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Item 7. Management’s Discussion and Analysis

2026-04-01 compared with 2023-03-21 · 117 added, 214 removed, 7 unchanged (98% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis of our financial condition and results of operations should be read together with our financial statements

and related notes included elsewhere in this Annual Report, which have been prepared in accordance with GAAP.

The following discussion

and analysis of our financial condition and results of operations should be read together with our audited financial statements

and related notes included elsewhere in this Annual Report, which have been prepared in accordance with generally accepted accounting

principles in the United States (“U.S.

The following discussion may contain forward-looking statements based

on assumptions we believe to be reasonable.

Our actual results could differ materially from those discussed in these forward-looking

Factors that could cause or contribute to these differences include, but are not limited to, those set forth under

Part I, Item 1A.

Risk Factors in this Annual Report.

Trust Overview

Trust is a passive investment vehicle, and its assets will not be actively managed.

As a result, it will not engage in any activities

designed to obtain a profit from, or to ameliorate losses caused by, changes in the market prices of Bitcoins.

The investment objective

of the Trust is for the Units to reflect the performance of Bitcoin as measured by reference to Coin Metrics CMBI Bitcoin Index

(the “Index”), less the aggregate Trust expenses and other liabilities.

To date, the Trust has not met its investment

Units are intended to constitute a cost-effective and convenient means of gaining investment exposure to Bitcoin.

However, an investment

in the Units may operate and perform differently over time, and at any given time, than an investment directly in Bitcoin due to

such factors as Trust fees and expenses, the quantity of Units available for trading, and the relative liquidity, and differences

in the markets trading Bitcoin from the markets trading the Units (e.g., hours of operation, marketplace rules, clearance and settlement,

market participants).

Although the Units will not be the exact equivalent of a direct investment in Bitcoin, they provide investors

with an alternative that constitutes a relatively cost-effective way to participate in Bitcoin markets through the securities market.

The Units have been quoted on OTC Markets since February 12, 2021, and on OTCQX under the symbol “OBTC” since February

26, 2021, and to date have not met their investment objective.

this time, the Trust is not operating a redemption program for Units and therefore Units are not redeemable by the Trust.

the Trust may halt issuances of Units for extended periods of time.

As a result, the value of the Units of the Trust may not

approximate, and when

traded on any secondary market, the Units may trade at a substantial premium over, or discount to, the Trust’s NAV per Unit.

Critical Accounting Policies and Estimates

Investment Transactions and Revenue

Trust considers investment transactions to be the receipt of Bitcoin for Units creations and the delivery of Bitcoin for Units

redemptions or for payment of expenses in Bitcoin.

At this time, the Trust is not accepting redemption requests from unitholders.

The Trust records its investment transactions on a trade date basis and changes in fair value are reflected as the net change in

unrealized appreciation or depreciation on investments.

Realized gains and losses are calculated using a first in first out method.

Realized gains and losses are recognized in connection with transactions including settling obligations for the Management Fee

other expenses in Bitcoin.

Principal Market

and Fair Value Determination

determine which Bitcoin market will serve as the Trust’s principal market (or in the absence of a principal market, the most

advantageous market) for purposes of calculating the Trust’s NAV, the Trust follows FASB ASC 820-10, which outlines the application

of fair value accounting.

ASC 820-10 determines fair value to be the price that would be received for Bitcoin in a current sale,

which assumes an orderly transaction between market participants on the measurement date.

ASC 820-10 requires the Trust to assume

that Bitcoin is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous

Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent,

knowledgeable and willing and able to transact.

The Trust purchases Bitcoin

directly from various counterparties, such as Galaxy Digital, Jane Street and Cumberland DRW LLC, and does not itself transact

in any Bitcoin markets.

The purchase price of Bitcoin from our counterparties may vary significantly.

The Trust looks to these

counterparties when assessing entity-specific and market-based volume and the level of activity in the Bitcoin markets.

determines the value of Bitcoin at any given time by reference to the market price of Bitcoin traded on Coinbase Pro, the Trust’s

principal market, as determined at 4:00 p.m., New York time on each Business Day (the “Bitcoin Market Price”).

Trust evaluates its principal market selection (or in the absence of a principal market the most advantageous market) at least

annually and conducts a quarterly analysis to determine (i) if there have been recent changes to each Bitcoin market’s trading

volume and level of activity in the trailing twelve months, (ii) if any Bitcoin markets have developed that the Trust has access

to, or (iii) if recent changes to a Bitcoin market’s price stability have occurred that would materially impact the selection

of the principal market and necessitate a change in the Trust’s determination of its principal market.

The Trust does not

anticipate changing its principal market more frequently than annually, in connection with its annual evaluation of its principal

market selection and annual financial audit.

Each annual evaluation will take into account the findings from the Trust’s

quarterly reviews.

The cost basis of a Trust

investment in Bitcoin recorded by the Trust for financial reporting purposes is the fair value of the Bitcoin at the time of contribution

to the Trust.

The Bitcoin cost basis recorded by the Trust may differ from the value of the proceeds collected by the Sponsor from

the sale of the corresponding Units to investors.

Investment Company Considerations

Trust is an investment company for GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC

Topic 946, Financial Services – Investment Companies .

The Trust uses fair value as its method of accounting for Bitcoin

in accordance with its classification as an investment company for accounting purposes.

The Trust is not a registered investment

company under the Investment Company Act of 1940.

GAAP requires management to make estimates and assumptions that affect the reported

amounts in the financial statements and accompanying notes.

Actual results could differ from those estimates and these differences

could be material.

Review of Financial Results (audited)

Financial Highlights for Year Ended

December 31, 2022 and 2021

Months Ended December 31,

Net realized and unrealized (loss) gain on investment in Bitcoin

$ (82,539,061 )

Net (decrease) increase in net assets resulting from operations

$ (83,658,388 )

$ 129,673,168

Net realized and unrealized

loss on investment in Bitcoin for the year ended December 31, 2022 was $82,539,061, which includes a realized gain of $834,003

on the transfer of Bitcoins to pay the Management Fee and other expenses and net change in unrealized depreciation on investment

in Bitcoin of $83,373,064.

Net realized and unrealized loss on investment in Bitcoin for the year was driven by Bitcoin price depreciation

from $45,867.86 per Bitcoin as of December 31, 2021 to $16,561.21 per Bitcoin as of December 31, 2022.

Net decrease in net assets

resulting from operations was $83,658,388 for the year ended December 31, 2022, which consisted of the net realized and unrealized

loss on investment in Bitcoin, the Management Fee of $388,890 and other expenses of $730,437.

Net assets decreased to $46,014,780

for the year ended December 31, 2022, a 65% decrease for the year.

The decrease in net assets resulted from the aforementioned

Bitcoin price depreciation, and Trust’s expenses of $1,119,327 for the year.

Risky loan practices, overleveraged

positions, undercollateralized stablecoins, and flat-out fraud plagued the crypto industry in 2022, likely contributing to increased

volatility and price depreciation.

As a result, several crypto companies entered bankruptcy during 2022, shaking investor confidence

in the industry.

2022 saw two major spikes in Bitcoin volatility, one about halfway through the year and the other near year end.

The first peak in volatility occurred on June 24, 2022, when the 30-day annualized price volatility hit 94.53%.

This coincided

with major market events such as Terra’s stablecoin (UST) and native asset (LUNA) losing approximately $18 billion of value

as well as hedge fund, Three Arrows Capital, and crypto-lending companies, Voyager and Celsius, filing for bankruptcy.

volatility peak occurred on November 22, 2022, when the 30-day annualized price volatility reached 80.18%.

This spike in volatility

corresponded with the bankruptcies of the world’s second largest crypto exchange, FTX, and their trading arm, Alameda Research,

along with crypto-lender, BlockFi.

Net realized and unrealized

gain on investment in Bitcoin for the year ended December 31, 2021 was $16,870,167 which includes a realized gain of $12,335 on

the transfer of Bitcoins to pay the Management Fee and other expenses and net change in unrealized appreciation on investment in

Bitcoin of $16,857,832.

Net realized and unrealized gain on investment in Bitcoin for the year was driven by Bitcoin price appreciation

from $29,026.66 per Bitcoin as of December 31, 2020 to $45,867.86 per Bitcoin as of December 31, 2021.

Net increase in net assets

resulting from operations was $15,939,190 for the year ended December 31, 2021, which consisted of the net realized and unrealized

gain on investment in Bitcoin, less the Management Fee of $605,731 and other expenses of $325,246, net of waivers.

Net assets increased

to $129,673,168 on December 31, 2021, a 189% increase for the year.

The increase in net assets resulted from the aforementioned

Bitcoin price appreciation and capital contribution of approximately 1,299.49 Bitcoin with a value of $68,827,296 to the Trust

in connection with Units issuance during the period, which was partially offset by the Trust’s Net expenses of $930,977 for

Cash Resources and Liquidity

selling Bitcoins to pay expenses, the Sponsor endeavours to sell the exact number of Bitcoins needed to pay expenses in order to

minimize the Trust’s holdings of assets other than Bitcoin.

As a consequence, the Sponsor expects that the Trust will not

record any cash flow from its operations and that its cash balance will be zero at the end of each reporting period.

of digital assets, specifically Bitcoin, have experienced substantial volatility, which may reflect “bubble” type volatility,

meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to rapidly changing

investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation,

and media reporting.

Bitcoin may have value based on various factors, including their acceptance as a means of exchange by consumers

and others, scarcity, and market demand.

exchange for the Management Fee, the Sponsor has agreed to bear the routine operational, administrative and other ordinary fees

and expenses incurred by the Trust.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely

to result in material changes to its liquidity needs.

Selected Operating Data

Twelve Months December 31,

Opening balance

Sponsor Fee, related party

Other Expenses

Closing balance

Accrued but unpaid Sponsor Fee, related party

Unreimbursed expenses due to Sponsor

Accrued but unpaid other expenses, net of other assets

Net closing balance

Number of Units:

Opening balance

Closing balance

As of December 31,

Bitcoin Market Price

Bitcoin Holdings per Unit

Units have been adjusted retroactively to reflect the 4:1 Unit split effective January 5, 2021.

Historical Digital Asset Holdings and

Bitcoin Prices

movements in the price of Bitcoins will directly affect the price of the Units, investors should understand recent movements in

the price of Bitcoin.

Investors, however, should also be aware that past movements in the Bitcoin price are not indicators of future

Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches

experienced by service providers, as well as political and economic uncertainties around the world.

following chart illustrates the movements in the NAV and the Bitcoin Market Price (referred to in the chart as “Market Price”)

from the beginning of the Trust’s operations on January 3, 2019 to December 31, 2022.

The table below illustrates

the movements in the Bitcoin Market Price since the beginning of the Trust’s operations on January 3, 2019.

Since the beginning

of the Trust’s operations to December 31, 2022 the Bitcoin Market Price has ranged from $3,358.67 to $67,371.70, with the

straight average being $23,558.64.

The Sponsor has not observed a material difference between the Bitcoin Market Price and average

prices from the constituent Bitcoin exchanges individually or as a group.

may contain forward-looking statements based on assumptions we believe to be reasonable.

Our actual results could differ materially from

those discussed in these forward-looking statements.

Factors that could cause or contribute to these differences include, but are not

limited to, those set forth under “Risk Factors” starting on page 31 of this Annual Report.

Highlights for Years Ended December 31, 2025 and 2024

realized and unrealized loss on investment in Bitcoin for the year ended December 31, 2025 was $11,315,457 which includes

a realized gain of $31,706,586 on the transfer of Bitcoin to pay the Management Fee, redemptions and other expenses and net change in unrealized

depreciation on investment in Bitcoin of $43,022,043.

Net realized and unrealized loss on investment in Bitcoin for the period was

driven by Bitcoin price depreciation from $93,393 per Bitcoin as of December 31, 2024, to $87,316 per Bitcoin as of December 31,

Net decrease in net assets resulting from operations was $13,448,292 for the year ended December 31, 2025, which consisted of

the net realized gain and unrealized depreciation on investment in Bitcoin, the Management Fee of $954,927 and other expenses of

Net assets decreased to $136,695,615 on December 31, 2025, a 24% decrease for the period.

The decrease in net assets

resulted from the aforementioned Bitcoin price depreciation, the Trust’s expenses of $2,132,835 and capital redemptions of

$30,635,576 for the period.

realized and unrealized gain on investment in Bitcoin for the year ended December 31, 2024 was $120,959,062 which includes a realized

gain of $52,607,095 on the transfer of Bitcoin to pay the Management Fee, redemptions and other expenses and net change in unrealized appreciation

on investment in Bitcoin of $68,351,967.

Net realized and unrealized gain on investment in Bitcoin for the period was driven by Bitcoin

price appreciation from $42,014 per Bitcoin as of December 31, 2023, to $93,393 per Bitcoin as of December 31, 2024.

Net increase in

net assets resulting from operations was $119,372,537 for the year ended December 31, 2024, which consisted of the net realized and unrealized

gain on investment in Bitcoin, less the Management Fee of $678,610 and other expenses of $907,915.

Net assets increased to $180,779,483

on December 31, 2024, a 57% increase for the period.

The increase in net assets resulted from the aforementioned Bitcoin price appreciation

partially offset by the Trust’s expenses of $1,586,525 for the period and capital redemption of $54,057,318 for the period.

Resources and Liquidity

Management Fee is paid in U.S.

When selling Bitcoin to pay expenses, the Sponsor endeavors to sell the exact number of Bitcoin

needed to pay expenses in order to minimize the Trust’s holdings of assets other than Bitcoin.

As a consequence, the Sponsor expects

that the Trust will not record any cash flow from its operations and that its cash balance will be zero at the end of each reporting

The prices of digital assets, specifically Bitcoin, have experienced substantial volatility, which may reflect “bubble”

type volatility, meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to

rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors,

manipulation, and media reporting.

Bitcoin may have value based on various factors, including their acceptance as a means of exchange

by consumers and others, scarcity, and market demand.

exchange for the Management Fee, the Sponsor has agreed to pay all routine and ordinary administrative and operating expenses of the

Trust including the fees of the Trustee, the Trust Administrator, Fund Accountant, Transfer Agent, the Custodians’ Fees,

Listing Exchange fees, SEC registration fees, printing and mailing costs, tax reporting fees, audit fees, license fees and ordinary

legal fees and expenses.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in

material changes to its liquidity needs.

Digital Asset Holdings and Bitcoin Prices

movements in the price of Bitcoin directly affects the price of the Shares, investors should understand recent movements in the price

Investors, however, should also be aware that past movements in the Bitcoin price are not indicators of future movements.

Movements may be influenced by various factors, including, but not limited to, government regulation and security breaches experienced

by service providers, as well as political and economic uncertainties around the world.

following chart illustrates the historical movements in the NAV of the Trust from the beginning of the Trust’s operations on January 3, 2019, to December 31, 2025.

Prior to trading on the Listing Exchange on December 19, 2025, NAV was determined based on the estimated fair market value price for Bitcoin, reflecting the execution price of Bitcoin on its

principal market as determined by the Trust, which uses pricing methodology designed in accordance with ASC 820-10.

From December 19, 2025, through December 31, 2025, NAV is determined based on the Index.

table below illustrates the movements in the Bitcoin Market Price since the beginning of the Trust’s operations on January 3, 2019

through December 18, 2025.

Beginning on December 19, 2025, the performance of Bitcoin is measured by reference to the Index.

beginning of the Trust’s operations through December 18, 2025, the Bitcoin Market Price has ranged from $3,358.67 to $125,492.00,

with the straight average being $41,482.46.

From December 19, 2025 through December 31, 2025, the Index price has ranged from $87,218.24

to $88,121.12.

The Sponsor has not observed a material difference between the Bitcoin Market Price, the Index price and average prices

from the constituent Bitcoin exchanges individually or as a group.

End of period

3 unchanged sentences

Year ended December 31, 2022

Year ended December 31, 2023

Year ended December 31, 2024

Year ended December 31, 2025

January 3, 2019 (the inception of the Trust’s operations) to December 31, 2025

Secondary Market Trading

The Trust’s Units

have been quoted on OTC Markets since February 12, 2021, and on OTCQX since February 26, 2021 under the symbol “OBTC”.

The price of the Units as quoted on OTCQX (and OTC Markets) has varied significantly from the NAV per Unit.

From February 12, 2021

to December 31, 2022, the maximum premium of the closing price of the Units quoted on OTCQX (and OTC Markets) over the value of

the Trust’s NAV per Unit was approximately 240% and the average daily discount since the Units were first traded on OTC Markets

on February 12, 2021 was approximately 8%.

As of December 31, 2022, the Trust’s Units were quoted on OTCQX at a discount

of approximately 40% to the Trust’s NAV per Unit.

The historical premium of

the closing price of the Units quoted on OTCQX and OTC Markets as compared with the NAV per Unit has varied, from a high of 240%

on February 16, 2021 (closing price $56.39 per Unit on OTCQX (and OTC Markets) and NAV per Unit

$16.58) to a low (i.e., discount) of 46% on

November 18, 2022 (closing price $3 per Unit on OTCQX (and OTC Markets) and NAV per Unit $5.56).

The historical premiums and discounts

at times reflect a material deviation from the Bitcoin Market Price.

The following table sets

out the range of high and low closing prices for the Units as reported by OTCQX, the Trust’s NAV per Unit and the Trust’s

Bitcoin Holdings per Unit for the period from February 12, 2021 to December 31, 2022.

Quantitative and Qualitative Disclosures about

Not applicable.

Financial Statements and Supplementary Data

See Index to Financial Statements on page F-1

for a list of the financial statements filed herein.

Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure

Market Trading

Trust’s Shares were quoted on OTC Markets from February 12, 2021, and on OTCQX under the symbol OBTC from February 26, 2021, through

December 18, 2025.

On December 19, 2025, the Trust’s Shares began trading on the Listing Exchange.

Historically, the price of the

Shares as quoted on OTCQX (and OTC Markets) varied significantly from the NAV per Share.

From February 12, 2021, to December 18, 2025,

the maximum premium of the closing price of the Shares quoted on OTCQX (and OTC Markets) over the value of the Trust’s NAV per

Share by reference to the Bitcoin Market Price was approximately 240% and the average daily discount was approximately -11.65%.

December 31, 2025, the Trust’s Shares have been traded on the Listing Exchange at a premium of approximately 0.14% to the Trust’s

NAV per Share.

quoted on OTCQX and OTC Markets, the historical premium of the closing price of the Shares as compared with the NAV per Share has varied,

from a high of 240.16% on February 16, 2021, (closing price $56.39 per Share on OTCQX (and OTC Markets) and NAV per Share $16.58) to

a low (i.e., discount) of -46.15% on November 18, 2022 (closing price $3 per Share on OTCQX (and OTC Markets) and NAV per Share $5.56).

following table sets out the range of high and low closing prices for the Shares as reported by OTCQX, the Trust’s NAV per Share

for the period from February 12, 2021, to December 18, 2025.

NAV per Share

“Section 1A—Risk Factors” for a discussion of market risk.

Trust holds one type of investment - Bitcoin.

To avoid having to pre-fund purchases or sales of Bitcoin in connection with cash creations

and redemptions and sales of Bitcoin to pay the Management Fee and any other Trust expenses not assumed by the Sponsor, to the extent

applicable, the Trust may acquire Trade Credits from the Lender on a short-term basis pursuant to the Coinbase Trade Financing Agreement

(the “Trade Financing Agreement”).

The Trust must fully repay to the Lender the Trade Credits extended during a Defined Interval

by the Settlement Deadline for that Defined Interval.

“Defined Interval” means a twenty-four (24) hour period starting at

ET (or such other time as may be notified by the Lender to the Trust from time to time) on any day that the Lender has extended

Trade Credit to the Trust.

The “Settlement Deadline” shall mean 6:00 p.m.

ET on the calendar day immediately following the

start of a Defined Interval.

The Trust is permitted to repay the Trade Credits at any time during the Defined Interval.

Failure of the

Trust to fully repay the Trade Credits by the Settlement Deadline may result in an Event of Default (as such term is defined in the agreement).

The Trust must repay the Lender with the same type of asset that the Lender provided in extending the applicable Trade Credit.

repayment obligation shall be satisfied only when the Lender receives good funds for cash Trade Credits or Bitcoin for Trade Credits.

All cash repayments must be made to the Lender in good funds by the Settlement Deadline, regardless of whether the Federal Reserve wire

transfer system is open for business.

and Other Risks

“Section 1A—Risk Factors” for a discussion of trading and other related risks.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Trust does not hold securities and does not invest in derivative instruments.

FINANCIAL STATEMENTS

“Index to Financial Statements” on page F-1 for a list of the financial statements being filed therein.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 7. Management’s Discussion and Analysis