What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-13 compared with 2024-11-12 · 188 added, 161 removed, 2 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Form 10-Q.

Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements involve risks and uncertainties.

All statements (other than statements of historical fact) included in this Form 10-Q that address activities, events or developments

that may occur in the future, the Trust’s operations, the Sponsor’s plans and references to the Trust’s future success

and other similar matters are forward-looking statements.

Words such as “could,” “would,” “may,”

“expect,” “intend,” “estimate,” “predict,” and variations on such words or negatives

thereof, and similar expressions that reflect our current views with respect to future events and Trust performance, are intended to

identify such forward-looking statements.

These forward-looking statements are only predictions, subject to risks and uncertainties that

are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed.

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those

expressed therein.

We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable

However, we make no assurances that management’s estimates, expectations, beliefs, or projections will be achieved or accomplished.

These forward-looking statements are based on assumptions about many important factors that could cause actual results to differ materially

from those in the forward-looking statements.

We do not intend to update any forward-looking statements even if new information becomes

available or other events occur in the future, except as required by the federal securities law s.

and Trust Overview

21Shares Core Ethereum ETF (the “Trust”) is a Delaware statutory trust, formed on September 5, 2023, pursuant to the Delaware

Statutory Trust Act (“DSTA”).

The Trust operates pursuant to an Amended and Restated Trust Agreement (the “Trust Agreement”).

The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company

Act”) and is not a commodity pool for purposes of the Commodity Exchange Act (“CEA”).

The Trust is managed and controlled

by 21Shares US LLC (the “Sponsor”).

The Sponsor is a limited liability company formed in the state of Delaware on June 16,

2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is 21co Holdings Limited (formerly known as

Amun Holdings Limited).

The Sponsor is not subject to regulation by the Commodity Futures Trading Commission (“CFTC”) as

a commodity pool operator with respect to the Trust, or a commodity trading advisor with respect to the Trust.

The Trust is an exchange-traded

fund (“ETF”) that issues units of beneficial interest (the “Shares”) representing fractional undivided beneficial

interests in its net assets that trade on the Cboe BZX Exchange, Inc.

(the “Exchange”).

The Shares are listed for trading

on the Exchange under a ticker symbol “CETH”.

Sponsor served as the “Seed Capital Investor” to the Trust.

On May 1, 2024, the Sponsor, in its capacity as Seed Capital

Investor, subject to certain conditions, purchased 2 Shares at a per-Share price of $50.00 (the “Seed Creation Baskets”).

Total proceeds to the Trust from the sale of these Seed Creation Baskets were $100.

Delivery of the Seed Creation Baskets was made on

June 18, 2024 (the “Seed Capital Purchase Date”), 21Shares US LLC, in its capacity as Seed Capital Investor, purchased

the initial Seed Creation Baskets comprising 20,000 Shares (the “Initial Seed Creation Baskets”).

In its capacity as

the Seed Capital Investor, 21Shares US LLC has acted as a statutory underwriter in connection with this purchase.

The total proceeds

to the Trust from the sale of the Initial Seed Creation Baskets were $340,739.

On June 18, 2024, the Trust purchased ether with

the proceeds of the Initial Seed Creation Baskets by transacting with an Ether Counterparty to acquire ether on behalf of the Trust in

exchange for cash provided by 21Shares US LLC in its capacity as Seed Capital Investor.

All ether acquired in connection with the Initial

Seed Creation Baskets is held by the ether Custodians.

Trust’s investment objective is to seek to track the performance of ether, as measured by the performance of the CME CF Ether-Dollar

Reference Rate—New York Variant (the “Index”), adjusted for the Trust’s expenses and other liabilities.

CF Benchmarks

is the administrator for the Index (the “Index Provider”).

The Index is designed to reflect the performance of ether

In seeking to achieve its investment objective, the Trust holds ether at its Custodians and values its Shares daily based

on the Index.

The Trust is a passive investment vehicle and is not a leveraged product.

The Sponsor does not actively manage the ether

held by the Trust.

Trust issues Shares only in Creation Units of 10,000 or multiples thereof.

Creation Units are issued and redeemed in exchange for cash.

Individual Shares will not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “CETH.”

The Trust issues Shares in Creation Units on a continuous basis at the applicable NAV per Share on the creation order date.

Trust pays the unitary Sponsor Fee of 0.21% of the Trust’s ether holdings.

The Sponsor Fee is paid by the Trust to the Sponsor

as compensation for services performed under the Trust Agreement.

The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period

which commenced on July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million

of Trust assets, whichever comes first.

Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities

Act”), and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.

NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets.

The NAV is calculated

on each Business Day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price.

determining the NAV of the Trust on any Business Day, the Administrator calculates the price of the ether held by the Trust as of 4:00

ET on such day.

The Administrator also calculates the “NAV per Share” of the Trust, which equals the NAV of the Trust

divided by the number of outstanding Shares.

For purposes of making these calculations, a Business Day means any day other than a day

when the Exchange is closed for regular trading.

addition to calculating NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the Principal

Market NAV and Principal Market NAV per Share on each valuation date for such financial statements.

The determination of the Principal

Market NAV and Principal Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the

value of ether is determined using the fair value of ether based on the price in the ether market that the Trust considers its “principal

market” as of 4:00 p.m.

Discussion and Analysis of Financial Condition and Results of Operations

This information should be

read in conjunction with the financial statements and notes included in Item 1 of Part I of this Form 10-Q.

This Form 10-Q contains “forward-looking

statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, and

such forward-looking statements involve risks and uncertainties.

All statements (other than statements of historical fact) included in

this Form 10-Q that address activities, events or developments that may occur in the future, the Trust’s operations, the Sponsor’s

plans and references to the Trust’s future success and other similar matters are forward-looking statements.

Words such as “could,”

“would,” “may,” “expect,” “intend,” “estimate,” “predict,” and

variations on such words or negatives thereof, and similar expressions that reflect our current views with respect to future events and

Trust performance, are intended to identify such forward-looking statements.

These forward-looking statements are only predictions, subject

to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ

materially from those discussed.

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes

to differ materially from those expressed therein.

We express our estimates, expectations, beliefs, and projections in good faith and

believe them to have a reasonable basis.

However, we make no assurances that management’s estimates, expectations, beliefs, or projections

will be achieved or accomplished.

These forward-looking statements are based on assumptions about many important factors that could cause

actual results to differ materially from those in the forward-looking statements.

We do not intend to update any forward-looking statements

even if new information becomes available or other events occur in the future, except as required by the federal securities laws.

Organization and Trust Overview

The Trust is a Delaware statutory

trust, formed on September 5, 2023, pursuant to the DSTA.

The Trust operates pursuant to an Amended and Restated Trust Agreement (the

“Trust Agreement”).

The Trust is not registered as an investment company under the 1940 Act, and is not a commodity pool for

purposes of the CEA.

The Trust is managed and controlled by the Sponsor.

The Sponsor is a limited liability company formed in the state

of Delaware on June 16, 2021, and is a wholly owned subsidiary of Jura Pentium Inc., whose ultimate parent company is 21co Holdings Limited

(formerly known as Amun Holdings Limited).

The Sponsor is not subject to regulation by the CFTC as a commodity pool operator with respect

to the Trust, or a commodity trading advisor with respect to the Trust.

The Trust is an exchange-traded fund that issues units of beneficial

interest representing fractional undivided beneficial interests in its net assets that trade on the Exchange.

The Shares are listed for

trading on the Exchange under a ticker symbol “CETH”.

The Sponsor served as the

“Seed Capital Investor” to the Trust.

On May 1, 2024, the Sponsor, in its capacity as Seed Capital Investor, subject to certain

conditions, purchased 2 Shares at a per-Share price of $50.00 (the “Initial Seed Shares”).

Total proceeds to the Trust from

the sale of these Initial Seed Shares were $100.

Delivery of the Seed Shares was made on May 1, 2024.

On June 18, 2024 (the

“Seed Capital Purchase Date”), 21Shares US LLC, in its capacity as Seed Capital Investor, purchased the initial Seed Creation

Baskets comprising 20,000 Shares (the “Initial Seed Creation Baskets”).

In its capacity as the Seed Capital Investor,

21Shares US LLC has acted as a statutory underwriter in connection with this purchase.

The total proceeds to the Trust from the sale of

the Initial Seed Creation Baskets were $340,739.

On June 18, 2024, the Trust purchased ether with the proceeds of the Initial Seed

Creation Baskets by transacting with an Ether Counterparty to acquire ether on behalf of the Trust in exchange for cash provided by 21Shares

US LLC in its capacity as Seed Capital Investor.

All ether acquired in connection with the Initial Seed Creation Baskets is held by the

ether Custodians.

The Trust’s investment

objective is to seek to track the performance of ether, as measured by the performance of the CME CF Ether-Dollar Reference Rate—New

York Variant, adjusted for the Trust’s expenses and other liabilities.

CF Benchmarks Ltd.

is the administrator for the Index (the

“Index Provider”).

The Index is designed to reflect the performance of ether in U.S.

In seeking to achieve its investment

objective, the Trust holds ether at its Custodians and values its Shares daily based on the Index.

The Trust is a passive investment vehicle

and is not a leveraged product.

The Sponsor does not actively manage the ether held by the Trust.

The Trust issues Shares only

in Creation Baskets of 10,000 or multiples thereof.

Creation Baskets are issued and redeemed in exchange for cash.

Individual Shares will

not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “CETH.” The Trust issues Shares

in Creation Baskets on a continuous basis at the applicable NAV per Share on the creation order date.

The Trust pays the

unitary Sponsor Fee of 0.21% of the Trust’s ether holdings.

The Sponsor Fee is paid by the Trust to the Sponsor as

compensation for services performed under the Trust Agreement.

The Sponsor agreed to waive the entire Sponsor Fee for (i) a

six-month period which commenced on July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii)

the first $500 million of Trust assets, whichever came first.

The six-month waiver period ended on January 23, 2025, at which time

the Sponsor began collecting the Sponsor Fee.

Except for during periods during which the Sponsor Fee is being waived, the Sponsor

Fee accrues daily and is payable in ether weekly in arrears.

The Administrator calculates the Sponsor Fee on a daily basis by

applying a 0.21% annualized rate to the Trust’s total ether holdings, and the amount of ether payable in respect of each daily

accrual is determined by reference to the Index.

The Trust is an “emerging

growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such,

the Trust may elect to comply with certain reduced public company reporting requirements.

The NAV of the Trust is used

by the Trust in its day-to-day operations to measure the net value of the Trust’s assets.

The NAV is calculated on each Business

Day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price.

In determining the

NAV of the Trust on any Business Day, the Administrator calculates the price of the ether held by the Trust as of 4:00 p.m.

The Administrator also calculates the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the

number of outstanding Shares.

In addition to calculating

NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the Principal Market NAV and Principal

Market NAV per Share on each valuation date for such financial statements.

The determination of the Principal Market NAV and Principal

Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the value of ether is determined

using the fair value of ether based on the price in the ether market that the Trust considers its “principal market” as of

ET on the valuation date, rather than using the Index.

and NAV per Share are not measures calculated in accordance with GAAP and are not intended as substitute for Principal Market and Principal

Market NAV per Share, respectively.

Accounting Estimates

financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States

The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial

position and results of operations.

These estimates and assumptions affect the Trust’s application of accounting policies.

is a summary of accounting policies on cash and investment valuation.

There were no material estimates involving a significant level

of estimation uncertainty that had or are reasonably likely to have had a material impact on the Trust’s financial condition used

in the preparation of the financial statements.

In addition, please refer to Note 2 to the Financial Statements included in this report

for further discussion of the Trust’s accounting policies.

includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S.

federally insured

Trust’s policy is to value investments held at fair value.

The Trust follows the provisions of ASC 820, Fair Value Measurements

ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs

to valuation techniques used to measure fair value.

ASC 820 determines fair value to be the price that would be received for ether in

a current sale, which assumes an exit price resulting from an orderly transaction between market participants on the measurement date.

ASC 820-10 requires the assumption that ether is sold in its principal market to market participants (or in the absence of a principal

market, the most advantageous market).

Trust utilizes an exchange traded price from the Trust’s principal market for ether as of 4:00 p.m.

ET on the Trust’s financial

statement measurement date.

of Operations

the Three Months ended on September 30, 2024*

realized and change in unrealized loss on investment in ether for the three months ended September 30, 2024, was $(3,223,608) which includes

a net change in unrealized depreciation on investment in ether of $(3,222,608).

Net realized and unrealized loss on investment in ether

for the period was driven by ether price depreciation from $3,423.00 per ether as of June 30, 2024 to $2,594.43 per ether as of September

Net increase in net assets resulting from operations was $ 12,240,686 for the period ended September 30, 2024, which consisted

of a net increase in the number of shares outstanding offset by the aforementioned net realized and change in unrealized loss on investment

the period May 1, 2024 (initial seed creation) through September 30, 2024*

Net realized and change in

unrealized loss on investment in ether for the period May 1, 2024 (date of initial seeding) through September 30, 2024, was $(3,222,047)

which includes a net change in unrealized depreciation on investment in ether of $(3,222,047).

Net realized and unrealized loss on investment

in ether for the period was driven by ether price depreciation from $3,483.68 per ether as of June 18, 2024 to $2,594.43 per ether as

of September 30, 2024.

Net increase in net assets resulting from operations was $ 12,582,986 for the period ended September 30, 2024,

which consisted of a net increase in the number of shares outstanding offset by the aforementioned net realized and change in unrealized

loss on investment in ether.

prior year comparative period has been provided as this is the first year of the Trust’s

and Capital Resources

Trust is not aware of any trends, demands, commitments, events, or uncertainties that are reasonably likely to result in material changes

to its liquidity needs.

The Trust’s only ordinary recurring expense is the fee paid to the Sponsor at an annual rate of 0.21% of

the daily net asset value of the Trust.

The Sponsor is waiving the entire Sponsor Fee for (i) a six-month period which commenced on July

23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million of Trust assets, whichever

In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the

Trust, including but not limited to the following:

fees charged by Administrator, the Custodians, Transfer Agent and the Trustee, the

Marketing Fee, Cboe BZX Exchange listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and

mailing costs, website fees, tax reporting fees, audit fees, license fees and expenses, up to $100,000 per annum in ordinary legal fees

and expenses.

The Sponsor bears expenses in connection with the Trust’s organization and initial offering costs.

Sponsor is not required to pay any extraordinary or non-routine expenses.

Extraordinary expenses are fees and expenses which are unexpected

or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses.

Extraordinary

fees and expenses also include material expenses which are not currently anticipated obligations of the Trust.

The Trust will be responsible

for the payment of such expenses to the extent any such expenses are incurred.

Routine operational, administrative, and other ordinary

expenses are not deemed extraordinary expenses.

NAV and NAV per Share are

not measures calculated in accordance with GAAP and are not intended as substitutes for Principal Market and Principal Market NAV per

Share, respectively.

Critical Accounting Estimates

The financial statements and

accompanying notes are prepared in accordance with GAAP.

The preparation of these financial statements relies on estimates and assumptions

that impact the Trust’s financial position and results of operations.

These estimates and assumptions affect the Trust’s application

of accounting policies.

Below is a summary of accounting policies on cash and investment valuation.

There were no material estimates involving

a significant level of estimation uncertainty that had or are reasonably likely to have had a material impact on the Trust’s financial

condition used in the preparation of the financial statements.

In addition, please refer to Note 2 to the Financial Statements included

in this report for further discussion of the Trust’s accounting policies.

Cash includes non-interest

bearing, non-restricted cash maintained with one financial institution that does not exceed U.S.

federally insured limits.

Investment Valuation

The Trust’s policy is

to value investments held at fair value.

The Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”).

ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used

to measure fair value.

ASC 820 determines fair value to be the price that would be received for ether in a current sale, which assumes

an exit price resulting from an orderly transaction between market participants on the measurement date.

ASC 820-10 requires the assumption

that ether is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market).

The Trust utilizes an exchange

traded price from the Trust’s principal market for ether as of 4:00 p.m.

ET on the Trust’s financial statement measurement

Results of Operations

For the Three Months ended on March 31, 2025

The Trust's net asset value decreased from $16,869,879

at December 31, 2024 to $8,403,421 at March 31, 2025.

The decrease in the Trust's net asset value was primarily driven by a decrease in

the price of ether from $3,340.57 as of December 31, 2024 to $1,827.55 as of March 31, 2025.

The decrease in the Trust's net asset value

was also attributable to a decrease in the number of outstanding Shares, which decreased 90,000 as a result of 520,000 shares being created

and 610,000 shares being redeemed during the quarter.

Net decrease in net assets

resulting from operations for the quarter ended March 31, 2025 was $9,861,010, resulting from a net change in unrealized loss on investment

in ether of $6,380,524, a net realized loss of $3,476,102 from ether sold for redemptions, and a net investment loss of $5,907 together

with an unrealized gain on the Sponsor Fee payable of $1,523.

Other than the net Sponsor Fee of $5,907, the Trust had no expenses during

Liquidity and Capital Resources

The Trust is not aware

of any trends, demands, commitments, events, or uncertainties that are reasonably likely to result in material changes to its

liquidity needs.

The Trust’s only ordinary recurring expense is the fee paid to the Sponsor at an annual rate of 0.21% of the

Trust’s total ether holdings.

The Sponsor agreed to waive the entire Sponsor Fee for (i) a six-month period which commenced on

July 23, 2024 (the day the Trust’s Shares were initially listed on the Exchange), or (ii) the first $500 million of Trust

assets, whichever came first.

The six-month waiver period ended on January 23, 2025, at which time the Sponsor began collecting the

In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by

the Trust, including but not limited to the following:

fees charged by Administrator, the Custodians, Transfer Agent and the

Trustee, the Marketing Fee, the Exchange’s listing fees, typical maintenance and transaction fees of the DTC, SEC registration

fees, printing and mailing costs, website fees, tax reporting fees, audit fees, license fees and expenses, up to $100,000 per annum

in ordinary legal fees and expenses.

The Sponsor bears expenses in connection with the Trust’s organization and initial

offering costs.

The Sponsor is not required

to pay any extraordinary or non-routine expenses.

Extraordinary expenses are fees and expenses which are unexpected or unusual in nature,

such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses.

Extraordinary fees and expenses

also include material expenses which are not currently anticipated obligations of the Trust.

The Trust will be responsible for the payment

of such expenses to the extent any such expenses are incurred.

Routine operational, administrative, and other ordinary expenses are not

deemed extraordinary expenses.

The Trust will sell ether on an as-needed basis to pay the Sponsor’s fee.

Off-Balance Sheet Arrangements

The Trust does not have any

off-balance sheet arrangements.

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-Q

Item 2. Management’s Discussion and Analysis