreement.

Arbitration is intended

to be the exclusive means for resolving such disputes or claims arising thereunder except for claims made under the federal securities

Costs in arbitration proceedings may be higher than those in litigation proceedings, and Unitholders may face limited access

to information and other imbalances of resources.

This provision can discourage claims against us because it limits the ability

of Unitholders to bring a claim in a judicial forum that they find favorable.

As arbitration provisions in commercial agreements

have generally been respected by federal courts and state courts, we believe that the arbitration provision in the subscription

agreement is enforceable, however, the issue of enforceability is not free from doubt.

To the extent that one or more of the provisions

in our subscription agreement with respect to the arbitration were to be found by a court to be unenforceable, we would abide by

such decision.

We do not intend for secondary purchasers of Unitholders to be bound by the arbitration provision in the subscription

Unitholders are bound by the fee-shifting

provision contained in the subscription agreement, which may discourage actions against us.

The subscription agreement

also provides that if any legal action or any arbitration or other proceeding is brought for the enforcement of the subscription

agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions in the

subscription agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’

fees and their costs incurred in that action nor proceedings, in addition to any other relief to which they may be entitled;

however, that the foregoing shall not apply to any claim, suit, action or proceeding brought to enforce any duty or liability created

by the federal securities laws.

In the event a Unitholder initiates or asserts a claim against us, including the Trust, our Sponsor

and its officers, in accordance with the dispute resolution provisions contained in the subscription agreement and the Unitholder

does not prevail, the Unitholder will be obligated to reimburse us for all reasonable costs and expenses incurred in connection

with such claim, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal, if any.

subscription agreement does not define what constitutes a successful or prevailing party, though we intend to apply a broad interpretation

to such provision to apply the fee-shifting provision broadly.

We, including our Sponsor and its officers, reserve the ability

to seek to enforce such provision against a former or current Unitholder, including those who purchase Units in a secondary transaction,

depending on the nature and facts of the claim made or instituted by the Unitholder, however, whether a specific judgment satisfies

the applicable criteria and the extent of recovery for applicable fees and expenses will be subject to judicial interpretation.

The provision could discourage Unitholder lawsuits that might otherwise benefit the Trust or its Unitholders.

Under Delaware law,

“fee shifting by contract .

[is] enforceable self-ordering by contractual parties.” Manti Holdings, LLC v.

Acquisition Company, Inc., 2020 WL 4596838, at 6 (Del.

11, 2020), aff’d, 261 A.3d 1199 (Del.

While there are

statutes prohibiting fee-shifting provisions in corporations’ charters and bylaws with respect to intra-corporate litigation,

fee-shifting provisions in agreements between corporations and their stockholders have been found acceptable.

Delaware courts have also confirmed that, where a corporation and a stockholder are parties to a negotiated transaction (e.g.,

a shareholders agreement), either party thereto can enforce an agreed-upon fee-shifting provision against each other.

We are not aware of any Delaware case law or statutes indicating that a statutory trust would be treated any differently

to a corporation or any other business entity with regard to its ability to enforce the fee-shifting provision in a contract between

any entity and its owner.

Moreover, “[i]t is the policy of [The Delaware Statutory Trust Act] to give maximum effect to the

principle of freedom of contract and to the enforceability of governing instruments.” 8 Del.

Although we believe

the fee-shifting provision is enforceable, the enforceability of fee-shifting provisions has been challenged in legal proceedings,

and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or

more of the specified types of actions or proceedings.

The Trust relies on third-party service

providers to perform certain functions essential to the affairs of the Trust and the replacement of such service providers could

pose a challenge to the safekeeping of the Trust’s Bitcoins and to the operations of the Trust.

The Trust relies on

the Custodian and other third-party service providers to perform certain functions essential to managing the affairs of the Trust.

Any disruptions to such service providers’ business operations, resulting from business failures, financial instability,

security failures, government mandated regulation or operational problems, could have an adverse impact on the Trust’s ability

to access critical services and be disruptive to the operations of the Trust and require the Sponsor to replace such service provider.

Moreover, the Sponsor could decide to replace a service

provider to the Trust for other reasons.

If the Sponsor is required

to replace any other service provider, they may not be able to find a party willing to serve in such capacity in a timely manner

If the Sponsor decides, or is required, to replace a third-party service provider, this could negatively impact the

Trust’s ability to operate the Trust and could have a negative impact on the value of the Units.

Pandemics, epidemics and other natural

and man-made disasters could negatively impact the value of the Trust’s holdings and/or significantly disrupt its affairs.

Pandemics, epidemics

and other natural and man-made disasters could negatively impact demand for digital assets, including Bitcoin, and disrupt the

operations of many businesses, including the businesses of the Trust’s service providers.

For example, the COVID-19 pandemic

had serious adverse effects on the economies and financial markets of many countries, resulting in increased volatility and uncertainty

in economies and financial markets of many countries and in the digital asset markets.

Moreover, governmental authorities and regulators

throughout the world have in the past responded to major economic disruptions, including as a result of the COVID-19 pandemic,

with a variety of fiscal and monetary policy changes, such as quantitative easing, new monetary programs and lower interest rates.

An unexpected or quick reversal of any such policies, or the ineffectiveness of such policies, could increase volatility in economies

and financial markets generally, and could specifically increase volatility in digital asset markets, which could adversely affect

the value of Bitcoin and the value of the Units.

Risk Factors Related to the Regulation

of the Trust and the Units

Regulatory changes or actions

may affect the value of the Units or restrict the use of Bitcoins, mining activity or the operation of the Bitcoin Network or the

Bitcoin markets in a manner that adversely affects the value of the Units.

As digital assets

have grown in both popularity and market size, the U.S.

Regulation of the Bitcoin industry

continues to evolve and is subject to change;

future regulatory developments are impossible to predict but may significantly and

adversely affect the Trust.

domestic and foreign regulators and governments have focused on regulation of Bitcoin.

In the U.S., developments include the following:

On May 7, 2014 the SEC published an investor alert that highlighted fraud

and other concerns relating to certain investment opportunities denominated in Bitcoin and fraudulent and unregistered investment

schemes targeted at participants in online Bitcoin forums.

On July 25, 2017, the SEC issued a Report of Investigation (the

“Report”) which concluded that digital assets or tokens issued for the purpose of raising funds may be securities

within the meaning of the federal securities laws.

The Report emphasized that whether a digital asset is a security is based

on the particular facts and circumstances, including the economic realities of the transactions.

On January 7, 2020, the SEC

issued a press release announcing that digital assets and electronic investments, would be at the top of the SEC’s priorities

The SEC continues to take action against persons or entities misusing Bitcoin in connection with fraudulent schemes

(i.e., Ponzi scheme), inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities.

On September 17, 2015, the CFTC provided clarity regarding the regulatory

treatment of Bitcoin in the Coinflip civil enforcement case.

There the CFTC determined that Bitcoin and other virtual currencies

are regulated as commodities under the CEA.

Based on this determination, the CFTC applied Commodity Exchange At provisions

and CFTC regulations to a Bitcoin derivatives trading platform.

Also of significance, the CFTC took the position that Bitcoin

is not encompassed by the definition of currency under the Commodity Exchange Act and CFTC regulations.

The CFTC defined Bitcoin

and other “virtual currencies” as “a digital representation of value that functions as a medium of exchange,

a unit of account, and/or a store of value, but does not have legal tender status in any jurisdiction.

Bitcoin and other virtual

currencies are distinct from ‘real’ currencies, which are the coin and paper money of the United States or another

country that are designated as legal tender, circulate, and are customarily used and accepted as a medium of exchange in the

country of issuance.” On July 6, 2017, the CFTC granted LedgerX, LLC an order of registration as a Swap Execution Facility

for digital assets and on July 24, 2017, the CFTC approved LedgerX, LLC as the first derivatives clearing organization for

digital currency.

On September 21, 2017, the CFTC filed a civil enforcement action in federal court against a New York corporation

and its principal, charging them with fraud, misappropriation, and issuing false account statements in connection with a Ponzi

scheme involving investments in Bitcoin, which the CFTC asserted is a commodity subject to its jurisdiction.

On October 17,

2017, the CFTC’s LabCFTC office issued A CFTC Primer on Virtual Currencies (“Primer”).

As noted in the Primer,

beyond instances of fraud or manipulation, the CFTC staff does not claim general jurisdiction over “spot” or cash-market

exchanges and transactions involving virtual currencies that do not utilize margin, leverage or financing.

On December 1,

2017, the CFTC approved the self-certification of binary Bitcoin options for the Cantor Exchange and exchange-traded Bitcoin

futures contracts for the Chicago Mercantile Exchange Inc.

and CBOE Futures Exchange.

On December 15, 2017, the CFTC issued

a proposed interpretation of the “actual delivery” requirements with respect to virtual currencies under the CEA.

Section 2(c)(2)(D) of the Commodity Exchange Act provides the CFTC with direct oversight authority over “retail commodity

transactions” – defined as agreements, contracts or transactions in any commodity that are entered into with,

or offered to retail market participants on a leveraged or margined basis, or financed by the offeror, the counterparty or

a person acting in concert with the offeror or counterparty on a similar basis.

Such a transaction is subject to the Commodity

Exchange Act as if it were a commodity future.

The statute contains an exception for contracts of sale that result in “actual

delivery” within 28 days from the date of the transaction.

The proposed interpretation establishes two primary factors

necessary to demonstrate “actual delivery” of retail commodity transactions in virtual currency:

(1) a customer

having the ability to:

(i) take possession and control of the entire quantity of the commodity, whether it was purchased on

commerce (both within and away from any particular platform) no later than 28 days from the date of the transaction;

the offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with

the offeror or counterparty seller on a similar basis) not retaining any interest in or control over any of the commodity

purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.

Currently, the CFTC takes the position that Bitcoin is a commodity, although

it has not issued regulations to formalize this position.

The Trust is not registered as a commodity pool for purposes of

the CEA, and the Sponsor is not registered as a commodity pool operator, a commodity trading advisor or otherwise.

and the Sponsor will continue to monitor and evaluate whether any such registrations may be or may become required.

On March 25, 2014, the “IRS released the Notice noting that Bitcoin

will be treated as property for U.S.

Federal income tax purposes and that Bitcoin may be held as a capital asset.

9, 2019, the IRS released the Revenue Ruling and published the FAQs on reporting virtual currency transactions.

Ruling provides more guidance to taxpayers and tax practitioners regarding the treatment of a cryptocurrency hard forks and

The FAQs provide guidance on how to report virtual currency transactions for those who hold virtual currency as

a capital asset.

On March 18, 2013, FinCEN issued interpretive guidance relating to the application

of the Bank Secrecy Act to distributing, exchanging and transmitting “virtual currencies.” More specifically,

it determined that a user of virtual currencies (such as Bitcoin) for its own account will not be considered a money service

business (“MSB”) or be required to register, report and perform recordkeeping;

however, an administrator or exchanger

of virtual currency must be a registered money services business under FinCEN’s money transmitter regulations.

result, Bitcoin exchanges that deal with U.S.

residents or otherwise fall under U.S.

jurisdiction are required to obtain licenses

and comply with FinCEN regulations.

FinCEN released additional guidance clarifying that, under the facts presented, miners

acting solely for their own benefit, software developers, hardware manufacturers, escrow service providers and investors in

Bitcoin would not be required to register with FinCEN on the basis of such activity alone, but that Bitcoin exchanges, certain

types of payment processors and convertible digital asset administrators would likely be required to register with FinCEN

on the basis of the activities described in the October 2014 and August 2015 letters.

FinCEN has also taken significant enforcement

steps against companies alleged to have violated its regulations, including the assessment in July 2017 of a civil money penalty

in excess of $110 million against BTC-e for alleged willful violation of U.S.

anti-money laundering laws.

On May 9, 2019 FinCEN

published a guidance entitled “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible

Virtual Currencies.” In that guidance, FinCEN consolidated and clarified regulatory requirements and prior guidance

In February 2020, former U.S.

Treasury Secretary Steven Mnuchin testified in Congress that FinCEN was set to release

new requirements related to cryptocurrencies.

In December 2020, FinCEN released a notice of proposed rulemaking setting forth

proposed U.S.

anti-money laundering regulations that would expand the application of U.S.

anti-money laundering rules to virtual

Such rules have not yet been finalized.

In a report titled “Strategies for Improving the U.S.

Payment System,”

published in January 2015 by the Federal Reserve, “Digital Value Transfer Vehicles” technology was identified

for further exploration and monitoring.

Since then, the Federal Reserve Chairman, Jerome Powell confirmed that the Federal

Reserve is in the initial stages of exploring and analyzing the “costs and benefits of pursuing” a central bank

digital currency initiative.

In June 2015, the New York Department of Financial Services (the “NYDFS”)

finalized a rule that requires most businesses involved in digital currency business activity in or involving New York, excluding

merchants and consumers, to apply for a license (“BitLicense”) from the NYDFS and to comply with anti-money laundering,

cyber security, consumer protection, and financial and reporting requirements, among others.

As an alternative to the BitLicense

in New York, firms can apply for a charter to become limited purpose trust companies qualified to engage in digital currency

business activity.

Other states have considered regimes similar to the BitLicense or have required digital currency businesses

to register with their states as money transmitters, such as Washington and Georgia, which results in digital currency businesses

being subject to requirements similar to those of NYDFS’ BitLicense regime.

Certain state regulators, such as the Texas

Department of Banking, Kansas Office of the State Bank Commissioner and the Illinois Department of Financial and Professional

Regulation, have found that mere transmission of Bitcoin, without activities involving transmission of fiat currency, does

not constitute money transmission requiring licensure.

The North Carolina Commissioner of Banks has issued guidance providing

that North Carolina’s money transmission regulations only apply to the transmission of digital currency and not its

In July 2017, Delaware amended its General Corporation Law to provide for the creation and maintenance of certain required

records by blockchain technology and permit its use for electronic transmission of stockholder communications.

On September 15, 2015, the Conference of State Bank Supervisors finalized

their proposed model regulatory framework for state regulation of participants in “virtual currency activities.”

The Conference of State Bank Supervisors’ proposed framework is a non-binding model and would have to be independently

adopted, in sum or in part, by state legislatures or regulators on a case-by-case basis.

In July 2017, the Uniform Law Commission

(the “ULC”), a private body of lawyers and legal academics from the several U.S.

states, voted to finalize and

approve a uniform model state law for the regulation of virtual currency businesses, including Bitcoin (the “Uniform

Virtual Currency Act”).

Having been approved by the ULC, the Uniform Virtual Currency Act now goes to each of the U.S.

states and territories for their consideration and would have to be independently adopted, in sum or in part, by state legislatures

or regulators on a case-by-case basis.

The regulation of Bitcoin,

digital assets and related products and services continues to evolve.

The inconsistent and sometimes conflicting regulatory landscape

may make it more difficult for Bitcoin businesses to provide services, which may impede the growth of the Bitcoin economy and have

an adverse effect on consumer adoption of Bitcoin.

There is a possibility of future regulatory change altering, perhaps to a material

extent, the nature of an investment in the Units or the ability of the Trust to continue to operate.

Additionally, to the extent

that Bitcoin itself is determined to be a security, commodity future or other regulated asset, or to the extent that a United States

or foreign government or quasi-governmental agency exerts regulatory authority over the Bitcoin network, Bitcoin trading or ownership

in Bitcoin, such determination may have an adverse effect on the value of your investment in the Trust.

In sum, Bitcoin regulation

takes many different forms and will, therefore, impact Bitcoin and its usage in a variety of manners.

Regulatory changes or actions may

affect the value of the Units or restrict the use of Bitcoins, mining activity or the operation of the Bitcoin Network or the Bitcoin

markets in a manner that adversely affects the value of the Units.

As digital assets have

grown in both popularity and market size, the U.S.

Congress and a number of U.S.

federal and state agencies (including FinCEN,

SEC, CFTC, FINRA, the Consumer Financial Protection Bureau, the Department of Justice, The Department of Homeland Security, the

SEC, CFTC, FINRA, the Consumer Financial Protection Bureau, the Department of Justice, the Department of

Homeland Security, the

Federal Bureau of Investigation, the IRS and state financial institution regulators) have been examining the operations of Bitcoin

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Trust to continue to operate.

In August 2021,

SEC Chair Gary Gensler asked Congress to pass a law that could give the agency the legal authority to monitor crypto exchanges.

This statement follows former U.S.

Treasury Secretary Steven Mnuchin’s statement that he had “very serious concerns”

about digital assets in July 2019.

In August 2021, SEC

Chair Gary Gensler asked Congress to pass a law that could give the agency the legal authority to monitor crypto exchanges.

statement follows former U.S.

Treasury Secretary Steven Mnuchin’s statement in July 2019 that he had “very serious

concerns” about digital assets.

Former Secretary Mnuchin indicated that one source of concern is digital assets’ potential

to be used to fund illicit activities in July 2019.

Former Secretary Mnuchin has indicated that the U.S.

Financial Crimes Enforcement

Network is planning to release new requirements relating to digital asset activities in the first half of 2020.

As of the date

of this disclosure, no such requirements have been released.

Law enforcement

agencies have often relied on the transparency of blockchains to facilitate investigations.

However, certain privacy-enhancing

features have been, or are expected to be, introduced to a number of digital asset networks.

If the Bitcoin Network were to adopt

any of these features, these features may provide law enforcement agencies with less visibility into transaction-level data.

the European Union’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing

digital assets like Zcash and Monero in criminal activity on the internet.

Although no regulatory action has been taken to treat

privacy-enhancing digital assets differently, this may change in the future.

Former Secretary Mnuchin had indicated that FinCEN was planning to release

new requirements relating to digital asset activities in the first half of 2020.

As of the date of this disclosure, no such requirements

have been released.

Moreover, President’s Bident’s March 9, 2022 Executive Order, asserting that technological advances

and the rapid growth of the digital asset markets “necessitate an evaluation and alignment of the United States Government

approach to digital assets,” signals an ongoing focus on digital asset policy and regulations in the United States.

of reports issued pursuant to the Executive Order have focused on various risks related to the digital asset ecosystem, and have

recommended additional legislation and regulatory oversight.

There have also been several bills introduced in Congress that propose

to establish additional regulation and oversight of the digital asset markets.

15, 2023, the SEC proposed a new rule that would enhance safeguarding of assets for registered investment advisers.

the changes would amend and redesign Rule 206(4)-2, the SEC’s custody rule, under the Advisers Act and amend certain related

recordkeeping and reporting obligations.

The proposed rule would exercise the SEC’s authority under Section 411 of the Dodd-Frank Act by broadening the application

of the current investment adviser custody rule beyond client funds and securities to include any client assets in an investment

adviser’s possession or when an investment adviser has authority to obtain possession of client assets, requiring the investment

adviser to hold client assets with a qualified custodian.

As such, the rule would expand SEC authority to digital assets held by

or in control of an investment adviser on behalf of clients.

Law enforcement agencies

have often relied on the transparency of blockchains to facilitate investigations.

However, certain privacy-enhancing features

have been, or are expected to be, introduced to a number of digital asset networks.

If any such features are introduced to the

Bitcoin Network, any exchanges or businesses that facilitate transactions in Bitcoin may be at an increased risk of criminal or

civil lawsuits, or of having banking services cut off if there is a concern that these features interfere with the performance

of anti-money laundering duties and economic sanctions checks.

In addition, these features will provide law enforcement agencies

with less visibility into transaction-level data.

Europol, the European Union’s law enforcement agency, released a report

in October 2017 noting the increased use of privacy-enhancing digital assets like Zcash and Monero in criminal activity on the

In August 2022, OFAC banned all U.S.

citizens from using Tornado Cash, a digital asset protocol designed to obfuscate

blockchain transactions, by adding certain Ethereum digital wallet addresses associated with the protocol to its Specially Designated

Nationals list.

Approximately 60% of Ethereum validators, as well as notable industry participants such as Centre Consortium, the

issuer of the USDC stablecoin, have reportedly complied with the sanctions and blacklisted the sanctioned addresses from interacting

with their network.

Although no regulatory action has been taken to treat privacy-enhancing digital assets differently, this may

change in the future.

Additionally, concerns

have been raised about the electricity required to secure and maintain digital asset networks as well as the electricity consumed

by the Bitcoin mining process.

Due to these concerns around energy consumption, particularly as such concerns relate to public

utilities companies, various states and cities have implemented, or are considering implementing, moratoriums on digital asset

mining in their jurisdictions.

A significant reduction in mining activity as a result of such actions could adversely affect the

security of the Bitcoin Network by making it easier for a malicious actor or botnet to manipulate the Blockchain.

a malicious actor or botnet obtains control of more than 50% of the processing power on the Bitcoin Network, or otherwise obtains

control over the Bitcoin Network through its influence over core developers or otherwise, such actor or botnet could manipulate

the Blockchain to adversely affect the value of the Units or the ability of the Trust to operate.”

have been raised about the electricity required to secure and maintain digital asset networks.

As of December 31, 2020, in connection

with the mining process, over 138 million tera hashing operations are performed every second, non-stop on the Bitcoin Network.

Although measuring the electricity consumed by this process is difficult because these operations are performed by various machines

with varying levels of efficiency, the process consumes a significant amount of energy.

Further, in addition to the direct energy

costs of performing these calculations, there are indirect costs that impact the digital asset network’s total energy consumption,

including the costs of cooling the machines that perform these calculations.

Due to these concerns around energy consumption, particularly

as such concerns relate to public utilities companies, various states and cities have implemented, or are considering implementing,

moratoriums on digital asset mining in their jurisdictions.

A significant reduction in mining activity as a result of such actions

could adversely affect the security of the Bitcoin Network by making it easier for a malicious actor or botnet to manipulate the

See “—If a malicious actor or botnet obtains control of more than 50% of the processing power on the Bitcoin

Network, or otherwise obtains control over the Bitcoin Network through its influence over core developers or otherwise, such actor

or botnet could manipulate the Blockchain to adversely affect the value of the Units or the ability of the Trust to operate.”

To the extent that Bitcoin itself

is determined to be a security, such determination may have an adverse effect on the value of your investment in the Trust.

Many blockchain

startups use digital asset networks, such as the Bitcoin network, to launch their initial coin offerings, also known as ICOs.

July 2017, the SEC determined that tokens issued by The DAO, for instance, were securities under the U.S.

Many blockchain startups use

digital asset networks, such as the Bitcoin network, to launch their initial coin offerings, also known as ICOs.

In July 2017, the

SEC determined that tokens issued by The DAO, for instance, were securities under the U.S.

securities laws.

SEC reasoned that the unregistered sale of digital asset tokens can, in certain circumstances, including initial coin offerings,

be considered illegal public offering of securities.

In November 2018, the SEC determined that two other token issuances by companies

called CarrierEQ, Inc., (d/b/a Airfox) and Paragon Coin, Inc.

The SEC reasoned that

the unregistered sale of digital asset tokens can, in certain circumstances, including initial coin offerings, be considered illegal public offering of securities.

In November 2018, the SEC determined that two other token issuances by companies called

Inc., (d/b/a Airfox) and Paragon Coin, Inc.

were unregistered securities offerings.

And in September 2019, the

SEC determined that the token issuance of EOS by a company called Block.one, was an unregistered securities offering and ordered

Block.one to pay a

$24 million civil penalty.

could make a similar determination with respect to digital tokens distributed in other initial coin offerings.

If the SEC were

to determine that Bitcoin is a security, the Trust and the Sponsor would be subject to additional regulatory and compliance requirements

federal securities laws, including the Investment Company Act and, with respect to the Sponsor, the Advisers Act.

addition, the SEC’s determination or a market expectation of the SEC’s determination that any digital asset is a security

could adversely affect the market price of Bitcoin or digital assets generally and thus the value of the Shares.

Regulatory changes or actions

In September 2019, the SEC determined

that the token issuance of EOS by a company called Block.one, was an unregistered securities offering and ordered Block.one to

pay a $24 million civil penalty.

The SEC could make a similar determination with respect to digital tokens distributed in other

initial coin offerings.

If the SEC were to determine that Bitcoin is a security, the Trust and the Sponsor would be subject to

additional regulatory and compliance requirements under U.S.

federal securities laws, including the Investment Company Act and,

with respect to the Sponsor, the Advisers Act.

In addition, the SEC’s determination or a market expectation of the SEC’s

determination that any digital asset is a security could adversely affect the market price of Bitcoin or digital assets generally

and thus the value of the Shares.

Regulatory changes or other events

in foreign jurisdictions may have impacted the price of Bitcoin or may impact it in the future.

Various foreign

jurisdictions may, in the near future, adopt laws, regulations or directives that affect the Bitcoin Network, the Bitcoin exchange

market and their users, particularly Bitcoin exchanges and service providers that fall within such jurisdictions’ regulatory

scope, which may in turn, impact the price of Bitcoin.

Such laws, regulations or directives may conflict with those of the United

States and may negatively impact the acceptance of Bitcoin by users, merchants and service providers outside the United States

and may therefore impede the growth or sustainability of the Bitcoin economy globally, or otherwise negatively affect the value

The regulatory uncertainty surrounding the treatment of Bitcoin creates risks for the Trust.

March 5, 2020, South Korea voted to amend its Financial Information Act to require virtual asset service providers to register

and comply with its AML and Combating the Financing of Terrorism (“CFT”) framework.

These measures also provide the

government with the authority to close digital asset exchanges that do not comply with specified processes.

The Chinese and South

Korean governments have also banned initial coin offerings (“ICOs”) and there are reports that Chinese regulators have

taken action to shut down a number of China-based digital asset exchanges.

Further, on January 19, 2018, a Chinese news organization

reported that the People’s Bank of China had ordered financial institutions to stop providing banking or funding to “any

activity related to cryptocurrencies.” Similarly, in April 2018, the Reserve Bank of India banned the entities it regulates

from providing services to any individuals or business entities dealing with or settling digital assets.

On March 5, 2020, this

ban was overturned in the Indian Supreme Court, although the Reserve Bank of India is currently challenging this ruling and, in

December 2021, reportedly informed its central board of directors that it favors a complete ban on cryptocurrencies.

There remains

significant uncertainty regarding the South Korean, Indian and Chinese governments’ future actions with respect to the regulation

of digital assets and digital asset exchanges.

Such laws, regulations or directives may conflict with those of the United States

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

therefore impede the growth or sustainability of the Bitcoin economy in the European Union, China, Japan, Russia and the United

States and globally, or otherwise negatively affect the value of Bitcoin.

Other foreign jurisdictions including Canada, Germany

and Sweden have also approved exchange-traded Bitcoin products.

In July 2019, the

United Kingdom’s Financial Conduct Authority proposed rules to address harm to retail consumers deriving from the sale of

derivatives and exchange traded notes (“ETNs”) that reference certain types of digital assets, contending that they

are “ill-suited” to retail investors citing extreme volatility, valuation challenges and association with financial

In addition to ETNs, the proposed ban would affect financial products including contracts for difference, options and futures.

Public consultation on the proposed restriction closed in October 2019.

A determination

that Bitcoin is a security under U.S.

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

The sale of the Units could be

subject to SEC or state securities registration.

The offer and sale

of the Units in a Rule 506 offering is not registered with the SEC under the Securities Act or with a state regulator under the

securities laws of any state.

If a regulator or a court determines that the sale of the Units should have been registered, the

Trust may be required to provide investors who purchased in the offering the option to rescind their investment on terms favorable

to those investors.

If this occurs, the Trust may lack sufficient assets to repay all purchasers seeking rescission, the secondary

market for the Units, if any, may be negatively impacted, and the value of the Units held by remaining investors may decrease.

Various foreign jurisdictions

have and may, in the near future, adopt laws, regulations or directives that affect the Bitcoin Network, the Bitcoin exchange market

and their users, particularly Bitcoin exchanges and service providers that fall within such jurisdictions’ regulatory scope,

which may in turn, impact the price of Bitcoin.

For example, China has made transacting in cryptocurrencies illegal for Chinese

citizens in mainland China, and additional restrictions may follow.

Both China and South Korea have banned initial coin offerings

entirely and regulators in other jurisdictions, including Canada, Singapore and Hong Kong, have opined that initial coin offerings

may constitute securities offerings subject to local securities regulations.

In May 2021, the Chinese government announced renewed

efforts to restrict cryptocurrency trading and mining activities, citing concerns about high energy consumption and its desire

to promote financial stability.

Regulators in Inner Mongolia and other regions of China have proposed regulations that would create

penalties for companies engaged in cryptocurrency mining activities and introduce heightened energy saving requirements on industrial

parks, data centers and power plants providing electricity to cryptocurrency miners.

In April 2018, the Reserve Bank of India banned

the entities it regulates from providing services to any individuals or business entities dealing with or settling digital assets.

On March 5, 2020, this ban was overturned in the Indian Supreme Court, although the Reserve Bank of India is currently challenging

this ruling and, in December 2021, reportedly informed its central board of directors that it favors a complete ban on cryptocurrencies.

The United Kingdom’s Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and

exchange traded notes that reference certain types of digital assets, contending that they are “ill-suited” to retail

investors citing extreme volatility, valuation challenges and association with financial

A new bill, the Financial Services and Markets Bill (“FSMB”), has made its way through the House of Commons

and is expected to work through the House of Lords and become law in 2023.

The FSMB would bring digital asset activities within

the scope of existing laws governing financial institutions, markets and assets.

In addition, the European Council of the European

Union approved the text of MiCA in October 2022, establishing a regulatory framework for digital asset services across the European

MiCA is intended to serve as a comprehensive regulation of digital asset markets and imposes various obligations on digital

asset issuers and service providers.

The main aims of MiCA are industry regulation, consumer protection, prevention of market abuse

and upholding the integrity of digital asset markets.

MiCA is expected to pass the European Parliament in 2023 and come into effect

For further discussion, see “Government Oversight — Regulation of Bitcoin.”

Such laws, regulations

or directives may conflict with those of the United States and may negatively impact the acceptance of Bitcoin by users, merchants

and service providers outside the United States and may therefore impede the growth or sustainability of the Bitcoin economy globally,

or otherwise negatively affect the price and value of Bitcoin.

Moreover, other events, such as the interruption in telecommunications

or Internet services, cyber-related terrorist acts, civil disturbances, war or other catastrophes, could also negatively affect

the digital asset economy in one or more jurisdictions.

For example, Russia’s invasion of Ukraine on February 24, 2022 led

to volatility in digital asset prices, with an initial steep decline followed by a sharp rebound in prices.

The regulatory uncertainty

surrounding the treatment of Bitcoin creates risks for the Trust.

The sale of the Units could be subject

to SEC or state securities registration.

The offer and sale of

the Units in a Rule 506 offering is not registered with the SEC under the Securities Act or with a state regulator under the securities

laws of any state.

If a regulator or a court determines that the sale of the Units should have been registered, the Trust may be

required to provide investors who purchased in the offering the option to rescind their investment on terms favorable to those

If this occurs, the Trust may lack sufficient assets to repay all purchasers seeking rescission, the secondary market

for the Units, if any, may be negatively impacted, and the value of the Units held by remaining investors may decrease.

The Trust is not a registered investment

The Trust is not a registered

investment company.

The Trust is not

a registered investment company subject to the Investment Company Act.

Consequently, Unitholders of the Trust do not have the regulatory

protections provided to shareholders in registered investment companies which, for example, require that investment companies have

a certain percentage of disinterested directors and requirements as to the relationship between the investment company and certain

of its affiliates.

The Trust could be, or could

become, subject to the CEA.

investment company subject to the Investment Company Act.

Consequently, Unitholders of the Trust do not have the regulatory protections

provided to shareholders in registered investment companies which, for example, require that investment companies have a certain

percentage of disinterested directors and requirements as to the relationship between the investment company and certain of its

The Trust could be, or could become,

subject to the Commodity Exchange Act.

Currently, the CFTC

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regulation, and may be less reliable than U.S.

To the extent any

of the Trust’s assets are valued based on trading conducted on Bitcoin markets outside the U.S., trading on such markets

is not regulated by any U.S.

To the extent any of

the Trust’s assets are valued based on trading conducted on Bitcoin markets outside the U.S., trading on such markets is

not regulated by any U.S.

governmental agency and may involve certain risks not applicable to trading in U.S.

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These factors could adversely affect the performance of

Future regulations may impose

other regulatory burdens, which could harm the Trust or even cause the Trust to liquidate.

Current and future

legislation, CFTC and SEC rulemaking and other regulatory developments may affect the manner in which Bitcoin are treated for classification

Future regulations may impose other

regulatory burdens, which could harm the Trust or even cause the Trust to liquidate.

Current and future legislation,

CFTC and SEC rulemaking and other regulatory developments may affect the manner in which Bitcoins are treated for classification

and clearing purposes, and the manner in which the Units, the Trust and the Sponsor are regulated.

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In addition, on March

9, 2022, President Biden announced an executive order on cryptocurrencies which seeks to establish a unified federal regulatory

9, 2022, President Biden announced an executive order on cryptocurrencies that seeks to establish a unified federal regulatory

regime for cryptocurrencies.

In the face of such developments, new or additional registration and compliance steps may result in

extraordinary expenses to the Trust.

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

the Trust may be dissolved or liquidated at a time that is disadvantageous to Unitholders.

To the extent that

Bitcoin is deemed to fall within the definition of a “commodity interest” under the CEA, the Trust and the Sponsor

may be subject to additional regulation under the CEA and CFTC regulations.

The Sponsor or the Trust may be required to register

as a commodity pool operator or commodity trading advisor with the CFTC and become a member of the National Futures Association

and may be subject to additional regulatory requirements with respect to the Trust, including disclosure and reporting requirements.

These additional requirements may result in extraordinary, recurring and nonrecurring expenses.

If the Sponsor or the Trust determines

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

Any such termination could result

in the liquidation of the Trust’s Bitcoin at a time that is disadvantageous to Unitholders.

To the extent that

Bitcoin is deemed to fall within the definition of a security under U.S.

federal securities laws, the Trust and the Sponsor may

be subject to additional requirements under the Investment Company Act and the Advisers Act.

The Sponsor or the Trust may be required

to register as an investment adviser under the Advisers Act.

Such additional registration may result in extraordinary, recurring

and non-recurring expenses.

If the Sponsor or the Trust determines not to comply with such additional regulatory requirements,

the Sponsor will terminate the Trust.

Any such termination could result in the liquidation of the Trust’s Bitcoin at a time

that is disadvantageous to Unitholders.

Banks may not provide banking

services, or may cut off banking services, to businesses that provide Bitcoin-related services or that accept Bitcoin as payment,

which could directly impact the Trust’s operations, damage the public perception of Bitcoin and the utility of Bitcoin as

a payment system and could decrease the price of Bitcoin and adversely affect an investment in the Units.

On June 7, 2022, U.S.

Senators Kirsten Gillibrand and Cynthia Lummis introduced the “Responsible

Financial Innovation Act,” a bipartisan proposed legislation that would create a regulatory framework for digital assets,

including a standard for determining which digital assets are commodities and what are securities, and would assign regulatory

authority over digital asset spot markets to the CFTC.

In the face of such developments, new or additional registration and compliance

steps may result in extraordinary expenses to the Trust.

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

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

To the extent that Bitcoin

is deemed to fall within the definition of a “commodity interest” under the CEA, the Trust and the Sponsor may be subject

to additional regulation under the CEA and CFTC regulations.

The Sponsor or the Trust may be required to register as a commodity

pool operator or commodity trading advisor with the CFTC and become a member of the National Futures Association and may be subject

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

These additional

requirements may result in extraordinary, recurring and non-recurring expenses.

If the Sponsor or the Trust determines not to comply

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

Any such termination could result in the liquidation

of the Trust’s Bitcoin at a time that is disadvantageous to Unitholders.

To the extent that Bitcoin

is deemed to fall within the definition of a security under U.S.

federal securities laws, the Trust and the Sponsor may be subject

to additional requirements under the Investment Company Act and the Advisers Act.

For example, in February 15, 2023, the SEC proposed

a new rule that would enhance safeguarding of assets for registered investment advisers, If adopted, the changes would amend and

redesign Rule 206(4)-2, the SEC’s custody rule, under the Advisers Act and amend certain related recordkeeping and reporting

The proposed rule would exercise the SEC’s authority under Section 411 of the Dodd-Frank Act by broadening the

application of the current investment adviser custody rule beyond client funds and securities to include any client assets in an

investment adviser’s possession or when an investment adviser has authority to obtain possession of client assets, requiring

the investment adviser to hold client assets with a qualified custodian.

As such, the rule, if adopted substantially as proposed,

would expand SEC authority to digital assets held by or in control of an investment adviser on behalf of clients.

If the Sponsor

or the Trust were required to register as an investment adviser under the Advisers Act, such additional registration may result

in extraordinary, recurring and non-recurring expenses and create additional uncertainty with respect to new or shifting regulatory

requirements.

If the Sponsor or the

Trust determines not to comply with any additional regulatory requirements, the Sponsor will terminate the Trust.

Any such termination

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

Banks may not provide banking services,

or may cut off banking services, to businesses that provide Bitcoin-related services or that accept Bitcoin as payment, which could

directly impact the Trust’s operations, damage the public perception of Bitcoin and the utility of Bitcoin as a payment system

and could decrease the price of Bitcoin and adversely affect an investment in the Units.

A number of companies

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This may have an adverse impact on the Trust’s operations.

Similarly, a number of such companies have had their

existing bank accounts closed by their banks.

Banks may refuse to provide bank accounts and other banking services to Bitcoin-related

companies or companies that accept Bitcoin for a number of reasons, such as perceived compliance risks or costs.

The difficulty

that many businesses that provide Bitcoin-related services have and may continue to have in finding banks willing to provide them

with bank accounts and other banking services may be currently decreasing the usefulness of Bitcoin as a payment system and harming

public perception of Bitcoin or could decrease its usefulness and harm its public perception in the future.

Similarly, the usefulness

of Bitcoin as a payment system and the public perception of Bitcoin could be damaged if banks were to close the accounts of many

or of a few key businesses providing Bitcoin-related services.

This could decrease the price of Bitcoin and therefore adversely

affect an investment in the Units.

It may be illegal now, or in

the future, to acquire, own, hold, sell or use Bitcoin in one or more countries, and ownership of, holding or trading in Units

may also be considered illegal and subject to sanctions.

The United States,

China, Russia, India or other jurisdictions may take additional regulatory actions in the future that further restrict the right

to acquire, own, hold, sell or use Bitcoin or to exchange Bitcoin for fiat currency.

For example, the United States and other G7

leaders imposed expansive economic sanctions on Russia as a result of the conflict in Ukraine and new guidance issued by the Department

of Treasury highlighted the expectation of compliance with such sanctions, including as it relates to transactions using virtual

currency, such as Bitcoin.

Additional regulatory actions could result in the restriction of ownership, holding or trading in the

Such a restriction

could subject the Trust or the Sponsor

to investigations, civil or criminal fines and penalties, which could harm the reputation of the Trust or its Sponsor, and could

result in the termination and liquidation of the Trust at a time that is disadvantageous to Unitholders, or may adversely affect

an investment in the Units.

Recently, the FDIC declared Signature Bank in New York

insolvent and placed the bank into receivership and established a bridge bank where all deposits were transferred.

Trust does not have material cash operations, it had an account holding nominal cash at Signature Bank and was able to access

funds within one business day of the FDIC’s actions.

Although the closing of Signature Bank did not have a material impact

on the Trust, it is possible that a future closing of a bank with which the Trust has a financial relationship could subject the

Trust to adverse conditions and pose challenges in finding an alternative suitable bank to provide the Trust with bank accounts

and banking services.

Also, a number of companies

that provide Bitcoin-related services have had their existing bank accounts closed by their banks.

Banks may refuse to provide

bank accounts and other banking services to Bitcoin-related companies or companies that accept Bitcoin for a number of reasons,

such as perceived compliance risks or costs.

The difficulty that many businesses that provide Bitcoin-related services have and

may continue to have in finding banks willing to provide them with bank accounts and other banking services may be currently decreasing

the usefulness of Bitcoin as a payment system and harming public perception of Bitcoin or could decrease its usefulness and harm

its public perception in the future.

Similarly, the usefulness of Bitcoin as a payment system and the public perception of Bitcoin

could be damaged if banks were to close the accounts of many or of a few key businesses providing Bitcoin-related services.

could decrease the price of Bitcoin and therefore adversely affect an investment in the Units.

It may be illegal now, or in the

future, to acquire, own, hold, sell or use Bitcoin in one or more countries, and ownership of, holding or trading in Units may

also be considered illegal and subject to sanctions.

The United States, China,

Russia, India or other jurisdictions may take additional regulatory actions in the future that further restrict the right to acquire,

own, hold, sell or use Bitcoin or to exchange Bitcoin for fiat currency.

For example, the United States and other G7 leaders imposed

expansive economic sanctions on Russia as a result of the conflict in Ukraine and new guidance issued by the Department of Treasury

highlighted the expectation of compliance with such sanctions, including as it relates to transactions using virtual currency,

such as Bitcoin.

Additional regulatory actions could result in the restriction of ownership, holding or trading in the Units.

a restriction could subject the Trust or the Sponsor to investigations, civil or criminal fines and penalties, which could harm

the reputation of the Trust or its Sponsor, and could result in the termination and liquidation of the Trust at a time that is

disadvantageous to Unitholders, or may adversely affect an investment in the Units.

If the Bitcoin Network is used to

facilitate illicit activities, businesses that facilitate transactions in Bitcoin could be at increased risk of criminal and civil

lawsuits, or of having services cut off, which could negatively affect the price of Bitcoin and the value of the Units.

Digital asset networks

have in the past been, and may continue to be, used to facilitate illicit activities.

If the Bitcoin Network is used to facilitate

illicit activities, businesses that facilitate transactions in Bitcoin could be at increased risk of potential criminal or civil

lawsuits, or of having banking or other services cut off, and Bitcoin could be removed from digital asset exchanges as a result

of these concerns.

Other service providers of such businesses may also cut off services if there is a concern that the Bitcoin

network is being used to facilitate crime.

Any of the aforementioned

occurrences could increase regulatory scrutiny of the Bitcoin Network and/or adversely affect the price of Bitcoin, the attractiveness

of the Bitcoin Network and an investment in the Units of the Trust.

If regulatory changes or interpretations

of the Trust’s or Sponsor’s activities require registration as money service businesses under the regulations promulgated

of the Trust’s or Sponsor’s activities require registration as money services businesses under the regulations promulgated

by FinCEN under the authority of the U.S.

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regimes for the licensing of such businesses, the Trust and/or Sponsor could suffer reputational harm and also extraordinary, recurring

and/or nonrecurring expenses, which would adversely impact an investment in the Units.

and/or non-recurring expenses, which would adversely impact an investment in the Units.

If regulatory changes

8 unchanged sentences

In the event of any such requirement, to the extent that the Sponsor decides to continue the Trust, the required registrations,

licensure and regulatory compliance steps may result in extraordinary, nonrecurring expenses to the Trust.

licensure and regulatory compliance steps may result in extraordinary, non-recurring expenses to the Trust.

Regulatory compliance

would include, among other things, implementing anti-money laundering and consumer protection programs.

To the extent the

Trust or Sponsor is found to have operated without appropriate state or federal licenses, it may be subject to investigation, administrative

To the extent the Trust

or Sponsor is found to have operated without appropriate state or federal licenses, it may be subject to investigation, administrative

or court proceedings, and civil or criminal monetary fines and penalties, all of which would harm the reputation of the Trust or

its Sponsor, decrease the liquidity of the Trust, and have a material adverse effect on the price of the Units.

If the Sponsor decides

to comply with such additional federal or state regulatory obligations and continue the Trust, the required registrations, licensure

and regulatory compliance steps may result in extraordinary, nonrecurring expenses to the Trust, possibly affecting an investment

in the Units in a material and adverse manner.

Furthermore, the Trust and its service providers may not be capable of complying

with certain federal or state regulatory obligations applicable to money service businesses’ money transmitters and businesses

involved in digital currency business activity.

If the Sponsor and/or the Trust determines not to comply with such requirements,

the Sponsor will act to dissolve and liquidate the Trust.

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

Bitcoin at a time that is disadvantageous to Unitholders.

Digital assets are not insured

or guaranteed by any government or government agency.

If the Sponsor

decides to comply with such additional federal or state regulatory obligations and continue the Trust, the required registrations,

licensure and regulatory compliance steps may result in extraordinary, non-recurring expenses to the Trust, possibly affecting

an investment in the Units in a material and adverse manner.

Furthermore, the Trust and its service providers may not be capable

of complying with certain federal or state regulatory obligations applicable to money services businesses’ money transmitters

and businesses involved in digital currency business activity.

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

requirements, the Sponsor will act to dissolve and liquidate the Trust.

Any such termination could result in the liquidation of

the Trust’s Bitcoin at a time that is disadvantageous to Unitholders.

Laws and regulations may also be

introduced or interpreted by regulators that lack experience in digital assets and blockchain technology.

This may result in unclear

rules with which compliance may be difficult.

Governments, quasi-government

and financial institutions may impose additional regulation on digital assets and blockchain technology, and the regulatory environment

for digital assets is changing and unpredictable.

Governments, quasi-government and financial institutions may impose additional

regulation on digital assets and blockchain technology, and the regulatory environment for digital assets is changing and unpredictable.

Many governments,

regulators, self-regulators and other quasi-government agencies around the world that seek to regulate the digital assets industry

may lack experience in digital assets and blockchain technology generally.

They may seek to use existing laws and regulations and

interpret them to apply to the digital assets industry.

Many of these legal and regulatory regimes were adopted prior to the advent

of the internet, mobile technologies, digital assets and related technologies.

As a result, they do not contemplate or address

unique issues associated with digital assets and are thus subject to significant uncertainty and vary widely across jurisdictions.

This may result in unclear rules that are difficult or impractical to comply with, and therefore increase the Trust’s legal

and regulatory compliance risks.

While interest in

digital assets is increasing, digital asset regulation is also evolving and increasing.

Governmental authorities and regulators

have been looking to take on a more active role in regulating digital assets to ensure the assets are not used for illicit purposes

and reduce financial risk by promoting better compliance, among other things.

Although regulation on digital assets will increase

the regulatory responsibility and costs for investors and exchanges, it may also further legitimize the industry.

The digital assets industry is

relatively new and has limited access to policymakers or lobbying organizations, which may harm the Trust’s ability to effectively

react to proposed laws and regulation of digital assets adverse to the Trust’s business.

organizations and financial institutions may impose additional regulation on digital assets and blockchain technology, and the

regulatory environment for digital assets is changing and unpredictable.

Many governments, regulators,

self-regulators and other quasi-government agencies around the world that seek to regulate the digital assets industry may lack

experience in digital assets and blockchain technology generally.

They may seek to use existing laws and regulations and interpret

them to apply to the digital assets industry.

Many of these legal and regulatory regimes were adopted prior to the advent of the

internet, mobile technologies, digital assets and related technologies.

As a result, they do not contemplate or address unique

issues associated with digital assets and are thus subject to significant uncertainty and vary widely across jurisdictions.

may result in unclear rules that are difficult or impractical to comply with, and therefore increase the Trust’s legal and

regulatory compliance risks.

The digital assets industry is relatively

new and has limited access to policymakers or lobbying organizations, which may harm the Trust’s ability to effectively react

to proposed laws and regulation of digital assets adverse to the Trust’s business.

Various governmental

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many jurisdictions.

Competitors from more established industries, including traditional financial services, may have

greater access to lobbyists or governmental

Accordingly, legislators and regulators that are concerned about the potential for digital assets for illicit usage

may affect statutory and regulatory changes with minimal or discounted inputs from the digital assets industry.

As a result, new

laws and regulations may be proposed and adopted, or existing laws and regulations may be interpreted in new ways that can adversely

impact the digital assets industry and/or digital asset platforms.

The Trust may not

be able to appropriately adapt to such sudden adverse legal and regulatory changes.

Competitors from more established industries, including traditional financial services, may have greater access

to lobbyists or governmental officials.

Accordingly, legislators and regulators that are concerned about the potential for digital

assets for illicit usage may affect statutory and regulatory changes with minimal or discounted inputs from the digital assets

As a result, new laws and regulations may be proposed and adopted, or existing laws and regulations may be interpreted

in new ways that can adversely impact the digital assets industry and/or digital asset platforms.

The Trust may not be

able to appropriately adapt to such sudden adverse legal and regulatory changes.

Its inability to adapt to such changes in time

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adversely impact its reputation, business, operating results, financial condition and share price.

The treatment of the Trust for

The treatment of the Trust for U.S.

federal income tax purposes is uncertain.

The Sponsor intends

As discussed in greater

detail above in “Certain U.S.

Federal Income Tax Consequences—Tax Treatment of the Trust”, the Sponsor intends

to take the position that the Trust is properly treated as a grantor trust for U.S.

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federal income tax.

Rather, if the Trust is a grantor trust,

each beneficial owner of Units will be 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 Units.

Rather, each beneficial owner of Units

will be 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 Units.

Because of the evolving

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treated as a grantor trust for such purposes.

If the Trust is

not properly classified as a grantor trust, the Trust might be classified as a partnership for U.S.

If 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.

However, due to the uncertain treatment of digital currency for U.S.

federal income tax purposes (as discussed below in “Certain

due to the uncertain treatment of digital currency for U.S.

federal income tax purposes (as discussed below in “Certain U.S.

Federal Income Tax Consequences—Uncertainty Regarding the U.S.

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net taxable income and certain distributions made by the Trust to Unitholders would be treated as taxable dividends to the extent

of the Trust’s current and accumulated earnings and profits.

Any such dividend distributed to a beneficial owner of Units

that is a non-U.S.

of the Trust’s current and accumulated earnings and profits (as calculated for U.S.

federal income tax purposes).

dividend distributed to a beneficial owner of Units that is a non-U.S.

person for U.S.

federal income tax purposes would be subject to U.S.

federal withholding tax at a rate of 30%

(or such lower rate as provided in an applicable tax treaty).

Unitholders could incur a tax

liability without an associated distribution.

federal income tax purposes would be subject

federal withholding tax at a rate of 30% (or such lower rate as provided in an applicable tax treaty).

Unitholders could incur a tax liability

without an associated distribution.

In the normal course

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Consequences to U.S.

The treatment of Bitcoin for

Holders” above.

The treatment of Bitcoin for U.S.

federal income tax purposes is uncertain.

As discussed in

the section entitled “Certain U.S.

As discussed in the

section titled “Certain U.S.

Federal Income Tax Consequences—Uncertainty Regarding the U.S.

Federal Income Tax

Treatment of Digital Currency”, assuming that the Trust is properly treated as a grantor trust for U.S.

federal income tax

purposes, each beneficial owner of Units will be treated for U.S.

federal income tax purposes as the owner of an undivided interest

in the Bitcoin (and, if applicable, any Additional Currency) held in the Trust.

Federal Income Tax Treatment

of Digital Currency” below, assuming that the Trust is properly treated as a grantor trust for U.S.

federal income tax purposes,

each beneficial owner of Units will be treated for U.S.

federal income tax purposes as the owner of an undivided interest in the

Bitcoin (and, if applicable, any Additional Currency) held in the Trust.

Due to the new and evolving nature of digital currencies

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tax treatment of digital currency are uncertain.

In 2014, the IRS

released a Notice discussing certain aspects of “convertible virtual currency” (that is, digital currency that has

an equivalent value in fiat currency or that acts as a substitute for fiat currency) for U.S.

federal income tax purposes and,

in particular, stating that such digital currency (i) is “property” (ii) is “not treated as currency” for

purposes of the rules relating to foreign currency gain or loss and (iii) may be held as a capital asset.

In 2014, the IRS released

a Revenue Ruling in which the IRS concluded that a hard fork on a digital currency blockchain (i) does not create taxable income

if the taxpayer does not subsequently receive new units of digital currency and (ii) does create taxable ordinary income if the

taxpayer receives new units of cryptocurrency by airdrop.

Simultaneously with the release of the Revenue Ruling, the IRS also published

the FAQs, which address, among other issues, how to determine the fair market value of digital currencies and the proper method

of determining a holder’s holding period and tax basis for units of digital currency (including those acquired at different

times or at varying prices.

However, the Notice, Revenue Ruling and FAQs do not address other significant aspects

federal income tax treatment

of digital currencies, including:

(i) whether convertible virtual currencies are properly treated as “commodities”

federal income tax purposes;

(ii) whether convertible virtual currencies are properly treated as “collectibles”

federal income tax purposes;

(iii) the proper method of determining a holder’s holding period and tax basis for

convertible virtual currencies acquired at different times or at varying prices;

and (iv) whether and how a holder of convertible

virtual currencies acquired at different times or at varying prices may designate, for U.S.

federal income tax purposes, which

of the convertible virtual currencies is transferred in a subsequent sale, exchange or other disposition.

The uncertainty surrounding

federal income tax treatment of digital currencies and other digital assets could affect the performance of the Trust.

Moreover, although the Revenue Ruling and FAQs address the treatment of hard forks, there continues to be uncertainty with respect

to the timing and amount of the income inclusions.

There can be no

assurance that the IRS will not alter its position with respect to digital currencies in the future or that a court would uphold

the treatment set forth in the Notice, Revenue Ruling and FAQs.

It is also unclear what additional guidance on the treatment of

digital currencies for U.S.

the Notice, noting that Bitcoin will be treated as property for U.S.

Federal income tax purposes and that Bitcoin may be held as

a capital asset.

In 2019, the IRS released the Revenue Ruling and published the FAQs on reporting virtual currency transactions.

The Revenue Ruling provides more guidance to taxpayers and tax practitioners regarding the treatment of a cryptocurrency hard forks

and airdrops.

The FAQs provide guidance on how to report virtual currency transactions for those who hold virtual currency as a

capital asset.

There can be no assurance

that the IRS will not alter its position with respect to digital currencies in the future or that a court would uphold the treatment

set forth in the Notice, Revenue Ruling and FAQs.

It is also unclear what additional guidance on the treatment of digital currencies

federal income tax purposes may be issued in the future.

Any such alteration of the current IRS positions

or additional guidance could result in adverse tax consequences for Unitholders and could have an adverse effect on the value of

Future developments that may arise with respect to digital currencies may increase the uncertainty with respect to the

treatment of digital currencies for U.S.

Any such alteration of the current IRS positions or additional

guidance could result in adverse tax consequences for Unitholders and could have an adverse effect on the value of Bitcoin.

developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital

currencies for U.S.

federal income tax purposes.

For example, the Notice addresses only digital currency that

is “convertible virtual currency,” and it is conceivable that, as a result of a fork, airdrop or similar occurrence,

the Trust will hold certain types of digital currency that are not within the scope of the Notice.

Unitholders are

urged to consult their tax advisers regarding the tax consequences of owning and disposing of Units and digital currencies in general.

Future developments regarding

the treatment of digital currency for U.S.

For example, the Notice addresses only digital currency that is “convertible

virtual currency,” and it is conceivable that, as a result of a fork, airdrop or similar occurrence, the Trust will hold

certain types of digital currency that are not within the scope of the Notice.

Unitholders are urged

to consult their tax advisers regarding the tax consequences of owning and disposing of Units and digital currencies in general.

Future developments regarding the

treatment of digital currency for U.S.

federal income tax purposes could adversely affect the value of the Units.

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state tax purposes may be issued in the future.

The treatment of

digital currencies for tax purposes by non-U.S.

The treatment of digital

currencies for tax purposes by non-U.S.

jurisdictions may differ from the treatment of digital currencies for U.S.

state or local tax purposes.

federal, state

or local tax purposes.

It is possible, for example, that a non-U.S.

jurisdiction would impose sales tax or value-added tax

on purchases and sales of digital currencies for fiat currency.

If a foreign jurisdiction with a significant share of the market

of Bitcoin users imposes onerous tax burdens on digital currency users, or imposes sales or value-added tax on purchases and sales

of digital currency for fiat currency, such actions could result in decreased demand for Bitcoin in such jurisdiction.

jurisdiction would impose sales tax or value-added tax on purchases

and sales of digital currencies for fiat currency.

If a foreign jurisdiction with a significant share of the market of Bitcoin

users imposes onerous tax burdens on digital currency users, or imposes sales or value-added tax on purchases and sales of digital

currency for fiat

currency, such actions could result in decreased demand for Bitcoin in such jurisdiction.

Any future guidance

3 unchanged sentences

any such future guidance could have an adverse effect on the value of the Units.

tax-exempt Unitholder

may recognize “unrelated business taxable income” a consequence of an investment in Units.

Under the guidance

provided in Revenue Ruling and FAQs, hard forks, airdrops and similar occurrences with respect to digital currencies will under

certain circumstances be treated as taxable events giving rise to ordinary income.

In the absence of guidance to the contrary,

it is possible that any such income recognized by a U.S.

tax-exempt Unitholder would constitute “unrelated business taxable

income” (“UBTI”).

A tax-exempt Unitholder should consult its tax advisor regarding whether such Unitholder may

recognize UBTI as a consequence of an investment in Units.

tax-exempt Unitholder may

recognize UBTI a consequence of an investment in Units.

Under the guidance provided

in Revenue Ruling and FAQs, hard forks, airdrops and similar occurrences with respect to digital currencies will under certain

circumstances be treated as taxable events giving rise to ordinary income.

In the absence of guidance to the contrary, it is possible

that any such income recognized by a U.S.

tax-exempt Unitholder would constitute UBTI.

A tax-exempt Unitholder should consult its

tax advisor regarding whether such Unitholder may recognize UBTI as a consequence of an investment in Units.

Unitholders may be subject

federal withholding tax on income derived from forks, airdrops and similar occurrences.

The Revenue Ruling

and FAQs do not address whether income recognized by a non-U.S.

person as a result of a fork, airdrop or similar occurrence could

be subject to the 30% withholding tax imposed on U.S.-source “fixed or determinable annual or periodical” income.

Unitholders should assume that, in the absence of guidance, a withholding agent is likely to withhold 30% of any such income recognized

by a non-U.S.

Unitholder in respect of its Units, including by deducting such withheld amounts from proceeds that such non-U.S.

Unitholder would otherwise be entitled to receive in connection with a distribution of Additional Currency.

Risk Factors Related to Potential

Conflicts of Interest

Potential conflicts of interest

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

The Sponsor and its affiliates have no fiduciary duties to the Trust

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

The Revenue Ruling and

FAQs do not address whether income recognized by a non-U.S.

person as a result of a fork, airdrop or similar occurrence could be

subject to the 30% withholding tax imposed on U.S.-source FDAP income.

Unitholders should assume that, in the absence

of guidance, a withholding agent is likely to withhold 30% of any such income recognized by a non-U.S.

Unitholder in respect of

its Units, including by deducting such withheld amounts from proceeds that such non-U.S.

Unitholder would otherwise be entitled

to receive in connection with a distribution of Additional Currency.

Risk Factors Related to Potential Conflicts

Potential conflicts of interest may

arise among the Sponsor or its affiliates and the Trust.

The Sponsor and its affiliates have no fiduciary duties to the Trust and

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

of the Trust and its Unitholders.

The Sponsor will

manage the affairs of the Trust.

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

Trust and its Unitholders, on the other hand.

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

of its affiliates over the Trust and its Unitholders.

The Sponsor will manage

the affairs of the Trust.

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

and its Unitholders, on the other.

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

its affiliates over the Trust and its Unitholders.

These potential conflicts include, among others, the following:

The Sponsor has no fiduciary duties to, and is allowed to take into account the interests of parties other than, the Trust and its Unitholders in resolving conflicts of interest;

The Trust has agreed to indemnify the Sponsor and its affiliates pursuant to the Trust Agreement;

The Sponsor is responsible for allocating its own limited resources among different clients and potential future business ventures, to each of which it owes fiduciary duties;

The Sponsor and its staff also service affiliates of the Sponsor, including several other digital asset investment vehicles, and their respective clients and cannot devote all of its, or their, respective time or resources to the management of the affairs of the Trust;

The Sponsor, its affiliates and their officers and employees are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with the Trust;

There is an absence of arm’s-length negotiation with respect to certain terms of the Trust, and, where applicable, there has been no independent due diligence conducted with respect to the Trust;

The Sponsor decides whether to retain separate counsel, accountants or others to perform services for the Trust;

The Sponsor may appoint an agent to act on behalf of the Unitholders, including in connection with the distribution of any Additional Currency, which agent may be the Sponsor or an affiliate of the Sponsor.

By purchasing the

Units, Unitholders agree and consent to the provisions set forth in the Trust Agreement.

The Sponsor has no fiduciary duties to, and is allowed to take into account

the interests of parties other than, the Trust and its Unitholders in resolving conflicts of interest;

The Trust has agreed to indemnify the Sponsor and its affiliates pursuant

to the Trust Agreement;

The Sponsor is responsible for allocating its own limited resources among

different clients and potential future business ventures, to each of which it owes fiduciary duties;

The Sponsor and its staff also service affiliates of the Sponsor, including

several other digital asset investment vehicles, and their respective clients and cannot devote all of its, or their, respective

time or resources to the management of the affairs of the Trust;

The Sponsor, its affiliates and their officers and employees are not prohibited

from engaging in other businesses or activities, including those that might be in direct competition with the Trust;

There is an absence of arm’s-length negotiation with respect to certain

terms of the Trust, and, where applicable, there has been no independent due diligence conducted with respect to the Trust;

The Sponsor decides whether to retain separate counsel, accountants or others

to perform services for the Trust;

The Sponsor may appoint an agent to act on behalf of the Unitholders, including

in connection with the distribution of any Additional Currency, which agent may be the Sponsor or an affiliate of the Sponsor.

By purchasing the Units,

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

See “Description of the Trust Documents—Description

of the Trust Agreement.”

Unitholders cannot be assured

of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.

Unitholders cannot

be assured that the Sponsor will be willing or able to continue to serve as sponsor to the Trust for any length of time.

Sponsor discontinues its activities on behalf of the Trust and a substitute sponsor is not appointed, the Trust will terminate

and liquidate its Bitcoins.

Appointment of a

substitute sponsor will not guarantee the Trust’s continued operation, successful or otherwise.

Because a substitute sponsor

may have no experience managing a digital asset financial vehicle, a substitute sponsor may not have the experience, knowledge

or expertise required to ensure that the Trust will operate successfully or continue to operate at all.

Therefore, the appointment

of a substitute sponsor may not necessarily be beneficial to the Trust and the Trust may terminate.

The Custodian could resign or

be removed by the Sponsor, which would trigger early termination of the Trust, or the Sponsor may need to find and appoint a replacement

custodian, which could pose a challenge to the safekeeping of the Trust’s Bitcoin.

The custodial

services agreements with FDAS and Coinbase Custody each include termination provisions.

For example, the New Custodial Services

Agreement indicates that either party may terminate the agreement upon thirty-day’s prior written notice and that the Trust

may cancel its custodial account at any time by withdrawing all balances and contacting Coinbase Custody.

If Coinbase Custody

resigns or is removed without replacement, the Trust will dissolve in accordance with the terms of the Trust Agreement.

could also decide to replace

the custodian of the Trust’s Bitcoin

On March 11, 2022, the Trust delivered to FDAS a notice of

termination of the Custodial Services Agreement dated May 18, 2020.

The notice of termination will become effective on April 10,

On March 10, 2022, the Trust transferred its custodied digital assets from FDAS to Coinbase Custody.

For a further discussion

of the conflicts of interest among the Sponsor, the Trust and others, see “Conflicts of Interest.”

The respective officers, employees

and/or affiliates of the Sponsor may trade in Bitcoin or other cryptocurrency markets for their own personal trading accounts,

and in doing so may take positions opposite to those held by the Trust or may compete with the Trust for positions in the marketplace.

The respective officers,

employees and/or affiliates of the Sponsor may manage other accounts in addition to the services that they provide to the Trust,

including their personal trading accounts.

The management of such other accounts in addition to services provided to the Trust

can present certain conflicts of interest.

The other accounts might have similar or different investment objectives or strategies

as the Trust, or otherwise hold, purchase or sell investments that are eligible to be held, purchased or sold by the Trust, or

may take positions

that are opposite in direction from those taken by the Trust.

When managing personal trading accounts, the respective

officers, employees and/or affiliates of the Sponsor may take into account their own interests without regard to the interests

of the Trust or the Unitholders.

Records of other accounts, including personal trading accounts, will not be available for inspection

by Unitholders.

Unitholders cannot be assured of

the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.

Unitholders cannot be

assured that the Sponsor will be willing or able to continue to serve as sponsor to the Trust for any length of time.

If the Sponsor

discontinues its activities on behalf of the Trust and a substitute sponsor is not appointed, the Trust will terminate and liquidate

its Bitcoins.

Appointment of a substitute

sponsor will not guarantee the Trust’s continued operation, successful or otherwise.

Because a substitute sponsor may have

no experience managing a digital asset financial vehicle, a substitute sponsor may not have the experience, knowledge or expertise

required to ensure that the Trust will operate successfully or continue to operate at all.

Therefore, the appointment of a substitute

sponsor may not necessarily be beneficial to the Trust and the Trust may terminate.

See “Conflicts of Interest—The

If the Custodian resigns or is removed

by the Sponsor or otherwise, without replacement, it could trigger early termination of the Trust, or the Sponsor would need to

find and appoint a replacement custodian, which could pose a challenge to the safekeeping of the Trust’s Bitcoin.

The custodial services

agreements with FDAS included and Coinbase Custody includes termination provisions.

For example, the Custodial Services Agreement

with Coinbase Custody indicates that either party may terminate the agreement upon thirty-day’s prior written notice and

that the Trust may cancel its custodial account at any time by withdrawing all balances and contacting the Custodian.

Custody resigns or is removed without replacement, the Trust will dissolve in accordance with the terms of the Trust Agreement.

The Sponsor could replace the custodian of the Trust’s Bitcoin Holdings.

On March 11, 2022, the Trust delivered to FDAS a

notice of termination of the custodial services agreement dated May 18, 2020.

The notice of termination became effective on April

On March 10, 2022, the Trust transferred its custodied digital assets from FDAS to the Custodian.

Although the transfer

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custodian is not without any risk.

The transferring maintenance responsibilities of the Trust’s Bitcoin Holdings to another

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

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

Unitholders may be adversely

affected by the lack of independent advisers representing investors in the Trust.

The Sponsor has

consulted with counsel, accountants and other advisers regarding the formation and operation of the Trust.

No counsel was appointed

to represent investors in connection with the formation of the Trust or the establishment of the terms of the Trust Agreement and

Moreover, no counsel has been appointed to represent Unitholders in connection with an investment in the Units.

an investor should consult his, her or its own legal, tax and financial advisers regarding the desirability of an investment in

Lack of such consultation may lead to an undesirable investment decision with respect to investment in the Units.

Unresolved Staff Comments

The transferring of maintenance responsibilities of the Trust’s Bitcoin Holdings to another

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

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

In addition, to the

extent that the Sponsor is not able to find a suitable party willing to serve as a replacement custodian, the Sponsor may be required

to terminate the Trust and liquidate the Trust’s Bitcoin.

In addition, the extent that the Sponsor finds a suitable party

and must enter into a modified Custodian Agreement that is less favorable for the Trust or Sponsor and/or transfer the Trust’s

assets in a relatively short time period, the safekeeping of the Trust’s Bitcoin may be adversely affected, which may in

turn adversely affect the value of the Units

Unitholders may be adversely affected

by the lack of independent advisers representing investors in the Trust.

The Sponsor has consulted with counsel, accountants

and other advisers regarding the formation and operation of the Trust.

No counsel was appointed to represent investors in connection

with the formation of the Trust or the establishment of the terms of the Trust Agreement and the Units.

Moreover, no counsel has been appointed

to represent Unitholders in connection with an investment in the Units.

Accordingly, an investor should consult his, her or its

own legal, tax and financial advisers regarding the desirability of an investment in the Units.

Lack of such consultation may lead

to an undesirable investment decision with respect to investment in the Units.

Unresolved Staff

Not applicable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors