Bitwise XRP ETF 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the Trust’s financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, the Trust’s 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. GAAP”). The following discussion may contain forward-looking statements based on assumptions the Trust believes to be reasonable. The Trust’s actual results could differ materially from those discussed in these forward-looking statements. See “Statement Regarding Forward-Looking Statements” above. You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Trust and the Sponsor undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Annual Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Annual Report. Trust Overview The Trust’s registration statement on Form S-1 relating to its continuous public offering of Shares was declared effective by the U.S. Securities and Exchange Commission on November 19, 2025 and the Shares of the Trust were listed on the Exchange on November 20, 2025. Prior to the commencement of operations on November 19, 2025, on On October 10, 2025, Bitwise Asset Management, Inc. ("BAM"), the parent company of the Sponsor, purchased 8 Shares at a per-share price of $25.00 for $200.00 in a transaction exempt from registration under Section 4(a)(2) of the 1933 Act (the "Seed Shares"). On November 19, 2025, BAM redeemed the entirety of its 8 Seed Shares for $200 and Bitwise Investment Manager, LLC (“BIM”), an affiliate of the Sponsor, purchased the initial 100,000 Shares of the Trust (the “Seed Baskets”) for $2,277,445, at a per-Share price of $22.77. The business and operations of the Trust are described above under Part I, Item I under the heading “Business”, which is incorporated into this Item by reference. Results of Operations Financial Information for the period from November 19, 2025 (commencement of operations) through December 31, 2025 For the period November 19, 2025 (commencement of operations) through December 31, 2025* Investment income Investment income $ — Expenses Sponsor Fee 73 Total Expenses 73 Less: Waivers and Reimbursement (48 ) Net Expenses 25 Net investment loss (25 ) Net realized and unrealized gain (loss) Net change in unrealized appreciation (depreciation) on investment in XRP (25,912 ) Net realized and unrealized gain (loss) (25,912 ) Net increase (decrease) in net assets resulting from operations $ (25,937 ) * No comparative period information yet available as the Trust commenced operations on November 19, 2025. 81 The following provides a discussion of the material items that impacted the Trust’s financial condition during the applicable period: Sponsor Fee ^ The Trust pays a unitary Sponsor Fee of 0.34% per annum of the Trust’s XRP holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of the Trust assets through December 19, 2025. The Sponsor Fee for the period from November 19, 2025 (commencement of operations) to December 31, 2025 was approximately $25. Net Realized Gain (Loss) from XRP ^ Net realized gain on the sale of XRP to pay the Sponsor Fee for the period from November 19, 2025 (commencement of operations) to December 31, 2025 was approximately $0. Net realized loss on investment in XRP sold for redemptions for the period from November 19, 2025 (commencement of operations) to December 31, 2025 was approximately $0. Net Change in Unrealized Appreciation (Depreciation) from XRP^ Net change in unrealized depreciation on investment in XRP for the period from November 19, 2025 (commencement of operations) to December 31, 2025 was approximately $25,912. Net Increase (Decrease) in Net Assets resulting from Operations^ Net decrease in net assets resulting from operations for the period from November 19, 2025 (commencement of operations) to December 31, 2025 was approximately $25,937. This change was primarily due to a decrease in unrealized depreciation on investments in XRP, no change to net realized gain (loss), with a net realized and unrealized loss on investment in XRP of approximately $25,912, less the Sponsor Fee of $25, for the period from November 19, 2025 (commencement of operations) to December 31, 2025. The change in net realized and unrealized gain (loss) was primarily due to fluctuations in the ripple price during the respective period. For the period from November 19, 2025 (commencement of operations) to December 31, 2025, the net realized and unrealized loss on investment in XRP was driven by the XRPUSD_NY price depreciation from $2.03 per XRP as of November 19, 2025 (commencement of operations) to $1.82 per XRP as of December 31, 2025. Net Assets^ As of December 31, 2025*, the Trust held a net closing balance of 131,223,200.0749 XRP with a total market value of $238,530 based on the XRPUSD_NY price of $1.82 used to determine the Trust's NAV. The total market value of the Trust's XRP held was $239,758 based on the price of a XRP (Lukka Prime Rate) in the principal market (Coinbase) of $1.83, used to determine the Trust's Principal Market NAV. Net assets increased to approximately $241,369 at December 31, 2025*, with a 10.14% decrease in Principal Market NAV per-share for the period from November 19, 2025 (commencement of operations) to December 31, 2025. The increase in net assets primarily resulted from the net increase in capital due to share activity, partially offset by the aforementioned XRP price depreciation and net decrease resulting from operations of $25,937. * No comparative period information yet available as the Trust commenced operations on November 19, 2025. ^ Amounts displayed are in the ‘000s, except for per-share/coin references Liquidity and Capital Resources The Trust agreed to pay the unitary Sponsor Fee of 0.34% per annum of the Trust’s XRP holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of Trust assets through December 19, 2025, and has been accruing at an annual rate of 0.34% of the Trust’s net assets since then. As a result, the only ordinary expense of the Trust is expected to be the Sponsor Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses 82 of the Trust, which include the Trustee’s monthly fee and out-of-pocket expenses, the fees of the Trust’s regular service providers (Cash Custodian, XRP Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor also agreed to pay the costs of the Trust’s organization. The Trust may incur certain extraordinary, non-recurring expenses that are not assumed by the Sponsor, including but not limited to, taxes and governmental charges, any applicable brokerage commissions, financing fees, XRP network fees and similar transaction fees, 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 Shareholders (including, for example, in connection with any fork of the XRP blockchain, any Incidental Rights and any IR Asset), any indemnification of the Cash Custodian, XRP Custodian, Prime Execution Agent, Transfer Agent, Administrator or other agents, service providers or counterparties of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters. The Trust does not hold a cash balance except in connection with the creation and redemption of Baskets (blocks of 10,000 Shares) or to pay expenses not assumed by the Sponsor. To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust’s XRP as necessary to pay such expenses. The cash proceeds of the sale are sent to the Sponsor to pay the expenses. Any remaining cash is distributed back to the Cash Custodian. The Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s only sources of cash are proceeds from the sale of Baskets and XRP. The Trust will not borrow to meet liquidity needs. See Part I, Item I under the heading “Business - Fees and Expenses” for an additional discussion of the Trust’s 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. Off‑Balance Sheet Arrangements and Contractual Obligations As of December 31, 2025, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Trust’s financial position. Sponsor Fee payments made to the Sponsor are calculated as a fixed percentage of the Trust’s NAV. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods as NAVs are not known until a future date. No material changes have occurred during the period from November 20, 2025 (commencement of operations) to December 31, 2025. Critical Accounting Policies Principal Market and Fair Value Determination The Trust’s periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) and utilize an exchange-traded price from the Trust’s principal market for XRP on the Trust’s financial statement measurement date. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with U.S. GAAP. The Trust has engaged a third-party vendor to obtain a price from a principal market for XRP, which will be either the market the Trust normally transacts in for XRP or, if the Trust does not normally transact in any market or such market suffers an operational interruption and is unavailable, determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. Under U.S. GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities. 83 Investment Company Considerations The Trust is an investment company for U.S. 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 XRP 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. U.S. 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. Please refer to Note 2 to the financial statements included in this Annual Report for further discussion of the Trust’s accounting policies. Item 7A. Quantitative and Qualitative Disclosure About Market Risk. As a smaller reporting company, the Trust is not required to provide the information required by this item.