What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-04-01 compared with 2023-03-21 · 1917 added, 2263 removed, 48 unchanged (99% of the section changed)

An investment in the Units involves

material risks as described below.

These risks should also be read in conjunction with the other information included in this Annual

Report, including the Trust’s financial statements and related notes thereto.

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

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

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

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

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.

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.

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 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.

The lack of active trading markets for the Units may result in losses on an investment in the Trust at the time of disposition of Units.

A possible “short squeeze” due to a sudden increase in demand for the Units that largely exceeds supply may lead to price volatility in the Units.

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.

Disruptions at OTC trading desks and potential consequences of an OTC trading desk’s failure could adversely affect an investment in the Units.

Disruptions at Bitcoin exchanges and potential consequences of a Bitcoin exchange’s failure could 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.

Related to the Trust and the Units

The Trust has only a limited performance history.

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 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.

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

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.

The sale of the Units could be subject to SEC or state securities registration.

The Trust is not a registered investment company.

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.

federal income tax purposes is uncertain.

Unitholders could incur a tax liability without an associated distribution.

The treatment of Bitcoin for U.S.

federal income tax purposes is uncertain.

Future developments regarding the treatment of digital currency for U.S.

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.

federal income tax purposes could adversely affect the value of the 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

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

to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of 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 to the capabilities and development of blockchain technologies, such as the infancy of their development, their

dependence on the internet and other technologies, their dependence on the role played by miners and developers and the potential

for malicious activity.

For example, the realization of one or more of the following risks could materially adversely affect the

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, 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 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

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

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

a variety of factors that are difficult to evaluate.

For example, the realization of one or more of the following risks could materially

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.

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.

Shares are speculative and involve a high degree of risk.

Before making an investment decision, you should consider carefully the risks

described below, as well as the other information included in this Annual Report.

Factors Related to Digital Assets

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

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 Shares and the Shares could lose all or substantially all of their value.

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

These increases were followed by steep drawdowns throughout 2022 in digital asset trading prices, including for Bitcoin.

In the 2021-2022

cycle, the price of Bitcoin peaked at $67,734 and bottomed at $15,632, marking a steep 77% drawdown.

These episodes of rapid price appreciation

followed by steep drawdowns have occurred multiple times throughout Bitcoin’s history, including in 2011, 2013-2014, and 2017-2018,

before repeating again in 2021-2022.

Over the course of 2023 and 2024, Bitcoin prices continued to exhibit extreme volatility.

the results of the U.S.

presidential election in November 2024, the price of Bitcoin rallied to a then all-time high of over $100,000

in December 2024 based, in part, on the market’s perception that the new presidential administration would be pro-digital assets.

During 2025, Bitcoin prices swung between a low of $76,737 to a high of $125,663.

volatility may persist and the value of the Shares may significantly decline in the future without recovery.

The digital asset markets

may still be experiencing a bubble or may experience a bubble again in the future.

For example, in the first half of 2022, each of Celsius

Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the

digital asset ecosystem and negative publicity surrounding digital assets more broadly.

In November 2022, FTX Trading Ltd.

one of the largest digital asset platforms by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity

issues and likely insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter, FTX’s CEO resigned and FTX and

many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar

proceedings around the globe, following which the U.S.

Department of Justice brought criminal fraud and other charges, and the SEC and

CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives,

including its former CEO.

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

bankruptcy filing, such as BlockFi Inc.

and Genesis Global Capital, LLC.

In response to these events (collectively, the “2022 Events”),

the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may

continue to be, negatively affected, further undermining confidence in the digital asset markets.

These events also negatively impacted

the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity.

If the liquidity

of the digital asset markets were to be negatively impacted by similar events in the future, digital asset prices, including Bitcoin,

may continue to experience significant volatility or price declines and confidence in the digital asset markets may be undermined.

addition, regulatory and enforcement scrutiny increased as a result of such events, including from, among others, the Department of Justice,

the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities.

It is not possible to predict all of the

risks of past or future events that may result in a loss of confidence in the digital asset ecosystem and/or expose the Trust, its service

providers or the digital asset industry as a whole to extreme price volatility.

value of Bitcoin as represented by the Index may also be subject to momentum pricing due to speculation regarding future appreciation

in value, leading to greater volatility that could adversely affect the value of the Shares.

Momentum pricing typically is associated

with growth stocks and other assets whose valuation, as determined by the investing public, accounts for 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 the Index more volatile.

As a result, Bitcoin may be more likely to fluctuate

in value due to changing investor confidence, which could impact future appreciation or depreciation in the Index and could adversely

affect the value of the Shares.

participants may also act based on perceptions that digital assets are subject to a more favorable regulatory environment compared to

that of traditional financial instruments.

False perceptions about the regulatory oversight of Bitcoin may contribute to increased speculative

interest, elevated trading volumes and inflated valuations.

volatility in the future, including further declines in the trading prices of Bitcoin, could have a material adverse effect on the value

of the Shares and the Shares could lose all or substantially all of their value.

The Trust is not actively managed and does not take

any actions to take advantage, or mitigate the impacts, of volatility in the price of Bitcoin.

value of the Shares is subject to a number of factors relating to the fundamental investment characteristics of Bitcoin as a digital

asset, including the fact that digital assets are bearer instruments and loss, theft, or compromise of the associated private keys could

result in permanent loss of the asset, and the capabilities and development of blockchain technologies such as the Bitcoin blockchain.

assets such as Bitcoin were only introduced within the past 16 years, and the value of the Shares is subject to a number of factors over

time relating to the capabilities and development of blockchain technologies, such as the recentness of their development, their dependence

on the internet and other technologies, their dependence on the role played by users, developers and miners and the potential for malicious

For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:

asset networks, including the Bitcoin network, and the software used to operate them are in the early stages of development.

the recentness of the development of digital asset networks, digital assets may not function as intended and parties may be unwilling

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

Because Bitcoin is a digital asset, the

value of the Shares is subject to a number of factors relating to the fundamental investment characteristics of digital assets, including

the fact that digital assets are bearer instruments and loss, theft, compromise, or destruction of the associated private keys could

result in permanent loss of the asset.

assets, including Bitcoin, are controllable only by the possessor of both the unique public key and private key or keys relating

to the Bitcoin network address, or “wallet,” at which the digital asset is held.

Private keys must be safeguarded and

kept private in order to prevent a third-party from accessing the digital asset held in such wallet.

The loss, theft, compromise

or destruction of a private key required to access a digital asset may be irreversible.

If a private key is lost, stolen, destroyed

or otherwise compromised and no backup of the private key is accessible, the owner would be unable to access the digital asset corresponding

to that private key and the private key will not be capable of being restored by the digital asset network resulting in the total

loss of the value of the digital asset linked to the private key.

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.

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, including the

Bitcoin blockchain, resulting in the operation of multiple separate networks.

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 past decade, Bitcoin 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 Bitcoin mining operations are not sufficiently high, including

due to an increase in electricity costs or a decline in the market price of Bitcoin, or if Bitcoin mining operations are unable to

arrange alternative sources of financing (e.g., if lenders refuse to make loans to such miners), Bitcoin miners are more likely to

immediately sell more Bitcoin than they otherwise would, resulting in an increase in liquid supply of Bitcoin, which would generally

tend to reduce Bitcoin’s market price.

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 Bitcoin blockchain

until a block is mined 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 a digital asset network.

asset mining operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise

to public opinion against allowing, or government regulations restricting, the use of electricity for mining operations.

Additionally,

miners may be forced to cease operations during an electricity shortage or power outage, or if electricity prices increase where

the mining activities are performed.

digital asset networks, including the Bitcoin network, face significant scaling challenges and may periodically be upgraded with

various features designed to increase the speed and throughput of digital asset transactions.

These attempts to increase the volume

of transactions may not be effective, and such upgrades may fail, resulting in potentially irreparable damage to the Bitcoin network

and to the value of Bitcoin.

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.

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

1 unchanged sentence

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

ownership and large sales or distributions by holders of such digital assets could have an adverse effect on the market price of

such digital asset.

As of January

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

these circumstances, a malicious actor may be able to compromise the security of the Bitcoin network or take the Trust’s Bitcoin,

which would adversely affect the value of the Shares.

Moreover, functionality of the Bitcoin network may be negatively affected such

that it is no longer attractive to users, thereby dampening demand for Bitcoin.

Even if another digital asset other than Bitcoin

were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets

generally could negatively affect the demand for digital assets and therefore adversely affect the value of the Shares.

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.

assets represent a new and rapidly evolving industry, and the value of the Shares depends on the continued acceptance of Bitcoin.

Bitcoin network was first launched in 2009 and Bitcoin was the first cryptographic digital asset created to gain global adoption and

critical mass.

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 a

variety of factors that are difficult to evaluate.

For example, the realization of one or more of the following risks could materially

adversely affect the value of the Shares:

has only recently become selectively accepted as a means of payment by retail and commercial outlets, and use of Bitcoin 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 digital asset platforms, Bitcoin-related companies or service providers;

or maintain accounts for persons or entities transacting in Bitcoin.

As a result, the price of Bitcoin may be influenced to a significant

extent 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.

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.

Further, the lack of availability of banking services could prevent the Trust from being

able to complete creations and redemptions of Baskets, the timely liquidation of Bitcoin and withdrawal of assets from the Bitcoin

Custodian even if the Sponsor determined that such liquidation was appropriate or suitable, or otherwise disrupt the Trust’s

privacy-preserving features have been or are expected to be introduced to digital asset networks, such as the Bitcoin network, and

platforms 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 or facilitate illicit financing or crime.

developers and miners may otherwise 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.

Trust is not actively managed and does not have any formal strategy relating to the development of the Bitcoin network.

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.

governance of decentralized networks, such as 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 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.

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.

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.

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.

amendments to the Bitcoin network ’ s protocols and software could, if accepted and authorized by the Bitcoin network

community, adversely affect an investment in the Trust.

Bitcoin network uses a cryptographic protocol to govern the interactions within the Bitcoin network.

A loose community known as the core

developers has evolved to informally manage the source code for the protocol.

Membership in the community of core developers evolves over

time, largely based on self-determined participation in the resource section dedicated to Bitcoin on Github.com.

The core developers

can propose amendments to the Bitcoin network’s source code that, if accepted by miners and users, could alter the protocols and

software of the Bitcoin network and the properties of Bitcoin.

These alterations would occur through software upgrades, and could potentially

include changes to the irreversibility of transactions and limitations on the mining of new Bitcoin, which could undermine the appeal

and market value of Bitcoin.

Alternatively, software upgrades and other changes to the protocols of the Bitcoin network could fail to

work as intended or could introduce bugs, security risks, or otherwise adversely affect, the speed, security, usability, or value of

the Bitcoin network or Bitcoin.

As a result, the Bitcoin network could be subject to changes to its protocols and software in the future

that may adversely affect an investment in the Trust.

open-source structure of the Bitcoin network protocol means that the core developers and other contributors are generally not directly

compensated for their contributions in maintaining and developing the Bitcoin network protocol.

A failure to properly monitor and upgrade

the Bitcoin network protocol could damage the Bitcoin network and an investment in the Trust.

Bitcoin network operates based on an open-source protocol maintained by the core developers and other contributors, largely on the GitHub

resource section dedicated to Bitcoin development.

As Bitcoin is rewarded solely for mining activity and is not sold to raise capital

for the Bitcoin network, and the Bitcoin network protocol itself is made available for free rather than sold or made available subject

to licensing or subscription fees and its use does not generate revenues for its development team, the core developers are generally

not compensated for maintaining and updating the source code for the Bitcoin network protocol.

Consequently, there is a lack of financial

incentive for developers to maintain or develop the Bitcoin network and the core developers may lack the resources to adequately address

emerging issues with the Bitcoin network protocol.

Although the Bitcoin network is currently supported by the core developers, there

can be no guarantee that such support will continue or be sufficient in the future.

For example, there have been recent reports that

the number of core developers who have the authority to make amendments to the Bitcoin network’s source code in the GitHub repository

is relatively small, although there are believed to be a larger number of developers who contribute to the overall development of the

source code of the Bitcoin network.

Alternatively, some developers may be funded by entities whose interests are at odds with other participants

in the Bitcoin network.

In addition, a bad actor could also attempt to interfere with the operation of the Bitcoin network by attempting

to exercise a malign influence over a core developer.

To the extent that material issues arise with the Bitcoin network protocol and

the core developers and open-source contributors are unable to address the issues adequately or in a timely manner, the Bitcoin network

and an investment in the Trust may be adversely affected.

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

digital asset networks, including the Bitcoin network, face significant scaling challenges due to the fact that public blockchains generally

face a tradeoff between security and scalability.

One means through which public blockchains achieve security is decentralization, meaning

that no intermediary is responsible for securing and maintaining these systems.

For example, a greater degree of decentralization generally

means a given digital asset network is less susceptible to manipulation or capture.

A digital asset network may be limited in the number

of transactions it can process by the capabilities of each single fully participating node.

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.

Since January

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

or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers)

obtains a majority of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter the Blockchain on

which transactions in Bitcoin rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely

manner, or at all.

1, 2025, Bitcoin transaction fees have decreased from $1.53 per Bitcoin transaction, on average, to $0.68 per transaction, on average,

on December 31, 2025.

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 Shares.

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 Shares.

assets may have concentrated ownership and large sales or distributions by holders of such digital assets could have an adverse effect

on the market price of such digital assets.

largest Bitcoin wallets are believed to hold, in aggregate, a significant percentage of the Bitcoin in circulation.

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, and it is possible that some of these wallets are controlled by the same person or entity.

As a result of this

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

the digital asset award for mining blocks and transaction fees for recording transactions on the Bitcoin network are not sufficiently

high to incentivize miners, or if certain jurisdictions continue to limit mining activities, miners may cease expanding processing power

or demand high transaction fees, which could negatively impact the value of Bitcoin and the value of the Shares.

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 Bitcoin

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.

have historically accepted relatively low transaction confirmation fees on most digital asset networks.

If miners demand higher transaction

fees for recording transactions in the Blockchain or a software upgrade automatically charges fees for all transactions on the Bitcoin

network, the cost of using Bitcoin may increase and the marketplace may be reluctant to accept Bitcoin as a means of payment.

Alternatively,

miners could collude in an anti-competitive manner to reject low transaction fees on the Bitcoin network and force users to pay higher

fees, thus reducing the attractiveness of the Bitcoin network.

Higher transaction confirmation fees resulting through collusion or otherwise

may adversely affect the attractiveness of the Bitcoin network, the value of Bitcoin and the value of the Shares.

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 Bitcoin blockchain

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

a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions

of the computers) obtains control of more than 50% of the processing power dedicated to mining on the Bitcoin network, it may be able

to alter the Bitcoin blockchain on which transactions in Bitcoin rely by constructing fraudulent blocks or preventing certain transactions

from completing in a timely manner, or at all.

The malicious actor or botnet could also control, exclude or modify the ordering of transactions.

malicious actor or botnet would not be able to generate new tokens or transactions using such control, it could “double-spend”

Although the malicious actor or botnet would not be able to generate new tokens or transactions using such control, it could “double-spend”

its own tokens (i.e., spend the same tokens in more than one transaction) and prevent the confirmation of other users’ transactions

for so long as it maintained control.

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

made to the Blockchain may not be possible.

Further, a malicious actor or botnet could create a flood of transactions in order

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

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

If network participants, including the core

developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power,

the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin Network will increase, which may

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.

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 made to the

Bitcoin blockchain may not be possible.

Further, a malicious actor or botnet could create a flood of transactions in order to slow down

the Bitcoin network.

operates using open-source protocols, meaning that any user can download the software, modify it and then propose that the users

and miners of Bitcoin adopt the modification.

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 since the Bitcoin blockchain’s genesis block was mined in 2009, and others

have come close.

The possible crossing or near-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.

Also, there have been reports that two mining pools recently controlled

in excess of 50% of the aggregate mining power on the Bitcoin network and may do so now or in the future.

If network participants, including

the core developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing

power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin network will increase, which may

adversely affect the value of the Shares.

Also, if miners experience financial or other difficulties on a large scale and are unable

to participate in mining activities, whether due to a downturn in the Bitcoin market or other factors, the risks of the Bitcoin network

becoming more centralized could increase.

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 users and miners accept amendments to the source code

proposed by the controlled core developer, other core developers do not counter such amendments, and such amendments enable the malicious

exploitation of the Bitcoin network, the risk that a malicious actor may be able to obtain control of the Bitcoin network in this manner

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

Bitcoin network operates using open-source protocols, meaning that any user can download the software, modify it and then propose that

the users and miners of Bitcoin adopt the modification.

When a modification is introduced and a substantial majority of users and miners

consent to the modification, the change is implemented and the network remains uninterrupted.

However, if less than a substantial

majority of users and miners consent to the proposed modification, and the modification is not compatible with the software prior

to its modification, the consequence would be what is known as a “hard fork” of the Bitcoin Network, with one group

running the pre-modified software and the other running the modified software.

The effect of such a fork would be the existence

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

However, if less than a substantial majority

of users and miners consent to the proposed modification, and the modification is not compatible with the software prior to its modification,

the consequence would be what is known as a “hard fork” of the Bitcoin network, with one group running the pre-modified software

and the other running the modified software.

The effect of such a fork would be the existence of two versions of Bitcoin running in parallel

on separate networks using separate blockchain ledgers, 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

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

as a network community’s response to a significant security breach.

For example, in June 2016, an anonymous hacker exploited

a smart contract running on the Ethereum network to syphon approximately $60 million of ETH held by The DAO, a distributed autonomous

organization, into a segregated account.

In response to the hack, most participants in the Ethereum community elected to adopt

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.

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

fork can lead to new security concerns.

may also occur as a network community’s response to a significant security breach.

For example, in July 2016, Ethereum

“forked” into Ethereum and a new digital asset, Ethereum Classic, as a result of the Ethereum network community’s

response to a significant security breach in which an anonymous hacker exploited a smart contract running on the Ethereum network to

syphon approximately $60 million of ETH held by The DAO, a distributed autonomous organization, into a segregated account.

response to the hack, most participants in the Ethereum community elected to adopt a “fork” that effectively reversed

However, a minority of users continued to develop the original blockchain, with the digital asset on that blockchain now

referred to as “Ethereum Classic”.

Ethereum Classic now trades on several digital asset platforms.

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.

could result in a permanent fork, as in the case of Ethereum and Ethereum Classic.

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 Shares.

a hard fork can lead to new security concerns.

For example, when the Ethereum and Ethereum Classic networks split in July 2016, replay

attacks, in which transactions from one network were rebroadcast to nefarious effect on the other network, plagued Ethereum exchanges

attacks, in which transactions from one network were rebroadcast to nefarious effect on the other network, plagued Ethereum platforms

through at least October 2016.

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

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

at that time, as a result of replay attacks.

Similar replay attack concerns occurred in connection with the Bitcoin Cash and Bitcoin

Satoshi’s Vision networks split in November 2018.

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.

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

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

more susceptible to attack.

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,

a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotors of a

new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of

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

hard fork may adversely affect the price of Bitcoin at the time of announcement or adoption.

For example, the announcement of a hard

fork could lead to increased demand for the prefork digital asset, in anticipation that ownership of the prefork digital asset would

entitle holders to a new digital asset following the fork.

The increased demand for the prefork digital asset may cause the price of

the digital asset to rise.

After the hard fork, it is possible the aggregate price of the two versions of the digital asset running in

parallel would be less than the price of the digital asset immediately prior to the fork.

Furthermore, while the Sponsor will, as permitted

by the terms of the Trust Agreement, determine which network is generally accepted as the Bitcoin network and should therefore be considered

the appropriate network for the Trust’s purposes, there is no guarantee that the Sponsor will choose the network and the associated

digital asset that is ultimately the most valuable fork.

Either of these events could therefore adversely impact the value of the Shares.

another example of the effects of hard forks on digital assets, on September 15, 2022, the Ethereum Network completed its merge, moving

from a proof-of-work model to a proof-of-stake model.

The Ethereum proof-of-work miners who disagreed with the new consensus mechanism

forked the network which resulted in the Ethereum proof-of-work network.

Ethereum proof-of-work network was driven by a small but vocal

group of miners who wished to hold onto revenue as Ethereum switched to proof-of-stake.

The vast majority of token holder votes preferred

the new proof-of-stake consensus method.

There was no material impact on the Ethereum network as a result of the fork.

All ether holders

were airdropped Ethereum proof-of-work network tokens as a result of the hard fork.

However, not all liquidity providers were able to

trade the new token and the Ethereum proof-of-work network token almost immediately lost most of its value.

may also be cloned.

Unlike a fork, which modifies 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 block.

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.

future fork in the Bitcoin network could adversely affect the value of the Shares or the ability of the Trust to operate.

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

addition to forks, a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotors

of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the

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

For example, in March 2017 the promoters of Stellar

Lumens announced that anyone that owned Bitcoin as of June 26, 2017 could claim, until August 27, 2017, a certain amount of Stellar Lumens.

Airdrops could create operational security, legal or regulatory, or other risks for the Trust, the Sponsor, the Bitcoin Custodian, Authorized

Participants, or other entities.

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.

We refer to the right to receive any such benefit as an “Incidental

Right” and any such virtual currency acquired through an Incidental Right as “Additional Currency.” There are

likely to be operational, tax, securities law, regulatory, legal and practical issues that significantly limit, or prevent entirely,

Unitholders’ ability to realize a benefit, through their interests in the Trust, from any such Additional Currency.

For instance,

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

the Bitcoin Network and should therefore be considered the appropriate network for the Trust’s purposes.

The Sponsor will

base its determination on a variety of then relevant factors, including, but not limited to, the Sponsor’s beliefs regarding

expectations of the core developers of Bitcoin, users, services, businesses, miners and other constituencies, as well as the actual

continued acceptance of, mining power on, and community engagement with, the Bitcoin Network.

There is no guarantee that the Sponsor

will choose the digital asset that is ultimately the most valuable fork, and the Sponsor’s decision may adversely affect

the value of the Units as a result.

The Sponsor may also disagree with Unitholders, security vendors and the Index Provider on

what is generally accepted as Bitcoin and should therefore be considered “Bitcoin” for the Trust’s purposes,

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

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.

Miners have historically

accepted relatively low transaction confirmation fees on most digital asset networks.

If miners demand higher transaction fees

for recording transactions in the Blockchain or a software upgrade automatically charges fees for all transactions on the Bitcoin

Network, the cost of using Bitcoin may increase and the marketplace may be reluctant to accept Bitcoin as a means of payment.

Alternatively,

miners could collude in an anti-competitive manner to reject low transaction fees on the Bitcoin Network and force users to pay

higher fees, thus reducing the attractiveness of the Bitcoin Network.

Higher transaction confirmation fees resulting through collusion

or otherwise may adversely affect the attractiveness of the Bitcoin Network, the value of Bitcoin and the value of the Units.

Any name change and any associated

rebranding initiative by the core developers of Bitcoin may not be favorably received by the digital asset community, which could

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

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

After a name change and an associated

rebranding initiative, a digital asset may not be able to achieve or maintain brand name recognition or status that is comparable

Right” and any such virtual currency (other than Bitcoin) acquired through an Incidental Right as “IR Virtual Currency.”

There are likely to be operational, tax, securities law, regulatory, legal and practical issues that significantly limit, or prevent

entirely, Shareholders’ ability to realize a benefit, through their interests in the Trust, from any such IR Virtual Currency.

For instance, the Bitcoin Custodian may not agree to provide access to the IR Virtual Currency.

In addition, the Sponsor may determine

that there is no safe or practical way to custody the IR Virtual 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 IR Virtual Currency exceed

the benefits of owning the IR Virtual Currency.

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

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

For example, it

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

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

Sponsor may also determine, in consultation with its legal advisors and tax consultants, that the IR Virtual Currency is, or is

likely to be deemed, a security under federal or state securities laws or cause the Trust to lose its status as an investment trust

classified as a grantor trust.

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

Shares, such IR Virtual 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 IR Virtual Currency in a manner that would result in Shareholders receiving more than an

insignificant value thereof.

In making such a determination, the Sponsor will 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

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.

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 Shares.

the event of a hard fork of the Bitcoin network, the Sponsor will, as permitted by the terms of the Trust Agreement, use its sole 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 the Bitcoin network and should therefore be considered the appropriate network for the Trust’s purposes.

The Sponsor will base

its determination on whatever factors it deems relevant, including, but not limited to, the Sponsor’s beliefs regarding expectations

of the core developers of Bitcoin, users, services, businesses, miners and other constituencies, as well as the actual continued acceptance

of, mining power on, and community engagement with, the Bitcoin network, or whatever other factors it deems relevant.

There is no guarantee

that the Sponsor will choose the digital asset that is ultimately the most valuable fork, and the Sponsor’s decision may adversely

affect the value of the Shares as a result.

The Sponsor may also disagree with Shareholders, the Bitcoin Custodian, other service providers,

the Index Administrator, cryptocurrency platforms, or other market participants on what is generally accepted as Bitcoin and should therefore

be considered “Bitcoin” for the Trust’s purposes, which may also adversely affect the value of the Shares as a result.

hard fork could change the source code to the Bitcoin network, including the 21 million Bitcoin supply cap.

principle, a hard fork could change the source code for the Bitcoin network, including the source code which limits the supply of Bitcoin

to 21 million.

Although many observers believe this is unlikely at present, there is no guarantee that the current 21 million supply

cap for outstanding Bitcoin, which is estimated to be reached by approximately the year 2140, will not be changed.

If a hard fork changing

the 21 million supply cap is widely adopted, the limit on the supply of Bitcoin could be lifted, which could have an adverse impact on

the value of Bitcoin and the value of the Shares.

name change and any associated rebranding initiative by the core developers, users or miners of Bitcoin or the Bitcoin network may not

be favorably received by the digital asset community, which could negatively impact the value of Bitcoin and the value of the Shares.

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

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

After a name change and an

associated rebranding initiative, a digital asset may not be able to achieve or maintain brand name recognition or status that is comparable

to the recognition and status previously enjoyed by such digital asset.

The failure of any name change and any associated rebranding

initiative by a digital asset may result in such digital asset not realizing some or all of the anticipated benefits contemplated

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

Bitcoin Network.

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.

initiative by a digital asset may result in such digital asset not realizing some or all of the anticipated benefits contemplated by

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

Factors Related to the Digital Asset Markets

value of the Shares relates directly to the value of Bitcoin, the value of which may be highly volatile and subject to fluctuations due

to a number of factors.

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

affect the value of the Shares.

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

An increase in the global Bitcoin supply;

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;

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;

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

Fiat currency withdrawal and deposit policies on Bitcoin exchanges;

The liquidity of Bitcoin markets;

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;

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

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, 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;

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,

the Sponsor expects the value of the Units to decline proportionately.

The value of a Bitcoin

as represented by the Bitcoin Market Price or by the Trust’s principal market may also be subject to momentum pricing due

to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the value of the

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing

public, accounts for future appreciation in value, if any.

The Sponsor believes that momentum pricing of Bitcoins has resulted,

and may continue to result, in speculation regarding future appreciation in the value of Bitcoin, inflating and making the Bitcoin

Market Price more volatile.

As a result, Bitcoin may be more likely to fluctuate in value due to changing investor confidence,

which could impact future appreciation or depreciation in the Bitcoin Market Price and could adversely affect the value of the

of an asset may be defined as a measure of the risk or price moves for the asset calculated from the standard deviation of day-to-day

logarithmic historical price changes.

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 (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, 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,

Bitcoin’s 30-day annualized price volatility denominated in U.S.

dollars was 19.79%.

Over the past five years, Bitcoin’s

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

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

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

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

is significantly smaller than expected and that the U.S.

makes up a significantly larger percentage of the Bitcoin exchange market

than is commonly understood.

Nonetheless, any actual or perceived false trading in the Bitcoin exchange market, and any other fraudulent

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 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.

Negative perception,

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 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

in Bitcoin through means other than the Units, including through direct investments in Bitcoin and other potential financial vehicles,

possibly including securities backed by or linked to Bitcoin and digital asset financial vehicles similar to the Trust.

and financial conditions, and other conditions beyond the Sponsor’s control, may make it more attractive to invest in other

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 price of the Units, the NAV and

the NAV per Unit.

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.

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:

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

more opportunities for institutional and retail investors to invest in the digital asset market.

If exchange-listing requests are

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 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

will change as fluctuations occur in the market price of the Trust’s Bitcoin Holdings.

Unitholders should be aware that the

secondary market trading price of a Unit may be different from the NAV per Unit (i.e., Units may trade at a premium over, or a

discount to, the NAV), and similarly the secondary market trading price per Unit may be different from the NAV per Unit, for a

number of reasons, including price volatility, trading volume and any closings of Bitcoin trading platforms due to fraud, failure,

security breaches or otherwise.

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,

FINRA determined the Units met the criteria for quotation and trading on the OTCQX under the ticker symbol “OBTC.”

Nevertheless, there can be no assurance that, the Units will trade with sufficient liquidity for the quotation to be of practical

use to investors.

Moreover, quotation may be halted due to market conditions, or in light of the OTCQX rules and procedures.

can be no assurance that the requirements necessary to maintain the quotation of the Units on the OTCQX will continue to be met.

The lack of active trading markets

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.

A possible “short squeeze”

due to a sudden increase in demand for the Units that largely exceeds supply may lead to price volatility in the Units.

Bitcoin price speculation

may involve long and short exposures.

To the extent that aggregate short exposure exceeds the number of Units available for purchase

(for example, in the event that large redemption requests by Unitholders dramatically affect Unit liquidity), Unitholders with

short exposure may have to pay a premium to repurchase Units for delivery to Unit lenders.

Those repurchases may, in turn, dramatically

increase the price of the Units until additional Units are issued.

This is often referred to as a “short squeeze.”

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

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

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

be able to realize the profit they expect.

If this is the case, the liquidity of Units may decline and the price of the Units may

fluctuate independently of the price of Bitcoin and may fall.

In addition, the Sponsor may postpone, suspend or reject purchase

orders, as applicable, for a variety of permitted reasons under certain circumstances.

To the extent such orders are postponed,

suspended or rejected, the arbitrage mechanism resulting from the process through which investors purchase Units directly from

the Trust may fail to closely link the price of the Units to the value of the underlying Bitcoin, as measured using the Bitcoin

Market Price.

If this is the case, the liquidity of the Units may decline and the price of the Units may fluctuate independently

of the Bitcoin Market Price and may fall.

The Units have experienced significant premiums since their commencement of trading in

the OTC Markets and on OTCQX and may continue to do so in the future.

Information about the Trust’s historical trading prices,

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

Disruptions at OTC trading desks

and potential consequences of an OTC trading desk’s failure could adversely affect an investment in the Units.

There are a limited

number of OTC trading desks with which the Trust can transact in Bitcoin to effect issuances and redemptions (if any).

at or withdrawal from the market by any such OTC trading desk may adversely affect the Trust’s ability to purchase or sell

Bitcoin, which may potentially negatively impact the market price of the Units.

A disruption at one or more OTC trading desks will

reduce liquidity in the market and may negatively impact the Trust’s ability to value its Bitcoin.

Because there is currently

no publicly disseminated and verifiable feed with respect to the price of Bitcoin on a regulated exchange, investors must rely

on other pricing sources, such as the Bitcoin Market Price or prices obtained directly from the OTC trading desks, to obtain the

price of Bitcoin.

Disruptions at Bitcoin exchanges

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, currencies of other governments and other cryptocurrencies.

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

Bitcoin trades on exchanges are

recorded on the exchange’s internal ledger only and each internal ledger entry for a trade will correspond to an entry for

an offsetting trade in U.S.

dollars or other government currency.

To sell Bitcoin on a Bitcoin exchange, a user will transfer Bitcoin

(using the Bitcoin network) from him or herself to the Bitcoin exchange.

Conversely, to buy Bitcoin on a Bitcoin exchange, a user

will transfer U.S.

dollars or other government currency to the Bitcoin exchange.

After completing the transfer of Bitcoin or U.S.

dollars, the user will execute his or her trade and withdraw either the Bitcoin (using the Bitcoin network) or the U.S.

back to the user.

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

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.

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.

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

cannot be assured, by the Trust, the Custodian or any other person.

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.

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 (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.

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

investment vehicle with no management and no board of directors.

Thus, the Units are not entitled to the same rights as shares

issued by a corporation operating a business enterprise with management and a board of directors.

By acquiring Units, you are not

acquiring the right to elect directors, to vote on certain matters regarding the issuer of your Units or to take other actions

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.

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,

employees and agents also have a right to be indemnified from the Trust for any liability or expense they incur without gross negligence,

bad faith, or willful misconduct on their part.

Similarly, the Custodial Services Agreement provides for indemnification of the

Custodian by the Trust under certain circumstances.

That means that it may be necessary to sell assets of the Trust to cover losses

or liability suffered by any of the foregoing parties.

Any sale of that kind would reduce the NAV of the Trust and the NAV per

The Trust’s Bitcoin Holdings

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.

A market disruption,

such as a foreign government taking political actions that disrupt the market in its currency, its commodity production or exports,

or in another major export, can also make it difficult to liquidate a position.

In the event of a fork of the Bitcoin network,

certain Bitcoin exchanges and/or OTC counterparties may halt deposits and withdrawals of Bitcoin for a set period of time thus

reducing liquidity in the markets.

Unexpected market illiquidity may cause major losses to Unitholders at any time.

The large amount

of Bitcoin the Trust may acquire increases the risk of illiquidity by both making its Bitcoin more difficult to liquidate and increasing

the losses incurred while trying to do so.

To the extent the Trust is unable to purchase or sell Bitcoin at a desired price as

a result of illiquidity, the Trust may not be able to effect issuances and redemptions (if permitted) of Units for cash.

Transactions in Bitcoin are irreversible

and the Trust may be unable to recover improperly transferred Bitcoin.

Bitcoin transactions

are irreversible.

An improper transfer, whether accidental or resulting from theft, can only be undone by the receiver of the Bitcoin

agreeing to send the Bitcoin back to the original sender in a separate subsequent transaction.

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.

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

its technology and may develop and redesign its technology, including enhancements and alterations that may be implemented from

time to time, and it expects its service providers to do the same.

In doing so, there is risk that failures may occur and result

in service interruptions or other negative consequences.

Any technology updates that cause disruptions in the proper functioning

of the Trust’s or any of its service provider’s technology systems may have an adverse impact on the Trust and an investment

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

to protect against failure, hacking, malware and general security threats, and it expects its service providers to take their own

steps to maintain and upgrade their own technology systems with the same goals in mind.

The Trust is not liable to Unitholders

for the failure or penetration of technology systems absent gross negligence, willful misconduct or bad faith.

To the extent technology

systems fail or are penetrated, any loss of the Trust’s Bitcoin or loss of confidence in the Trust’s ability to safeguard

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 is potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive

problems and security breaches.

Any such problems or security breaches could give rise to a halt in the Trust’s operations,

and expose the Trust to a risk of financial loss, litigation and other liabilities.

In the event of a security breach, the Trust

may cease operations, suspend redemptions or suffer a loss of Bitcoin or other assets.

Any of these events, particularly if they

result in a loss of confidence in the Trust’s ability to operate, could have a material adverse effect on an investment in

Technology system failures could

cause interruptions in the Trust’s ability to operate.

If the Sponsor’s

systems fail to perform, the Trust could experience disruptions in operations and slower response times, which may cause delays

in the Trust’s ability to buy or sell Bitcoin.

Any such failures may also result in the theft, loss or damage of the Trust’s

Any such theft, loss or damage of the Trust’s Bitcoin would have a negative impact on the value of the Units and

adversely affect the Trust’s ability to operate.

In addition, a loss of confidence in the Trust’s ability to secure

the Trust’s Bitcoin with its technology system may adversely affect the Trust and the value of an investment in the Units.

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 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.

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

increase in the global Bitcoin supply or a decrease in global Bitcoin demand;

conditions of, and overall sentiment towards, the digital assets and blockchain technology industry;

activity on digital asset platforms, which, in many cases, is largely unregulated or may be subject to manipulation;

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, and their ability to meet user demands;

trading activity on digital asset platforms, which, in many cases, is largely unregulated;

in the Bitcoin network;

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

preferences and perceptions of Bitcoin specifically and digital assets generally;

events, publicity, and social media coverage relating to the digital assets and blockchain technology industry;

currency withdrawal and deposit policies on digital asset platforms;

liquidity of digital asset markets and any increase or decrease in trading volume or market making on digital asset markets;

failures, bankruptcies, hacking, fraud, crime, government investigations, or other negative developments affecting digital asset

businesses, including digital asset platforms, or banks or other financial institutions and service providers which provide services

to the digital assets industry;

use of leverage in digital asset markets, including the unwinding of positions, “margin calls,” collateral liquidations

and similar events;

and trading activities of large or active consumer and institutional users, speculators, miners, and investors in Bitcoin;

active derivatives market for Bitcoin or for digital assets generally;

policies of governments, legislation or regulation, 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 digital asset

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

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

maintenance, troubleshooting, and development of the Bitcoin network including by miners and developers worldwide;

ability for the Bitcoin network to attract and retain miners to secure and confirm transactions accurately and efficiently;

technological viability and security of the Bitcoin network and Bitcoin transactions, including vulnerabilities against hacks and

strength of market participants;

availability and cost of funding and capital;

liquidity and credit risk of digital asset platforms;

interruptions

in service from or closures or failures of major digital asset platforms or their banking partners, or outages or system failures

affecting the Bitcoin network;

confidence in digital assets and digital assets platforms;

risk management or fraud by entities in the digital assets ecosystem;

competition from other forms of digital assets or payment services;

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

returns from investing in Bitcoin have at times diverged from those associated with other asset classes to a greater or lesser extent,

there can be no assurance that there will be any such divergence in the future, either generally or with respect to any particular asset

class, or that price movements will not be correlated.

In addition, there is no assurance that Bitcoin will maintain its value in the

long, intermediate, short, or any other term.

In the event that the price of Bitcoin declines, the Sponsor expects the value of the Shares

to decline proportionately.

price of Bitcoin as represented by the Index or other pricing source used by the Trust may also be subject to momentum pricing due to

speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the value of the Shares.

Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public,

accounts for future appreciation in value, if any.

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 the Index more volatile.

Bitcoin may be more likely to fluctuate in value due to changing investor confidence, which could impact future appreciation or depreciation

in the Index or other pricing source used by the Trust and could adversely affect the value of the Shares.

the Trust holds only Bitcoin and cash, an investment in the Trust may be more volatile than an investment in a more broadly diversified

Trust holds only Bitcoin and cash.

As a result, the Trust’s holdings are not diversified.

Accordingly, the Trust’s NAV may

be more volatile than another investment vehicle with a more broadly diversified portfolio and may fluctuate substantially over short

or long periods of time.

Fluctuations in the price of Bitcoin are expected to have a direct impact on the value of the Shares.

investment in the Trust may be deemed speculative and is not intended as a complete investment program.

An investment in Shares should

be considered only by persons financially able to maintain their investment and who can bear the risk of total loss associated with 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

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.

Investors should review closely the objective and strategy of the Trust and redemption rights, as discussed

herein, and familiarize themselves with the risks associated with an investment in the Trust.

to the unregulated nature and lack of transparency surrounding the operations of digital asset platforms, which may experience fraud,

manipulation, security failures or operational problems, as well as the wider Bitcoin market, the value of Bitcoin and, consequently,

the value of the Shares may be adversely affected, causing losses to Shareholders.

asset platforms are relatively new and, in some cases, unregulated.

Many operate outside the United States.

Furthermore, while many prominent

digital asset platforms provide the public with significant information regarding their ownership structure, management teams, corporate

practices and regulatory compliance, many digital asset platforms do not provide this information.

Digital asset platforms may not be

subject to, or may not comply with, regulation in a similar manner as other regulated trading platforms, such as national securities

exchanges or designated contract markets.

As a result, the marketplace may lose confidence in digital asset platforms, including prominent

platforms that handle a significant volume of Bitcoin trading.

digital asset platforms are unlicensed, unregulated, operate without extensive supervision by governmental authorities, and do not provide

the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and

regulatory compliance.

In particular, those located outside the United States may be subject to significantly less stringent regulatory

and compliance requirements in their local jurisdictions, and may take the position that they are not subject to laws and regulations

that would apply to a national securities exchange or designated contract market in the United States, or may, as a practical matter,

be beyond the ambit of U.S.

As a result, trading activity on or reported by these digital asset platforms is generally significantly

less regulated than trading in regulated U.S.

securities and commodities markets, and may reflect behavior that would be prohibited in

regulated U.S.

trading venues.

For example, in 2019 there were reports claiming that 80.95% of Bitcoin trading volume on digital asset

platforms was false or noneconomic in nature, with specific focus on unregulated platforms located outside of the United States.

reports alleged that certain overseas platforms have displayed suspicious trading activity suggestive of a variety of manipulative or

fraudulent practices, such as fake or artificial trading volume or trading volume based on non-economic “wash trading” (where

offsetting trades are entered into for other than bona fide reasons, such as the desire to inflate reported trading volumes), and attributed

such manipulative or fraudulent behavior to motives, such as the incentive to attract listing fees from token issuers who seek the most

liquid and high-volume platforms on which to list their coins.

academics and market observers have put forth evidence to support claims that manipulative trading activity has occurred on certain Bitcoin

For example, in a 2017 paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary

Cyber Research Center at Tel Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction

data from a 2014 Mt.

Gox security breach, to identify and analyze the impact of “suspicious trading activity” on Mt.

between February and November 2013, which, according to the authors, caused the price of Bitcoin to increase from around $150 to more

than $1,000 over a two-month period.

In August 2017, it was reported that a trader or group of traders nicknamed “Spoofy”

was placing large orders on Bitfinex without actually executing them, presumably in order to influence other investors into buying or

selling by creating a false appearance that greater demand existed in the market.

In December 2017, an anonymous blogger (publishing

under the pseudonym “Bitfinex’d”) cited publicly available trading data to support his or her claim that a trading bot nicknamed

“Picasso” was pursuing a paint-the-tape-style manipulation strategy by buying and selling Bitcoin and Bitcoin Cash between

affiliated accounts in order to create the appearance of substantial trading activity and thereby influence the price of such assets.

Even in the United States, there have been allegations of wash trading even on regulated venues.

Any actual or perceived false trading

in the digital asset platform market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of

Bitcoin and/or negatively affect the market perception of Bitcoin.

Bitcoin market globally and in the United States is not subject to comparable regulatory guardrails as exist in regulated securities

Furthermore, many Bitcoin trading venues lack certain safeguards put in place by exchanges for more traditional assets to enhance

the stability of trading on the exchanges and prevent “flash crashes,” such as limit-down circuit breakers.

the prices of Bitcoin on trading venues may be subject to larger and/or more frequent sudden declines than assets traded on more traditional

Tools to detect and deter fraudulent or manipulative trading activities such as market manipulation, front-running of trades,

and wash-trading may not be available to or employed by digital asset platforms, or may not exist at all.

The SEC has identified possible

sources of fraud and manipulation in the Bitcoin market generally, including, among others (1) “wash trading;” (2) persons

with a dominant position in Bitcoin manipulating Bitcoin pricing;

(3) hacking of the Bitcoin network and trading platforms;

(4) malicious

control of the Bitcoin network;

(5) trading based on material, non-public information (for example, plans of market participants to significantly

increase or decrease their holdings in Bitcoin, new sources of demand for Bitcoin) or based on the dissemination of false and misleading

(6) manipulative activity involving purported “stablecoins,” including Tether (for more information, see “Risk

Factors—Risk Factors Related to Digital Assets—Prices of Bitcoin may be affected due to stablecoins (including Tether and

Dollar Coin (“USDC”)), the activities of stablecoin issuers and their regulatory treatment”);

and (7) fraud and

manipulation at Bitcoin trading platforms.

The effect of potential market manipulation, front-running, wash-trading, and other fraudulent

or manipulative trading practices may inflate the volumes actually present in crypto market and/or cause distortions in price, which

could adversely affect the Trust or cause losses to Shareholders.

addition, over the past several years, some digital asset platforms have been closed due to fraud and manipulative activity, business

failure or security breaches.

In many of these instances, the customers of such digital asset platforms were not compensated or made

whole for the partial or complete losses of their account balances in such digital asset platforms.

While, generally speaking, smaller

digital asset platforms are less likely to have the infrastructure and capitalization that make larger digital asset platforms more stable,

larger digital asset platforms are more likely to be appealing targets for hackers and malware and their shortcomings or ultimate failures

are more likely to have contagion effects on the digital asset ecosystem, and therefore 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 digital asset platforms could be subject to abrupt failure with consequences for both users of digital asset platforms

and the digital asset industry as a whole.

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

Gox, the value of one Bitcoin fell on other platforms 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.

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

asset platform.

The value of Bitcoin and other digital assets immediately decreased over 10% following reports of the theft at Bitfinex.

Regulatory enforcement actions have followed, such as in July 2017, when FinCEN assessed a $110 million fine against BTC-E, a now defunct

digital asset platform, for facilitating crimes such as drug sales and ransomware attacks.

In addition, in December 2017, Yapian, the

operator of Seoul-based digital asset platform 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 platform accounts, with any potential further distributions to be made following Yapian’s pending bankruptcy

In addition, in January 2018, the Japanese digital asset platform, Coincheck, was hacked, resulting in losses of approximately

$535 million, and in February 2018, the Italian digital asset platform, Bitgrail, was hacked, resulting in approximately $170 million

In May 2019, one of the world’s largest digital asset platforms, Binance, was hacked, resulting in losses of approximately

In November 2022, FTX, one of the largest digital asset platforms by volume at the time, halted customer withdrawals amid

rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO.

Shortly thereafter,

FTX’s CEO resigned and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered

insolvency, liquidation, or similar proceedings around the globe, following which the U.S.

Department of Justice brought criminal fraud

and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its

affiliates’ senior executives, including its former CEO.

Around the same time, there were reports that approximately $300-600 million

of digital assets were removed from FTX and the full facts remain unknown, including whether such removal was the result of a hack, theft,

insider activity, or other improper behavior.

perception, a lack of stability and standardized regulation in the digital asset markets and the closure or temporary shutdown of digital

asset platforms due to fraud, business failure, security breaches or government mandated regulation, and associated losses by customers,

may reduce confidence in the Bitcoin network and result in greater volatility or decreases in the prices of Bitcoin.

Furthermore, the

closure or temporary shutdown of a digital asset platform used in calculating the Index may result in a loss of confidence in the Trust’s

ability to determine its NAV on a daily basis.

The potential consequences of a digital asset platform’s failure could adversely

affect the value of the Shares.

Index has a limited performance history, the Index price could fail to track the global Bitcoin price, and a failure of the Index could

adversely affect an investment in the Shares.

Index has a limited history and the methodology for determining the Index established by the Index Administrator is relatively new and

The failure of the Index methodology to measure the actual price of Bitcoin could have an adverse effect on the Trust and on

an investment in the Trust.

In addition, the price 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

the fair value of the Bitcoin held by the Trust in the Trust’s financial statements in accordance with GAAP.

Index used to calculate the value of the Trust ’ s Bitcoin may be volatile, adversely affecting the value of the Shares.

price of Bitcoin on public digital asset platforms has a limited history, and during this history, Bitcoin prices on the digital asset

markets more generally, and on digital asset platforms individually, have been volatile and subject to influence by many factors, including

operational interruptions.

The Index and the price of Bitcoin generally, remains subject to volatility experienced by digital asset platforms,

and such volatility could adversely affect the value of the Shares.

because the number of liquid and credible digital asset platforms is limited, the Index is necessarily composed of a limited number

of digital asset platforms.

If a digital asset platform were subjected to regulatory, volatility or other pricing issues, in the case

of the Index, the Index Administrator would have limited ability to remove such digital asset platform from the Index, which could skew

the price of Bitcoin as represented by the Index.

Trading on a limited number of digital asset platforms may result in less favorable

prices and decreased liquidity of Bitcoin and, therefore, could have an adverse effect on the value of the Shares.

from central bank digital currencies ( “ CBDCs ” ) and emerging payments initiatives involving financial

institutions could adversely affect the value of Bitcoin and other digital assets.

banks in various countries have introduced digital forms of legal tender (CBDCs).

Whether or not they incorporate blockchain or similar

technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replace, Bitcoin and other

cryptocurrencies as a medium of exchange or store of value.

Central banks and other governmental entities have also announced cooperative

initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction

in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently announced

a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments

and settlement activities, which could compete with, or reduce the demand for, Bitcoin.

As a result of any of the foregoing factors,

the value of Bitcoin could decrease, which could adversely affect an investment in the Trust.

of Bitcoin may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers and their regulatory

the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for the Bitcoin market and other

digital asset markets.

Stablecoins are digital assets designed to have a stable value over time as compared to typically volatile digital

assets, and are typically marketed as being pegged to a fiat currency, such as the U.S.

dollar, at a certain value.

Although the prices

of stablecoins are intended to be stable, their market value may fluctuate.

This volatility has in the past apparently impacted the price

Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants

in the Bitcoin market.

In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient

backing in a way that, when the stablecoin is used to pay for Bitcoin, could cause artificial rather than genuine demand for Bitcoin,

artificially inflating the price of Bitcoin, and also argue that those associated with certain stablecoins may be involved in laundering

On February 17, 2021, the New York Attorney General entered into an agreement with Tether’s operators, requiring them to

cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made

regarding the assets backing Tether.

On October 15, 2021, the CFTC announced a settlement with Tether’s operators in which they

agreed to pay $42.5 million in fines to settle charges that, among other things, Tether’s operators claim that it maintained sufficient

dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency”

held by Tether were untrue.

is a reserve-backed stablecoin issued by Circle Internet Financial that is commonly used as a method of payment in digital asset markets,

including the Bitcoin market.

While USDC is designed to maintain a stable value at US$1.00 at all times, on March 10, 2023, the value

of USDC fell below $1.00 for multiple days after Circle Internet Financial disclosed that US$3.3 billion of the USDC reserves were held

at Silicon Valley Bank, which had entered FDIC receivership earlier that day.

Stablecoins are reliant on the U.S.

banking system and

treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adversely

affect the value of the Shares.

An affiliate of the Sponsor has a minority equity interest in the issuer of USDC.

the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact on

the broader digital asset market, including the market for Bitcoin.

Because a large portion of the digital asset market still depends

on stablecoins such as Tether and USDC, there is a risk that a disorderly de-pegging or a run on Tether or USDC could lead to dramatic

market volatility in digital assets more broadly.

Volatility in stablecoins, operational issues with stablecoins (for example, technical

issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins or potential manipulative activity

when unbacked stablecoins are used to pay for other digital assets (including Bitcoin), or regulatory concerns about stablecoin issuers

or intermediaries, such as exchanges, that support stablecoins, could impact individuals’ willingness to trade on trading venues

that rely on stablecoins, reduce liquidity in the Bitcoin market, and affect the value of Bitcoin, and in turn impact an investment in

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 Shares.

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 December 31, 2025, Bitcoin was the largest digital asset by market capitalization and had the largest

combined mining power.

Despite this first-to-market advantage, as of December 31, 2025, there were over 10,000 alternative digital assets

tracked by CoinMarketCap.com, having a total market capitalization of approximately $2.96 trillion (including the approximately $1.75

trillion market capitalization 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 smart contract

platforms rather than open platforms like the Bitcoin network.

Competition from the emergence or growth of alternative digital assets

and smart contracts platforms, such as Ethereum, Solana, Avalanche, Polkadot, or Cardano, could have a negative impact on the demand

for, and price of, Bitcoin and thereby adversely affect the value of the Shares.

addition, some digital asset networks, including the Bitcoin network, may be the target of ill will from users of other digital asset

For example, Litecoin is the result of a hard fork of Bitcoin.

Some users of the Bitcoin network may harbor ill will toward

the Litecoin network, and vice versa.

These users may attempt to negatively impact the use or adoption of the Bitcoin network.

may invest in Bitcoin through means other than the Shares, including through direct investments in Bitcoin and other potential financial

vehicles, possibly including securities backed by or linked to Bitcoin and digital asset financial vehicles similar to the Trust, or

Bitcoin futures-based products.

Market and financial conditions, and other conditions beyond the Sponsor’s control, may make it

more attractive to invest in other financial vehicles or to invest in Bitcoin directly, which could limit the market for, and reduce

the liquidity of, the Shares.

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 Index, the Trust’s Bitcoin

holdings, the price of the Shares, the NAV of the Trust and the NAV per Share.

from other exchange-traded Bitcoin products could adversely affect the Trust and the value of the Shares.

Trust and the Sponsor face competition with respect to the creation of competing exchange-traded Bitcoin products.

Since January 2024,

the SEC has approved several spot Bitcoin exchange traded funds (“ETFs”), with many such products being currently publicly

The Sponsor’s competitors may have greater financial, technical and human resources than the Sponsor.

These competitors

may also compete with the Sponsor in recruiting and retaining qualified personnel.

Smaller or early-stage companies may also prove to

be effective competitors, particularly through collaborative arrangements with large and established companies.

The Trust’s competitors

may also charge a substantially lower fee than the Management Fee in order to achieve initial market acceptance and scale.

the Sponsor’s competitors may commercialize a competing product more rapidly or effectively than the Sponsor is able to, which

could adversely affect the Sponsor’s competitive position and the likelihood that the Trust will achieve initial market acceptance,

and could have a detrimental effect on the scale and sustainability of the Trust.

If the Trust fails to achieve sufficient scale due

to competition, the Sponsor may have difficulty raising sufficient revenue to cover the costs associated with launching and maintaining

the Trust and such shortfalls could impact the Sponsor’s ability to properly invest in robust ongoing operations and controls of

the Trust to minimize the risk of operating events, errors, or other forms of losses to the Shareholders.

In addition, the Trust may

also fail to attract adequate liquidity in the secondary market due to such competition, resulting in a sub-standard number of Authorized

Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in the Shares for

extended periods and the Trust’s failure to reflect the performance of the price of Bitcoin.

the Trust’s timing in reaching the market relative to other competitor Bitcoin products could have a detrimental effect on the

scale and success of the Trust, including difficulties gaining name recognition or acquiring new investors who may have a preference

for a pre-established spot Bitcoin ETF.

In addition, investors may invest in Bitcoin through means other than the Trust, including through

direct investments in Bitcoin and other potential financial vehicles, possibly including securities backed by or linked to Bitcoin, digital

asset financial vehicles similar to the Trust, or Bitcoin futures-based products.

Market and financial conditions, as well as increased

competition from alternative investment vehicles and other conditions beyond the Sponsor’s control, may make it more attractive

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

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 Trust’s Bitcoin holdings, the price of the Shares,

and the NAV of the Trust.

Factors Related to the Trust and the Shares

Trust may be negatively impacted by the effects of public health emergencies on the global economy and the markets and service providers

relevant to the performance of the Trust.

seen during the COVID-19 pandemic, the impact of a public health crisis could adversely affect the economies of many nations and the

entire global economy as well as individual issuers, assets and capital markets, and could have serious negative effects on social, economic

and financial systems, including significant uncertainty and volatility in the digital asset markets.

For example, digital asset prices,

including Bitcoin, decreased significantly in the first quarter of 2020 amidst broader market declines as a result of the COVID-19 outbreak.

public health emergencies could result in an increase of the costs of the Trust and affect liquidity in the digital asset market, as

well as the correlation between the price of the Shares and the NAV of the Trust, any of which could adversely affect the value of the

In addition, future public health emergencies could impair the information technology and other operational systems upon which

the Trust’s service providers, including the Sponsor, the Trustee, and the Custodians, rely, and could otherwise disrupt the ability

of employees of the Trust’s service providers to perform essential tasks on behalf of the Trust.

Governmental and quasi-governmental

authorities and regulators throughout the world have at times responded to major economic disruptions with a variety of fiscal and monetary

policy changes, including, but not limited to, direct capital infusions into companies and other issuers, new monetary tools and lower

interest rates.

An unexpected or sudden reversal of these policies, or the ineffectiveness of these policies, is likely to increase volatility

in the digital asset markets, which could adversely affect the value of Bitcoin and the price of the Shares.

Future public health emergencies

could also cause the closure of futures exchanges, which could eliminate the ability of Authorized Participants to hedge purchases of

Baskets, increasing trading costs of Shares and resulting in a sustained premium or discount in the Shares.

Each of these outcomes would

negatively impact the Trust.

amount of the Trust ’ s assets represented by each Share will decline over time as the Trust pays the Management Fee

and additional expenses borne by the Trust, and as a result, the value of the Shares may decrease over time.

amount of Bitcoin represented by each Share will decrease over the life of the Trust due to the sales of Bitcoin necessary to pay the

Management Fee and other Trust expenses.

Without increases in the price of Bitcoin sufficient to compensate for that decrease, the price

of the Shares will also decline and you will lose money on your investment in Shares.

the Trust does not have any income, it needs to sell Bitcoin to cover the Management Fee and expenses not assumed by the Sponsor.

Trust may also be subject to other liabilities (for example, as a result of litigation) that have also not been assumed by the Sponsor.

The only source of funds to cover those liabilities will be sales of Bitcoin held by the Trust.

Even if there are no expenses other than

those assumed by the Sponsor, and there are no other liabilities of the Trust, the Sponsor will still need to sell Bitcoin to pay the

Management Fee.

The result of these sales is a decrease in the amount of Bitcoin represented by each Share.

New purchases of Bitcoin

utilizing cash proceeds for new Shares issued by the Trust do not reverse this trend.

decrease in the amount of Bitcoin represented by each Share results in a decrease in its price even if the price of Bitcoin has not changed.

To retain the Share’s original price, the price of Bitcoin has to increase.

Without that increase, the lesser amount of Bitcoin

represented by the Share will have a correspondingly lower price.

If these increases do not occur, or are not sufficient to counter the

lesser amount of Bitcoin represented by each Share, you will sustain losses on your investment in Shares.

increase in the Trust expenses not assumed by the Sponsor, or the existence of unexpected liabilities affecting the Trust, will force

the Sponsor to sell larger amounts of Bitcoin, and will result in a more rapid decrease of the amount of Bitcoin represented by each

Share and a corresponding decrease in its value.

Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of Bitcoin.

The Trust is not actively

managed and will be affected by a general decline in the price of Bitcoin.

Trust is a passive investment vehicle that does not seek to generate returns beyond tracking the price of Bitcoin.

The Sponsor does not

actively manage the Bitcoin held by the Trust.

This means the Sponsor does not speculatively sell Bitcoin at times when its price is

high or speculatively acquire Bitcoin at low prices with the expectation of future price increases.

It also means the Trust will not

utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective.

Any losses sustained by the Trust

will adversely affect the value of your Shares.

value of the Shares may be influenced by a variety of factors unrelated to the value of Bitcoin.

value of the Shares may be influenced by a variety of factors unrelated to the price of Bitcoin and the digital asset platforms included

in the Index that may have an adverse effect on the value of the Shares.

These factors include the following factors:

unanticipated

problems or issues with respect to the mechanics of the Trust’s operations and the trading of the Shares may arise, in particular

due to the fact that the mechanisms and procedures governing the creation and redemption of the Shares in exchange for Bitcoin or

cash, offering of the Shares and storage of Bitcoin have been developed specifically for this product;

Trust could experience difficulties in operating and maintaining its technical infrastructure, including in connection with expansions

or updates to such infrastructure, which are likely to be complex and could lead to unanticipated delays, unforeseen expenses and

security vulnerabilities;

Trust could experience unforeseen issues relating to the performance and effectiveness of the security procedures used to protect

the Trust’s account with the Bitcoin Custodian, or the security procedures may not protect against all errors, software flaws

or other vulnerabilities in the Trust’s technical infrastructure, which could result in theft, loss or damage of its assets;

providers may default on or fail to perform their obligations or deliver services under their contractual agreements with the Trust,

or decide to terminate their relationships with the Trust, for a variety of reasons, which could affect the Trust’s ability

the Bitcoin network introduces privacy enhancing features in the future, service providers may decide to terminate their relationships

with the Trust due to concerns that the introduction of privacy enhancing features to the Bitcoin network may increase the potential

for Bitcoin to be used to facilitate crime, exposing such service providers to potential reputational harm.

of these factors could affect the value of the Shares, either directly or indirectly through their effect on the Trust’s assets.

liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants.

the event that one or more Authorized Participants withdraw from or cease participation in creation and redemption activity for any reason,

the liquidity of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in your incurring

a loss on your investment in Shares.

may be situations where an Authorized Participant is unable to redeem a Basket of Shares.

To the extent the value of Bitcoin decreases,

these delays may result in a decrease in the amount the Authorized Participant will receive when the redemption occurs, as well as a

reduction in liquidity for all Shareholders in the secondary market.

Shares surrendered by Authorized Participants in Basket-size aggregations are redeemable in exchange for the amount of Bitcoin corresponding

to the redemption value or the cash proceeds from selling the underlying amount of Bitcoin, redemptions may be suspended (1) for any

period during which the Listing Exchange is closed, other than for customary weekend or holiday closings, or trading on the Listing Exchange

is suspended or restricted;

(2) for any period during which an emergency (for example, an interruption in services or availability of

the Bitcoin Custodian, Cash Custodian, Trust Administrator, or other service providers to the Trust, act of God, catastrophe, civil disturbance,

government prohibition, war, terrorism, strike or other labor dispute, fire, force majeure, interruption in telecommunications, order

entry systems, internet services, or network provider services, unavailability of Fedwire, SWIFT or banks’ payment processes, significant

technical failure, bug, error, disruption or fork of the Bitcoin network, hacking, cybersecurity breach, or power, internet, or Bitcoin

network outage, or similar event) exists, and 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 the Shareholders.

If any of these events

occurs at a time when an Authorized Participant intends to redeem Shares, and the price of Bitcoin decreases before such Authorized Participant

is able again to surrender for redemption Baskets, such Authorized Participant will sustain a loss with respect to the amount that it

would have been able to obtain upon the redemption of its Shares, had the redemption taken place when such Authorized Participant originally

intended it to occur.

As a consequence, Authorized Participants may reduce their trading in Shares during periods of suspension, decreasing

the number of potential buyers of Shares in the secondary market and, therefore, decreasing the price a Shareholder may receive upon

Trust is an “ emerging growth company ” and it cannot be certain if the reduced disclosure requirements

applicable to emerging growth companies will make the Shares less attractive to investors.

Trust is an “emerging growth company” as defined in the JOBS Act.

For as long as the Trust continues to be an emerging growth

company it may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies

but not to emerging public companies, which include, among other things:

from the auditor attestation requirements under Section 404(b) of the Sarbanes-Oxley Act;

disclosure obligations regarding executive compensation in the Trust’s periodic reports and audited financial statements in

this Annual Report;

from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes

on “golden parachute” compensation;

from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless otherwise determined by the

SEC, any new audit rules adopted by the PCAOB.

Trust could be an emerging growth company until the last day of the fiscal year following the fifth (5 th ) anniversary after

its initial public offering, or until the earliest of (i) the last day of the fiscal year in which it has annual gross revenue of $1.235

billion or more;

(ii) the date on which it has, during the previous three year period, issued more than $1 billion in non-convertible

or (iii) the date on which it is deemed to be a large accelerated filer under the federal securities laws.

The Trust will qualify

as a large accelerated filer as of the first day of the first (1 st ) fiscal year after it has (A) more than $700 million in

outstanding equity held by nonaffiliates, (B) been public for at least twelve months and (C) filed at least one annual report on Form

addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with

new or revised accounting standards.

This allows an emerging growth company to delay the adoption of these accounting standards until

it would otherwise apply to private companies.

The Trust has elected to avail itself of this exemption and, therefore, it may not be

subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

The Trust cannot

predict if investors will find an investment in the Trust less attractive if it relies on these exemptions.

lack of an active trading market for the Shares may result in losses on your investment at the time of disposition of your Shares.

Shares are listed for trading on the Listing Exchange, you should not assume that an active trading market for the Shares will be maintained.

If you need to sell your Shares at a time when no active market for them exists, such lack of an active market will most likely adversely

affect the price you receive for your Shares (assuming you are able to sell them).

the process of creation and redemption of Baskets encounters any unanticipated difficulties, the possibility for arbitrage transactions

by Authorized Participants intended to keep the price of the Shares closely linked to the price of Bitcoin may not exist and, as a result,

the price of the Shares may fall or otherwise diverge from the NAV.

the processes of creation and redemption of Shares (which depend on timely transfers of Bitcoin to and by the Bitcoin Custodian and

Prime Execution Agent) encounter any unanticipated difficulties due to, for example, the price volatility of Bitcoin, the

insolvency, business failure or interruption, default, failure to perform, security breach, or other problems affecting the Prime

Execution Agent, Bitcoin Custodian, Authorized Participants or Bitcoin Trading Counterparties, the closing of Bitcoin trading

platforms due to fraud, failures, security breaches or otherwise, or network outages or congestion, spikes in transaction fees

demanded by miners, or other problems or disruptions affecting the Bitcoin network, then potential market participants, such as the

Authorized Participants and their customers, who would otherwise be willing to purchase or redeem Baskets (in the case of Authorized

Participants) to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the

price of the underlying Bitcoin or to engage in Bitcoin transactions (in the case of Bitcoin Trading Counterparties or transactions

facilitated by the Prime Execution Agent) may not take the risk that, as a result of those difficulties, they may not be able to

realize the profit they expect.

In certain such cases, as further described in “Business of the Trust,” the Sponsor may

suspend the process of creation and redemption of Baskets.

During such times, trading spreads, and the resulting premium or

discount, on Shares may widen.

Alternatively, in the case of a network outage or other problems affecting the Bitcoin network, the

processing of transactions on the Bitcoin network may be disrupted, which in turn may prevent Bitcoin Trading Counterparties (as

defined in “Description of the Shares and the Trust Agreement—Issuance of Baskets”) from depositing or withdrawing

Bitcoin from their accounts at the Prime Execution Agent, or prevent the Prime Execution Agent from facilitating Bitcoin

transactions, which in turn could affect the creation or redemption of Baskets.

If this is the case, the liquidity of the Shares may

decline and the price of the Shares may fluctuate independently of the price of Bitcoin and may fall or otherwise diverge from the

Furthermore, in the event that the market for Bitcoin should become relatively illiquid and thereby materially restrict

opportunities for arbitraging, the price of Shares may diverge from the value of Bitcoin.

use of cash creations and redemptions, as opposed to in-kind creations and redemptions, may adversely affect the arbitrage transactions

by Authorized Participants intended to keep the price of the Shares closely linked to the price of Bitcoin and, as a result, the price

of the Shares may fall or otherwise diverge from the NAV.

Trust may effect its creations and redemptions in exchange for cash or in-kind.

The use of cash creations and redemptions, as

opposed to in-kind creations and redemptions, could cause delays in trade execution due to potential operational issues arising from

implementing a cash creation and redemption model, which involves greater operational steps (and therefore execution risk) than the

originally contemplated in-kind creation and redemption model, or the potential unavailability or exhaustion of the Trade Credits,

which the Trust would not be able to use in connection with in-kind creations and redemptions.

Such delays could cause the execution

price associated with such trades to materially deviate from the price used to determine the NAV by reference to the Index.

though the Authorized Participant is responsible for the dollar cost of such difference in prices, Authorized Participants could

default on their obligations to the Trust, or such potential risks and costs could lead to Authorized Participants, who would

otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between

the price of the Shares and the price of the underlying Bitcoin, to elect to not participate in the Trust’s Share creation and

redemption processes.

This may adversely affect the arbitrage mechanism intended to keep the price of the Shares closely linked to

the price of Bitcoin, and as a result, the price of the Shares may fall or otherwise diverge from the NAV.

If the arbitrage

mechanism is not effective, purchases or sales of Shares on the secondary market could occur at a premium or discount to NAV, which

could harm Shareholders by causing them to buy Shares at a price higher than the value of the underlying Bitcoin held by the Trust

or sell Shares at a price lower than the value of the underlying Bitcoin held by the Trust, causing Shareholders to suffer losses.

Alternatively, Authorized Participants could refrain from participating in creating and redeeming Baskets, and if not replaced,

could disrupt the Trust’s ability to operate.

an owner of Shares, you do not have the rights normally associated with ownership of other types of shares.

are not entitled to the same rights as shares issued by a corporation.

By acquiring Shares, you are not acquiring the right to elect

directors, to receive dividends, to vote on certain matters regarding the issuer of your Shares or to take other actions normally associated

with the ownership of shares.

You only have the limited rights contained in the Trust Agreement and described under “Description

of the Shares and the Trust Agreement.”

Sponsor and the Trustee may agree to amend the Trust Agreement without the consent of the Shareholders.

Sponsor may amend the Trust Agreement without the consent of any Shareholder, so long as the amendment is not adverse to the interests

of the Shareholders and does not adversely affect the limitations on the liability of the Shareholders.

Any amendment that adversely

affects the rights of Shareholders, appoints a new Sponsor, dissolves the Trust or makes any material change to the Trust’s purpose

or structure must be approved by the affirmative vote of Shareholders owning at least a majority (over 50%) of the outstanding Shares.

do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act

or the protections afforded by the Commodity Exchange Act.

Investment Company Act is designed to protect investors by preventing insiders from managing investment companies to their benefit and

to the detriment of public investors, such as:

the issuance of securities having inequitable or discriminatory provisions;

the management

of investment companies by irresponsible persons;

the use of unsound or misleading methods of computing earnings and asset value;

in the character of investment companies without the consent of investors;

and keeping investment companies from engaging in excessive

To accomplish these ends, the Investment Company Act requires the safekeeping and proper valuation of fund assets, restricts

greatly transactions with affiliates, limits leveraging, and imposes governance requirements as a check on fund management.

Trust is not a registered investment company under the Investment Company Act, and the Sponsor believes that the Trust is not required

to register under such act.

Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies.

Trust does not hold or trade in commodity interests regulated by the Commodity Exchange Act, as administered by the CFTC.

the Sponsor believes that the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and that neither the Sponsor

nor the Trustee is subject to regulation by the CFTC as a commodity pool operator or a commodity trading adviser in connection with the

operation of the Trust.

Consequently, Shareholders do not have the regulatory protections provided to investors in Commodity Exchange

Act-regulated instruments or commodity pools.

threats to the Trust ’ s account at the Bitcoin Custodian could result in the halting of Trust operations and a loss

of Trust assets or damage to the reputation of the Trust, each of which could result in a reduction in the value of the Shares.

breaches, computer malware and computer hacking attacks have been a prevalent concern in relation to digital assets.

The Sponsor believes

that the Trust’s Bitcoin held in the Trust’s account at the Bitcoin Custodian or in the Trading Account (as defined herein)

held with the Prime Execution Agent is an appealing target to hackers or malware distributors seeking to destroy, damage or steal the

Trust’s Bitcoin and will only become more appealing as the Trust’s assets grow.

To the extent that the Trust, the Sponsor

or the Bitcoin Custodian or Prime Execution Agent is unable to identify and mitigate or stop new security threats or otherwise adapt

to technological changes in the digital asset industry, the Trust’s Bitcoin may be subject to theft, loss, destruction or other

Sponsor believes that the security procedures in place for the Trust, including, but not limited to, offline storage, or offline (cold)

storage, multiple encrypted private key “shards,” and other measures, are reasonably designed to safeguard the Trust’s

Nevertheless, the security procedures cannot guarantee the prevention of any loss due to a security breach, software defect

or act of God that may be borne by the Trust and the security procedures may not protect against all errors, software flaws or other

vulnerabilities in the Trust’s technical infrastructure, which could result in theft, loss or damage of its assets.

does not control the Bitcoin Custodian’s or Prime Execution Agent’s operations or their implementation of such security procedures

and there can be no assurance that such security procedures will actually work as designed or prove to be successful in safeguarding

the Trust’s assets against all possible sources of theft, loss or damage.

Assets not held in offline (cold) storage, such as assets

held in a trading account, may be more vulnerable to security breach, hacking or loss than assets held in offline (cold) storage.

assets held in a trading account, including the Trust’s Trading Account at the Prime Execution Agent, are held on an omnibus, rather

than segregated basis, which creates greater risk of loss.

Even though Bitcoin is only moved into the Trading Account in connection with

and to the extent of purchases and sales of Bitcoin by the Trust and such Bitcoin is swept from the Trust’s Trading Account to

the Trust’s Vault Account (as defined herein) each trading day pursuant to a regular end-of-day sweep process, there are no policies

that would limit the amount of Bitcoin that can be held temporarily in the Trading Account maintained by the Prime Execution Agent.

could create greater risk of loss of the Trust’s Bitcoin, which could cause Shareholders to suffer losses.

security procedures and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an

employee of the Sponsor, the Bitcoin Custodian, or otherwise, and, as a result, an unauthorized party may obtain access to the Trust’s

account at the Bitcoin Custodian, the relevant private keys (and therefore Bitcoin) or other data or property of the Trust.

Additionally,

outside parties may attempt to fraudulently induce employees of the Sponsor or the Bitcoin Custodian to disclose sensitive information

in order to gain access to the Trust’s infrastructure.

As the techniques used to obtain unauthorized access, disable or degrade

service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized

until launched against a target, the Sponsor and the Bitcoin Custodian may be unable to anticipate these techniques or implement adequate

preventative measures.

actual or perceived breach of the Trust’s account at the Bitcoin Custodian could harm the Trust’s operations, result in partial

or total loss of the Trust’s assets, resulting in a reduction or destruction in the value of the Shares.

The Trust may also cease

operations, the occurrence of which could similarly result in a reduction in the value of the Shares.

transactions are irrevocable, and stolen or incorrectly transferred Bitcoin may be irretrievable.

As a result, any incorrectly executed

Bitcoin transactions could adversely affect the value of the Shares.

transactions are typically not reversible without the consent and active participation of the recipient of the transaction.

Once a transaction

has been verified and recorded in a block that is added to the Bitcoin blockchain, an incorrect transfer or theft of Bitcoin generally

is not reversible and the Trust may not be capable of seeking compensation for any such transfer or theft.

Although the Trust’s

transfers of Bitcoin are regularly made to or from the Trust’s account at the Bitcoin Custodian, it is possible that, through computer

or human error, or through theft or criminal action, the Trust’s Bitcoin could be transferred from the Trust’s account at

the Bitcoin Custodian in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.

events have occurred in connection with digital assets in the past.

For example, in September 2014, the Chinese digital asset platform

Huobi announced that it had sent approximately 900 Bitcoin and 8,000 Litecoin (worth approximately $400,000 at the prevailing market

prices at the time) to the wrong customers.

To the extent that the Trust is unable to seek a corrective transaction with such third-party

or is incapable of identifying the third-party which has received the Trust’s Bitcoin through error or theft, the Trust will be

unable to revert or otherwise recover incorrectly transferred Bitcoin.

The Trust is unable to convert or recover its Bitcoin transferred

to uncontrolled accounts.

To the extent that the Trust is unable to seek redress for such error or theft, such loss could adversely affect

the value of the Shares.

lack of full insurance and Shareholders ’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer

Agent and Custodian expose the Trust and its Shareholders to the risk of loss of the Trust ’ s Bitcoin for which no

person or entity is liable.

Trust is not a banking institution or otherwise a member of the 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 insure the Trust’s Bitcoin.

the Bitcoin Custodian and its related custodial entities are required under the Prime Broker Agreement to maintain insurance coverage

that is commercially reasonable for the custodial services it provides, and the Bitcoin Custodian and its related custodial entities

have advised the Sponsor that they maintain insurance at commercially reasonable amounts for the digital assets custodied on behalf of

clients, including the Trust’s Bitcoin, resulting from theft, shareholders cannot be assured that the Bitcoin Custodian or its

related custodial entities will maintain adequate insurance or that such coverage will cover losses with respect to the Trust’s

Moreover, while the Bitcoin Custodian maintains certain capital reserve requirements depending on the assets under custody and

to the extent required by applicable law, and such capital reserves may provide additional means to cover client asset losses, the Sponsor

does not know the amount of such capital reserves, and neither the Trust nor the Sponsor have access to such information.

The Trust cannot

be assured that the Bitcoin Custodian will maintain capital reserves sufficient to cover losses with respect to the Trust’s Bitcoin.

Furthermore, the Bitcoin Custodian has represented in securities filings that the total value of crypto assets in its possession and

control is significantly greater than the total value of insurance coverage that would compensate it in the event of theft or other loss

In addition, the Bitcoin insurance market is limited, and the level of insurance maintained by the Bitcoin Custodian may be

substantially lower than the assets of the Trust.

the Bitcoin Custodian’s maximum liability with respect to a breach of their obligations under the Prime Broker Agreement is the

greater of (i) the aggregate amount of fees paid by the Sponsor to the Bitcoin Custodian in the 12-month period prior to the event giving

rise to the liability or (ii) than the value of the supported digital assets on deposit in the Trust’s Vault Account(s) at the

time of the event giving rise to the liability, provided that in no event shall the Bitcoin Custodian’s aggregate liability in

respect of any custody wallet exceed $100,000,000.

The Bitcoin Custodian and its affiliates are also 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 website through which the custodial services are provided or the custodial services.

Shareholders’ 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.

a result, the recourse of the Trust or the Shareholders is limited.

of a critical banking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust’s

ability to create or redeem Baskets, or could cause losses to the Trust.

Prime Execution Agent facilitates the buying and selling or settlement of Bitcoin by the Trust in connection with cash creations and

redemptions between the Trust and the Authorized Participants, and the sale of Bitcoin to pay the Management Fee, any other Trust expenses,

to the extent applicable, and in extraordinary circumstances, to effect the liquidation of the Trust’s Bitcoin.

The Prime Execution

Agent relies on bank accounts to provide its trading platform services and including temporarily holding any cash related to a customer’s

purchase or sale of Bitcoin.

In particular, the Prime Execution Agent has disclosed that customer cash held by the Prime Execution Agent,

including the cash associated with the Trust’s Trading Account, is held in one or more banks’ accounts for the benefit of

the Prime Execution Agent’s customers, or in money market funds in compliance with Rule 2a-7 under the Investment Company Act and

rated “AAA” by S&P (or the equivalent from any eligible rating service), provided that such investments are held in accounts

in Coinbase’s name for the benefit of customers and are permitted and held in accordance with state money transmitter laws.

Prime Execution Agent has represented to the Sponsor that it has implemented the following policy with respect to the cash associated

with the Trust’s Trading Account.

First any cash related to the Trust’s purchase or sale of Bitcoin is held in one or more

omnibus accounts in the Prime Execution Agent’s name for the benefit of its clients at one or more U.S.

insured depository institutions;

or (ii) with respect to U.S.

dollars, liquid investments, which may include but are not limited to U.S.

treasuries and money market funds,

in accordance with state money transmitter laws.

The Prime Execution Agent titles such accounts it maintains with U.S.

insured depository

institutions and maintain records of the Trust’s interest therein in a manner designed to make available FDIC pass-through deposit

insurance, up to the per-depositor coverage limit then in place (currently $250,000 per depositor per insured depository institution),

but does not guarantee that pass-through insurance will apply since such insurance is dependent on the compliance of the bank.

insurance does not apply to cash held in a money market fund.

The Prime Execution Agent has agreed to title the accounts in a manner

designed to enable receipt of FDIC deposit insurance where applicable on a pass-through basis.

Second, to the extent the Trust’s

cash in the Trading Account in aggregate exceeds the amounts that can be maintained at the banks on the foregoing basis, the Prime Execution

Agent has represented that it currently conducts an overnight sweep of the excess into U.S.

government money market funds.

has not independently verified the Prime Execution Agent’s representations.

To the extent that the Prime Execution Agent faces

difficulty establishing or maintaining banking relationships, the loss of the Prime Execution Agent’s banking partners or the imposition

of operational restrictions by these banking partners and the inability for the Prime Execution Agent to utilize other financial institutions

may result in a disruption of creation and redemption activity of the Trust, or cause other operational disruptions or adverse effects

for the Trust.

In the future, it is possible that the Prime Execution Agent could be unable to establish accounts at new banking partners

or establish new banking relationships, or that the banks with which the Prime Execution Agent is able to establish relationships may

not be as large or well-capitalized or subject to the same degree of prudential supervision as the existing providers.

Trust could also suffer losses in the event that a bank in which the Prime Execution Agent holds customer cash, including the cash associated

with the Trust’s Trading Account (which is used by the Prime Execution Agent to move cash flows associated with the Trust’s

orders to sell Bitcoin in connection with payment of the Management Fee, and to the extent applicable, other Trust expenses), fails,

becomes insolvent, enters receivership, is taken over by regulators, enters financial distress, or otherwise suffers adverse effects

to its financial condition or operational status.

Recently, some banks have experienced financial distress.

For example, on March 8,

2023, the California Department of Financial Protection and Innovation announced that Silvergate Bank had entered voluntary liquidation,

and on March 10, 2023, Silicon Valley Bank was closed by the regulator, which appointed the FDIC, as receiver.

Similarly, on March 12,

2023, the New York Department of Financial Services took possession of Signature Bank and appointed the FDIC as receiver.

A joint statement

by the Department of the Treasury, the Federal Reserve and the FDIC on March 12, 2023, stated that depositors in Signature Bank and Silicon

Valley Bank will have access to all of their funds, including funds held in deposit accounts, in excess of the insured amount.

1, 2023, First Republic Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC

Following a bidding process, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank, National

Association, to acquire the substantial majority of the assets and assume certain liabilities of First Republic Bank from the FDIC.

the Prime Execution Agent were to experience financial distress or its financial condition is otherwise affected by the failure of its

banking partners, the Prime Execution Agent’s ability to provide services to the Trust could be affected.

Moreover, the future

failure of a bank at which the Prime Execution Agent maintains customer cash, in the Trust’s Trading Account associated with the

Trust’s orders to sell Bitcoin in connection with payment of the Management Fee, and to the extent applicable, other Trust expenses,

could result in losses to the Trust, to the extent the balances are not subject to deposit insurance, notwithstanding the regulatory

requirements to which the Prime Execution Agent is subject or other potential protections.

The Trust may maintain cash balances with

the Prime Execution Agent that are not insured or are in excess of the FDIC’s insurance limits, or which are maintained by the

Prime Execution Agent at money market funds and subject to the attendant risks (e.g., “breaking the buck”).

the Trust could suffer losses.

Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to Shareholders.

to the terms of the Trust Agreement, the Trust is required to dissolve under certain circumstances.

In addition, the Sponsor may, in

its sole discretion, dissolve the Trust for a number of reasons, including if the Sponsor determines, in its sole discretion, that it

is desirable or advisable for any reason to discontinue the affairs of the Trust.

the Trust is required to terminate and liquidate, or the Sponsor determines in accordance with the terms of the Trust Agreement that

it is appropriate to terminate and liquidate the Trust, such termination and liquidation could occur at a time that is disadvantageous

to Shareholders, such as when the actual exchange rate of Bitcoin at such time is lower than the Index was at the time when Shareholders

purchased their Shares.

In such a case, when the Trust’s Bitcoin is sold as part of its liquidation, the resulting proceeds distributed

to Shareholders will be less than if the actual exchange rate at such time were higher at the time of sale.

Trust Agreement includes provisions that limit Shareholders ’ voting rights and restrict Shareholders ’

right to bring a derivative action.

Trust is a passive investment vehicle with no management and no board of directors.

Thus, the Shares are not entitled to the same rights

as shares issued by a corporation operating a business enterprise with management and a board of directors.

By acquiring Shares, you

are not acquiring the right to elect directors, to vote on certain matters regarding the issuer of your Shares or to take other actions

normally associated with the ownership of shares, such as the right to bring “oppression” or “derivative” actions.

You only have the extremely limited rights described under “Description of Shares and the Trust Agreement.”

under Section 7.4 of the Trust Agreement, no Shareholder shall have the right to bring or maintain a derivative action, suit or other

proceeding on behalf of the Trust unless two or more Shareholders who (i) are not affiliates of one another;

and (ii) collectively hold

at least 10% of the outstanding Shares 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 Shareholder attempting to bring or maintain a derivative action in the name of the

Trust will be required to locate other Shareholders with which it is not affiliated and that have sufficient Shares to meet the 10.0%

threshold based on the number of Shares outstanding on the date the claim is brought and thereafter throughout the duration of the action,

suit or proceeding.

A minority Shareholder may have difficulties attempting to locate other Shareholders to reach the 10% threshold under

this provision and may result in increased costs to a Shareholder 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.

right to bring derivative actions is limited and it might be difficult for minority Shareholders to locate other Shareholders to reach

the ownership threshold for derivative actions.

Section 7.4 of the Trust Agreement, no Shareholder shall have the right to bring or maintain a derivative action, suit or other proceeding

on behalf of the Trust unless two or more Shareholders who (i) are not affiliates of one another;

and (ii) collectively hold at least

10% of the outstanding Shares 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 Shareholder attempting to bring or maintain a derivative action in the name of the

Trust will be required to locate other Shareholders with which it is not affiliated and that have sufficient Shares to meet the 10.0%

threshold based on the number of Shares outstanding on the date the claim is brought and thereafter throughout the duration of the action,

suit or proceeding.

A minority Shareholder may have difficulties attempting to locate other Shareholders to reach the 10% threshold under

this provision and may result in increased costs to a Shareholder 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.

Index price being used to determine the NAV of the Trust may not be consistent with GAAP.

The net assets reported in the Trust’s

periodic financial statements may differ, in some cases significantly, from the Trust’s NAV determined using the Index pricing.

Trust determines the NAV of the Trust on each Business Day based on the value of Bitcoin as reflected by the Index.

The methodology used

to calculate the Index price to value Bitcoin in determining NAV of the Trust may not be deemed consistent with GAAP.

The Trust utilizes

the Bitcoin Market Price, which reflects the execution price of Bitcoin on its principal market as determined by the Trust (or by a third-party

service provider, as later determined by the Sponsor) for purposes of the Trust’s periodic financial statements.

Creation and redemption

of Baskets, the Management Fee and other expenses borne by the Trust are determined using the Trust’s NAV determined daily based

on the Index.

Such NAV of the Trust determined using the Index price may differ, in some cases significantly, from the net assets reported

in the Trust’s periodic financial statements.

Extraordinary

Expenses resulting from unanticipated events may become payable by the Trust, adversely affecting the value of the Shares.

consideration for the Management Fee, the Sponsor has contractually assumed ordinary course operational and periodic expenses of the

Trust, with the exception of those described in “Business of the Trust – Trust Expenses.” Expenses incurred by the

Trust but not assumed by the Sponsor, such as, among others, taxes and governmental charges;

expenses and costs of any extraordinary

services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of Shareholders;

or extraordinary legal fees and expenses are not assumed by the Sponsor and are borne by the Trust.

The Sponsor will cause the Trust

to sell Bitcoin held by the Trust.

Accordingly, the Trust may be required to sell or otherwise dispose of Bitcoin at a time when the

trading prices for those assets are depressed.

sale or other disposition of assets of the Trust in order to pay Extraordinary Expenses could have a negative impact on the value of

the Shares for several reasons.

These include the following factors:

Trust is not actively managed and no attempt will be made to protect against or to take advantage of fluctuations in the prices of

Consequently, if the Trust incurs expenses in U.S.

dollars, the Trust’s Bitcoin may be sold at a time when the values

of the disposed assets are low, resulting in a negative impact on the value of the Shares.

the Trust does not generate any income, every time that the Trust pays expenses, it delivers Bitcoin to the Sponsor or sells Bitcoin.

Any sales of the Trust’s assets in connection with the payment of expenses will decrease the amount of the Trust’s assets

represented by each Share each time its assets are sold or transferred to the Sponsor.

Trust ’ s delivery or sale of Bitcoin to pay expenses or other operations of the Trust could result in Shareholders

incurring tax liability without an associated distribution from the Trust.

that the Trust is treated as a grantor trust for U.S.

federal income tax purposes, each delivery of Bitcoin by the Trust to pay the Management

Fee or other expenses and each sale of Bitcoin by the Trust to pay Trust expenses not assumed by the Sponsor will be a taxable event

to beneficial owners of Shares.

Thus, the Trust’s payment of expenses could result in beneficial owners of Shares incurring tax

liability without an associated distribution from the Trust.

Any such tax liability could adversely affect an investment in the Shares.

value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Trust Administrator,

the Bitcoin Custodian or the Cash Custodian under the Trust Documents.

the Trust Agreement and the Trust’s agreements with its service providers (“Trust Documents”) each of the Sponsor,

the Trustee, the Trust Administrator, and the Custodians has a right to be indemnified by the Trust for certain liabilities or expenses

that it incurs without, depending on the applicable Trust Document, gross negligence, bad faith or willful misconduct on its part.

the Sponsor, the Trustee, the Trust Administrator, or the Custodians may require that the assets of the Trust be sold in order to cover

losses or liability suffered by it.

Any sale of that kind would reduce the digital asset holdings of the Trust and the value of the Shares.

property rights claims may adversely affect the Trust and the value of the Shares.

Sponsor is not aware of any intellectual property rights claims that may prevent the Trust from operating and holding Bitcoin.

third parties may assert intellectual property rights claims relating to the operation of the Trust and the mechanics instituted for

the investment in, holding of and transfer of Bitcoin.

Regardless of the merit of an intellectual property or other legal action, any

legal expenses to defend or payments to settle such claims would be Extraordinary Expenses that would be borne by the Trust through the

sale or transfer of its Bitcoin.

Additionally, a meritorious intellectual property rights claim could prevent the Trust from operating

and force the Sponsor to terminate the Trust and liquidate its Bitcoin.

As a result, an intellectual property rights claim against the

Trust could adversely affect the value of the Shares.

the Trust fails to maintain an effective system of internal controls, it may not be able to accurately or timely report our financial

condition or results of operations or prevent fraud which may adversely affect the market for the Shares.

Trust is responsible for establishing and maintaining internal controls over financial reporting.

Under this requirement, the Trust must

adopt, implement and maintain an internal control system designed to provide reasonable assurance to its management regarding the preparation

and fair presentation of published financial statements.

The Trust is also required to adopt, implement, and maintain disclosure controls

and procedures that are designed to ensure information required to be disclosed by the Trust in reports it files or submits to the SEC

is recorded, processed, summarized and reported within the time periods specified by the SEC.

There is a risk that the Trust’s

internal controls over financial reporting and disclosure controls and procedures could fail to operate as designed or otherwise fail

to satisfy SEC requirements.

Such a failure could result in the reporting or disclosure of incorrect information or a failure to report

information on a timely basis.

Such a failure could be to the disadvantage of shareholders and could expose the Trust to penalties or

otherwise adversely affect its status under the federal securities laws and SEC regulations and may adversely affect the market for the

the preparation of the Trust’s financial statements for the fiscal year ended December 31, 2025, our Principal Executive Officer and Principal Financial Officer concluded that the Trust’s disclosure controls

and procedures were ineffective due to a material weakness.

The material weakness was identified and remains unremediated as of December

Management has begun enhancing its policies and procedures to remedy the material weakness.

Any internal control system, no matter how well designed, has inherent limitations.

Therefore, even those systems determined to be effective may provide only reasonable assurance with respect to financial statement

preparation and presentation and other disclosure matters.

Factors Related to the Regulation of the Trust and the Shares

asset markets in the United States currently exist in a state of regulatory uncertainty, and adverse legislative or regulatory developments

could significantly harm the value of Bitcoin or the Shares, such as by banning, restricting or imposing onerous conditions or prohibitions

on the use of Bitcoin, mining activity, digital wallets, the provision of services related to trading and custodying Bitcoin, the operation

of the Bitcoin network, or the digital asset markets generally.

has been a lack of consensus regarding the regulation of digital assets, including Bitcoin, and their markets.

As a result of the growth

in the size of the digital asset market, as well as the 2022 Events, 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

Federal Bureau of Investigation, the IRS and state financial institution regulators) have been examining the operations of Bitcoin

networks, Bitcoin users and Bitcoin markets, with particular focus on the extent to which Bitcoin can be used to launder the proceeds

of illegal activities or fund criminal or terrorist enterprises and the safety and soundness of exchanges and other service providers

that hold digital assets for users.

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

posed by digital assets to investors.

Ongoing and future regulatory actions with respect to digital assets generally or Bitcoin

in particular may alter, perhaps to a materially adverse extent, the nature of an investment in the Units or the ability of the

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.

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 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

federal and state agencies

(including FinCEN, SEC, OCC, CFTC, FINRA, CFPB, the Department of Justice, the Department of Homeland Security, the Federal Bureau of

Investigation, the IRS, state financial institution regulators, and others) have been examining the operations of digital asset networks,

digital asset users and the digital asset markets.

Many of these state and federal agencies brought enforcement actions or issued consumer

advisories regarding the risks posed by digital assets to investors.

2022 Events, including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager

Digital, Genesis Global Capital, BlockFi and others, and other developments in the digital asset markets, have resulted in calls for

heightened scrutiny and regulation of the digital asset industry, with a specific focus on intermediaries such as digital asset platforms, and custodians.

Federal and state legislatures and regulatory agencies may introduce and enact new laws and regulations to

regulate digital asset intermediaries, such as digital asset platforms and custodians.

The March 2023 collapses of Silicon Valley Bank,

Silvergate Bank, and Signature Bank, which in some cases provided services to the digital assets industry, may amplify and/or accelerate

these trends.

On January 3, 2023, the federal banking agencies issued a joint statement on crypto-asset risks to banking organizations

following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud and scams, legal uncertainties,

significant volatility, and contagion risk.

requires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply with

the anti-money laundering regulations applicable to money transmitters.

Entities which fail to comply with such regulations are subject

to fines, may be required to cease operations, and could have potential criminal liability.

For example, in 2015, FinCEN assessed a $700,000

fine against a sponsor of a digital asset for violating several requirements of the Bank Secrecy Act by acting as a money services business

and selling the digital asset without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering

In 2017, FinCEN assessed a $110 million fine against BTC-e, a now defunct digital asset platform, for similar violations.

requirement that exchangers that do business in the United States register with FinCEN and comply with anti-money laundering regulations

may increase the cost of buying and selling Bitcoin and therefore may adversely affect the price of Bitcoin and an investment in the

has added digital currency addresses, including addresses on the Bitcoin network, to the list of Specially Designated Nationals whose

assets are blocked, and with whom U.S.

persons are generally prohibited from dealing.

Such actions by OFAC, or by similar organizations

in other jurisdictions, may introduce uncertainty in the market as to whether Bitcoin that has been associated with such addresses in

the past can be easily sold.

This “tainted” Bitcoin may trade at a substantial discount compared to untainted Bitcoin.

fungibility in the Bitcoin markets may reduce the liquidity of Bitcoin and therefore adversely affect their price.

regulations from the New York State Department of Financial Services (“NYDFS”), businesses involved in digital asset business

activity for third parties in or involving New York, excluding merchants and consumers, must apply for a license, commonly known as a

BitLicense, from the NYDFS (a “BitLicense”) and must comply with anti-money laundering, cybersecurity, consumer protection,

and financial and reporting requirements, among others.

As an alternative to a BitLicense, a firm can apply for a charter to become a

limited purpose trust company under New York law qualified to engage in certain digital asset business activities.

Other states have

considered or approved digital asset business activity statutes or rules, passing, for example, regulations or guidance indicating that

certain digital asset business activities constitute money transmission requiring licensure.

inconsistency in applying money transmitting licensure requirements to certain businesses may make it more difficult for these businesses

to provide services, which may affect consumer adoption of Bitcoin and its price.

In an attempt to address these issues, the Uniform

Law Commission passed a model law in July 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similarities

to the BitLicense and features a multistate reciprocity licensure feature, wherein a business licensed in one state could apply for accelerated

licensure procedures in other states.

It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.

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.

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.

Trump indicated during his campaign that his administration will be “pro-digital assets” and reportedly discussed the creation

of a national Bitcoin reserve, and other potential policies related to digital assets including Bitcoin.

Beginning in early 2025, the

current administration took steps to strengthen U.S.

leadership in the digital assets space, including through the use of executive orders

and the establishment of an interagency working group that is tasked with proposing a regulatory framework governing the issuance and

operation of digital assets in the United States.

In January 2025, President Trump issued the “Strengthening American Leadership

in Digital Financial Technology” Executive Order, and the interagency working group released a report in July 2025 outlining the

administration’s recommendations to Congress and various agencies reflecting the administration’s “pro-innovation mindset

toward digital assets and blockchain technologies.” In addition to specific recommendations for comprehensive regulatory oversight

and for the SEC and CFTC to provide clarity on key issues involving digital asset trading and ensure access to consumers, the report

also sought to provide clarity on the taxation of digitals assets and access to banking services for the industry and support innovation

in the financial markets, among other initiatives.

Signed into law shortly before the working group’s report was released, the

GENIUS Act establishes a federal regulatory framework for stablecoins, which is the first significant federal digital assets legislation

in the United States.

Meanwhile, the SEC has taken steps to provide clear regulatory guidance for digital assets through the creation

of a crypto task force, speeches, statements and published staff guidance and has held a series of roundtables focused on digital asset-related

In July 2025, the U.S.

Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System,

and the FDIC issued a statement for banking organizations regarding the safekeeping of digital assets, which focused on how existing

laws, regulations and risk management principles apply to such activities, and signaled additional progress in the increasing regulatory

clarity for digital assets by key financial regulators in the United States.

Moreover, the proposed digital assets market infrastructure

legislation, the CLARITY Act, continues to progress.

The passage of the GENIUS Act and continued progress of the CLARITY Act in Congress

signals a change in the U.S.

government’s approach to digital assets and increasing regulatory clarity for the industry.

the release of the January 2025 Executive Order, the SEC rescinded Staff Accounting Bulletin (“SAB”) 121 by issuing SAB 122.

Released in March 2022, SAB 121 provided interpretative guidance for a reporting entity that operates a platform that allows its users

to transact in digital assets and that engages in activities in which it has an obligation to safeguard customers’ digital assets.

Effectively, SAB 121 was seen as a prohibition on national banks and other large financial institutions custodying digital assets.

122 rescinds that prohibition and offers guidance on how an entity that has an obligation to safeguard crypto-assets for others should

disclose to investors the entity’s obligation to safeguard crypto-assets held for others.

In May 2025, the SEC’s Division

of Trading and Markets issued a series of “Frequently Asked Questions” which confirmed that broker-dealers could take custody

of crypto assets, such as Bitcoin and Ether, and facilitate in-kind creations and redemptions for spot crypto exchange traded products

In late July 2025, the SEC voted to approve an order to permit in-kind creations and redemptions by Authorized

Participants for certain Bitcoin and Ether-based crypto asset ETPs.

this time, it is not possible to predict the ultimate impact of the numerous legislative and regulatory developments on the ability of

digital asset markets to function or how any new regulations or changes to existing regulations might impact the value of digital assets

generally and Bitcoin held by the Trust specifically.

The consequences of increased federal regulation of digital assets and digital

asset activities could have a material adverse effect on the Trust and the Shares.

determination that Bitcoin or any other digital asset is a “ security ” may adversely affect the

value of Bitcoin and the value of the Shares, and result in potentially extraordinary, nonrecurring expenses to, or termination of, the

on its characteristics, a digital asset may be considered a “security” under the federal securities laws.

The test for determining

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

Public, though non-binding, statements made in the past by senior officials at the SEC and endorsed by its previous chair in a letter

to a member of Congress appeared to indicate that the SEC did not consider Bitcoin to be a security, at least currently, and the staff

has provided informal assurances to a handful of promoters that their digital assets are not securities.

On the other hand, the SEC has

brought enforcement actions against the promoters of several other digital assets on the basis that the digital assets in question are

a digital asset is a security under the federal securities laws currently depends on whether it is included in the lists of instruments

making up the definition of “security” in the Securities Act, the Exchange Act and the Investment Company Act.

Digital assets

as such do not appear in any of these lists, although each list includes the terms “investment contract” and “note,”

and the SEC has typically analyzed whether a particular digital asset is a security by reference to whether it meets the tests developed

by the federal courts interpreting these terms, known as the Howey and Reves tests, respectively.

For many digital assets,

whether or not the Howey or Reves tests are met is difficult to resolve definitively, and substantial legal arguments can

often be made both in favor of and against a particular digital asset qualifying as a security under one or both of the Howey

and Reves tests.

Adding to the complexity, the SEC staff has indicated that the security status of a particular digital asset

can change over time as the relevant facts evolve.

part of determining whether Bitcoin is a security for purposes of the federal securities laws, the Sponsor takes into account a number

of factors, including the various definitions of “security” under the federal securities laws and federal court decisions

interpreting elements of these definitions, such as the U.S.

Supreme Court’s decisions in the Howey and Reves cases,

as well as reports, orders, press releases, public statements and speeches by the SEC and its staff providing guidance on when a digital

asset may be a security for purposes of the federal securities laws, and other materials relevant to the status of Bitcoin as a security

Finally, the Sponsor discusses the security status of Bitcoin with its external securities lawyers.

Through this process the

Sponsor believes that it is applying the proper legal standards in determining that Bitcoin is not a security in light of the uncertainties

inherent in the Howey and Reves tests.

However, because of these uncertainties and the fact-based nature of the analysis,

the Sponsor acknowledges that Bitcoin may in the future be found by the SEC or a federal court to be a security notwithstanding the Sponsor’s

prior conclusion;

and the Sponsor’s prior conclusion, even if reasonable under the circumstances and made in good faith, would

not preclude legal or regulatory action based on the presence of a security.

Sponsor may dissolve the Trust if the Sponsor determines Bitcoin is a security under the federal securities laws, whether that determination

is initially made by the Sponsor itself, or because the SEC or a federal court subsequently makes that determination.

Because the legal

tests for determining whether a digital asset is or is not a security often leave room for interpretation, and because the SEC has not

taken a definitive position, for so long as the Sponsor believes there to be good faith grounds to conclude that the Trust’s Bitcoin

is not a security, the Sponsor does not intend to dissolve the Trust on the basis that Bitcoin could at some future point be determined

to be a security.

enforcement action by the SEC or a state securities regulator asserting that Bitcoin is a security, or a court decision to that effect,

would be expected to have an immediate material adverse impact on the trading value of Bitcoin, as well as the Shares.

This is because

the business models behind most digital assets are incompatible with regulations applying to transactions in securities.

a clear regulatory framework for digital assets in the U.S., if a digital asset is determined or asserted to be a security, it may be

difficult or impossible for the digital asset to be traded, cleared or custodied in the United States through the same channels used

by non-security digital assets, which in addition to materially and adversely affecting the trading value of the digital asset is likely

to significantly impact its liquidity and market participants’ ability to convert the digital asset into U.S.

in 2020 the SEC filed a complaint against the issuer of XRP, Ripple Labs, Inc., and two of its executives, alleging that they raised

more than $1.3 billion through XRP sales that should have been registered under the federal securities laws, but were not.

prior to the SEC’s action, XRP’s market capitalization at times reached over $100 billion.

However, in the weeks following

the SEC’s complaint, XRP’s market capitalization fell to less than $10 billion, which was less than half of its market capitalization

in the days prior to the complaint.

Although the SEC and Ripple recently reached a settlement to resolve the enforcement action and to

dismiss their respective court appeals, which has largely been viewed as positive in the digital assets market, there remains continued

uncertainty as to the regulatory framework that will be applied by the SEC and courts to digital assets.

Such uncertainty may remain

until legislation providing a regulatory framework is adopted.

addition, if Bitcoin is determined to be a security, the Trust could be considered an unregistered “investment company” under

SEC rules, which could necessitate the Trust’s liquidation.

In this case, the Trust and the Sponsor may be deemed to have participated

in an illegal offering of securities and there is no guarantee that the Sponsor will be able to register the Trust under the Investment

Company Act at such time or take such other actions as may be necessary to ensure the Trust’s activities comply with applicable

law, which could force the Sponsor to liquidate the Trust.

whether or not the Sponsor or the Trust were subject to additional regulatory requirements as a result of any SEC or federal court determination

that its assets include securities, the Sponsor may nevertheless decide to terminate the Trust, in order, if possible, to liquidate the

Trust’s assets while a liquid market still exists.

For example, in response to the SEC’s action against the issuer of XRP,

certain significant market participants announced they would no longer support XRP and announced measures, including the delisting of

XRP from major digital asset trading platforms.

The sponsor of the Grayscale XRP Trust subsequently dissolved the trust and liquidated

If the SEC or a federal court were to determine that Bitcoin is a security, it is likely that the value of the Shares of

the Trust would decline significantly, and that the Trust itself may be terminated and, if practical, its assets liquidated.

industries may have more influence with policymakers than the digital asset industry, which could lead to the adoption of laws and regulations

that are harmful to the digital asset industry.

digital asset industry is relatively new and does not have the same access to policymakers and lobbying organizations in many jurisdictions

compared to industries with which digital assets may be seen to compete, such as banking, payments and consumer finance.

from other, more established industries may have greater access to and influence with governmental officials and regulators and may be

successful in persuading these policymakers that digital assets require heightened levels of regulation compared to the regulation of

traditional financial services.

As a result, new laws and regulations may be proposed and adopted in the United States and elsewhere,

or existing laws and regulations may be interpreted in new ways, that disfavor or impose compliance burdens on the digital asset industry

or digital asset platforms, which could adversely impact the value of Bitcoin and therefore the value of the Shares.

changes or actions in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, mining

activity or the operation of their networks or the digital asset platform market in a manner that adversely affects the value of the

foreign jurisdictions have adopted, and may continue to adopt laws, regulations or directives that affect digital asset networks (including

the Bitcoin network), the digital asset markets (including the Bitcoin market), and their users, particularly digital asset platforms

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

For example, if China or other foreign jurisdictions

were to ban or otherwise restrict manufacturers’ ability to produce or sell semiconductors or hard drives in connection with Bitcoin

mining, it would have a material adverse effect on digital asset networks (including the Bitcoin network) and the digital asset market,

and as a result, impact the value of the Shares.

number of foreign jurisdictions have recently taken regulatory action aimed at digital asset activities.

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.

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.

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 crime.

The Financial Services and Markets Bill became law in 2023 and

brought digital asset activities within the scope of existing laws governing financial institutions, markets and assets.

In the European

Union, the Markets in Crypto Assets Regulation, which is intended to serve as a comprehensive regulation of digital asset markets and

imposes various obligations on digital asset issuers and service providers entered into force in June 2023, with its provisions related

to issuers of asset-referenced tokens and electronic money tokens applying as of June 30, 2024.

The remaining provisions, including those

related to crypto-asset services providers, and issuers of crypto-assets other than asset-referenced tokens and electronic money tokens,

began applying on December 30, 2024.

laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of one or more

digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability

of the digital asset economy in the European Union, China, Japan, Russia and the United States and globally, or otherwise negatively

affect the 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 effect of any future regulatory change or other events on the Trust

or Bitcoin is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Shares.

regulators or public utilities take actions that restrict or otherwise impact mining activities, there may be a significant decline in

such activities, which could adversely affect the Bitcoin network and the value of the Shares.

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.

In July 2017, the

SEC determined that tokens issued by The DAO, for instance, were securities under the U.S.

securities laws.

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.

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

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 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

takes the position that Bitcoin is a commodity, although it has not issued regulations to formalize this position.

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.

The Trust and the Sponsor will continue to monitor and evaluate whether any such registrations may

be or may become required.

Trading on Bitcoin markets outside

the United States is not subject to U.S.

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.

governmental agency and may involve certain risks not applicable to trading in U.S.

foreign markets may be more susceptible to disruption than U.S.

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 Bitcoins are treated for classification

and clearing purposes, and the manner in which the Units, the Trust and the Sponsor are regulated.

Currently, the CFTC takes the

position that Bitcoin is a commodity and has brought enforcement actions against Bitcoin operators who have not registered as futures

commission merchants or commodity pool operators, although several court challenges to this position are still pending and the

CFTC has not yet issued regulations to formalize its position.

Although several U.S.

federal district courts have recently held

for certain purposes that Bitcoin is a currency or a form of money, these rulings are not definitive and the Sponsor and the Trust

cannot be certain as to how future regulatory developments may affect the treatment of Bitcoin under the law.

In addition, on March

9, 2022, President Biden announced an executive order on cryptocurrencies that seeks to establish a unified federal regulatory

regime for cryptocurrencies.

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.

For example, as of December 31, 2025,

approximately 1.043 billion tera hashes were performed every second in connection with mining 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.

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 calculations on any given

digital asset network, there are indirect costs that impact a network’s total energy consumption, including the costs of cooling

the machines that perform these calculations.

by concerns around energy consumption and the impact on public utility companies, various states and cities have implemented, or are

considering implementing, moratoriums on mining activity 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 relevant blockchain.

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 relevant blockchain to adversely affect the value of the Shares or the ability of the Trust to operate.”

If regulators or public utilities take actions that restrict or otherwise impact mining activities, such actions could result in decreased

security of a digital asset network, including the Bitcoin network, and consequently adversely impact the value of the Shares.

regulators subject the Trust, the Trustee or the Sponsor to regulation as a money service business or money transmitter, this could result

in Extraordinary Expenses to the Trust, the Trustee or the Sponsor and also result in decreased liquidity for the Shares.

the extent that the activities of the Trust, the Trustee or the Sponsor cause it to be deemed a money services business under the regulations

promulgated by FinCEN, the Trust, the Trustee or the Sponsor may be required to comply with FinCEN regulations, make certain reports

to FinCEN and maintain certain records.

Similarly, the activities of the Trust, the Trustee or the Sponsor may require it to be licensed

as a money transmitter or as a digital asset business, such as under the NYDFS’ BitLicense regulation.

additional regulatory obligations may cause the Trust, the Trustee or the Sponsor to incur Extraordinary Expenses.

If the Trust, the

Trustee or the Sponsor decide to seek the required licenses, there is no guarantee that they will timely receive them.

The Trustee may

decide to discontinue and wind up the Trust.

A dissolution of the Trust in response to the changed regulatory circumstances may be at

a time that is disadvantageous to the Shareholders.

Additionally,

to the extent the Trust, the Trustee or the 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, the Trustee or the Sponsor, and have a material adverse effect on the price of the Shares.

the Bitcoin network is used to facilitate illicit activities, businesses that facilitate Bitcoin transactions could be at increased risk

of criminal or civil liability, or of having services cut off, which could negatively affect the price of Bitcoin and the value of the

transaction details of peer-to-peer transactions are recorded on the Bitcoin blockchain, a buyer or seller of digital assets on a peer-to-peer

basis directly on the Bitcoin network may never know to whom the public key belongs or the true identity of the party with whom it is

Public key addresses are randomized sequences of alphanumeric characters that, standing alone, do not provide sufficient

information to identify users.

In addition, certain technologies may obscure the origin or chain of custody of digital assets.

certain technologies, such as Bitcoin trading platforms commonly referred to as “mixers,” may obscure the origin or chain

of custody of Bitcoin.

The opaque nature of the market poses asset verification challenges for market participants, regulators and auditors

and gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump and dump

Digital assets have in the past been used to facilitate illicit activities.

If a digital asset was used to facilitate illicit

activities, businesses that facilitate transactions in such digital assets could be at increased risk of potential criminal or civil

liability or lawsuits, or of having banking or other services cut off, and such digital asset could be removed from digital asset platforms.

Any of the aforementioned occurrences could adversely affect the price of the relevant digital asset, the attractiveness of the respective

blockchain network and an investment in the Shares.

If the Trust, the Sponsor or the Trustee were to transact with a sanctioned entity,

the Trust, the Sponsor or the Trustee would be at risk of investigation, potential criminal or civil lawsuits or liability, have their

assets frozen, lose access to banking services or services provided by other service providers, or suffer disruptions to their operations,

any of which could negatively affect the Trust’s ability to operate or cause losses in value of the Shares.

Trust takes measures with the objective of reducing illicit financing risks in connection with the Trust’s activities.

illicit financing risks are present in the digital asset markets, including markets for Bitcoin.

There can be no assurance that the measures

employed by the Trust will prove successful in reducing illicit financing risks, and the Trust is subject to the complex illicit financing

risks and vulnerabilities present in the digital asset markets.

If such risks eventuate, the Trust, the Sponsor or the Trustee or their

affiliates could face civil or criminal liability, fines, penalties, or other punishments, be subject to investigation, have their assets

frozen, lose access to banking services or services provided by other service providers, or suffer disruptions to their operations, any

of which could negatively affect the Trust’s ability to operate or cause losses in value of the Shares.

changes or interpretations could obligate the Trust, the Trustee or the Sponsor to register and comply with new regulations, resulting

in potentially extraordinary, nonrecurring expenses to the Trust.

and future federal or state legislation, CFTC and SEC rulemaking and other regulatory developments may impact the manner in which Bitcoin

In particular, Bitcoin may be classified by the CFTC as a “commodity interest” under the Commodity Exchange Act

or may be classified by the SEC as a “security” under U.S.

federal securities laws.

The Sponsor, the Trustee and the Trust

cannot be certain as to how future regulatory developments will impact the treatment of Bitcoin under the law.

In the face of such developments,

the required registrations and compliance steps may result in extraordinary, nonrecurring expenses to the Trust.

If the Trustee decides

to terminate the Trust in response to the changed regulatory circumstances, the Trust may be dissolved or liquidated at a time that is

disadvantageous to Shareholders.

the extent that Bitcoin is deemed to fall within the definition of a “commodity interest” under the Commodity Exchange Act,

the Trust, the Trustee and the Sponsor may be subject to additional regulation under the Commodity Exchange Act and CFTC regulations.

The Sponsor or the Trustee may be required to register as a commodity pool operator or commodity trading adviser 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/or nonrecurring expenses

of the Trust, thereby materially and adversely impacting the Shares.

If the Sponsor or the Trustee determines not to comply with such

additional regulatory and registration requirements, the Trustee 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

that provide Bitcoin-related services have been unable to find banks that are willing to provide them with bank accounts and banking

This may have an adverse impact on the Trust’s operations.

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 services 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 non-recurring expenses, which would adversely impact an investment in the Units.

If regulatory changes

or interpretations of the Trust’s or Sponsor’s activities require the registration of the Trust or Sponsor as a money

services business under the regulations promulgated by FinCEN under the authority of the U.S.

Bank Secrecy Act, the Trust or Sponsor

may be required to register and comply with such regulations.

If regulatory changes or interpretations of the Trust’s or

Sponsor’s activities require the licensing or other registration as a money transmitter or business engaged in digital currency

activity (e.g., under the New York BitLicense regime) (or equivalent designation) under state law in any state in which the Trust

or Sponsor operates, the Trust or Sponsor may be required to seek licensure or otherwise register and comply with such state law.

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, 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

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, 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

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

organizations, consumer agencies and public advocacy groups around the world have been examining the operations of cryptocurrency

networks, customers and platforms, with a focus on how digital assets can be used to launder the proceeds of illegal activities,

fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold digital

assets for customers.

Many of these entities have called for heightened regulatory oversight and have issued consumer advisories

describing the risks posed by digital assets to customers and investors.

Unlike more established

industries, the digital assets industry is relatively new and has limited access to policymakers and lobbying organizations in

many jurisdictions.

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

may result in the Trust being unable to offer its product and services in certain jurisdictions or customer segments, which may

adversely impact its reputation, business, operating results, financial condition and share price.

The treatment of the Trust for U.S.

of the Trust’s Bitcoin at a time that is disadvantageous to Shareholders.

the extent that Bitcoin is deemed to fall within the definition of “security” under U.S.

federal securities laws, the Trust,

the Trustee and the Sponsor may be subject to additional requirements under the Investment Company Act and the Sponsor or the Trustee

may be required to register as an investment adviser under the Investment Advisers Act.

Such additional registration may result in extraordinary,

recurring and/or non-recurring expenses of the Trust, thereby materially and adversely impacting the Shares.

If the Sponsor or the Trustee

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

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

treatment of the Trust for U.S.

federal income tax purposes is uncertain.

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.

Sponsor intends to take the position that the Trust is properly treated as a grantor trust for U.S.

federal income tax purposes.

Assuming that

the Trust is a grantor trust, the Trust will not be subject to U.S.

that the Trust is a grantor trust, the Trust is not subject to U.S.

federal income tax.

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

nature of digital currencies, it is not possible to predict potential future developments that may arise with respect to digital

currencies, including forks, airdrops and other similar events.

Assuming that the Trust is currently a grantor trust for U.S.

income tax purposes, certain future developments could render it impossible, or impracticable, for the Trust to continue to be

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.

Rather, if the Trust is a grantor trust, each

beneficial owner of Shares is treated as directly owning its pro rata share of the Trust’s assets and a pro rata portion of the

Trust’s income, gain, losses and deductions “flows through” to each beneficial owner of Shares.

Trust may take certain positions with respect to the tax consequences of Incidental Rights and its receipt of IR Virtual Currency.

the IRS were to disagree with, and successfully challenge any of these positions the Trust might not qualify as a grantor trust.

if in consultation with legal advisors and tax consultants, the Trust determines that the IR Virtual Currency is, or is likely to be

deemed, a security under federal or state securities laws or cause the Trust to lose its status as an investment trust classified as

a grantor trust, the Sponsor will cause the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency to which the Trust

may become entitled in the future.

However, there can be no assurance that these abandonments would be treated as effective for U.S.

federal income tax purposes, or that the Sponsor will continue to cause the Trust to irrevocably abandon any Incidental Rights and IR

Virtual Currency if there are future regulatory developments that would make it feasible for the Trust to retain those assets.

Trust were treated as owning any asset other than Bitcoin (and/or incidental cash) as of any date on which it creates or redeems Shares,

it may cease to qualify as a grantor trust for U.S.

federal income tax purposes.

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.

Federal Income Tax Treatment of Digital Currency”),

there can be no assurance in this regard.

If the Trust were classified as a partnership for U.S.

federal income tax purposes, the

tax consequences of owning Units generally would not be materially different from the tax consequences described herein, although

there might be certain differences, including with respect to timing of the recognition of taxable income or loss.

tax information reports provided to beneficial owners of Units would be made in a different form.

If the Trust were not classified

as either a grantor trust or a partnership for U.S.

federal income tax purposes, it would be classified as a corporation for such

In that event, the Trust would be subject to entity-level U.S.

federal income tax (currently at the rate of 21%) on its

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 (as calculated for U.S.

of the evolving nature of digital currencies, it is not possible to predict potential future developments that may arise with respect

to digital currencies, including forks, airdrops and other similar occurrences.

Assuming that the Trust is currently a grantor trust

federal income tax purposes, certain future developments could render it impossible, or impracticable, for the Trust to continue

to be treated as a grantor trust for such purposes.

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.

dividend distributed to a beneficial owner of Units that is a non-U.S.

However, due to the uncertain treatment of digital currency for U.S.

federal income tax purposes, future developments regarding the treatment

of digital currency for U.S.

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

If the Trust were classified

as a partnership for U.S.

federal income tax purposes, the tax consequences of owning Shares generally are not expected to be materially

different from the tax consequences described herein, although there might be certain differences, including with respect to timing of

the recognition of taxable income or loss and (in certain circumstances) withholding taxes.

In addition, tax information reports provided

to beneficial owners of Shares would be made on a Schedule K-1.

If the Trust were not classified as either a grantor trust or a partnership

federal income tax purposes, it generally would be classified as a corporation for such purposes.

If it were treated as a corporation,

the Trust would be subject to entity-level U.S.

federal income tax (currently at the rate of 21%), plus possible state and/or local taxes,

on its net taxable income, and certain distributions made by the Trust to Shareholders 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 Shares that

is a non-U.S.

person for U.S.

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

of business, it is possible that the Trust could incur a taxable gain in connection with the delivery or sale of Bitcoin (including,

as a result of the Trust using Bitcoin and Additional Currency to pay its expenses) that is otherwise not associated with a distribution

to Unitholders.

In the event that this occurs, Unitholders may be subject to tax due to the grantor trust status of the Trust even

though there is not a corresponding distribution from the Trust.

See “Certain U.S.

Federal Income Tax Consequences—Tax

Consequences to U.S.

Holders” above.

The treatment of Bitcoin for U.S.

federal income tax purposes generally 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).

treatment of digital currency for U.S.

federal income tax purposes is uncertain.

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” 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

and the absence of comprehensive guidance with respect to digital currencies, many significant aspects of the U.S.

federal income

tax treatment of digital currency are uncertain.

In 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.

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 Bitcoin.

that the Trust is properly treated as a grantor trust for U.S.

federal income tax purposes, each beneficial owner of Shares is treated

federal income tax purposes as the owner of an undivided interest in the Bitcoin held in the Trust.

Due to the new and evolving

nature of digital currencies and the absence of comprehensive guidance with respect to digital currencies, many significant aspects of

federal income tax treatment of digital currency are uncertain.

2014, the Internal Revenue Service (“IRS”) released a notice (the “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 “currency” for purposes of the rules relating to foreign currency gain or loss;

and (iii) may be held as a capital

In 2019, the IRS released a revenue ruling and a set of “Frequently Asked Questions” (the “Ruling & FAQs”)

that provide some additional guidance, including guidance to the effect that, under certain circumstances, hard forks of digital currencies

are taxable events giving rise to ordinary income and guidance with respect to the determination of the tax basis of digital currency.

However, the Notice and the Ruling & FAQs do not address other significant aspects of the U.S.

federal income tax treatment of digital

Moreover, although the Ruling & FAQs address the treatment of hard forks, there continues to be uncertainty with respect

to the timing and amount of the income inclusions.

IRS and Treasury department have also released regulations addressing information reporting of digital assets (the “Regulations”)

(and collectively with the Notice, the Ruling & FAQs, and the Regulations, the “Existing IRS Guidance”).

The Regulations

also provide guidance with respect to the calculation of gain or loss and the basis of digital assets under Section 1001 and 1012 of

Certain aspects of the Regulations have been delayed to January 1, 2027.

developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital

1 unchanged sentence

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.

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

As discussed above,

many significant aspects of the U.S.

federal income tax treatment of digital currency, such as Bitcoin, are uncertain, and it is

unclear what guidance on 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 may hold certain types of

digital currency that are not within the scope of the Notice.

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 Existing IRS Guidance.

It is also unclear what additional guidance on the treatment of digital currencies

federal income tax purposes may be issued in the future.

is possible that any such guidance would have an adverse effect on the prices of digital currency, including on the price of Bitcoin

in the Bitcoin markets, and therefore may have an adverse effect on the value of the Units.

Because of the evolving

nature of digital currencies, it is not possible to predict potential future developments that may arise with respect to digital

currencies, including forks, airdrops and similar occurrences.

Such developments may increase the uncertainty with respect to the

treatment of digital currencies for U.S.

Any future guidance on the treatment of digital currencies for U.S.

federal income tax purposes could increase the expenses of the Trust and could have an adverse effect on the prices of digital currencies,

including on the price of Bitcoin in the digital asset markets.

As a result, any such future guidance could have an adverse effect on

the value of the Shares.

are urged to consult their tax advisers regarding the tax consequences of owning and disposing of Shares and digital currencies in general.

developments regarding the treatment of digital currency for U.S.

federal income tax purposes could adversely affect the value of the

discussed above, many significant aspects of the U.S.

federal income tax treatment of digital currency, such as Bitcoin, are uncertain,

and it is unclear what guidance on the treatment of digital currency for U.S.

federal income tax purposes may be issued in the future.

It is possible that any such guidance would have an adverse effect on the prices of digital currency, including on the price of Bitcoin

in digital asset platforms, and therefore may have an adverse effect on the value of the Shares.

of the evolving nature of digital currencies, it is not possible to predict potential future developments that may arise with respect

to digital currencies, including forks, airdrops and similar occurrences.

Such developments may increase the uncertainty with respect

to the treatment of digital currencies for U.S.

federal income tax purposes.

2 unchanged sentences

federal income tax purposes.

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.

The taxing authorities

of certain states, including New York, (i) have announced that they will follow the Notice with respect to the treatment of digital

currencies for state income tax purposes and/or (ii) have issued guidance exempting the purchase and/or sale of digital currencies

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 Shares.

taxing authorities of certain states, including New York, (i) have announced that they will follow the Notice with respect to the treatment

of digital currencies for state income tax purposes;

and/or (ii) have issued guidance exempting the purchase and/or sale of digital currencies

for fiat currency from state sales tax.

However, it is unclear what further guidance on the treatment of digital currencies for

state tax purposes may be issued in the future.

The treatment of digital

currencies for tax purposes by non-U.S.

Other states have not issued any guidance on these points, and could take different positions

(e.g., imposing sales taxes on purchases and sales of digital currencies for fiat currency), and states that have issued guidance on

their tax treatment of digital currencies could update or change their tax treatment of digital currencies.

It is unclear what further

guidance on the treatment of digital currencies for state or local tax purposes may be issued in the future.

A state or local government

authority’s treatment of Bitcoin may have negative consequences, including the imposition of a greater tax burden on investors

in Bitcoin or the imposition of a greater cost on the acquisition and disposition of Bitcoin generally.

treatment of digital currencies for tax purposes by non-U.S.

jurisdictions may differ from the treatment of digital currencies for U.S.

federal, 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.

Any future guidance

on the treatment of digital currencies for state, local or non-U.S.

tax purposes could increase the expenses of the Trust and could

have an adverse effect on the prices of digital currencies, including on the price of Bitcoin in the Bitcoin markets.

any such future guidance could have an adverse effect on the value of the 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 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.

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.

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.

future guidance on the treatment of digital currencies for state, local or non U.S.

tax purposes could increase the expenses of the Trust

and could have an adverse effect on the prices of digital currencies, including on the price of Bitcoin in digital asset platforms.

a result, any such future guidance could have an adverse effect on the value of the Shares.

Tax-Exempt Shareholder may recognize “ unrelated business taxable income ” as a consequence

of an investment in Shares.

the guidance provided in the Ruling & 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 Shareholder (as defined under “U.S.

Federal Income Tax Consequences”

below) would constitute “unrelated business taxable income” (“UBTI”).

Tax-exempt Shareholders should consult

their tax advisers regarding whether such Shareholder may recognize UBTI as a consequence of an investment in Shares.

could incur a tax liability without an associated distribution of the Trust.

the normal course of business, it is possible that the Trust could incur a taxable gain in connection with the sale of Bitcoin (such

as sales of Bitcoin to obtain fiat currency with which to pay the Management Fee or Trust expenses, and including deemed sales of Bitcoin

as a result of the Trust using Bitcoin to pay the Management Fee or its expenses) that is otherwise not associated with a distribution

to Shareholders.

Shareholders may be subject to tax due to the grantor trust status of the Trust even though there is not a corresponding

distribution from the Trust.

hard “ fork ” of the Bitcoin blockchain could result in Shareholders incurring a tax liability.

a hard fork occurs in the Bitcoin blockchain, the Trust could hold both the original Bitcoin and the alternative new Bitcoin.

has held that a hard fork resulting in the creation of new units of cryptocurrency is a taxable event giving rise to ordinary income.

Moreover, if such an event occurs, the Trust Agreement provides that the Sponsor shall have the discretion to determine whether the original

or the alternative asset shall constitute Bitcoin.

The Trust shall treat whichever asset the Sponsor determines is not Bitcoin as Incidental

Rights or IR Virtual Currency, which it has committed to irrevocably abandon.

Existing IRS Guidance does 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.

Shareholders (as defined under “U.S.

Federal Income Tax Consequences” below) should assume that, in the absence of guidance,

a withholding agent (including the Sponsor) is likely to withhold 30% of any such income recognized by a Non-U.S.

Shareholder in respect

of its Shares, including by deducting such withheld amounts from proceeds that such Non-U.S.

Shareholder would otherwise be entitled

to receive in connection with a distribution of Incidental Rights or IR Virtual Currency.

The Sponsor has committed to cause the Trust

to irrevocably abandon any Incidental Rights and IR Virtual Currency to which the Trust may become entitled in the future.

However, there

can be no assurance that these abandonments would be treated as effective for U.S.

federal income tax purposes, or that the Sponsor will

continue to cause the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency if there are future regulatory developments

that would make it feasible for the Trust to retain those assets.

receipt of Incidental Rights or IR Virtual Currency may cause Shareholders to incur a United States federal, state, and/or local, or

non-U.S., tax liability.

Any tax liability could adversely impact an investment in the Shares and may require Shareholders to prepare

and file tax returns they would not otherwise be required to prepare and file.

Factors Related to Potential Conflicts of Interest

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 Shareholders 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 Shareholders.

Sponsor manages 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 Shareholders, 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 Shareholders.

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.

See “Description of the Trust Documents—Description

of the Trust Agreement.”

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

Sponsor has no fiduciary duties to, and is allowed to take into account the interests of parties other than, the Trust and its Shareholders

in resolving conflicts of interest, provided the Sponsor does not act in bad faith;

Trust has agreed to indemnify the Sponsor, the Trustee, and their respective affiliates pursuant to the Trust Agreement;

Sponsor is responsible for allocating its own limited resources among different clients and potential future business ventures, to

each of which it may owe fiduciary duties;

Sponsor and its staff also service affiliates of the Sponsor, and may also service 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;

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;

of the Sponsor may start to have substantial direct investments in Bitcoin, stablecoins (such as USDC), or other digital assets or

companies in the digital assets ecosystem that they are permitted to manage taking into account their own interests without regard

to the interests of the Trust or its Shareholders, and any increases, decreases or other changes in such investments could affect

the Index and, in turn, the value of the Shares;

Sponsor decides whether to retain separate counsel, accountants or others to perform services for the Trust;

Sponsor may appoint an agent to act on behalf of the Shareholders which may be the Sponsor or an affiliate of the Sponsor.

purchasing the Shares, Shareholders agree and consent to the provisions set forth in the Trust Agreement.

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

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

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.

1 unchanged sentence

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

of assets did not have any apparent negative impact on the Trust or its assets at this time, any transfer of assets to another

custodian is not without any risk.

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.

Legal Proceedings

Mine Safety Disclosures

Not applicable.

the Bitcoin Custodian is a fiduciary with respect to the Trust ’ s assets, it could resign or be removed by the Sponsor,

which may trigger early dissolution of the Trust.

Bitcoin Custodian has represented that it is a fiduciary under § 100 of the New York Banking Law and a qualified custodian for purposes

of Rule 206(4)-2(d)(6) under the Advisers Act and is licensed to custody the Trust’s Bitcoin in trust on the Trust’s behalf.

However, the Bitcoin Custodian may terminate the Custodial Services Agreement for cause at any time, and the Bitcoin Custodian can terminate

the Custodial Services Agreement for any reason upon providing the applicable notice provided under the Custodial Services Agreement.

If the Bitcoin Custodian resigns, is removed, or is prohibited by applicable law or regulation to act as custodian, and no successor

custodian has been employed, the Sponsor may dissolve the Trust in accordance with the terms of the Trust Agreement.

serves as the Bitcoin custodian for several competing exchange-traded Bitcoin products, which could adversely affect the Trust’s

operations and ultimately the value of the Shares.

Bitcoin Custodian is an affiliate of Coinbase Global.

As of the date hereof, Coinbase Global is the largest publicly traded crypto asset

company in the world by market capitalization and is also the largest crypto asset custodian in the world by assets under custody.

virtue of its leading market position and capabilities, and the relatively limited number of institutionally-capable providers of crypto

asset brokerage and custody services, Coinbase serves as the Bitcoin custodian for several competing exchange-traded Bitcoin products.

Therefore, Coinbase has a critical role in supporting the U.S.

spot Bitcoin exchange-traded product ecosystem, and its size and market

share create the risk that Coinbase may fail to properly resource its operations to adequately support all such products that use its

services that could harm the Trust, the Shareholders and the value of the Shares.

If Coinbase were to favor the interests of certain

products over others, it could result in inadequate attention or comparatively unfavorable commercial terms to less favored products,

which could adversely affect the Trust’s operations and ultimately the value of the Shares.

Trust’s Authorized Participants act in similar or identical capacities for several competing exchange-traded Bitcoin products which

may impact the ability or willingness of one or more Authorized Participants to participate in the creation and redemption process, adversely

affect the Trust’s ability to create or redeem Baskets and adversely affect the Trust’s operations and ultimately the value

of the Shares.

of the Trust’s Authorized Participants, now or in the future, act or may act in the same capacity for several competing exchange-traded

Bitcoin products.

Each Authorized Participant has limited balance sheet capacity, which means that, particularly during times of heightened

market trading activity or market volatility or turmoil, Authorized Participants may not be able or willing to submit creation or redemption

orders with the Trust or may do so in limited capacities.

The inability or unwillingness of Authorized Participants to do so could lead

to the potential for the Shares to trade at premiums or discounts to the NAV, and such premiums or discounts could be substantial.

if creations or redemptions are unavailable due to the inability or unwillingness of one or more of the Trust’s Authorized Participants

to submit creation or redemption orders with the Trust (or do so in a limited capacity), the arbitrage mechanism may fail to function

as efficiently as it otherwise would or be unavailable.

This could result in impaired liquidity for the Shares, wider bid/ask spreads

in the secondary trading of the Shares and greater costs to investors and other market participants, all of which could cause the Sponsor

to halt or suspend the creation or redemption of Shares during such times, among other consequences.

and Authorized Participants lack the right under the Custodial Services Agreement to assert claims directly against the Bitcoin Custodian,

which significantly limits their options for recourse.

the Shareholders nor any Authorized Participant have a right under the Custodial Services Agreement to assert a claim against the Bitcoin

Claims under the Custodial Services Agreement may only be asserted by the Trustee on behalf of the Trust.

Factors Related to ERISA

Notwithstanding

the commercially reasonable efforts of the Sponsor, it is possible that the underlying assets of the Trust will be deemed to include

“plan assets” for the purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) or

Section 4975 of the Code.

If the assets of the Trust were deemed to be “plan assets,” this could result in, among other things,

(i) the application of the prudence and other fiduciary standards of ERISA to investments made by the Trust;

and (ii) the possibility

that certain transactions in which the Trust might otherwise seek to engage in the ordinary course of its business and operation could

constitute non-exempt “prohibited transactions” under Section 406 of ERISA and/or Section 4975 of the Code, which could restrict

the Trust from entering into an otherwise desirable investment or from entering into an otherwise favorable transaction.

fiduciaries who decide to invest in the Trust could, under certain circumstances, be liable for “prohibited transactions”

or other violations as a result of their investment in the Trust or as co-fiduciaries for actions taken by or on behalf of the Trust

or the Sponsor.

There may be other federal, state, local, non-U.S.

law or regulation that contains one or more provisions that are similar

to the foregoing provisions of ERISA and the Code that may also apply to an investment in the Trust.

application of ERISA (including the corresponding provisions of the Code and other relevant laws) may be complex and dependent upon the

particular facts and circumstances of the Trust and of each Plan, and it is the responsibility of the appropriate fiduciary of each investing

Plan to ensure that any investment in the Trust by such Plan is consistent with all applicable requirements.

Each Shareholder, whether

or not subject to Title I of ERISA or Section 4975 of the Code, should consult its own legal and other advisors regarding the considerations

discussed above and all other relevant ERISA and other considerations before purchasing the Shares.

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