Item 7. Management’s Discussion and Analysis
Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
This information should be read in conjunction
with the financial statements and notes to financial statements included with this report. The discussion and analysis that follows may
contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified
by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative
of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this Report that
address activities, events, or developments that may occur in the future, including such matters movements in the cryptocurrencies markets
and indexes that track such movements, the operations of the Trust, the plans of the Sponsor and references to the Trust’s future
success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may
differ materially. These statements are based upon certain assumptions and analyses made by the Sponsor on the basis of its perception
of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the
circumstances. Whether or not actual results and developments will conform to the Sponsor’s expectations and predictions is subject
to a number of risks and uncertainties, including the special considerations discussed in this Report, general economic, market and business
conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and
other world economic and political developments. Consequently, all the forward-looking statements made in this Report are qualified by
these cautionary statements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized
or, even if substantially realized, will result in the expected consequences to, or have the expected effects on, the Trust’s operations
or the value of the Shares issued by the Trust. Moreover, neither the Sponsor nor any other person assumes responsibility for the accuracy
or completeness of the forward-looking statements. Neither the Trust nor the Sponsor undertakes an obligation to publicly update or conform
to actual results any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as
required by law.
As of December 31, 2025, the Trust had no operations
other than a sale to Van Eck Associates Corporation, the Seed Capital Investor, of 4,000 Shares for $100,000 ($25.00 per Share) on November
20, 2025, which were subsequently redeemed on December 22, 2025 and the Seed Capital Investor contributed 100,000 Shares, with an in-kind
transaction, for $2,500,000 ($25.00 per share) on December 22, 2025.
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Introduction
The Trust is a Delaware statutory trust. The Trust
does not have directors, officers or employees. The creation and operation of the Trust has been arranged by the Sponsor. The Trust is
administered by the Trust Agreement, among the Sponsor, the Trustee and the Delaware Trustee. The Trust is managed and controlled by the
Sponsor, a wholly owned subsidiary of VanEck. The Sponsor is not governed by a board of directors.
The Trust’s investment objective is to reflect
the performance of the price of AVAX, and rewards from staking a portion of the Trust’s AVAX, to the extent the Sponsor in its sole
discretion determines that the Trust may do so without undue legal or regulatory risk, such as, without limitation, by jeopardizing the
Trust’s ability to qualify as a grantor trust for U.S. federal income tax purposes, less the expenses of the Trust’s operations.
The Trust issues and redeems Shares only in blocks
of 25,000 Shares, a Basket, or integral multiples thereof, and only in transactions with Authorized Participants.
Shares of the Trust trade on the Exchange under
the ticker symbol “VAVX.”
Computation of Net Asset Value
The Trust’s NAV will be calculated based
on the Trust’s net asset holdings as reconciled to the AVAX Custodian’s accounts on a market approach, determined on a daily
basis in accordance with the MarketVector Avalanche Benchmark Rate price at 4:00 p.m. Eastern
time. The Sponsor believes that use of the MarketVector Avalanche Benchmark Rate mitigates against
idiosyncratic exchange risk, as the failure of any individual exchange will not materially impact pricing for the Trust. It also allows
the Administrator to calculate the NAV in a manner that significantly deters manipulation.
Liquidity
The Trust is not aware of any trends, demands,
conditions, or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor
has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period
covered by this Report was the Sponsor’s Fee. The Trust’s only source of liquidity is its sales of AVAX.
Significant Accounting Policies
In preparing financial statements in conformity
with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ from these
estimates. In addition, please refer to Note 2 to the Financial Statements included in this Report for further discussion of the Trust’s
accounting policies.
Results of Operations
The Year Ended December 31, 2025
From January
1, 2025 to November 20, 2025 (date of Seeding), the Trust had no operations other than a sale to the Seed Capital Investor, the parent
of the Sponsor, of 4,000 Shares at a per-Share price of $25.00. Delivery of the Seed Shares was made on November 20, 2025. Total proceeds
to the Trust from the sale of the Seed Shares were $100,000.
On December 22, 2025 (date of initial AVAX investment),
the Seed Shares were redeemed for cash and the Seed Capital Investor purchased the Seed Creation Baskets, comprising of 100,000 Shares
at a per-Share price of $25.00. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $2,500,000, which resulted
in the Trust receiving 206,019.901522 AVAX. Delivery of the Seed Creation Baskets was made on December 22, 2025. The Seed Capital Investor
acted as a statutory underwriter in connection with this purchase.
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The Trust’s NAV increased from $100,000 at November 20, 2025
(date of Seeding) to $ 2,517,563 at December 31, 2025, a 2,418% increase. The increase in the Trust’s NAV resulted primarily from
an increase in the number of outstanding shares, which increased from 4,000 Shares at November 20, 2025 to 100,000 Shares at December
31, 2025. This is the net result of 100,000 Shares (4 Baskets) being created and 4,000 Seed Shares being redeemed during the period, offset
by a decrease in the price of AVAX, which contracted from $13.76 at December 22, 2025 (date of initial AVAX investment) to $12.22 at December
31, 2025 resulting in a decline of 11%.
Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.
Not applicable.