As filed with the Securities and Exchange Commissionon November 26, 2024

Registration No. 333-_______

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Bitwise Bitcoin & Ethereum ETF

(Exact name of registrant as specified in its charter)

c/o Bitwise Investment Advisers, LLC
250 Montgomery Street, Suite 200
San Francisco, California 94104
(415) 707-3663
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices and for service of process purposes)

Copies to:

Richard Coyle, Esq.

James Audette, Esq.
Chapman and Cutler LLP

320 South Canal Street, 27^th Floor

Chicago, Illinois 60606

(312) 845-3724

Katherine Dowling, Esq.
Bitwise Investment Advisers, LLC
250 Montgomery Street, Suite 200
San Francisco, California 94104
(415) 707-3663

Approximate date of commencement of proposed saleto the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on thisForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:☒

If this Form is filed to register additional securitiesfor an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registrationstatement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filedpursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number ofthe earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filedpursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number ofthe earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrantis a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒

The registrant hereby amends this registrationstatement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment whichspecifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the SecuritiesAct of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, actingpursuant to said Section 8(a), may determine.

The information in thisProspectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securitiesand Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buythese securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectusdated November 26, 2024

PROSPECTUS

Shares

BitwiseBitcoin & Ethereum ETF

The Bitwise Bitcoin & Ethereum ETF (the “Trust”)is an exchange-traded product that issues common shares of beneficial interest (“Shares”) that are anticipated to be listedon the NYSE Arca, Inc. (the “Exchange”) under the ticker symbol “_____.” The Trust’s investment objectiveis to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust’s operationsand other liabilities. The Trust’s allocation of its assets to bitcoin and ether will approximate the relative market capitalizationof bitcoin and ether to one another. On the inception date of the Trust, ______, 2024, each Share represented _____ bitcoin and _____ether. In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and establish its net asset value (“NAV”)by reference to the CME CF Bitcoin – New York Variant for its bitcoin holdings (the “Bitcoin Pricing Benchmark”) andto the CME CF Ether – Dollar Reference Rate – New York Variant for its ether holdings (the “Ether Pricing Benchmark,”and, with the Bitcoin Pricing Benchmark, the “Pricing Benchmarks”). The Pricing Benchmarks are calculated by CF BenchmarksLtd. based on an aggregation of executed trade flow of major bitcoin and ether trading platforms. The Trust is sponsored and managed byBitwise Investment Advisers, LLC (the “Sponsor”).

The Trust will pay to the Sponsor a unitary managementfee of 0.___% per annum of the Trust’s bitcoin and ether holdings (the “Sponsor Fee”).

When the Trust creates or redeems its Shares,it will do so in blocks of 10,000 Shares (each, a “Basket”) based on the quantity of bitcoin and ether attributable to eachShare of the Trust (net of accrued but unpaid expenses and liabilities) multiplied by the number of Shares (10,000) comprising a Basket(the “Basket Amount”). For an order to create (purchase) a Basket, the purchase shall be in the amount of U.S. dollars neededto purchase the Basket Amount (plus a per-order transaction fee), as calculated by the Administrator (as defined below). For an orderto redeem a Basket, the Sponsor shall arrange for the Basket Amount of bitcoin and ether to be sold and the cash proceeds (minus a per-ordertransaction fee) distributed. The Trust only creates and redeems Baskets in transactions with financial firms that are authorized to purchaseor redeem Shares with the Trust (each, an “Authorized Participant”). Shares initially comprising the same Basket but offeredby the Authorized Participants to the public at different times may have different offering prices that depend on various factors, includingthe supply and demand for Shares, the value of the Trust’s assets, and market conditions at the time of a transaction. Investorswho buy or sell Shares during the day from their broker may do so at a premium or discount relative to the NAV of the Shares.

Bitwise Asset Management, Inc., the parent ofthe Sponsor, served as seed capital investor to the Trust (the “Seed Capital Investor”). The Seed Capital Investor agreedto purchase $___ in Shares on _________, and on ________ took delivery of __ Shares at a per-Share price of $___ (the “Seed Shares”).The $____ the Trust received in consideration for the sale of the Seed Shares served as the basis of the audit described in the sectionsentitled “REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” and “STATEMENT OF FINANCIAL CONDITION.”

Bitwise Investment Manager, LLC, an affiliateof the Sponsor, is expected to purchase the initial Baskets of Shares for $____________, at a per-Share price of $__ for these ________Shares (the “Seed Baskets”). Such proceeds are expected to be used by the Trust to purchase ether at or prior to the listingof Shares on the Exchange. Bitwise Investment Manager, LLC will act as a statutory underwriter in connection with the initial purchaseof the Seed Baskets.

Neither the Trust, nor the Sponsor, nor the Bitcoinand Ether Custodian (defined below), nor any other person associated with the Trust will, directly or indirectly, engage in actions whereany portion of the Trust’s ether becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ether orgenerate income or other earnings.

Investors who decide to buy or sell Shares ofthe Trust will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to thisoffering, there has been no public market for the Shares. Investing in the Trust involves risks similar to those involved with an investmentdirectly in ether and other significant risks. See “RISK FACTORS” beginning on page 14.

The offering of the Shares is registered withthe U.S. Securities and Exchange Commission (“SEC”) in accordance with the Securities Act of 1933 (the “1933 Act”).The Trust intends to issue Shares on a continuous basis and is registering an indeterminate number of Shares. The offering is intendedto be a continuous offering. The Trust is not a fund registered or subject to regulation under the Investment Company Act of 1940. TheTrust is not a commodity pool for purposes of the Commodity Exchange Act of 1936, and the Sponsor is not subject to regulation by theCommodity Futures Trading Commission as a commodity pool operator or a commodity trading adviser.

AN INVESTMENT IN THE TRUST MAY NOT BE SUITABLEFOR INVESTORS THAT ARE NOT IN A POSITION TO ACCEPT MORE RISK THAN MAY BE INVOLVED WITH OTHER EXCHANGE-TRADED PRODUCTS THAT DO NOT HOLDBITCOIN AND ETHER OR INTERESTS RELATED TO BITCOIN AND ETHER. THE SHARES ARE SPECULATIVE SECURITIES. THEIR PURCHASE INVOLVES A HIGH DEGREEOF RISK AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CONSIDER ALL RISK FACTORS BEFORE INVESTING IN THE TRUST. PLEASE REFER TO“RISK FACTORS” BEGINNING ON PAGE 14.

NEITHER THE SECURITIES AND EXCHANGE COMMISSIONNOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUSIS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is _____________,2025

TABLE OF CONTENTS

This Prospectus contains information you shouldconsider when making an investment decision about the Shares. You may rely on the information contained in this Prospectus. The Trustand the Sponsor have not authorized any person to provide you with different information and, if anyone provides you with different orinconsistent information, you should not rely on it. This Prospectus is not an offer to sell the Shares in any jurisdiction where theoffer or sale of the Shares is not permitted.

Until __________, 2024 (25 days after the dateof this Prospectus), all dealers effecting transactions in the Shares, whether or not participating in this distribution, may be requiredto deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwritersand with respect to unsold allotments or subscriptions. The Sponsor first intends to use this Prospectus on ___________, 2024.

The Shares are not registered for public salein any jurisdiction other than the United States.

STATEMENT REGARDINGFORWARD-LOOKING STATEMENTS

This Prospectus includes “forward-lookingstatements” that generally relate to future events or future performance. In some cases, you can identify forward-looking statementsby terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,”“believe,” “estimate,” “predict,” “potential,” or the negative of these terms or othercomparable terminology. All statements (other than statements of historical fact) included in this Prospectus that address activities,events, or developments that will or may occur in the future, including such matters as movements in the digital asset markets, the Trust’soperations, the Sponsor’s plans, and references to the Trust’s future success and other similar matters, are forward-lookingstatements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certainassumptions and analyses the Sponsor has made based on its perception of historical trends, current conditions, and expected future developments,as well as other factors appropriate in the circumstances.

Whether or not actual results and developmentswill conform to the Sponsor’s expectations and predictions is subject to a number of risks and uncertainties, including:

See“RISK FACTORS.” Consequently, all the forward-looking statements made in this prospectus are qualified by these cautionarystatements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized or, even ifsubstantially realized, that they will result in the expected consequences to, or have the expected effects on, the Trust’s operationsor the value of the Shares. Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conformsuch statements to actual results or to reflect a change in the Sponsor’s expectations or predictions.

EMERGINGGROWTH COMPANY STATUS

TheTrust is an “emerging growth company”as that term is used in the Jumpstart Our Business Startups Act (the “JOBSAct”) and, as such, may elect to comply with certain reduced reporting requirements.For as long as the Trust is an emerging growth company, unlike other public companies, it will not be required to:

The Trust will cease to be an “emerginggrowth company” upon the earliest of (i) when it has $1.235 billion or more in annual revenues; (ii) when it is deemed to be a largeaccelerated filer under Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934; (iii) when it issues more than $1.0 billionof non-convertible debt over a three-year period; or (iv) the last day of the fiscal year following the fifth anniversary of its initialpublic offering.

In addition, Section 107 of the JOBS Act providesthat an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the SecuritiesAct of 1933 for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoptionof certain accounting standards until those standards would otherwise apply to private companies; however, the Trust is choosing to “optout” of such extended transition period, and as a result, the Trust will comply with new or revised accounting standards on therelevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act providesthat the Trust’s decision to opt out of the extended transition period for complying with new or revised accounting standards isirrevocable.

Risk Factors

You should consider carefullythe risks described below before making an investment decision. You should also refer to the other information included in this Prospectus,as well as information found in documents incorporated by reference in this Prospectus, before you decide to purchase any Shares. Theserisk factors may be amended, supplemented or superseded from time to time by risk factors contained in any periodic report, prospectussupplement, post-effective amendment or in other reports filed with the SEC in the future.

Risks Related to Digital Assets and DigitalAsset Networks

The trading pricesof many digital assets, including bitcoin and ether, have experienced extreme volatility in recent periods and may continue to do so.Extreme volatility in the future, including further declines in the trading price of bitcoin or ether, could have a material adverse effecton the value of the Shares and the Shares could lose all or substantially all of their value.

The trading prices of manydigital assets, including bitcoin and ether, 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 and ether, over the course of 2017, followed by steepdrawdowns throughout 2018 in digital asset trading prices, including for bitcoin and ether. These drawdowns notwithstanding, digital assetprices, including bitcoin and ether, increased significantly again during 2019, decreased significantly again in the first quarter of2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainderof 2020 and the first quarter of 2021. Digital asset prices, including bitcoin and ether, continued to experience significant and suddenchanges throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022, and digital asset priceshave continued to fluctuate through 2023 and to date in 2024.

Extreme volatility in thefuture, including further declines in the trading price of bitcoin and ether, could have a material adverse effect on the value of theShares and the Shares could lose all or substantially all of their value. Furthermore, negative perception and a lack of stability andstandardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatilityin the price of bitcoin and ether and other digital assets, including a depreciation in value. The Trust is not actively managed and willnot take any actions to take advantage, or mitigate the impacts, of volatility in the price of bitcoin and ether.

The value of the Sharesis subject to a number of factors relating to the fundamental investment characteristics of bitcoin and ether as digital assets, includingthe fact that digital assets are bearer instruments and loss, theft, or compromise of the associated private keys could result in permanentloss of the asset, and the capabilities and development of blockchain technologies such as the Bitcoin and Ethereum blockchains.

Digital assets were only introducedin 2009, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and developmentof blockchain technologies, such as the recentness of their development, their dependence on the internet and other technologies, theirdependence on the role played by users, developers and validators and the potential for malicious activity. For example, the realizationof one or more of the following risks could materially adversely affect the value of the Shares:

A decline in the adoptionof digital assets generally, and bitcoin and ether specifically, could negatively impact the Trust.

The Sponsor will not adoptor employ any strategy that seeks to increase the usage of digital assets generally, or that seeks to spur further development of eitherbitcoin and the Bitcoin network or ether and the Ethereum network. However, a lack of expansion in usage of bitcoin and the Bitcoin networkor ether and the Ethereum network could adversely affect an investment in Shares.

The use of digital assets,such as bitcoin and ether to, among other things, buy and sell goods and services is part of a new and rapidly evolving industry thatemploys digital assets based upon computer-generated mathematical and/or cryptographic protocols. Both bitcoin and ether are a prominent,but not unique, part of this industry. The growth of this industry is subject to a high degree of uncertainty, as new assets and technologicalinnovations continue to develop and evolve.

Today, there is limited useof bitcoin or ether in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant portionof users. Certain merchants and major retail and commercial businesses have only recently begun accepting bitcoin or ether as a meansof payment for goods and services. This pattern may contribute to outsized price volatility, which in turn can make bitcoin and etherless attractive to merchants and commercial parties as a means of payment. A lack of expansion by bitcoin or ether into retail and commercialmarkets or a contraction of such use may result in a reduction in the price of bitcoin or ether, which could adversely affect an investmentin the Trust.

In addition, there is no assurancethat bitcoin or ether will maintain its value over the long term. The value of both bitcoin and ether is subject to risks related to itsusage. Even if growth in Bitcoin or Ethereum network adoption occurs in the near or medium term, there is no assurance that bitcoin orether usage will continue to grow over the long term. A contraction in the use of bitcoin or ether may result in increased volatilityor a reduction in the price of bitcoin or ether, which would adversely impact the value of the Shares.

Bitcoin’s adoption hasbeen increasing since bitcoin first gained mass media attention in 2013. It is increasingly accepted as a form of payment in the U.S.and abroad, and is gaining widespread use as a non-sovereign store of value for investors. Adoption, however, has been limited in somerespects when compared with the increase in the price of bitcoin. The continued adoption of bitcoin will require growth in its usage andin the usage of the Bitcoin network for various applications, as well as an accommodating regulatory environment, including with respectto the tax treatment of transactions denominated in bitcoin. In addition, alternative forms of digital assets and innovations in legacypayments systems may reduce use of the Bitcoin network and demand for bitcoin. A lack of expansion in usage of bitcoin and the Bitcoinnetwork could adversely affect the market for bitcoin and may have a negative impact on an investment in the Shares. Even if growth inbitcoin adoption continues in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term.A contraction in use of bitcoin may result in increased volatility or a reduction in the price of bitcoin, which could adversely impactthe value of an investment in the Trust.

Similarly, the further developmentand acceptance of the Ethereum network is subject to a variety of factors that are difficult to evaluate. For example, the Ethereum networkfaces significant obstacles to increasing the usage of ether without resulting in higher fees or slower transaction settlement times.While there will likely be attempts to increase the volume of transactions, such attempts may not be effective. The slowing, stoppingor reversing of the development, acceptance or usage of the Ethereum network and associated smart contracts may adversely affect the priceof ether and therefore an investment in the Shares. The further adoption of ether will require growth in its usage and in the Ethereumnetwork. Adoption of ether will also require an accommodating regulatory environment.

Digital assets representa new and rapidly evolving industry, and the value of the Shares depends on the acceptance of bitcoin and ether.

Thefirst digital asset, bitcoin, was launched in 2009. The Ethereum network launched in 2015 (though some ether was sold in a pre-mine in2014). Along with bitcoin, ether was one of the first cryptographic digital assets to gain global adoption and critical mass. In general,digital asset networks, including the Bitcoin network, Ethereum network and other cryptographic and algorithmic protocols governing theissuance of digital assets, represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult toevaluate. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:

TheTrust is not actively managed and will not have any formal strategy relating to the development of the Bitcoin network or Ethereum network.

Recent developmentsin the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participantsof the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.

Beginningin the fourth quarter of 2021, and continuing throughout 2022 and 2023, digital asset prices fell precipitously. This has led to volatilityand disruption in the digital asset markets and financial difficulties for several prominent industry participants, including digitalasset trading platforms, hedge funds and lending platforms. For example, in the first half of 2022, digital asset lenders Celsius NetworkLLC and Voyager Digital Ltd. and digital asset hedge fund Three Arrows Capital each declared bankruptcy, and the stablecoin TerraUSD collapsed.These events caused a loss of confidence in participants in the digital asset ecosystem, negative publicity surrounding digital assetsmore broadly, and market-wide declines in digital asset trading prices and liquidity.

Thereafter,in November 2022, FTX, the third largest digital asset trading platform by volume at the time, halted customer withdrawals amid rumorsof the company’s liquidity issues and likely insolvency. Shortly thereafter, FTX’s CEO resigned and FTX and numerous affiliatesof FTX filed for bankruptcy. The U.S. Department of Justice subsequently brought criminal charges, including charges of fraud, violationsof federal securities laws, money laundering, and campaign finance offenses, against FTX’s former CEO and others. Subsequently,in November 2023, FTX’s CEO was found guilty by a federal jury on all seven criminal counts against him, including fraud and conspiracyto commit wire fraud, conspiracy to commit securities fraud, conspiracy to commit commodities fraud, and conspiracy to commit money laundering.FTX is also under investigation by the SEC, the Justice Department, and the Commodity Futures Trading Commission, as well as by variousregulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experiencedextreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, theSEC, the CFTC, the White House and Congress. Following FTX’s bankruptcy filing, several other entities in the digital asset industryfiled for bankruptcy, such as BlockFi Inc. and Genesis Global Capital, LLC. Additionally, in November 2023, the U.S. Department of theTreasury settled charges against Binance for violations of U.S. anti-money laundering and sanctions laws. The SEC also brought chargesagainst Genesis Global Capital, LLC and Gemini Trust Company, LLC on January 12, 2023, for their alleged unregistered offer and sale ofsecurities to retail investors.

Thecollapse of TerraUSD and the bankruptcy filings of FTX, Celsius, Voyager and BlockFi have resulted in calls for heightened scrutiny andregulation of the digital asset industry, with a specific focus on digital asset trading platforms, and custodians. Federal and statelegislatures and regulatory agencies are expected to introduce and enact new laws and regulations to regulate digital asset intermediaries,such as digital asset trading platforms and custodians. The U.S. regulatory regime—namely the Federal Reserve Board, the U.S. Congressand certain U.S. agencies (e.g., the SEC, the CFTC, the Financial Crimes Enforcement Network (“FinCEN”), the Office of theComptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Bureau of Investigation) as well as the White House—haveissued reports and releases concerning digital assets, including ether and digital asset markets. However, the extent and content of anyforthcoming laws and regulations are not yet ascertainable with certainty and may not be ascertainable in the near future. It is possiblethat new laws and increased regulation and regulatory scrutiny may require the Trust to comply with certain regulatory regimes, whichcould result in new costs for the Trust. The Trust may have to devote increased time and attention to regulatory matters, which couldincrease costs to the Trust. New laws, regulations and regulatory actions could significantly restrict or eliminate the market for, oruses of, digital assets including ether, which could have a negative effect on the value of ether, which in turn would have a negativeeffect on the value of the Trust’s Shares.

Theseevents 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 tothe Sponsor and the Trust and their respective affiliates and/or the Trust’s third-party service providers, or to the digital assetindustry as a whole.

Continueddisruption and instability in the digital asset markets as these events develop, including further declines in the trading prices andliquidity of ether, could have a material adverse effect on the value of the Shares, and the Shares could lose all or substantially allof their value.

Digital assets mayhave concentrated ownership, and large sales or distributions by holders of such digital assets could have an adverse effect on the marketprice of such digital assets.

Thelargest bitcoin wallets and ether wallets are believed to hold, in aggregate, a significant percentage of the bitcoin and ether in circulation.Moreover, it is possible that other persons or entities control multiple wallets that collectively hold a significant number of bitcoinor ether, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the sameperson or entity. As a result of this concentration of ownership, large sales or distributions by such holders could have an adverse effecton the market price of bitcoin and ether.

Changes in thegovernance of a digital asset network may not receive sufficient support from users and miners or validators, which may negatively affectthat digital asset network’s ability to grow and respond to challenges.

The governance of decentralizednetworks, such as the Bitcoin network and Ethereum network, is by voluntary consensus and open competition. As a result, there may bea lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network’sutility and ability to grow and face challenges. The foregoing notwithstanding, the protocols for some decentralized networks, such asthe Bitcoin network and Ethereum network, are informally managed by a group of core developers that propose amendments to the relevantnetwork’s source code. Core developers’ roles evolve over time, largely based on self-determined participation. If a significantmajority of users and miners/validators adopt amendments to a decentralized network based on the proposals of such core developers, suchnetwork 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, ondigital asset networks.

The loss or destructionof a private key required to access a digital asset may be irreversible. The Bitcoin and Ether Custodian’s loss of access to a privatekey associated with the Trust’s bitcoin or ether could adversely affect an investment in the Shares.

Transfers of digital assets,including bitcoin and ether, among users are accomplished via digital asset transactions (i.e., sending bitcoin or ether from oneuser to another). The creation of a digital asset transaction requires the use of a unique numerical code known as a “private key.”In the absence of the correct private key corresponding to a holder’s particular digital asset, the digital asset is inaccessible.The custody of the Trust’s bitcoin and ether is handled by the Bitcoin and Ether Custodian, and the transfer of bitcoin and etherto and from Authorized Participants is directed by the Sponsor. The Sponsor has evaluated the procedures and internal controls of theTrust’s Bitcoin and Ether Custodian to safeguard the Trust’s bitcoin and ether holdings. If the Bitcoin and Ether Custodian’sinternal procedures and controls are inadequate to safeguard the Trust’s bitcoin and ether holdings, and the Trust’s privatekey(s) is(are) lost, destroyed or otherwise compromised and no backup of the private key(s) is(are) accessible, the Trust will be unableto access its bitcoin and ether, which could adversely affect an investment in the Shares. In addition, if the Trust’s private key(s)is(are) misappropriated and the Trust’s bitcoin and ether holdings are stolen, the Trust could lose some or all of its bitcoin andether holdings, which could adversely impact an investment in the Shares.

Competition fromcentral bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adverselyaffect the value of bitcoin, ether and other digital assets.

Central banks in various countrieshave introduced digital forms of legal tender (“CBDCs”). China’s CBDC project, known as Digital Currency ElectronicPayment, has reportedly been tested in a live pilot program conducted in multiple cities in China. Central banks representing at least130 countries have published retail or wholesale CBDC work ranging from research to pilot projects. Whether or not they incorporate blockchainor similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replace, bitcoin,ether and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental entities have also announcedcooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reducefriction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recentlyannounced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into theirpayments and settlement activities, which could compete with, or reduce the demand for, bitcoin and ether. As a result of any of the foregoingfactors, the value of bitcoin and ether could decrease, which could adversely affect an investment in the Trust.

The price of digitalassets, including bitcoin and ether, may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuersand their regulatory treatment.

Whilethe Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for digital asset markets. Stablecoinsare digital assets designed to have a stable value over time as compared to typically volatile digital assets, and are typically marketedas being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to bestable, their market value may fluctuate. This volatility has in the past apparently impacted the price of bitcoin and ether. Stablecoinsare a relatively new phenomenon and it is impossible to know all of the risks that they could pose to participants in the bitcoin andether markets. In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backingin a way that, when the stablecoin is used to pay for bitcoin or ether, could cause artificial rather than genuine demand for such digitalasset, artificially inflating the digital asset’s price, and also argue that those associated with certain stablecoins may be involvedin laundering money. On February 17, 2021, the New York Attorney General entered into an agreement with Tether’s operators, requiringthem to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statementsmade regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether’s operators in whichthey agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims that it maintained sufficient U.S.dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency”held by Tether were untrue. In addition, a large amount of Tether is issued as ERC-20 tokens on the Ethereum network. If Tether were tono longer be issued or operating on the Ethereum network, there would be no need to use ether to pay the gas fees needed to record ERC-20Tether transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could cause theprice of ether to decrease, affecting the value of the Shares.

USDCis 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 and ether markets. 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 US $1.00 for multiple days after Circle Internet Financial disclosed that US$3.3 billion of the USDC reserveswere held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Stablecoins are reliant on the U.S. banking systemand U.S. treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adverselyaffect the value of the Shares. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDCwere to no longer be issued or operating on the Ethereum network, there would be no need to use ether to pay the gas fees needed to recordERC-20 USDC transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could causethe price of ether to decrease, affecting the value of the Shares.

Giventhe foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact onthe broader digital asset market, including the market for bitcoin and ether. Because a large portion of the digital asset market stilldepends 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 todramatic 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 manipulativeactivity when unbacked stablecoins are used to pay for other digital assets (including bitcoin and ether), or regulatory concerns aboutstablecoin issuers or intermediaries, such as exchanges, that support stablecoins, could impact individuals’ willingness to tradeon trading venues that rely on stablecoins, reduce liquidity in the bitcoin and ether markets, and affect the value of bitcoin and ether,and in turn impact an investment in the Shares.

Anonymity andillicit financing risk.

Although transaction detailsof peer-to-peer bitcoin and ether transactions are recorded on the Bitcoin and Ethereum blockchains, a buyer or seller of bitcoin or etheron a peer-to-peer basis directly on the Bitcoin and Ethereum networks may never know to whom the public key belongs or the true identityof the party with whom it is transacting. 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 custodyof digital assets. The opaque nature of the market poses asset verification challenges for market participants, regulators and auditorsand gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump-and-dumpschemes. Digital assets have in the past been used to facilitate illicit activities. If bitcoin or ether was used to facilitate illicitactivities, businesses that facilitate transactions in bitcoin or ether could be at increased risk of potential criminal or civil liabilityor lawsuits, or of having banking or other services cut off, and bitcoin or ether could theoretically be removed from digital asset tradingplatforms. Any of the aforementioned occurrences could adversely affect the price of bitcoin or ether, the attractiveness of the Bitcoinnetwork or Ethereum network and an investment in the Shares. If the Trust or the Sponsor were to transact with a sanctioned entity, theTrust or the Sponsor would be at risk of potential criminal or civil lawsuits or liability.

The Trust takes measures withthe objective of reducing illicit financing risks in connection with the Trust’s activities. However, illicit financing risks arepresent in the digital asset markets, including markets for bitcoin and ether. There can be no assurance that the measures employed bythe Trust will prove successful in reducing illicit financing risks, and the Trust is subject to the complex illicit financing risks andvulnerabilities present in the digital asset markets. If such risks eventuate, the Trust, the Sponsor or their respective affiliates couldface civil or criminal liability, fines, penalties, or other punishments; be subject to investigation; have their assets frozen; loseaccess to banking services or services provided by other service providers; or suffer disruptions to their operations, any of which couldnegatively affect the Trust’s ability to operate or could cause losses in value of the Shares.

The Trust and the Sponsorhave adopted and implemented policies and procedures that are designed to comply with applicable anti-money laundering laws and sanctionslaws and regulations, including applicable know-your-customer (“KYC”) laws and regulations. The Sponsor and the Trust willonly interact with known third-party service providers with respect to whom the Sponsor or its affiliates have engaged in a thorough duediligence process and/or a thorough KYC process, such as the Authorized Participants, Digital Asset Trading Counterparties, Prime ExecutionAgent and Bitcoin and Ether Custodian. The Prime Execution Agent and Bitcoin and Ether Custodian must undergo counterparty due diligenceby the Sponsor. Each Authorized Participant must undergo onboarding by the Sponsor prior to placing creation or redemption orders withrespect to the Trust.

Furthermore, Authorized Participants,as broker-dealers, and the Prime Execution Agent and Bitcoin and Ether Custodian, as entities licensed to conduct virtual currency businessactivity by the New York Department of Financial Services and as limited-purpose trust companies subject to New York Banking Law, respectively,are “financial institutions” subject to the U.S. Bank Secrecy Act, as amended (“BSA”), and U.S. economic sanctionslaws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust thatthey have implemented compliance programs that are designed to ensure compliance with applicable sanctions and anti-money laundering laws.The Trust will not hold any bitcoin or ether except that which has been delivered by approved Digital Asset Trading Counterparties orby execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime ExecutionAgent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to complywith applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customersas well as ongoing transaction monitoring that is designed to identify and report suspicious activity conducted through customer accounts,including those opened by the Authorized Participants or their agents/partners for purposes of facilitating bitcoin and ether depositsto, and withdrawals from, the Trust’s Trading Balance, as required by law.

The Prime Execution Agentand Bitcoin and Ether Custodian have adopted and implemented anti-money laundering and sanctions compliance programs that provide additionalprotections to ensure that the Sponsor and the Trust do not transact with a sanctioned party. Notably, the Prime Execution Agent and Bitcoinand Ether Custodian perform screening using blockchain analytics to identify, detect, and mitigate the risk of transacting with a sanctionedor other unlawful actor. Pursuant to the Bitcoin and Ether Custodian’s and Prime Execution Agent’s blockchain analytics screeningprograms, any bitcoin or ether that is delivered to the Trust Bitcoin and Ether Account or the Trust’s Trading Balance will undergoscreening designed to assess whether the origins of that ether are illicit.

The Prime Execution Agreementprovides, among others, that if the Prime Execution Agent conducts blockchain analytics screening on a bitcoin or ether transaction depositedby an Authorized Participant and such screening results in the bitcoin or ether transaction being suspected or determined to be in violationof certain applicable sanctions laws, the Prime Execution Agent and its affiliates, including the Bitcoin and Ether Custodian, will (a)block or reject the deposit of such bitcoin or ether into the Trust’s Trading Account, where required by applicable sanctions laws,and (b) agree to promptly inform the Trust if any fund movement between an Authorized Participant’s account at the Prime ExecutionAgent and the Trust’s account(s) involves such bitcoin or ether, so long as permitted by applicable law.

However, there is no guaranteethat such procedures will always prove to be effective or that the Prime Execution Agent and its affiliates will always perform theirobligations. Such screening may also result in the ether identified by such screening being blocked or frozen by the Prime Execution Agent,and thus made unavailable to the Trust. Moreover, the Prime Execution Agreement and Bitcoin and Ether Custody Agreement require the Trustto attest that it has performed its own due diligence on the Digital Asset Trading Counterparties it has contracted with to source bitcoinand ether from and has confirmed that the Digital Asset Trading Counterparties have implemented policies, procedures and controls designedto comply with applicable anti-money laundering and applicable sanctions laws. Although the Sponsor arranges for such diligence to beperformed, including by the Trust’s service providers, there is no guarantee such diligence will prove effective in identifyingall possible sources of illicit financing risks. Digital Asset Trading Counterparties represent to the Sponsor that they conduct due diligenceon their own counterparties from whom they source the bitcoin and ether they deposit with the Trust, and that they have formed a reasonablebelief that such bitcoin and ether being transferred by the Digital Asset Trading Counterparty to the Trust was not derived from, or associatedwith, unlawful or criminal activity. However, there is the risk that Digital Asset Trading Counterparties may not conduct sufficient duediligence processes on the sources of their bitcoin and ether or that their representations to the Sponsor may turn out to be inaccurate,which could cause the Trust to suffer a loss. If the Authorized Participants or Digital Asset Trading Counterparties have inadequate policies,procedures and controls for complying with applicable anti-money laundering and applicable sanctions laws or the Trust’s proceduresor diligence proves to be ineffective, violations of such laws could result, which could result in regulatory liability for the Trustor the Sponsor under such laws, including governmental fines, penalties, and other punishments, as well as potential liability to or cessationof services by the Prime Execution Agent and its affiliates, including the Bitcoin and Ether Custodian, under the Prime Execution Agreementand Bitcoin and Ether Custody Agreement. Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust’sability to operate.

A temporary orpermanent “fork” of the Bitcoin blockchain or Ethereum blockchain could adversely affect an investment in the Trust.

The Bitcoin blockchain andEthereum blockchain both utilize open-source software. Any user can download the software, modify it and then propose that bitcoin usersand miners or ether users and validators adopt the modification. Bitcoin and Ethereum software updates are user driven, meaning they areadopted when users of the software choose to update their software, in contrast to centralized software solutions where a developmentcompany might “push” out mandatory software updates to the user community. When a change is proposed that modifies the operationof the Bitcoin or Ethereum networks and a substantial majority of bitcoin users and miners or ether users and validators consent to themodification, the change is implemented and the Bitcoin or Ethereum networks remain uninterrupted. However, if less than a substantialmajority of bitcoin users and miners or ether users and validators consent to the proposed modification, and the modification is nonethelessimplemented by some bitcoin users and miners or ether users and validators and the modification is not compatible or fully interoperablewith the software prior to its modification, the consequence would be what is known as a “fork” (i.e., “split”)of the Bitcoin or Ethereum networks (and the Bitcoin or Ethereum blockchains), with one version running the pre-modified software andthe other running the modified software. The effect of such a fork would be the existence of two (or more) versions of the Bitcoin networkor Ethereum network running in parallel (and the Bitcoin or Ethereum blockchains), but with each version’s bitcoin or ether tokenslacking interchangeability across the respective networks. A party owning bitcoin or ether at the time of the fork would hold equal amountsof both bitcoin or ether and the alternative forked digital asset (a “Forked Asset”).

Forks have occurred alreadyto both the Bitcoin network and Ethereum network. A Bitcoin network fork in August 2017 was related to a several-year dispute over howto increase the rate of transactions that the Bitcoin network can process. This fork resulted in the creation of the “Bitcoin Cash”network and a new Forked Asset (bitcoin cash). Bitcoin Cash is an example of an intentional fork to create a new digital asset networkwith differentiated features. To the extent such digital assets compete with bitcoin or ether, such competition could impact demand forbitcoin or ether and could adversely impact the value of the Shares.

Forks may also occur as anetwork community’s response to a significant security breach. For example, in July 2016, Ethereum “forked” into Ethereumand a new digital asset, Ethereum Classic, as a result of the Ethereum network community’s response to a significant security breach.In June 2016, an anonymous hacker exploited a smart contract running on the Ethereum network to syphon approximately $60 million of etherheld by The DAO, a distributed autonomous organization, into a segregated account. In response to the hack, most participants in the Ethereumcommunity elected to adopt a “fork” that effectively reversed the hack. However, a minority of users continued to developthe original blockchain, referred to as “Ethereum Classic,” with the digital asset on that blockchain now referred to as “ETC.”ETC now trades on several digital asset exchanges. A fork may also occur as a result of an unintentional or unanticipated software flawin the various versions of otherwise compatible software that users run. Such a fork could lead to users and miners or validators abandoningthe digital asset and associated network with the flawed software. It is possible, however, that a substantial number of users and minersor validators 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 Ethereum Classic.

The only digital assets thatwill be held by the Trust are bitcoin and ether. If either bitcoin or ether were to fork into two digital assets, the Trust may hold,in addition to its existing ether balance, a right to claim an equivalent amount of the new “forked” asset following the hardfork. However, the Pricing Benchmarks do not track forks involving bitcoin or ether. The Trust may receive or claim rights to any digitalassets created by a fork of the Bitcoin or Ethereum networks that are supported by the Custodian and for which the Trust’s tradingcounterparties support a secondary market. Furthermore, the Pricing Benchmarks do not track airdrops involving bitcoin or ether or theBitcoin or Ethereum networks. Accordingly, the Trust will disclaim, and the Sponsor will cause the Trust to irrevocably abandon, all rightsto digital assets airdropped to holders of bitcoin and ether. By investing in the Trust rather than directly in bitcoin and ether, youforgo potential economic benefits associated with airdrops. Before the Trust claims any digital asset resulting from a fork in the Bitcoinor Ethereum network or an airdrop (other than bitcoin or ether), the Trust would need to seek and obtain certain regulatory approvals,including an amendment to the Trust’s registration statement of which this Prospectus is a part, and approval of an applicationby the Exchange to amend its listing rules. If such approvals are not obtained, the Sponsor will cause the Trust to irrevocably abandonsuch digital asset.

In the event ofa hard fork of the Bitcoin network or Ethereum network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretionto determine which network should be considered the appropriate network for the Trust’s purposes, and in doing so may adverselyaffect the value of the Shares.

In the event of a hard forkof the Bitcoin network or Ethereum network, the Sponsor will use its discretion to determine, promptly and in good faith, which digitalasset network is generally accepted as the Bitcoin network or Ethereum network and should therefore be considered the appropriate networkfor the Trust’s purposes. The Sponsor will base its determination on a variety of then-relevant factors, including, but not limitedto, the Sponsor’s beliefs regarding expectations of the core developers of bitcoin or ether, users, services, businesses, minersor validators and other constituencies, as well as the actual continued acceptance of, and miner or validator and community engagementwith, the Bitcoin network or Ethereum network, along with market capitalization and trading activity. There is no guarantee that the Sponsorwill choose the digital asset that is ultimately the most valuable fork, and the Sponsor’s decision may adversely affect the valueof the Shares as a result. The Sponsor may also disagree with Shareholders, the Bitcoin and Ether Custodian, security vendors and theBenchmark Provider on what is generally accepted as bitcoin and ether and should therefore be considered “bitcoin” or “ether”for the Trust’s purposes, which may also adversely affect the value of the Shares as a result.

In the event ofa hard fork of the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian’s operations may be interrupted or subjectto additional security risks that could disrupt the Trust’s ability to process creations and redemptions of Shares or otherwisethreaten the security of the Trust’s bitcoin or ether holdings.

In the event of a hard forkof the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian may temporarily halt the ability of customers (including theTrust) to deposit, withdraw or transfer bitcoin or ether on the Bitcoin and Ether Custodian’s platform. Such a delay may be intendedto permit the Bitcoin and Ether Custodian to assess the resulting versions of the Bitcoin network or Ethereum network, to determine howbest to securely “split” the bitcoin or ether from the Forked Asset, and to prevent malicious users from conducting “replayattacks” (i.e., broadcasting transactions on both versions of the forked networks to put Bitcoin and Ether Custodian assetsat risk). As a result, the Trust is likely to suspend creations and redemptions during a period in which the Bitcoin and Ether Custodian’soperations are halted.

In addition, any losses experiencedby the Bitcoin and Ether Custodian due to a hard fork, including due to replay attacks or technological errors in assessing the fork,could have a materially adverse impact on an investment in the Shares.

Shareholders willnot receive the benefits of any forks or “airdrops.”

In addition to forks, a digitalasset, including bitcoin and ether, may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotorsof a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of thenew digital asset for free, based on the fact that they hold such other digital asset. Such airdrops are common on the Ethereum network,but have also occurred (and may continue to occur) on the Bitcoin network. Airdrops may be conducted by sending a token to the holdersof set amounts of bitcoin and ether or to particular public addresses on the Bitcoin and Ethereum networks. Airdrops may involve a userbeing entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. A userentitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholdersmay not receive the benefits of any forks; the Trust may not choose, or be able, to participate in an airdrop; and the timing of receivingany benefits from a fork, airdrop or similar event is uncertain.

A right to receive any suchbenefit of a fork or airdrop is referred to as an “Incidental Right” and any digital asset acquired through an IncidentalRight is known as an “IR Assets.” Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rightsand IR Assets. Such assets are not considered assets of the Trust at any point in time and will not be taken into account for purposesof determining the Trust’s NAV and the NAV per Share.

Pursuant to the Trust Agreement,to the extent that the Trust involuntarily receives such assets in a Trust wallet, it will, as soon as practicable and, if possible, immediately,distribute such assets to the Sponsor. Once such assets have been acquired, the Sponsor may take any lawful action necessary or desirablein connection with its acquisition thereof. In the event that the Sponsor decides to sell the Incidental Right(s) and/or IR Asset(s),it will seek to do so for cash. This may be a sale of the Incidental Right(s) and/or IR Asset(s) directly in exchange for cash, or inexchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash back to theTrust, which in turn would distribute the cash to the Depository Trust Company (“DTC”) to be distributed to Shareholders inproportion to the number of Shares owned.

Although the Sponsor intends,if possible, to arrange for the sale of any Incidental Right(s) and/or IR Asset(s) it receives from the Trust and subsequently contributesuch cash proceeds back to the Trust, it is under no obligation to do so. There are likely to be operational, tax, securities law, regulatory,legal and practical issues that significantly limit, or prevent entirely, the Sponsor’s ability to realize a benefit from any suchIncidental Right(s) and/or IR Asset(s). The Sponsor may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-casebasis in consultation with its legal advisers, tax consultants and custodian. In determining whether to attempt to acquire and/or retainany Incidental Right(s) and/or IR Asset(s), the Sponsor expects to take into consideration whatever factors it deems relevant in its discretion,including, without limitation:

The Sponsor is under no obligationto realize any economic benefit from any Incidental Right(s) and/or IR Asset(s) it receives from the Trust. The Sponsor may instead determine,in its sole discretion, to abandon such Incidental Rights or IR Assets permanently and irrevocably for no consideration. Before the Trustclaims any Incidental Right(s) and/or IR Asset(s) resulting from a fork or airdrop in the Bitcoin or Ethereum networks (other than bitcoinor ether), the Trust would need to seek and obtain certain regulatory approvals, including an amendment to the Trust’s registrationstatement of which this Prospectus is a part and approval of an application by the Exchange to amend its listing rules.

Due to the unregulatednature and lack of transparency surrounding the operations of digital asset trading platforms, which may experience fraud, manipulation,security failures or operational problems, as well as the wider bitcoin and ether market, the value of bitcoin and ether and, consequently,the value of the Shares may be adversely affected, causing losses to Shareholders.

Digital asset markets, includingspot markets for bitcoin and ether, are growing rapidly. The digital asset trading platforms through which bitcoin, ether and other digitalassets trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national andinternational and include a broadening range of digital assets and participants. Significant trading may occur on systems and platformswith minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or suspendwithdrawals entirely, rendering the exchange of digital assets for fiat currency difficult or impossible. Participation in spot marketsrequires users to take on credit risk by transferring digital assets from a personal account to a third party’s account.

Digital asset trading platformsdo not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms, such as nationalsecurities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate withoutextensive supervision by governmental authorities, and do not provide the public with significant information regarding their ownershipstructure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the UnitedStates may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital assettrading platforms may be out of compliance with existing regulations.

As a result, trading activityon or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securitiesand commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digitalasset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on theplatform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of digital assets such as bitcoin andether on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditionalexchanges. 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 trading platforms or may not exist at all. Consequently, the marketplacemay lose confidence in, or may experience problems relating to, these venues.

No digital asset trading platformon which bitcoin and ether trade is immune from these risks. The closure or temporary shutdown of digital asset trading platforms dueto fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the bitcoin and Ethereum networksand can slow down the mass adoption of bitcoin and ether. Further, digital asset trading platform failures or the failure of any othermajor component of the digital asset ecosystems can have an adverse effect on digital asset markets and the price of digital assets, includingbitcoin and ether, and could therefore have a negative impact on the performance of the Trust.

Negative perception, a lackof stability in the digital asset trading platforms, manipulation of digital asset trading platforms by customers and/or the closure ortemporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation mayreduce confidence in digital assets generally and result in greater volatility in the market price of digital assets and the Shares ofthe Trust. Furthermore, the closure or temporary shutdown of a digital asset trading platform may impact the Trust’s ability todetermine the value of its bitcoin and ether holdings or for Authorized Participants to effectively arbitrage Shares.

Digital assettrading platforms may be exposed to security breaches.

The nature of the assets heldat digital asset trading platforms makes them appealing targets for hackers and a number of digital asset trading platforms have beenvictims of cybercrimes. Over the past several years, some digital asset trading platforms have been closed due to security breaches. Inmany of these instances, the customers of such digital asset trading platforms were not compensated or made whole for the partial or completelosses of their account balances in such digital asset trading platforms. While, generally speaking, smaller digital asset trading platformsare less likely to have the infrastructure and capitalization that make larger digital asset trading platforms more stable, larger digitalasset trading platforms are more likely to be appealing targets for hackers and malware. For example, the collapse of Mt. Gox, which filedfor bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset trading platforms could besubject to abrupt failure with consequences both for users of digital asset trading platforms and for the digital asset industry as awhole. In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the value of onebitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in January 2015, Bitstampannounced 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 bitcoins worth around $78 million were stolen from Bitfinex, a large digital asset exchange. The valueof bitcoin and other digital assets immediately decreased by more than 10% following reports of the theft at Bitfinex. In July 2017, FinCENassessed a $110 million fine against BTC-e, a now-defunct digital asset exchange, for facilitating crimes such as drug sales and ransomwareattacks. In December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filedfor bankruptcy following a hack that resulted in a loss of 17% of Yapian’s assets. Following the hack, Youbit users were allowedto withdraw approximately 75% of the digital assets in their exchange accounts, with any potential further distributions to be made followingYapian’s pending bankruptcy proceedings. In January 2018, the Japanese digital asset trading platform, Coincheck was hacked, resultingin losses of approximately $535 million, and in February 2018, the Italian digital asset trading platform Bitgrail was hacked, resultingin approximately $170 million in losses. In May 2019, one of the world’s largest digital asset trading platforms, Binance, was hacked,resulting in losses of approximately $40 million.

Digital assettrading platforms may be exposed to fraud and market manipulation.

The blockchain infrastructurecould be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dumpand fraud across different systems, platforms or geographic locations. As a result of reduced oversight, these schemes may be more prevalentin digital asset markets than in the general market for financial products.

The SEC has identified possiblesources of fraud and manipulation in the digital asset market generally, including, among others, (1) “wash trading”; (2)persons with a dominant position in a digital asset manipulating such digital asset’s pricing; (3) hacking of the a digital assetnetwork and trading platforms; (4) malicious control of the digital asset network; (5) trading based on material, nonpublic information(for example, plans of market participants to significantly increase or decrease their holdings in a digital asset, new sources of demandfor the digital asset, etc.) or based on the dissemination of false and misleading information; (6) manipulative activity involving purported“stablecoins,” including Tether; and (7) fraud and manipulation at digital asset trading platforms.

Over the past several years,a number of digital asset trading platforms have been closed or faced issues due to fraud. In many of these instances, the customers ofsuch digital asset trading platforms were not compensated or made whole for the partial or complete losses of their account balances insuch digital asset trading platforms.

In 2019, there were reportsclaiming that 80.95% of bitcoin trading volume on digital asset trading platforms was false or noneconomic in nature, with specific focuson unregulated exchanges located outside of the United States. Such reports alleged that certain overseas exchanges have displayed suspicioustrading activity suggestive of a variety of manipulative or fraudulent practices. Other academics and market observers have put forthevidence to support claims that manipulative trading activity has occurred on certain digital asset exchanges. For example, in a 2017paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary Cyber Research Center at TelAviv University, a group of researchers used publicly available trading data, as well as leaked transaction data from a 2014 Mt. Gox securitybreach, to identify and analyze the impact of “suspicious trading activity” on Mt. Gox 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 Bitfinexwithout actually executing them, presumably in order to influence other investors into buying or selling by creating a false appearancethat greater demand existed in the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex’d) citedpublicly available trading data to support his or her claim that a trading bot nicknamed “Picasso” was pursuing a paint-the-tape-stylemanipulation strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts in order to create the appearance ofsubstantial trading activity and thereby influence the price of such assets.

In November 2022, FTX, oneof the largest digital asset trading platforms by volume at the time, halted customer withdrawals amid rumors of the company’s liquidityissues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX andmany of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similarproceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC andCFTC 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 million to $600 million of digital assets wereremoved from FTX. The full facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, orother improper behavior.

The potential consequencesof a digital asset trading platform’s failure or failure to prevent market manipulation could adversely affect the value of theShares. Any market abuse, and a loss of investor confidence in bitcoin and ether, may adversely impact pricing trends in bitcoin and ethermarkets broadly, as well as an investment in Shares of the Trust.

Digital assettrading platforms may be exposed to wash trading.

Digital asset trading platformson which bitcoin and ether trade may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for otherthan bona fide reasons, such as the desire to inflate reported trading volumes. Wash trading may be motivated by non-economic reasons,such as a desire for increased visibility on popular websites that monitor markets for digital assets so as to improve their attractivenessto investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seekthe most liquid and high-volume exchanges on which to list their coins. Results of wash trading may include unexpected obstacles to tradeand erroneous investment decisions based on false information.

In the United States, therehave been allegations of wash trading even on regulated trading venues. Any actual or perceived false trading in the digital asset tradingvenue market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of bitcoin and ether and/ornegatively affect the market perception of bitcoin and ether.

To the extent that wash tradingeither occurs or appears to occur on trading platforms on which bitcoin and ether trade, investors may develop negative perceptions aboutbitcoin, ether and the digital assets industry more broadly, which could adversely impact the price bitcoin and ether and, therefore,the price of Shares. Wash trading also may place more legitimate digital asset exchanges at a relative competitive disadvantage.

Digital assettrading platforms may be exposed to front-running.

Digital asset trading platformson which bitcoin and ether trade may be susceptible to “front-running,” which refers to the process when someone uses technologyor market advantage to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralizeddigital asset trading platforms. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage ofthe forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of afront runner is to buy a chunk of tokens at a low price and later sell them at a higher price while simultaneously exiting the position.Front-running happens via manipulation of gas prices or timestamps, also known as slow matching. To the extent that front-running occurs,it may result in investor frustrations and concerns as to the price integrity of digital asset exchanges and digital assets more generally.

Momentum pricing.

The market value of bitcoinand ether is not based on any kind of claim, nor is it backed by any physical asset. Instead, the market value depends on the expectationof being usable in future transactions and continued interest from investors. This strong correlation between an expectation and marketvalue is the basis for the current (and probable future) volatility of the market value of bitcoin and ether and may increase the likelihoodof momentum pricing.

Momentum pricing typicallyis associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciationin value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates pricesand leads to increased volatility. As a result, bitcoin and ether may be more likely to fluctuate in value due to changing investor confidencein future appreciation or depreciation in prices, which could adversely affect the price of bitcoin and ether and, in turn, an investmentin the Trust.

The value of bitcoin and etheras represented by the Pricing Benchmarks 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 of bitcoin and ether has previouslyresulted, and may continue to result, in speculation regarding future appreciation or depreciation in the value of bitcoin and ether,further contributing to volatility and potentially inflating prices at any given time. These dynamics may impact the value of an investmentin Trust.

Some market observers haveasserted that in time, the value of bitcoin and ether will fall to a fraction of its current value, or even to zero. Neither bitcoin norether has been in existence long enough for market participants to assess these predictions with any precision, but if these observersare even partially correct, an investment in the Shares may turn out to be substantially worthless.

Political or economiccrises may motivate large-scale sales of bitcoin and ether, which could result in a reduction in the price of bitcoin and ether and adverselyaffect an investment in the Shares.

As an alternative to fiatcurrencies that are backed by central governments, digital assets are subject to supply and demand forces based upon the desirabilityof an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will beimpacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of digitalassets, including bitcoin and ether, either globally or locally. Large-scale sales of bitcoin and ether would result in a reduction inthe price of bitcoin and ether and adversely affect an investment in the Shares.

Ownership of digitalassets, including bitcoin and ether, is pseudonymous, and the supply of accessible bitcoin and ether is unknown. Entities with substantialholdings in bitcoin and ether may engage in large-scale sales or distributions, either on nonmarket terms or in the ordinary course, whichcould result in a reduction in the price of bitcoin and ether and adversely affect an investment in the Shares.

There is no registry showingwhich individuals or entities own bitcoin or ether or the quantity of bitcoin or ether that is owned by any particular person or entity.It is possible, and in fact, reasonably likely, that a small group of early bitcoin and ether adopters hold a significant proportion ofthe bitcoin and ether that has been created to date. There are no regulations in place that would prevent a large holder of bitcoin andether from selling the bitcoin and ether it holds. To the extent such large holders of bitcoin and ether engage in large-scale sales ordistributions, either on nonmarket terms or in the ordinary course, it could result in a reduction in the price of bitcoin and ether andadversely affect an investment in the Shares. For example, in March 2018, it was reported that the trustee overseeing the bankruptcy ofthe Mt. Gox exchange had sold roughly $400 million worth of bitcoin and bitcoin cash belonging to the Mt. Gox bankruptcy estate. Whilethe trustee has publicly stated that the sale was conducted in a manner that would avoid affecting the market price, others have speculatedthat corresponding reductions in the trading price of bitcoin were a result of these large sales. A significant quantity of bitcoin andbitcoin cash remain in the Mt. Gox bankruptcy estate, and the process for selling the estate’s remaining bitcoin and bitcoin cashhas not yet been determined. Further large-scale sales or distributions, either by the Mt. Gox bankruptcy estate or other entities withsubstantial holdings, could result in selling pressure that may reduce the price of bitcoin and adversely affect an investment in theShares.

Irrevocable nature ofblockchain-recorded transactions.

Digital asset transactionsrecorded on the Bitcoin and Ethereum blockchains are not, from an administrative perspective, reversible without the consent and activeparticipation of the recipient of the transaction or, in theory, control or consent of a majorityof the nodes on the Bitcoin network or of a majority of the Ethereum network’s aggregate hash rate. Once a transaction hasbeen verified and recorded in a block that is added to the blockchain, an incorrect transfer of bitcoin and ether or a theft of bitcoinand ether generally will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer or theft. Itis possible that, through computer or human error, or through theft or criminal action, the Trust’s bitcoin and ether could be transferredfrom custody accounts in incorrect quantities or to unauthorized third parties. To the extent that the Trust is unable to seek a correctivetransaction with such third party or is incapable of identifying the third party that has received the Trust’s bitcoin and etherthrough error or theft, the Trust will be unable to revert or otherwise recover incorrectly transferred bitcoin and ether. To the extentthat the Trust is unable to seek redress for such error or theft, such loss could adversely affect the value of the Shares.

A disruption of theinternet may affect digital asset network operations, which may adversely affect the bitcoin and ether industries and an investment inthe Trust.

Digital asset networks, includingthe Bitcoin and Ethereum networks, rely on the internet. A significant disruption of internet connectivity could disrupt a digital assetnetwork’s functionality until such disruption is resolved. A disruption in the internet could adversely affect an investment inthe Trust or the ability of the Trust to operate. In particular, some variants of digital assets have experienced a number of denial-of-serviceattacks, which have led to temporary delays in block creation and digital asset transfers.

Digital assets are also susceptibleto border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercepttraffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one anotherto isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending andother security issues. If BGP hijacking occurs on the Bitcoin network or Ethereum network, participants may lose faith in the securityof bitcoin or ether, which could affect such digital asset's value and consequently the value of the Shares.

Any internet failures or internetconnectivity-related attacks that impact the ability to transfer bitcoin or ether could have a material adverse effect on the price ofsuch digital asset and the value of an investment in the Shares.

Potential amendmentsto a digital asset network’s protocols and software could, if accepted and authorized by the digital asset network community, adverselyaffect an investment in the Trust.

The Bitcoin and Ethereum networksuse cryptographic protocols to govern the interactions within the Bitcoin and Ethereum networks. A loose community known as the core developershas evolved to informally manage the source code for the protocol. Membership in the community of core developers evolves over time, largelybased on self-determined participation in the resource section dedicated to Bitcoin and Ethereum networks on Github.com. The core developerscan propose amendments to the Bitcoin and Ethereum networks’ source code that could alter the protocols and software of the Bitcoinand Ethereum networks and the properties of ether. These alterations would occur through software upgrades and could potentially includechanges to the irreversibility of transactions and limitations on the mining of new bitcoin or the issuance of new ether or changes tothe ether supply, which could undermine the appeal and market value of bitcoin and ether. Alternatively, software upgrades and other changesto the protocols of the Bitcoin and Ethereum networks could fail to work as intended or could introduce bugs, coding defects or flaws,or security risks, or they could otherwise adversely affect, the speed, security, usability, or value of the Bitcoin and Ethereum networksor bitcoin and ether. As a result, the Bitcoin and Ethereum networks could be subject to changes to their protocols and software in thefuture that may adversely affect an investment in the Trust.

Decentralized governanceof digital asset networks could have a negative impact on the performance of the Trust.

Governance of decentralizednetworks, such as the Bitcoin network and Ethereum networks, is achieved through voluntary consensus and open competition. In other words,the Bitcoin network and Ethereum network have no central decision-making body or clear manner in which participants can come to an agreementother than through overwhelming consensus. The lack of clarity on governance may adversely affect bitcoin and ether’s utility andability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-termproblems. For example, a seemingly simple technical issue once divided the Bitcoin and Ethereum networks community: namely, whether toincrease the block size of the blockchain or implement another change to increase the scalability of bitcoin and ether.

To the extent lack of clarityin corporate governance of the Bitcoin and Ethereum networks leads to ineffective decision-making that slows development and growth, thevalue of the Shares may be adversely affected.

Double-spending risks.

A malicious actor may attemptto double spend (i.e., spend the same units in more than one transaction) bitcoin or ether by altering the formation of the blockchain.In this type of attack, a miner or validator creates a valid new block containing a double-spend transaction and schedules the releaseof such attack block so that it is added to the blockchain before a target user’s legitimate transaction can be included in a block.All double-spend attacks require that the miner or validator sequence and execute the steps of its attack with sufficient speed and accuracy.Double-spend attacks require extensive coordination and are very expensive. Typically, transactions that allow for a zero-confirmationacceptance tend to be prone to these types of attacks. Accordingly, traders and merchants may execute instantaneous/zero-confirmationtransactions only if they are of sufficiently low value. Users and merchants can take additional precautions by adjusting their networksoftware programs to connect only to other well-connected participants in the Bitcoin and Ethereum networks and to disable incoming connections.

Flaws in source code.

In the past, flaws in thesource code for digital asset networks have been exposed and exploited, including flaws that disabled some functionality for users, exposedusers’ personal information and/or resulted in the theft of users’ digital assets. Discovery of flaws in or exploitationsof the source code that allow malicious actors to take or create money in contravention of known network rules have occurred. The cryptographyunderlying bitcoin and ether could prove to be flawed or ineffective, or developments in mathematics and/or technology, such as advancesin digital computing, algebraic geometry and quantum computing, could make cryptography ineffective. In any of these circumstances, amalicious actor may be able to steal bitcoin and ether held by others, which could adversely affect the demand for bitcoin and ether andtherefore adversely impact the price of bitcoin and ether and the value of the Shares. Even if a digital asset other than bitcoin or etherwas affected by similar circumstances, any reduction in confidence in the robustness of the source code or cryptography underlying digitalassets generally could negatively affect the demand for all digital assets, including bitcoin and ether, and therefore adversely affectthe value of the Shares.

Congestion or delayin a digital asset network may delay purchases or sales of bitcoin or ether by the Trust.

The size of each block ondigital asset networks, including the Bitcoin network and Ethereum network, is currently limited and the transaction rate is significantlybelow the level that centralized systems can provide. Increased transaction volume could result in delays in the recording of transactionsdue to congestion in digital asset networks. Moreover, unforeseen system failures, disruptions in operations, or poor connectivity mayalso result in delays in the recording of transactions on digital asset networks. Any delay in the Bitcoin and Ethereum networks couldaffect an Authorized Participant’s ability to buy or sell bitcoin and ether at an advantageous price resulting in decreased confidencein the respective network. Over the longer term, delays in confirming transactions could reduce the attractiveness to merchants and othercommercial parties as a means of payment. As a result, the Bitcoin and Ethereum networks and the value of the Trust would be adverselyaffected.

Any name changeand any associated rebranding initiative by the core developers of bitcoin or ether may not be favorably received by the digital assetcommunity, which could negatively impact the value of bitcoin or ether and the value of the Shares.

From time to time, digitalassets may undergo name changes and associated rebranding initiatives. For example, Bitcoin Cash may sometimes be referred to as BitcoinABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi’s Vision, and in the third quarterof 2018, the team behind ZEN rebranded and changed the name of ZenCash to “Horizen.” The Sponsor cannot predict the impactof any name change and any associated rebranding initiative on ether. After a name change and an associated rebranding initiative, a digitalasset may not be able to achieve or maintain brand-name recognition or status that is comparable to the recognition or status previouslyenjoyed by such digital asset. The failure of any name change and any associated rebranding initiative by a digital asset may result insuch 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 ether and the value of the Shares.

Risks Associated with Bitcoin and the Bitcoinnetwork

The value of the Sharesis subject to a number of factors relating to the fundamental investment characteristics of bitcoin and the capabilities and developmentof the Bitcoin blockchain.

Bitcoinhas only been in existence since 2009 and the medium-to-long term value of the Shares is subject to a number of factors relating to thecapabilities and development of the Bitcoin blockchain, such as the recentness of its development, its dependence on the internet andother technologies, its dependence on the role played by users, developers and miners 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 Shares:

The Bitcoin networkfaces significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.

Asof October 2024, the Bitcoin network handled approximately seven transactions per second. In an effort to increase the volume of transactionsthat can be processed on a given digital asset network, many digital assets are being upgraded with various features to increase the speedand throughput of digital asset transactions. For example, in August 2017, the Bitcoin network was upgraded with a technical feature knownas “Segregated Witness” that potentially doubles the transactions per second that can be handled on-chain. More importantly,Segregated Witness also enables so-called second layer solutions, such as the Lightning Network, or payment channels that greatly increasetransaction throughput (i.e., millions of transactions per second). Wallets and “intermediaries,” or connecting nodes thatfacilitate payment channels, that support Segregated Witness or Lightning Network-like technologies have not yet seen wide-scale use.Additionally, questions remain regarding Lightning Network services, such as its cost and who will serve as intermediaries.

In2021, the Bitcoin protocol implemented the Taproot upgrade to add enhanced support for complex transactions on the network such as multi-signaturetransactions, which require two or more parties to execute a transaction on the Bitcoin network. Prior to the upgrade, multi-signaturetransactions were historically slow, expensive, and easily identifiable. Taproot is intended to reduce the amount of data written to ablock and makes multi-signature transactions indistinguishable from regular transactions, adding an enhanced layer of privacy. However,Taproot also relaxed certain types of data requirements enforced by the Bitcoin blockchain to facilitate these changes which led to thelaunch of the “ordinal protocol.” The ordinal protocol takes advantage of Taproot’s relaxed data requirements to allowusers to add graphic images and other data files to bitcoin transactions (“Ordinals”). By the end of 2023, nearly 53 millionOrdinals had been inscribed to the Bitcoin blockchain.

Ascorresponding increases in throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increaseconsiderably. For example, the Bitcoin network has been, at times, at capacity, which has led to increased transaction fees. Since January1, 2019, bitcoin transaction fees have increased from $0.18 per bitcoin transaction, on average, to a high of $60.95 per transaction,on average, on April 20, 2021. As of December 31, 2022, bitcoin transaction fees were $1.17 per transaction, on average. Increasedfees and decreased settlement speeds could preclude certain uses for bitcoin (e.g., micropayments), and could reduce demand for, and theprice of, bitcoin, which could adversely impact the value of the Shares. In May 2023, events related to the adoption of Ordinals causedtransaction fees to temporarily spike above $30 per transaction. As of January 1, 2025, bitcoin transaction fees were averaging $____per transaction.

Thereis no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of transactions in bitcoinwill be effective, or how long these mechanisms will take to become effective, which could adversely impact an investment in the Shares.

Operational costmay exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoinnetwork.

TheBitcoin network is designed to periodically reduce the fixed award given to miners for solving new blocks (the “block reward”),most recently in April 2024, when the block reward reduced from 6.25 to 3.125 bitcoin. It is estimated that it will halve again during2028. As the block reward continues to decrease over time, the mining incentive structure may transition to a higher reliance on transactionconfirmation fees in order to incentivize miners to continue to dedicate processing power to the blockchain. If transaction confirmationfees become too high, the marketplace may be reluctant to use bitcoin. Increased transaction fees may motivate market participants, suchas merchants or commercial institutions, to switch from bitcoin to another digital asset or back to fiat currency as their preferred mediumof exchange. Decreased demand for bitcoin may adversely affect its price, which may adversely affect an investment in the Trust.

Ultimately,if the awards of new bitcoin for solving blocks declines and transaction fees for recording transactions are not sufficiently high toincentivize miners, miners may operate at a loss or cease operations. If the award does not exceed the costs of mining in the long-term,miners may have to cease operations entirely. If miners cease their operations, this could have a negative impact on the Bitcoin networkand could adversely affect the value of the bitcoin held by the Trust.

Minersceasing operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the confirmationprocess for transactions (i.e., temporarily decreasing the speed at which blocks are added to the blockchain until the next scheduledadjustment in difficulty for block solutions) and make the Bitcoin network more vulnerable to a malicious actor or botnet obtaining sufficientcontrol to manipulate the blockchain and hinder transactions. Any reduction in confidence in the confirmation process or processing powerof the Bitcoin network may adversely affect the value of the Shares.

To the extentthat any miners exclude some or all transactions, significant increases in fees and widespread delays in the recording of transactionscould result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in Shares.

Tothe extent that any miners solve blocks that exclude some or all transactions that have been transmitted to the Bitcoin network, suchtransactions will not be recorded on the blockchain until another miner solves a block that incorporates those transactions. Some in thebitcoin community have suspected that certain technologies (for example, before segregated witness was activated, ASICBoost) enhance speedand reduce electricity use of mining while reducing the number of transactions that are included in mined blocks on the Bitcoin network.To the extent that more blocks are mined with fewer transactions, transactions will settle more slowly, and fees will increase. This couldresult in a loss of confidence in the Bitcoin network, which could adversely impact an investment in the Shares.

Miners could actin collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network.

Bitcoinminers collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactionsto new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized toconfirm valid transactions as a means of collecting fees. To the extent that any miners cease to record transactions in solved blocks,such transactions will not be recorded on the Bitcoin Blockchain until a block is solved by a miner who does not require the payment oftransaction fees. Miners have historically accepted relatively low transaction confirmation fees because miners have a very low marginalcost of validating unconfirmed transactions. If miners collude in an anticompetitive manner to reject low transaction fees, then bitcoinusers could be forced to pay higher fees, thus reducing the attractiveness of the Bitcoin network, or to wait longer times for their transactionsto be validated by a miner who does not require the payment of a transaction fee. Bitcoin mining occurs globally and it may be difficultfor authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact an investmentin the Trust or the ability of the Trust to operate.

As technologyadvances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A declinein the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust.

Minersmay be unable to acquire the proper mining equipment or suitable amounts of equipment necessary to continue their operations or developand launch their operations. In addition, because successful mining of a digital asset that uses “proof of work” validationrequires maintaining or exceeding a certain level of computing power relative to other validators, miners will need to upgrade their mininghardware periodically to keep up with their competition. The development of supercomputers with disproportionate computing power may threatenthe integrity of the bitcoin market by concentrating mining power, which would make it unprofitable for other miners to mine. The expenseof purchasing or upgrading new equipment may be substantial and diminish returns to miners dramatically. A decline in miners may resultin a decrease in the value of bitcoin and the value of the Trust.

If profit marginsof bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction inthe price of bitcoin that could adversely affect an investment in the Trust.

Bitcoinnetwork mining operations have rapidly evolved over the past several years from individual users mining with computer processors, graphicsprocessing units and first-generation ASIC (application-specific integrated circuit) machines. New processing power is predominantly addedto the Bitcoin network currently by “professionalized” mining operations. Such operations may use proprietary hardware orsophisticated ASIC machines acquired from ASIC manufacturers. Significant capital is necessary for mining operations to acquire this hardware,lease operating space (often in data centers or warehousing facilities), afford electricity costs and employ technicians to operate themining farms. As a result, professionalized mining operations are of a greater scale than prior Bitcoin network validators and have moredefined, regular expenses and liabilities. In past years, individual miners are believed to have been more likely to hold newly minedbitcoin for extended periods.

Aprofessional mining operation operating at a low profit margin may be more likely to sell a higher percentage of its newly mined bitcoinrapidly, and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higherpercentage of the new bitcoin mined each day will be sold into the bitcoin market more rapidly, thereby reducing bitcoin prices. The networkeffect of reduced profit margins resulting in greater sales of newly mined bitcoin could result in a reduction in the price of bitcointhat could adversely affect an investment in the Trust.

New competingdigital assets may pose a challenge to bitcoin’s current market dominance, resulting in a reduction in demand for bitcoin, whichcould have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust.

TheBitcoin network and bitcoin, as an asset, hold a “first-to-market” advantage over other digital assets. This first-to-marketadvantage has resulted in the Bitcoin network having the broadest adoption and the estimated value of existing bitcoin is greater thanthe aggregate value of any digital asset. The Bitcoin network enjoys the largest user base and has more mining power in use to securethe Bitcoin blockchain than any other digital asset network. Having a large mining network provides users greater confidence in the securityand long-term stability of the Bitcoin network. This greater security may create a snowball effect that inures to the benefit of the Bitcoinnetwork – namely, the advantage of more users and miners makes a digital asset more secure, which potentially makes it more attractiveto new users and miners, resulting in a network effect that potentially strengthens the first-to-market advantage. However, despite themarked first-mover advantage of the Bitcoin network over other digital assets, it is possible that real or perceived shortcomings in theBitcoin network, or technological, regulatory or other developments, could result in a decline in popularity and acceptance of bitcoinand the Bitcoin network, and other digital assets and digital asset networks could become more widely accepted and used than the Bitcoinnetwork. In addition, central bank digital currencies may be attractive to some users due to lesser perceived volatility, greater trustworthinessand/or any applicable federal insurance.

Forexample, the Bitcoin network relies on a distributed group of core developers to propose upgrades to the Bitcoin software and protocols.Some proposed upgrades that might result in a “hard fork” of the Bitcoin network require overwhelming consensus and upgradeacceptance in order to deploy successfully. As a result, changes in the Bitcoin software have been conservative or slow to gain traction.For example, a delay in the integration of protocol upgrades that might facilitate the use of more complex “smart contract”programming language in Bitcoin led to certain developers launching the newer Ethereum virtual machine network in 2015. Similarly, a delayin the integration and inability to reach consensus on scaling solutions led to several hard forks of digital asset networks that hadgreater block sizes on their blockchains (e.g., Bitcoin Cash in 2017). While projects such as Rootstock and Blockstream have sought toaugment the slow pace of core software upgrades with “second-layer” or “side-chain” solutions for the Bitcoinnetwork, digital asset networks with features that are differentiated from Bitcoin may attract developers, investors and users, whichmay have a negative impact on an investment in the Shares.

The scheduledcreation of newly mined bitcoin and their subsequent sale may cause the price of bitcoin to decline, which could negatively affect aninvestment in the Trust.

Newly created bitcoin (“newlymined bitcoin”) are generated through a process referred to as “mining.” As of the date of this prospectus, the Bitcoinnetwork creates 3.125 bitcoin with each block added to the Bitcoin blockchain; these newly mined bitcoin are awarded to the bitcoin minerthat has added the block to the Bitcoin blockchain, which occurs on average approximately every 10 minutes. When the recipient makes newlymined bitcoin available for sale, there can be downward pressure on the price of bitcoin as the new supply is introduced into the Bitcoinmarket. A bitcoin mining operation may be more likely to sell a higher percentage of its newly created bitcoin, and more rapidly so, ifit is operating at a low profit margin, thus reducing the price of bitcoin. Lower bitcoin prices may result in further tightening of profitmargins for miners and decreasing profitability, thereby potentially causing even further selling pressure. Diminishing profit marginsand increasing sales of newly mined bitcoin could result in a reduction in the price of bitcoin, which could adversely impact an investmentin the Shares.

In addition, bitcoin miningis highly sensitive to energy prices and bitcoin market prices. To mine bitcoin, a bitcoin miner acquires specialized computers that consumesignificant amounts of energy. As energy prices fluctuate, the marginal cost of bitcoin mining increases and decreases. Conversely, theprice of bitcoin and amount of “hashrate” being expended by other bitcoin miners will impact the profitability and likelihoodof solving a block and receiving newly mined bitcoin. If the marginal cost of bitcoin mining exceeds the expected profit, miners may ceaseto expend energy to mine bitcoin. If a material number of miners turn off their mining hardware, the speed of transaction processing onthe Bitcoin network may experience a temporary slowdown and the overall security of the Bitcoin network against a 51% attack (as describedbelow) may be reduced.

Environmentalconcerns could slow or curtail the supply of bitcoin or the acceptance of bitcoin in payment.

Mining for the Bitcoin networkis an energy-consuming process involving the use of many thousands of high-powered purpose-built computers. Estimates and data vary widely,but several surveys have compared the bitcoin mining community’s energy consumption to that of several small countries. In addition,bitcoin mining also generates electronic waste, as existing computer chips become obsolete ever more quickly and are discarded as theyare replaced with faster models. Increased awareness of these issues has led some companies, notably Tesla and Greenpeace, to refuse acceptanceof bitcoin in payment. Certain localities, such as China, have recently banned mining altogether, while others seek to halt mining temporarilyuntil environmental impact studies can be conducted. These concerns could result in increased mining bans, as well as a slowing or decreasein bitcoin payment acceptance, affecting both the supply of, and demand for, bitcoin.

The Bitcoin networkrequires significant electricity to mine and it is possible that certain jurisdictions will implement regulations regarding the energyconsumption of the Bitcoin network, which could result in a significant reduction in mining activity and adversely affect the securityof the Bitcoin network.

In addition to financial regulation,concerns have been raised about the electricity required to secure and maintain the Bitcoin network. The “proof of work” validationmechanism used to verify transactions on the Bitcoin network necessitates that bitcoin miners maintain high levels of computing power,which can require extremely high energy usage. Although measuring the electricity consumed by this process is difficult because theseoperations 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 Bitcoin network’stotal energy consumption, including the costs of cooling the machines that perform these calculations. The availability and cost of electricitywill restrict the geographic locations of mining activities. High costs of electricity may incentivize miners to redirect their resourcesto other validation protocols, such as proof-of-stake blockchains, or abandon their validation activities entirely. A significant decreasein the computational resources dedicated to the Bitcoin network’s validation protocol could reduce the security of the network whichmay erode bitcoin’s viability as a store of value or means of exchange.

Due to concerns around energyconsumption and associated environmental concerns, particularly as such concerns relate to public utilities companies, various countries,states and cities have implemented, or are considering implementing, moratoriums on Bitcoin mining in their jurisdictions. Such moratoriumswould impede bitcoin mining and/or bitcoin use more broadly. For example, in November 2022, New York imposed a two-year moratorium onnew proof-of-work mining permits at fossil fuel plants in the state and, on May 26, 2021, Iran placed a temporary ban on bitcoin miningin an attempt to decrease energy usage and help alleviate blackouts.

Depending on how futures regulationsare formulated and applied, such policies could have the potential to negatively affect the price of bitcoin, and, in turn, the valueof the Shares. Increased regulation and the corresponding compliance cost of these regulations could additionally result in higher barriersto entry for bitcoin miners, which could increase the concentration of the hash rate, potentially having a negative impact on the priceof bitcoin.

The open-source structureof the Bitcoin network protocol means that the core developers and other contributors are generally not directly compensated for theircontributions in maintaining and developing the Bitcoin network protocol. A failure to properly monitor and upgrade the Bitcoin networkprotocol could damage the Bitcoin network and an investment in the Trust.

The Bitcoin network operatesbased on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource sectiondedicated to development of the Bitcoin network. As the Bitcoin network protocol is not sold or made available subject to licensing orsubscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated formaintaining and updating the Bitcoin network protocol. Consequently, there is a lack of financial incentive for developers to maintainor develop the Bitcoin network and the core developers may lack the resources to adequately address emerging issues with the Bitcoin networkprotocol. Although the Bitcoin network is currently supported by the core developers, there can be no guarantee that such support willcontinue or be sufficient in the future. Alternatively, entities whose interests are at odds with other participants in the Bitcoin networkmay seek to obtain control over the Bitcoin network by influencing core developers. For example, malicious actors could attempt to bribea core developer or group of core developers to propose certain changes to the network core developers. To the extent that material issuesarise with the Bitcoin network protocol and the core developers and open-source contributors are unable to address the issues adequatelyor in a timely manner, the Bitcoin network and an investment in the Trust may be adversely affected.

Decentralized governanceof the Bitcoin network could have a negative impact on the performance of the Trust.

Governance of decentralizednetworks, such as the Bitcoin network, is achieved through voluntary consensus and open competition. In other words, the Bitcoin networkhas no central decision-making body or clear manner in which participants can come to an agreement other than through overwhelming consensus.The lack of clarity on governance may adversely affect bitcoin’s utility and ability to grow and face challenges, both of whichmay require solutions and directed effort to overcome problems, especially long-term problems. For example, a seemingly simple technicalissue once divided the Bitcoin network community: namely, whether to increase the block size of the blockchain or implement another changeto increase the scalability of bitcoin.

To the extent lack of clarityin corporate governance of the Bitcoin network leads to ineffective decision- making that slows development and growth, the value of theShares may be adversely affected.

Mathematical or technologicaladvances could undermine the Bitcoin network’s consensus mechanism.

The Bitcoin network is premisedon multiple persons competing to solve cryptographic puzzles quickly. It is possible that mathematical or technological advances, suchas the development of quantum computers with significantly more power than computers presently available, could undermine or vitiate thecryptographic consensus mechanism underpinning the Bitcoin blockchain.

Large-Scale Sales orDistributions.

Some entities hold large amountsof bitcoin relative to other market participants, and to the extent such entities engage in large-scale hedging, sales or distributionson non-market terms, or sales in the ordinary course, it could result in a reduction in the price of bitcoin and adversely affect thevalue of the Shares. Additionally, political or economic crises may motivate large-scale acquisitions or sales of such digital assets,including bitcoin, either globally or locally. Such large-scale sales or distributions could result in selling pressure that may reducethe price of bitcoin and adversely affect an investment in the Shares.

As of the date of this Prospectus,the largest 100 bitcoin wallets held a substantial amount of the outstanding supply of bitcoin and it is possible that some of these walletsare controlled by the same person or entity. Moreover, it is possible that other persons or entities control multiple wallets that collectivelyhold a significant number of bitcoin, even if each wallet individually only holds a small amount. As a result of this concentration ofownership, large sales by such holders could have an adverse effect on the market price of bitcoin.

Congestion or delayin the Bitcoin network may delay purchases or sales of bitcoin by the Trust.

The size of each block onthe Bitcoin blockchain is currently limited and the transaction rate is significantly below the level that centralized systems can provide.Increased transaction volume could result in delays in the recording of transactions due to congestion in the Bitcoin network. Moreover,unforeseen system failures, disruptions in operations, or poor connectivity may also result in delays in the recording of transactionson the Bitcoin network. Any delay in the Bitcoin network could affect the Authorized Participant’s ability to buy or sell bitcoinat an advantageous price resulting in decreased confidence in the Bitcoin network. Over the longer term, delays in confirming transactionscould reduce the attractiveness to merchants and other commercial parties as a means of payment. As a result, the Bitcoin network andthe value of the Trust would be adversely affected.

Risks Associated with Ether and the Ethereumnetwork

The value of the Sharesis subject to a number of factors relating to the fundamental investment characteristics of ether and the capabilities and developmentof the Ethereum blockchain.

Ether has only been in existencesince 2015 and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and developmentof the Ethereum blockchain, such as the recentness of its development, its dependence on the internet and other technologies, its dependenceon the role played by users, developers and validators and the potential for malicious activity. For example, the realization of one ormore of the following risks could materially adversely affect the value of the Shares:

The Ethereum networkfaces significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.

Many digital asset networks,including the Ethereum network, face significant scaling challenges due to the fact that public blockchains generally face a tradeoffbetween security and scalability. One means through which public blockchains achieve security is decentralization, meaning that no intermediaryis responsible for securing and maintaining these systems. For example, a greater degree of decentralization generally means a given digitalasset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a givendigital asset network is responsible for securing the system by processing every transaction and every single full node is responsiblefor maintaining a copy of the entire state of the network. As a result, a digital asset network may be limited in the number of transactionsit can process by the fact that all validators participate in validating in each block and the capabilities of each single fully participatingnode.

In the second half of 2020,the Ethereum network began the first of several stages of an upgrade culminating in the Merge. The Merge amended the Ethereum network’sconsensus mechanism to a process known as proof-of-stake, and was intended to address the perceived shortcomings of the proof-of-workconsensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known under proof-of-workas “miners”) who did not win the race, under proof of work, to be the first in time to solve the cryptographic puzzle thatwould allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was only givento the first validator to successfully solve the puzzle and hash a given block, and not to others). Instead, under proof-of-stake, a singlevalidator is randomly selected to solve the cryptographic puzzle needed to validate a block, which it proposes to a committee of othervalidators, who vote for whether to include the block (or not), which reduces the computational work performed – and energy expended– to validate each block compared to proof-of-work. See “Overview of the Ethereum Industry—Creation of New Ether”and “—Modifications to the Ether Protocol” for additional information.

Following the Merge, coredevelopment of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughputand scalability and also improve existing or next generation uses. Future upgrades to the Ethereum protocol and Ethereum blockchain toaddress scaling issues – such as network congestion, slow throughput and periods of high transaction fees owing to spikes in networkdemand – have been discussed by network participants, such as sharding. The purpose of sharding is to increase scalability of theEthereum blockchain by splitting the blockchain into subsections, called shards, and dividing validation responsibility so that a definedsubset of validators would be responsible for each shard, rather than all validators being responsible for the entire blockchain, allowingfor parallel processing and validation of transactions. However, there appears to be uncertainty and a lack of existing widespread consensusamong network participants about how to solve the scaling challenges faced by the Ethereum network.

The rapid development of othercompeting scalability solutions, such as those which would rely on handling the bulk of computational work relating to transactions orsmart contracts and applications built on the Ethereum network (consistent with common usage, all such applications are referred to as“decentralized applications” or “dApps”, whether or not decentralized in fact) outside of the main Ethereum networkand Ethereum blockchain, has caused alternatives to sharding to emerge. “Layer 2” is a collective term for solutions whichare designed to help increase throughput and reduce transaction fees by handling or validating transactions off the main Ethereum network(known as “Layer 1”) and then attempting to take advantage of the perceived security and integrity advantages of the Layer1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details ofhow this is done vary significantly between different Layer 2 technologies and implementations. For example, “rollups” performtransaction execution outside the Layer 1 Ethereum network and then post the data, typically in batches, back to the Layer 1 Ethereumnetwork where consensus is reached. “Zero knowledge rollups” are generally designed to run the computation needed to validatethe transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactionsthemselves) that is recorded on the Layer 1 Ethereum network. By contrast, “optimistic rollups” assume transactions are validby default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling solutions include,among others, “state channels”, which are designed to allow participants to run a large number of transactions on the Layer2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum network (the transaction opening the state channel,and the transaction closing the channel), “side chains”, in which an entire Layer 2 blockchain network with similar capabilitiesto the existing Layer 1 Ethereum network runs in parallel with the existing Layer 1 Ethereum network and allows smart contracts and dAppsto run on the Layer 2 side chain without burdening the main Layer 1 network, and others. To date, the Ethereum network community has notcoalesced overwhelmingly around any particular Layer 2 solution, though this could change.

There is no guarantee thatany of the mechanisms in place or being explored for increasing the speed and throughput of settlement of Ethereum network transactionswill be effective, or how long these mechanisms will take to become effective, which could cause the Ethereum network to not adequatelyresolve scaling challenges and adversely impact the adoption of ether and the Ethereum network and the value of the Shares. There is noguarantee that any potential scaling solution, whether a change to the Layer 1 Ethereum network like sharding or the introduction of aLayer 2 solution like rollups, state channels or side chains, will achieve widespread adoption. It is possible that proposed changes tothe Layer 1 Ethereum network could divide the community, potentially even causing a hard fork, or that the decentralized governance ofthe Ethereum network causes network participants to fail to coalesce overwhelmingly around any particular solution, causing the Ethereumnetwork to suffer reduced adoption or causing nodes, users or validators to migrate to other blockchain networks. It is also possiblethat scaling solutions could fail to work as intended or could introduce bugs, coding defects or flaws, security risks, or other problemsthat could cause them to suffer operational disruptions. For example, in April 2024, Starknet, a Layer 2 built on the Layer 1 Ethereumnetwork, suffered an outage reportedly caused by a rounding error bug that halted production of new blocks on Starknet’s Layer 2blockchain network. Similar outages, bugs, defects, or other problems could affect Layer 2s in the future. Similarly, in multiple instancesthroughout 2022 and 2023, the Arbitrum Layer 2 network experienced outages due to failures in its primary node responsible for submittingtransactions to the Layer 1 Ethereum network. Although the Layer 1 Ethereum network is believed not to have been affected by those outages,problems on Layer 2s in the future could conceivably affect or cause issues for the Layer 1 Ethereum network. Alternatively, if a widelyused Layer 2 network were to fail, it could reduce demand for ether because it would eliminate a source of demand for using ether to recordtransactions from the Layer 2 onto the Layer 1 Ethereum network. Any of the foregoing could adversely affect the price of ether or thevalue of the Shares.

As of ________, 2025, theEthereum network handled approximately [13] transactions per second (according to Dune analytics). In an effort to increase the volumeof transactions that can be processed on a given digital asset network, many digital assets are being upgraded with various features toincrease the speed and throughput of digital asset transactions. As corresponding increases in throughput lag behind growth in the useof digital asset networks, average fees and settlement times may increase considerably. For example, the Ethereum network has been, attimes, at capacity, which has led to increased transaction fees. In December 2017, the popularity of the blockchain-based game Cryptokittiesled to significant network congestion on the Ethereum network. The game, which allows players to trade and create virtual kitties, representedby non-fungible tokens (“NFTs”), was reported by some sources to have accounted for more than 10% of the entire Ethereum networktraffic at the time causing increases in transaction fees and delays in transaction processing times, and driving Ethereum network trafficto a reported then-all time high. Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction feesper ether transaction, to a high of up to approximately $200.06 average daily transaction fees per transaction on May 1, 2022. As of October__, 2024, ether transaction fees stood at $[1.72] per transaction, on average. Increased fees and decreased settlement speeds could precludecertain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether, which could adversely impactthe value of the Shares.

If the digital assetaward or transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or ifcertain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding validating power ordemand high transaction fees, which could negatively impact the value of ether and the value of the Shares.

In 2021, the Ethereum networkimplemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate transaction fees paid to ether validators in sucha manner that reduced the total net issuance of ether fees paid to validators. If the digital asset awards for validating blocks or thetransaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or if certainjurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating power to validateblocks and confirmations of transactions on the Ethereum blockchain could be slowed. For example, the realization of one or more of thefollowing risks could materially adversely affect the value of the Shares:

If a malicious actoror botnet obtains control of more than 33% of the validating stake on the Ethereum network, or otherwise obtains control over the Ethereumnetwork through its influence over core developers or otherwise, such actor or botnet could delay or manipulate the Ethereum blockchainin the short term, which could adversely affect the value of the Shares or the ability of the Trust to operate.

Following the Merge and theswitch to proof-of-stake validation, the Ethereum network is currently vulnerable to several types of attacks, including:

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(over 50%) of the validating power on the Ethereum network, it may be able to alter the Ethereum blockchain on which transactions in etherrely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The maliciousactor or botnet could also control, exclude or modify the ordering of transactions. Although the malicious actor or botnet would not beable to generate new tokens or transactions using such control, it could “double-spend” its own tokens (i.e., spend the sametokens in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control(over 50%). To the extent that such malicious actor or botnet did not yield its control of the validating power on the Ethereum networkor the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum blockchain maynot be possible. If the malicious actor were to gain control of more than 33% of the total staked ether on the Ethereum network, theycould temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain, but it is not believed that theycould in double-spending or fraudulent block propagation. Even without 33% control, a malicious actor or botnet could create a flood oftransactions in order to slow down the Ethereum network (similar to a denial-of-service attack).

For example, in August 2020,the Ethereum Classic Network was the target of two double-spend attacks by an unknown actor or actors that gained more than 50% of theprocessing power of the Ethereum Classic Network. The attacks resulted in reorganizations of the Ethereum Classic Blockchain that allowedthe attacker or attackers to reverse previously recorded transactions in excess of $5.0 million and $1.0 million.

In addition, in May 2019,the Bitcoin Cash network experienced a 51% attack when two large mining pools reversed a series of transactions in order to stop an unknownminer from taking advantage of a flaw in a recent Bitcoin Cash protocol upgrade. Although this particular attack was arguably benevolent,the fact that such coordinated activity was able to occur may negatively impact perceptions of the Bitcoin Cash network. Although thetwo attacks described above took place on proof-of-work-based networks, it is possible that a similar attack may occur on the proof-of-stakeEthereum network, which could negatively impact the value of ether and the value of the Shares.

Although there are no knownreports of malicious activity on, or control of, the Ethereum network, it is possible that certain groups of coordinating or connectedether holders may together have more than 50% of outstanding ether, which if staked and if the users run validators, would permit themto exert authority over the validation of ether transactions. This risk is heightened if over 50% of the processing power on the networkfalls within the jurisdiction of a single governmental authority. If network participants, including the core developers and the administratorsof validating pools, do not act to ensure greater decentralization of ether, the feasibility of a malicious actor obtaining control ofthe validating power on the Ethereum network will increase, which may adversely affect the value of the Shares. See also“—Liquidstaking applications pose centralization concerns” below.

A malicious actor may alsoobtain control over the Ethereum network through its influence over core developers by gaining direct control over a core developer oran otherwise influential programmer. To the extent that nodes, users and validators accept amendments to the source code proposed by thecontrolled core developer, other core developers do not counter such amendments, and such amendments enable the malicious exploitationof the Ethereum network, the risk that a malicious actor may be able to obtain control of the Ethereum network in this manner exists.Moreover, it is possible that a group of ether holders that together control more than 50% of outstanding ether are in fact part of theinitial or current core developer group, or are otherwise influential members of the Ethereum community. To the extent that the initialor current core developer groups also control more than 50% of outstanding ether, as some believe, the risk of and arising from this particulargroup of users obtaining control of the validating power on the Ethereum network will be even greater, and should this materialize, itmay adversely affect the value of the Shares.

Liquid staking applicationspose centralization concerns.

Validators must deposit 32ether to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake (i.e.,vote on its view of the chain). For every 32 ether deposit that is staked, a unique validator key pair is generated. An application builton the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that providesa so-called “liquid staking” solution which permits holders of ether to deposit them with Lido, which stakes the ether whileissuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing32 staked ether) divided across over 30 node operators. At times, Lido has reportedly controlled around or in excess of 33% of the totalstaked ether on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transactionfinality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thuslost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most ofthe third party node operators where its ether is staked, and finally since the occurrence of such manipulation of the Ethereum network’sconsensus process by Lido or any other actor would likely cause ether to lose substantial value (which would obviously hurt Lido economically),it nevertheless poses centralization concerns. If Lido, or a bad actor with a similar sized stake, were to attempt to interfere with transactionfinality or block confirmations, it could negatively affect the use and adoption of the Ethereum network, the value of ether, and thusthe value of the Shares.

A temporary orpermanent “fork” in the Ethereum network could adversely affect the value of the Shares.

The Ethereum network operatesusing open-source protocols, meaning that any user can become a node by downloading the Ethereum Client and participating in the Ethereumnetwork, and no permission of a central authority or body is needed to do so. In addition, anyone can propose a modification to the Ethereumnetwork's source code and then propose that the Ethereum network community support the modification. These proposed modifications to theEthereum network’s source code, if adopted, can lead to forks (referred to as “planned forksˮ because they take placethrough a formal process).

In the case of planned forks,the core developers, including those associated with or funded by the Ethereum Foundation, are able to access and alter the Ethereum networksource code and, as a result, they are typically responsible for proposing quasi-official or widely publicized releases of updates andother changes to the Ethereum network’s source code called EIPs. Any user can propose an idea for modifying the Ethereum network'ssource code, and the core developers are responsible for merging the proposed idea into the EIP repository on GitHub, where it formallybecomes an EIP. However, the release of proposed updates to the Ethereum network’s source code by core developers does not guaranteethat the updates will be automatically adopted. The developers of each Ethereum Client must agree to implement the EIP’s changesto the Ethereum network in the source code for their respective client software, nodes must accept the changes made available by the developersof the Ethereum Client software they use by choosing to individually download the modified Ethereum Client software, and ultimately acritical mass of validators and users – such as dApp and smart contract developers, as well as end users of dApps and smart contracts,and anyone else who transacts on the Ethereum blockchain or Ethereum network – must support the shift, or the upgrades will lackadoption.

Typically in the case of aplanned fork, once the EIPs are formally introduced by being merged into the EIP repository on GitHub, a robust debate within the Ethereumcommunity as to the advisability of the proposed change ordinarily follows. Assuming the core developers at the protocol level and thedevelopers of individual Ethereum Clients reach a broad consensus among themselves in favor of introducing the change into the respectivesource code they are responsible for developing and maintaining, the source code modification will be introduced and made available todownload. A modification of the Ethereum network’s source code is only effective with respect to the Ethereum nodes that downloadit and modify their Ethereum Clients accordingly, and in practice such decisions are heavily influenced by the preferences of validatorsand users. Typically, after a modification is introduced and if a sufficiently broad critical mass of users and validators support themodification and nodes download the modification into their individual Ethereum Clients, the change is implemented and the Ethereum networkcontinues to operate uninterrupted, assuming there are no software issues (e.g., bugs, outages, etc.). However, if less than a sufficientlybroad critical mass (in practice, amounting to a substantial majority) of users and validators support the proposed modification and nodesrefuse to download the modification to their Ethereum Clients, and the modification is not backwards compatible with the Ethereum blockchainor network or the Ethereum Clients of nodes prior to their modification, the consequence would be what is known as a “hard fork”of the Ethereum network, with one group of nodes running the pre-modified software, with users and validators continuing to use the pre-modifiedsoftware, while the other group would adopt and run the modified software. The effect of such a hard fork would be the existence of twoversions of the Ethereum network running in parallel on separate networks using separate blockchain ledgers, yet lacking interchangeability.In practice, in a hard fork, the two networks would compete with each other for developers, node operators, users, validators, and adoption,potentially to their mutual detriment (for example, if the number of validators on each network is too small leading to security concerns,as discussed below, or if the number of users on each is reduced compared to the number of users of the single pre-fork blockchain network).Debates relating to hard forks can be contentious and hard fought among network participants, and can lead to ill will. Another possibleresult of a hard fork is an inherent decrease in the level of security due to significant amounts of validating power remaining on onenetwork or migrating instead to the new forked network. After a hard fork, it may become easier for an individual validator or validatingpool’s validating power to exceed 50% of the total on either network, thereby making them both more susceptible to attack.

A future fork in the Ethereumnetwork could adversely affect the value of the Shares or the ability of the Trust to operate. A fork could also adversely affect theprice of ether at the time of announcement or adoption or subsequently. For example, the announcement of a hard fork could lead to increaseddemand for the pre-fork digital asset, in anticipation that ownership of the pre-fork digital asset would entitle holders to a new digitalasset following the fork. The increased demand for the pre-fork digital asset may cause the price of the digital asset to rise. Afterthe hard fork, it is possible the aggregate price of the two versions of the digital asset running in parallel would be less than theprice of the digital asset immediately prior to the fork. Alternatively, as with any change to software code, software upgrades and otherchanges to the source code or protocols of the Ethereum network could fail to work as intended or could introduce bugs, coding defects,unanticipated or undiscovered problems, flaws, or security risks, create problematic economic incentives which incentivize behavior whichhas a negative effect on the Ethereum network’s users, validators, or the Ethereum network as a whole, or otherwise adversely affect,the speed, security, usability, or value of the Ethereum network or ether. If a fork caused operational problems for either post-forknetwork or blockchain, the digital assets associated with the affected network could lose some or all of their value. Furthermore, whilethe Sponsor will, as permitted by the terms of the Trust Agreement, determine which network is generally accepted as the Ethereum networkand should therefore be considered the appropriate network for the Trust’s purposes, and there is no guarantee that the Sponsorwill choose the network and the associated digital asset that is ultimately the most valuable fork. Any of these events could thereforeadversely impact the value of the Shares.

On March 13, 2024, the Ethereumnetwork underwent a planned fork called “Dencunˮ implementing a series of EIPs. EIP 4844, which some commentators perceiveto be the most significant EIP within the Dencun series, is intended to improve the economics of Layer 2s by reducing transaction feesfor Layer 2s who batch transactions executed on the Layer 2s and upload them as a batch (or as a single proof) onto the main Layer 1 Ethereumnetwork. Among other objectives, the Dencun software upgrade was designed to provide Layer 2 scaling solutions a designated storage spaceon the Layer 1 Ethereum network, called Binary Large Objects (“blobsˮ), which attach large data chunks to transactions on theLayer 1 Ethereum network and are recorded on its blockchain. The data in blobs become inaccessible on the Layer 1 Ethereum network aftera temporary period of time (three weeks), unlike the previous method of storing batched data from Layer 2s on the Layer 1 Ethereum network,which was stored permanently. The cost of accessing the temporary storage in blobs is expected by proponents of the Dencun upgrade tobe substantially lower than the cost of storing the data on the Ethereum Layer 1 network permanently, making Layer 2s more cost-efficientto operate and, some commentators hope, making them more attractive as a scaling solution. Immediately following the upgrade, some Layer2s reportedly experienced reduced transaction fees when batching transactions to the main Layer 1 Ethereum network, which in turn loweredthe transaction costs for executing transactions on such Layer 2s, but this also is believed to have resulted in ether prices (ether beingthe native asset of the Layer 1 Ethereum network) dropping as well due, in part, to the reduced demand for ether to pay the transactioncosts of recording data on the Layer 1 Ethereum network. Decreased ether prices could have an adverse effect on the value of the Shares.Additionally, some Layer 2s, such as Blast, reportedly experienced outages and other disruptions in the aftermath of the Dencun upgrade,which in the case of Blast halted block production on the Blast Layer 2 blockchain for a period of time, though it was reportedly restoredafterward. As with any change to software code, planned forks such as Dencun could introduce bugs, coding defects, unanticipated or undiscoveredproblems, flaws, security risks, problematic incentive structures, or otherwise fail to work as intended or achieve the expected benefitsthat proponents hope for in the short term or the long term, which could also have an adverse effect on adoption of the Ethereum networkand the value of ether, and therefore the Shares.

In September 2022, the Ethereumnetwork transitioned to a proof-of-stake consensus model, in an upgrade referred to as the “Merge.” Following the Merge, ahard fork of the Ethereum network occurred, as a small number of Ethereum validators and network participants planned to maintain theproof-of-work consensus mechanism that was removed as part of the Merge. This version of the network, which is not backwards compatiblewith the Ethereum Layer 1 blockchain, is considered a forked branch and was rebranded as “Ethereum Proof-of-Work.” To theextent significant developer talent, users or validators abandon the Ethereum Layer 1 network and adopt the Ethereum Proof-of-Work blockchaininstead, the value of the Shares could be adversely affected.

As illustrated by Dencun andthe Merge, the Ethereum network regularly implements planned forks in an effort to achieve its development roadmap, advance the scalabilityprocess, and to improve the network generally. For example, in connection with the Ethereum development roadmap, the Ethereum networkexecuted planned forks to transition from the initial Frontier development stage into the Homestead development stage in 2016; to transitionfrom the Homestead development stage to the first sub-stage, Byzantium, of the Metropolis development stage in 2017; to transition fromthe Byzantium sub-stage to the St. Petersburg sub-stage in early 2019; and to transition from the St. Petersburg sub-stage to the Istanbulsub-phase, in late 2019. In April 2021, the Ethereum network underwent the Berlin and Altair planned forks, among others. In 2022, Ethereumunderwent the Bellatrix and Paris planned forks in connection with the Merge. In 2023, Ethereum underwent the Capella and Shanghai plannedforks (collectively, “Shapella”), which enabled withdrawals of staked assets to the Ethereum Layer 1 blockchain mainnet forthe first time (they had previously been locked on the Beacon Chain testnet following the Merge). Any of these or future planned forkscould fail to work as intended or could introduce bugs, coding defects, unanticipated or undiscovered problems, flaws, or security risks,create problematic economic incentives which incentivize behavior which has a negative effect on the Ethereum network’s nodes, users,validators, or the Ethereum network as a whole, or otherwise adversely affect, the speed, security, usability, or value of the Ethereumnetwork or ether. Alternatively, such hard forks could be contentious, leading to a split and fracture in the Ethereum community to itscollective detriment, as discussed above. Any such outcomes could adversely affect the value of the Shares.

Forks may also occur as adigital asset network community’s response to a significant security breach. For example, in July 2016, Ethereum underwent a hardfork between the Layer 1 Ethereum network and a new digital asset running on a “forked” branch of the network, Ethereum Classic,as a result of the Ethereum network community’s response to a significant security breach. In June 2016, an anonymous hacker exploiteda smart contract running on the Ethereum network to syphon approximately $60 million of ether held by The DAO, a distributed autonomousorganization, into a segregated account. In response to the hack, and after a contentious debate, most participants in the Ethereum communityelected to adopt a hard fork that effectively reversed the hack, and this network constitutes the Layer 1 Ethereum network. However, aminority of users continued to develop the original blockchain, now referred to as “Ethereum Classic”, which is not backwardscompatible with the Layer 1 Ethereum network and is considered a forked branch, with the native digital asset on that blockchain now referredto as Ethereum Classic, or ETC. ETC now trades on several digital asset platforms. Following the July 2016 hard fork between the Ethereumand Ethereum Classic networks, new security concerns surfaced. Replay attacks, in which transactions from one network were rebroadcastto nefarious effect on the other network, plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced inJuly 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks. Similar replay attackconcerns occurred in connection with the Bitcoin Cash and Bitcoin Satoshi’s Vision networks split in November 2018, and securityconcerns could similarly surface in connection with future hard forks.

An unplanned fork may alsooccur as a result of an unintentional or unanticipated software flaw in the various versions of Ethereum Client software that nodes runand use to access the Ethereum network. For example, such an unplanned fork reportedly occurred in the Go-Ethereum (“Geth”)client, which is a popular Ethereum Client that many nodes use to access the Ethereum network and whose developers are financially supportedby the Ethereum Foundation. In November 2020, a bug was discovered in Geth (but not the other Ethereum Clients at the time, such as Besu,OpenEthereum, and Nethermind), and a patch was released that all nodes using the Geth client were supposed to download and apply simultaneously.However, not all nodes using Geth did so, resulting with the non-patched Geth nodes temporarily running a different version of the Ethereumblockchain than the patched Geth nodes and nodes using other Ethereum Clients. This temporarily created two conflicting versions of theEthereum blockchain, causing the nodes using the non-patched Geth version to be unable to reach consensus with the rest of the nodes onthe Ethereum blockchain, interrupting the non-patch Geth nodes’ access to the Ethereum network. For example, Infura, which is anode operator that provides services to major Ethereum smart contracts, wallet software providers like MetaMask, ether trading platforms,and other market participants, reportedly ran numerous nodes using the Geth client. Infura’s Geth client-running nodes reportedlyused the outdated, non-patched Geth version initially, which is said to have caused those nodes to be on the minority blockchain, impactingtransaction execution, validation, and recording on the main Layer 1 Ethereum network for Infura’s customers – such as Ethereum-basedsmart contracts, wallet providers like MetaMask, ether trading platforms, etc. – until Infura was able to apply the software updatereleased by the Geth client developers to Infura’s nodes that use Geth as their Ethereum Client. Ultimately, the problem was reportedlyfixed by releasing a new upgraded version of Geth that all nodes using the Geth client were to promptly download. This reportedly harmonizedthe conflicting versions and restored synchronization among Geth nodes, fixing the problem and restoring access to the Ethereum network,including for Infura and its customers.

In the future, if an accidentalor unintentional fork similar to what happened within the Geth client in November 2020 were to reoccur within Geth (or any other majorEthereum Client), or were to happen to the Ethereum network as a whole (instead of being limited to a single Ethereum Client, in thiscase Geth), such a fork could lead to nodes, users and validators losing confidence in the Ethereum network and abandoning it in favorof other blockchain protocols. Furthermore, it is possible that, in a future unplanned fork, a substantial number of nodes, users andvalidators could adopt an incompatible version of the digital asset while resisting community-led efforts to merge the two chains, resultingin a permanent fork. Moreover, following the Merge, nodes on the Ethereum network must run two Ethereum Clients, i.e., an ExecutionClient and a Consensus Client paired together, with the implementations selected at the discretion of the node operator. There are multiplegroups independently developing and implementing their respective Execution Clients and Consensus Clients; while some individual ExecutionClients or Consensus Clients are more popular or widely adopted than others, there remains heterogeneity among Ethereum Clients. EachExecution Client and Consensus Client needs to interoperate effectively with each other Execution Client and Consensus Client. Althoughthis diversity of Ethereum Clients is perceived by some to promote decentralization of the Ethereum network, it comes at a potential cost:if there are any unanticipated or undiscovered flaws, bugs, software defects, or interoperability failures causing any individual ExecutionClient to fail to interoperate effectively with any other individual Execution Client or any Consensus Client, the Ethereum network asa whole could suffer an unplanned fork, major disruption, catastrophic outage, system failure, loss of confidence or adoption among usersor validators, or a variety of other problems. Any of these events could cause ether to decline in value, adversely affecting the priceof Shares.

Protocols 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 fromthe new “clone” network and, in contrast to forks, holders of tokens of the existing network that was cloned do not receiveany tokens of the new network. A “clone” results in a competing network that has characteristics substantially similar tothe network it was based on, subject to any changes as determined by the developer(s) that initiated the clone. For example, followingthe DAO hack in July 2016, holders of Ethereum voted on-chain to reverse the hack, effectively causing a hard fork. For the days followingthe vote, the price of Ethereum rose from $11.65 on July 15, 2016 to $14.66 on July 21, 2016, the day after the first Ethereum Classicblock was mined. A clone may also adversely affect the price of ether at the time of announcement or adoption or subsequently. For example,on November 6, 2016, Rhett Creighton, a Zcash developer, cloned the Zcash Network to launch Zclassic, a substantially identical versionof the Zcash Network that eliminated the Founders’ Reward. For the days following the date the first Zclassic block was mined, theprice of ZEC fell from $504.57 on November 5, 2016 to $236.01 on November 7, 2016 in the midst of a broader sell off of ZEC beginningimmediately after the Zcash Network launch on October 28, 2016.

Moving from Proof-of-Work(PoW) to Proof-of-Stake (PoS) Consensus Mechanism.

InSeptember 2022, the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism called Serenity, or Ethereum 2.0. Unlikeproof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportionto the amount of computational resources expended, in proof-of-stake, validators risk or “stake” coins to compete to be randomlyselected to validate transactions and are rewarded coins in proportion to the total amount of coins staked. Any malicious activity, suchas disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or “slashing”of a portion of the staked coins. Proof-of-stake is viewed as more energy efficient and scalable than proof-of-work. There is no guaranteethat the Ethereum community will embrace Ethereum 2.0, and the new protocol may never fully scale.

Thepossibility exists that Ethereum 2.0 may never achieve the goals of the Ethereum community, which may have a negative impact on the marketvalue of ether, and consequently on the NAV of the Trust.

The open-source structureof the Ethereum network protocol means that the core developers and other contributors are generally not directly compensated for theircontributions in maintaining and developing the Ethereum network protocol. A failure to properly monitor and upgrade the Ethereum networkprotocol could damage the Ethereum network and an investment in the Trust.

The Ethereum network operatesbased on an open-source protocol maintained by the core developers and other contributors, largely on the GitHub resource section dedicatedto Ethereum network development. As new ether are rewarded solely for validator activity (other than the 2014 pre-mine) and are not soldon an ongoing basis to generate revenue to support development activity, and the Ethereum network protocol itself is made available forfree rather than sold or made available subject to licensing or subscription fees and its use does not generate revenues for its developmentteam, the core developers are generally not compensated for maintaining and updating the source code for the Ethereum network protocol.Consequently, there is a lack of financial incentive for developers to maintain or develop the Ethereum network and the core developersmay lack the resources to adequately address emerging issues with the Ethereum network protocol. Although the Ethereum network is currentlysupported 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 Ethereum network’ssource code in the GitHub repository is relatively small, although there are believed to be a larger number of developers who contributeto the overall development of the source code of the Ethereum network. The perception that high-profile contributors may no longer contributeto the network may have an adverse effect on the market price of any related digital assets. For example, in June 2017, an unfounded rumorcirculated that Ethereum core developer Vitalik Buterin had died. Following the rumor, the price of ether 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 ether.In the event a high-profile contributor to the Ethereum network, such as Vitalik Buterin, is perceived as no longer able to contributeto the Ethereum network due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is valid, it couldnegatively affect the price of ether, which could adversely impact the value of the Shares.

Alternatively, some developersmay be funded by entities whose interests are at odds with other participants in the Ethereum network. In addition, a bad actor couldalso attempt to interfere with the operation of the Ethereum network by attempting to exercise a malign influence over a core developer.To the extent that material issues arise with the Ethereum network protocol and the core developers and open-source contributors are unableto address the issues adequately or in a timely manner, the Ethereum network and an investment in the Trust may be adversely affected.

Smart contracts,including those relating to DeFi applications, are a new technology and their ongoing development and operation may result in problems,which could reduce the demand for ether or cause a wider loss of confidence in the Ethereum network, either of which could have an adverseimpact on the value of ether.

Smart contracts are programsrunning on the Ethereum blockchain that execute automatically when certain conditions are met. Since smart contracts typically cannotbe stopped or reversed, vulnerabilities in their programming can have damaging effects. For example, in June 2016, a vulnerability inthe smart contracts underlying The DAO allowed an attack by a hacker to syphon approximately $60 million worth of ether from The DAO’saccounts into a segregated account. In the aftermath of the theft, certain core developers and contributors pursued a “hard fork”of the Ethereum network in order to erase any record of the theft. Despite these efforts, the price of ether reportedly dropped approximately35% in the aftermath of the attack and subsequent hard fork. In addition, in July 2017, a vulnerability in a smart contract for a multi-signaturewallet software developed by Parity led to a reportedly $30 million theft of ether, and in November 2017, a new vulnerability in Parity’swallet software reportedly led to roughly $160 million worth of ether being indefinitely frozen in an account. Furthermore, in April 2018,a batch overflow bug was found in many Ethereum-based ERC20-compatible smart contract tokens that allowed hackers to create a large numberof smart contract tokens, causing multiple crypto asset platforms worldwide to shut down ERC20-compatible token trading. Similarly, inMarch 2020, a design flaw in the MakerDAO smart contract caused forced liquidations of crypto assets at significantly discounted prices,resulting in millions of dollars of losses to users who had deposited crypto assets into the smart contract. Other smart contracts, suchas bridges between blockchain networks and decentralized finance (“DeFi”) protocols, have also been manipulated, exploitedor used in ways that were not intended or envisioned by their creators such that attackers syphoned over $3.8 billion worth of digitalassets from smart contracts in 2022. Problems with the development, deployment, and operation of smart contracts may have an adverse effecton the value of ether.

In some cases, smart contractscan be controlled by one or more “admin keys” or users with special privileges, or “super users.” These superusers may have the ability to unilaterally make changes to the smart contract, enable or disable features on the smart contract, changehow the smart contract receives external inputs and data or transmits ether or other digital assets, and make other changes to the smartcontract. Furthermore, in some cases inadequate public information may be available about certain smart contracts or applications, andinformation asymmetries may exist, even with respect to open-source smart contracts or applications; certain participants may have hiddeninformational or technological advantages, making for an uneven playing field. There may be opportunities for bad actors to perpetratefraudulent schemes and engage in illicit activities and other misconduct, such as exit scams and rug pulls (orchestrated by developersand/or influencers who promote a smart contract or application and, ultimately, escape with the money at an agreed time), or Ponzi orsimilar fraud schemes.

Many DeFi applications arecurrently deployed on the Ethereum network, and smart contracts relating to DeFi applications currently represent a significant sourceof demand for ether. DeFi applications may achieve their investment purposes through self-executing smart contracts that may allow users,for example, to invest digital assets in a pool from which other users can borrow without requiring an intermediate party to facilitatethese transactions. These investments may earn interest for the investor based on the rates at which borrowers repay the loan, and cangenerally be withdrawn by the investor. For smart contracts that hold a pool of digital asset reserves, smart contract super users oradmin key holders may be able to extract funds from the pool, liquidate assets held in the pool, or take other actions that decrease thevalue of the digital assets held by the smart contract in reserves. Even for digital assets that have adopted a decentralized governancemechanism, such as smart contracts that are governed by the holders of a governance token, such governance tokens can be concentratedin the hands of a small group of core community members, who would be able to make similar changes unilaterally to the smart contract.If any such super user or group of core members unilaterally makes adverse changes to a smart contract, the design, functionality, featuresand value of the smart contract and its related digital assets may be harmed. In addition, assets held by the smart contract in reservesmay be stolen, misused, burnt, or locked up or otherwise become unusable and irrecoverable. Super users can also become targets of hackersand malicious attackers. If an attacker is able to access or obtain the super user privileges of a smart contract, or if a smart contract’ssuper users or core community members take actions that adversely affect the smart contract, users who transact with the smart contractmay experience decreased functionality of the smart contract or may suffer a partial or total loss of any digital assets they have usedto transact with the smart contract. Furthermore, the underlying smart contracts may be insecure, may contain bugs or other vulnerabilities,or otherwise may not work as intended. Any of the foregoing could cause users of the DeFi application to be negatively affected or couldcause the DeFi application to be the subject of negative publicity. Because DeFi applications may be built on the Ethereum network andrepresent a significant source of demand for ether, public confidence in the Ethereum network itself could be negatively affected, suchsources of demand could diminish, and the value of ether could decrease. Similar risks apply to any smart contract or decentralized application,not just DeFi applications.

Validators maysuffer losses due to staking, which could make the Ethereum network less attractive.

Validation on the Ethereumnetwork requires ether to be transferred into smart contracts on the underlying blockchain networks not under the Trust’s or anyoneelse’s control. If the Ethereum network source code or protocol fail to behave as expected, suffer cybersecurity attacks or hacks,experience security issues, or encounter other problems, such assets may be irretrievably lost. The Ethereum network imposes three typesof sanctions for validator misbehavior or inactivity, which would result in a portion of their staked ether being destroyed or “burned”:penalties, slashing and inactivity leaks. A validator may face penalties if it fails to take certain actions, such as providing a timelyattestation to a block proposed by another validator. Under this scenario, a validator’s staked ether could be burned in an amountequal to the reward to which it would have been entitled for performing the actions. A more severe sanction (i.e., “slashing”)is imposed if a validator commits malicious acts related to the proposal or attestation of blocks with invalid transactions. Slashingcan result in the validator having a portion of its staked ether immediately confiscated, withdrawn or burned by the network, resultingin losses to them. After this initial slashing, the validator is queued for forceful removal from the Ethereum network’s validator“pool,” and more of the validator’s stake is burned over a period of approximately 36 days with the exact amount ofether burned and time period determined by the network regardless of whether the validator makes any further slashable errors, at whichpoint the validator is automatically removed from the validator pool. Staked ether may also be burned through a process known as an “inactivityleak,” which is triggered if the Ethereum network has gone too long without finalizing a new block. For a new block to be successfullyadded to the blockchain, validators that account for at least two-thirds of all staked ether must agree on the validity of a proposedblock. This means that if validators representing more than one-third of the total staked ether are offline, no new blocks can be finalized.To prevent this, an inactivity leak causes the ether staked by the inactive validators to gradually “bleed away” until theseinactive validators represent less than one-third of the total stake, thereby allowing the remaining active validators to finalize proposedblocks. This provides a further incentive for validators to remain online and continue performing validation activities. Within the post-Mergenetwork, as part of the “activating” and “exiting” processes of staking, staked ether will be inaccessible fora variable period of time determined by a range of factors, including network congestion, resulting in potential inaccessibility duringthose periods. “Activation” is the funding of a validator to be included in the active set, thereby allowing the validatorto participate in the Ethereum network’s proof-of-stake consensus protocol. “Exit” is the request to exit from the activeset and no longer participate in the Ethereum network’s proof-of-stake consensus protocol. As part of these “activating”and “exiting” processes of staking on the Ethereum network, any staked ether will be inaccessible for a period of time. Theduration of activating and exiting periods are dependent on a range of factors, including network conditions. However, depending on demand,un-staking can take between hours, days or weeks to complete. Furthermore, the Ethereum network requires the payment of base fees andthe practice of paying tips is common, and such fees can become significant as the amount and complexity of the transaction grows, dependingon the degree of network congestion and the price of ether. Any cybersecurity attacks, security issues, hacks, penalties, slashing events,or other problems could damage validators’ willingness to participate in validation, discourage existing and future validators fromserving as such, and adversely impact the Ethereum network’s adoption or the price of ether. Any disruption of validation on theEthereum network could interfere with network operations and cause the Ethereum network to be less attractive to users and applicationdevelopers than competing blockchain networks, which could cause the price of ether to decrease. The limited liquidity during the “activation”or “exiting” processes could dissuade potential validators from participating, which could interfere with network operationsor security and cause the Ethereum network to be less attractive to users and application developers than competing blockchain networks,which could cause the price of ether to decrease.

Proof-of-stakeblockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period oftime as traditional proof-of-work blockchains.

Certaindigital assets, such as bitcoin, use a “proof-of-work” consensus algorithm. The genesis block on the Bitcoin blockchain wasmined in 2009, and Bitcoin’s blockchain has been in operation since then. Many newer blockchains enabling smart contract functionality,including the current Ethereum network following the completion of the Merge in 2022, use a newer consensus algorithm known as “proof-of-stake.”While their proponents believe that they may have certain advantages, the “proof-of-stake” consensus mechanisms and governancesystems underlying many newer blockchain protocols, including the Ethereum network following the Merge, and their associated digital assets—includingthe ether held by the Trust—have not been tested at scale over as long of a period of time or been subject to as widespread useor adoption as, for example, bitcoin’s proof-of-work consensus mechanism has. This could lead to these blockchains, and their associateddigital assets, having undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network participants (e.g.,validators), technical disruptions, or a wide variety of other problems, any of which could cause these blockchains not to function asintended, could lead to outright failure to function entirely causing a total outage or disruption of network activity, or could causethe blockchains to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in valueof the associated digital assets, including the Trust’s assets. Over the long term, there can be no assurance that the proof-of-stakeblockchain on which the Trust’s assets rely will achieve widespread scale or adoption or perform successfully; any failure to doso could negatively impact the value of the Trust’s assets.

The Trust willnot directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards orother income.

Neitherthe Trust, nor the Sponsor, nor the Bitcoin and Ether Custodian, nor any other person associated with the Trust will, directly or indirectly,engage in action where any portion of the Trust’s ether becomes subject to the Ethereum proof-of-stake validation or is used toearn additional ether or generate rewards or other income. The Trust’s inability to participate in staking will cause the Trustto forgo any additional ether, rewards or other income from which the Trust could have benefitted had the Trust been able to stake theTrust’s ether. Accordingly, the Trust may underperform other pooled investment vehicles holding ether that may participate in staking. Investors who seek to participate in staking rewards should consider other investment options.

Liquid stakingapplications pose centralization concerns.

Validatorsmust deposit 32 ether to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake(i.e., vote on its view of the chain). For every 32 ether depositthat is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, canmanage many validator key pairs. For example, Lido, an application that provides a so-called “liquid staking” solution whichpermits holders of ether to deposit them with Lido, which stakes the ether while issuing the holder a transferrable token, is reportedby some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ether) divided across over 30 nodeoperators. At times, Lido has reportedly controlled around or in excess of 33% of the total staked ether on the Ethereum network. Whileit is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using itsreported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliatedwith Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where itsether is staked, and finally since the occurrence of such manipulation of the Ethereum network’s consensus process by Lido or anyother actor would likely cause ether to lose substantial value (which would hurt Lido economically), it nevertheless poses centralizationconcerns. If Lido, or a bad actor with a similar sized stake, were to attempt to interfere with transaction finality or block confirmations,it could negatively affect the use and adoption of the Ethereum network, the value of ether, and thus the value of the Shares.

Competition from theemergence or growth of other digital assets or methods of investing in ether could have a negative impact on the price of ether and adverselyaffect the value of the Shares.

As of October 1, 2024, etherwas the second largest digital asset by market capitalization as tracked by CoinMarketCap.com. As of October 1, 2024, there were over8,000 alternative digital assets tracked by CoinMarketCap.com, having a total market capitalization of approximately $2.15 trillion (includingthe approximately $294 billion market cap of ether), as calculated using market prices and total available supply of each digital asset,excluding tokens pegged to other assets. Many consortiums and financial institutions are also researching and investing resources intoprivate or permissioned smart contracts platforms rather than open platforms like the Ethereum network. Competition from the emergenceor growth of alternative digital assets and smart contracts platforms, such as Solana, Avalanche or Cardano, could have a negative impacton the demand for, and price of, ether and thereby adversely affect the value of the Shares.

In addition, some digitalasset networks, including the Ethereum network, may be the target of ill will from users of other digital asset networks. For example,in July 2016, the Ethereum network underwent a contentious hard fork that resulted in the creation of a new digital asset network calledEthereum Classic. As a result, some users of the Ethereum Classic network may harbor ill will toward the Ethereum network. These usersmay attempt to negatively impact the use or adoption of the Ethereum network.

Investors may invest in etherthrough means other than the Shares, including through direct investments in ether and other potential financial vehicles, possibly includingsecurities backed by or linked to ether and digital asset financial vehicles similar to the Trust, or ether futures-based products. Marketand financial conditions, and other conditions beyond the Sponsor’s control, may make it more attractive to invest in other financialvehicles or to invest in ether directly, which could limit the market for, and reduce the liquidity of, the Shares. In addition, to theextent digital asset financial vehicles other than the Trust tracking the price of ether are formed and represent a significant proportionof the demand for ether, large purchases or redemptions of the securities of these digital asset financial vehicles, or private fundsholding ether, could negatively affect the Ether Pricing Benchmark, the Trust’s ether holdings, the price of the Shares, and theNAV of the Trust.

The Trust and the Sponsorface competition with respect to the creation of competing exchange-traded ether products. If the SEC were to approve many or all of thecurrently pending applications for such exchange-traded ether products, many or all of such products, including the Trust, could failto acquire substantial assets, initially or at all. The Trust’s competitors may also charge a substantially lower fee than the Sponsor’sFee in order to achieve initial market acceptance and scale. Accordingly, the Sponsor’s competitors may commercialize a competingproduct more rapidly or effectively than the Sponsor is able to, which could adversely affect the Sponsor’s competitive positionand the likelihood that the Trust will achieve initial market acceptance, and could have a detrimental effect on the scale and sustainabilityof the Trust. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenueto cover the costs associated with launching and maintaining the Trust and such shortfalls could impact the Sponsor’s ability toproperly invest in robust ongoing operations and controls of the Trust to minimize the risk of operating events, errors, or other formsof losses to the Shareholders. The Trust may also fail to attract adequate liquidity in the secondary market due to such competition,resulting in a substandard number of Authorized Participants willing to make a market in the Shares, which in turn could result in a significantpremium or discount in the Shares for extended periods and the Trust’s failure to reflect the performance of the price of ether.

Risks Associated with the Pricing Benchmarks,BRR, ERR, CME Bitcoin Real Time Price and CME Ether Real Time Price

The Pricing Benchmarks,BRR, ERR, CME Bitcoin Real Time Price and CME Ether Real Time Price each have a limited history.

The Bitcoin Pricing Benchmark,which was introduced on February 28, 2022, is based on materially the same methodology (except calculation time) as the BRR, which wasfirst introduced on November 14, 2016, and is the rate on which bitcoin futures contracts are cash-settled in U.S. dollars at the CME.The Ether Pricing Benchmark, which was introduced on February 28, 2022, is based on materially the same methodology (except calculationtime) as the ERR, which was first introduced on June 4, 2018, and is the rate on which ether futures contracts are cash-settled in U.S.dollars at the CME. The Pricing Benchmarks, the BRR, and the ERR have a limited history and their value is an average composite referencerate calculated using volume-weighted trading price data from the Constituent Platforms. A longer history of actual performance throughvarious economic and market conditions would provide greater and more reliable information for an investor to assess the Pricing Benchmarks’performance. The Benchmark Provider has substantial discretion at any time to change the methodology used to calculate the Pricing Benchmarks,including the Constituent Platforms that contribute prices to the Trust’s NAV. The Benchmark Provider does not have any obligationto take into consideration the needs of the Trust, the Shareholders, or anyone else in connection with such changes. There is no guaranteethat the methodology currently used in calculating the Pricing Benchmarks will appropriately track the price of bitcoin and ether in thefuture. Neither the CME Group nor the Benchmark Provider has any obligation to take into consideration the needs of the Trust or the Shareholdersin determining, composing, or calculating the Pricing Benchmarks or in the selection of the Constituent Platforms used. The ConstituentPlatforms are chosen by the Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee.

Although the Pricing Benchmarksare intended to accurately capture the market prices of bitcoin and ether, third parties may be able to purchase and sell bitcoin andether on public or private markets not included among the Constituent Platforms, and such transactions may take place at prices materiallyhigher or lower than the Pricing Benchmarks’ prices. Moreover, there may be variances in the price of bitcoin and ether on the variousConstituent Platforms, including as a result of differences in fee structures or administrative procedures on different Constituent Platforms.While the Pricing Benchmarks provide U.S. dollar-denominated prices of bitcoin and ether based on the volume-weighted price of bitcoinand ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform may not be equal to the valueof bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoin and ether on the Constituent Platformscould be materially higher or lower than the prices of the Pricing Benchmarks. To the extent the prices of the Pricing Benchmarks differmaterially from the actual prices available on a Constituent Platform, or from the global market prices of bitcoin and ether, the priceof the Shares may no longer track, whether temporarily or over time, the global market prices of bitcoin and ether, which could adverselyaffect an investment in the Trust by reducing investors’ confidence in the Shares’ ability to track the market prices of bitcoinand ether. To the extent such prices differ materially from the prices of the Pricing Benchmarks, investors may lose confidence in theShares’ ability to track the market prices of bitcoin and ether, which could adversely affect the value of the Shares.

The pricing sources (ConstituentPlatforms) used by the Pricing Benchmarks are digital asset trading venues that facilitate the buying and selling of bitcoin, ether andother digital assets. Although many pricing sources refer to themselves as “exchanges,” they are not registered with, or supervisedby, the SEC or the CFTC and they do not meet the regulatory standards of a national securities exchange or designated contract market.For these reasons, among others, purchases and sales of bitcoin and ether may be subject to temporary distortions or other disruptionsdue to various factors, including the lack of liquidity in the markets and government regulation and intervention. These circumstancescould affect the prices of bitcoin and ether used in Pricing Benchmarks calculations and, therefore, could adversely affect the bitcoinand ether prices as reflected by the Pricing Benchmarks.

The Constituent Platformshave changed over time. For example, effective April 2017, Bitfinex and OKcoin were removed from the Bitcoin Pricing Benchmark due totrading restrictions and on January 25, 2019, itBit was suspended from the Pricing Benchmarks due to data quality issues, which suspensionwas lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify theerrors that the itBit data contained through a full match of parameters. On August 30, 2019, Gemini was added to the Pricing Benchmarks.On October 28, 2019, Coinbase was added to the Ether Pricing Benchmark. On May 3, 2022, LMAX Digital was added to the Ether Pricing Benchmark.The Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee, may remove or add ConstituentPlatforms in the future at its discretion. For more information on the inclusion criteria for Constituent Platforms in the Pricing Benchmarks,see “THE TRUST AND BITCOIN AND ETHER PRICES.”

The Pricing Benchmarks arebased on various inputs which may include price data from various third-party digital asset trading platforms. Neither the CME Group northe Benchmark Provider guarantees the validity of any of these inputs, which may be subject to technological error, manipulative activity,or fraudulent reporting from their initial source.

The Trust utilizes the PricingBenchmarks to establish its NAV and NAV per Share. In the event that the Pricing Benchmarks are incorrectly calculated, is not timelycalculated or changes its calculation methodology in the future, such an occurrence may adversely impact an investment in the Shares orthe Trust’s operations.

The CME Bitcoin Real TimePrice and CME Ether Real Time Price also have a limited history and share some of the same structural and methodological features andrisks as the Pricing Benchmarks. The Trust utilizes the CME Bitcoin Real Time Price and CME Ether Real Time Price to establish its ITV.While investors are capable of assessing the intra-day movement of the price of the Shares and the bitcoin market price of bitcoin andether market price of ether, Shareholders may use the ITV as a data point in their assessment of the value of the Shares. In the eventthat the CME Bitcoin Real Time Price and CME Ether Real Time Price are incorrectly calculated, is not timely calculated or changes itscalculation methodology in the future, such an occurrence may adversely impact the utility of the ITV to Shareholders.

Although the Pricing Benchmarksand the CME Bitcoin Real Time Price and CME Ether Real Time Price are designed to accurately capture the market price of bitcoin and ether,third parties may be able to purchase and sell bitcoin and ether on public or private markets not included among the Constituent Platformsof the Pricing Benchmarks and CME Ether Real Time Price, and such transactions may take place at prices materially higher or lower thanthe level of the Pricing Benchmarks used to establish the NAV. To the extent such prices differ materially from the level of the PricingBenchmarks used to establish the NAV, investors may lose confidence in the Shares’ ability to track the market price of bitcoinand ether, which could adversely affect an investment in the Shares.

The BenchmarkProvider could experience systems failures or errors.

If the computers or otherfacilities of the Benchmark Provider, data providers and/or relevant stock exchange malfunction for any reason, calculation and disseminationof the Pricing Benchmarks may be delayed. Errors in Pricing Benchmarks data, the Pricing Benchmarks computations and/or construction mayoccur from time to time and may not be identified and/or corrected for a period of time or at all, which may have an adverse impact onthe Trust and the Shareholders. Any of the foregoing may lead to errors in the Pricing Benchmarks, which may lead to a different investmentoutcome for the Trust and its Shareholders than would have been the case had such events not occurred. The Pricing Benchmarks are thereference price for calculating the Trust’s NAV. Consequently, losses or costs associated with the Pricing Benchmarks’ errorsor other risks described above will generally be borne by the Trust and the Shareholders and neither the Sponsor nor its affiliates oragents make any representations or warranties regarding the foregoing.

If the Pricing Benchmarksare not available, the Trust’s holdings may be fair valued in accordance with the policy approved by the Sponsor. If the PricingBenchmarks are not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect accuratebitcoin and ether prices, the Trust’s holdings may be “fair valued” in accordance with the valuation policies approvedby the Sponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all availablefactors the Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor usingthird-party valuation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted medianprice of bitcoin and ether provided by a secondary pricing source (“Secondary Source”). If a Secondary Source is not availableor the Sponsor in its sole discretion determines the Secondary Sources are unreliable, the price set by the Trust’s principal marketas of 4:00 p.m. ET, on the valuation date would be considered for utilization. In the event the principal market price is not availableor the Sponsor in its sole discretion determines the principal market valuation is unreliable the Sponsor will use its best judgment todetermine a good faith estimate of fair value based upon all available factors. The Sponsor does not anticipate that the need to “fairvalue” bitcoin and ether will be a common occurrence.

To the extent the valuationdetermined in accordance with the policy approved by the Sponsor differs materially from the actual market price of bitcoin and ether,the price of the Shares may no longer track, whether temporarily or over time, the global market price of bitcoin and ether, which couldadversely affect an investment in the Trust by reducing investors’ confidence in the Shares’ ability to track the global marketprice of bitcoin and ether. To the extent such prices differ materially from the market price for bitcoin and ether, investors may loseconfidence in the Shares’ ability to track the market price of bitcoin and ether, which could adversely affect the value of theShares. The Sponsor does not anticipate that the need to “fair value” bitcoin and ether will be a common occurrence.

The Pricing Benchmarkscould fail to track the global bitcoin and ether prices, and a failure of the Pricing Benchmarks could adversely affect the value of theShares.

Although the Pricing Benchmarksare intended to accurately capture the market price of bitcoin and ether, third parties may be able to purchase and sell bitcoin and etheron public or private markets not included among the Constituent Platforms, and such transactions may take place at prices materially higheror lower than the prices of the Pricing Benchmarks. Moreover, there may be variances in the price of bitcoin and ether on the variousConstituent Platforms, including as a result of differences in fee structures or administrative procedures on different Constituent Platforms.While the Pricing Benchmarks provide a U.S. dollar-denominated composite for the price of bitcoin and ether based on the volume-weightedprice of bitcoin and ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform or pricingsource may not be equal to the value of bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoinand ether on the Constituent Platforms could be materially higher or lower than the prices of the Pricing Benchmarks. To the extent theprices of the Pricing Benchmarks differs materially from the actual prices available on a Constituent Platform, or from the global marketprice of bitcoin and ether, the price of the Shares may no longer track, whether temporarily or over time, the global market price ofbitcoin and ether, which could adversely affect an investment in the Trust by reducing investors’ confidence in the Shares’ability to track the market price of bitcoin and ether. To the extent such prices differ materially from the prices of the Pricing Benchmarks,investors may lose confidence in the Shares’ ability to track the market price of bitcoin and ether, which could adversely affectthe value of the Shares.

The Sponsor candiscontinue using the Pricing Benchmarks and use a different pricing or valuation methodology instead.

The Sponsor, in its sole discretion,may cause the Trust to price its portfolio based upon an index, benchmark or standard other than the Pricing Benchmarks at any time, withprior notice to the Shareholders, if investment conditions change or the Sponsor believes that another index, benchmark or standard betteraligns with the Trust’s investment objective and strategy. The Sponsor may make this decision for a number of reasons, including,but not limited to, a determination that the Pricing Benchmarks prices of bitcoin and ether differ materially from the global market pricesof bitcoin and ether and/or that third parties are able to purchase and sell bitcoin and ether on public or private markets not includedamong the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the price of the PricingBenchmarks. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the event that the Sponsorintends to establish the Trust’s NAV by reference to an index, benchmark or standard other than the Pricing Benchmarks, it willprovide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in the Trust’s annualor quarterly reports.

The Pricing Benchmarksprice used to calculate the value of the Trust’s bitcoin and ether may be volatile, adversely affecting the value of the Shares.

The price of bitcoin and etheron public digital asset trading platforms has a limited history, and during this history, bitcoin and ether prices on the digital assetmarkets more generally, and on digital asset trading platforms individually, have been volatile and subject to influence by many factors,including operational interruptions. While the Pricing Benchmarks are designed to limit exposure to the interruption of individual digitalasset trading platforms, the prices of the Pricing Benchmarks, and the prices of bitcoin and ether generally, remains subject to volatilityexperienced by digital asset exchanges, and such volatility could adversely affect the value of the Shares.

Furthermore, because the numberof liquid and credible digital asset trading platforms is limited, the Pricing Benchmarks will necessarily be composed of a limited numberof digital asset trading platforms. If a digital asset trading platform were subjected to regulatory, volatility or other pricing issues,the Benchmark Provider would have limited ability to remove such digital asset trading platform from the Pricing Benchmarks, which couldskew the price of bitcoin and ether as represented by the Pricing Benchmarks. Trading on a limited number of digital asset trading platformsmay result in less favorable prices and decreased liquidity of bitcoin and ether and, therefore, could have an adverse effect on the valueof the Shares.

The prices ofthe Pricing Benchmarks being used to determine the NAV of the Trust may not be consistent with GAAP. To the extent that the Trust’sfinancial statements are determined using a different pricing source that is consistent with GAAP, the NAV reported in the Trust’speriodic financial statements may differ, in some cases significantly, from the Trust’s NAV determined using the Pricing Benchmarkspricing.

The Trust will determine theNAV of the Trust on each business day based on the value of bitcoin and ether as reflected by the Pricing Benchmarks. The methodologyused to calculate the prices of the Pricing Benchmarks to value bitcoin and ether in determining the NAV of the Trust may not be deemedconsistent with GAAP. To the extent the methodology used to calculate the Pricing Benchmarks is deemed inconsistent with GAAP, the Trustwill utilize an alternative GAAP-consistent pricing source for purposes of the Trust’s periodic financial statements. Creation andredemption of Baskets, the Sponsor Fee and other expenses borne by the Trust will be determined using the Trust’s NAV determineddaily based on the Pricing Benchmarks. Such NAV of the Trust determined using the prices of the Pricing Benchmarks may differ, in somecases significantly, from the NAV reported in the Trust’s periodic financial statements.

Risks Related to Pricing.

The Trust’s portfoliowill be priced, including for purposes of determining the NAV, based upon the Pricing Benchmarks. The price of bitcoin and ether in U.S.dollars or in other currencies available from other data sources may not be equal to the prices used to calculate the NAV.

The NAV of the Trust willchange as fluctuations occur in the market price of the Trust’s bitcoin and ether holdings as reflected in the Pricing Benchmarks.Shareholders should be aware that the public trading price per Share may be different from the NAV for a number of reasons, includingprice volatility; trading activity; the closing of bitcoin and ether trading platforms due to fraud, failure, security breaches or otherwise;and the fact that supply-and-demand forces at work in the secondary trading market for Shares are related, but not identical, to the supply-and-demandforces influencing the market price of bitcoin and ether.

Shareholders also should notethat the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created andredeemed.

In the event that the valueof the Trust’s bitcoin and ether holdings or bitcoin and ether holdings per Share is incorrectly calculated, neither the Sponsornor the Administrator will be liable for any error and such misreporting of valuation data could adversely affect the value of the Shares.

Risks Associated with Investing in the Trust

Investment-Related Risks.

Investingin bitcoin and ether and, consequently, the Trust, is speculative. The prices of bitcoin and ether are volatile, and market movementsof bitcoin and ether are difficult to predict. Supply-and-demand changes rapidly are affected by a variety of factors, including regulationand general economic trends, such as interest rates, availability of credit, credit defaults, inflation rates and economic uncertainty.All investments made by the Trust will risk the loss of capital. Therefore, an investment in the Trust involves a high degree of risk,including the risk that the entire amount invested may be lost. No guarantee or representation is made that the Trust’s investmentprogram will be successful, that the Trust will achieve its investment objective or that there will be any return of capital investedto investors in the Trust, and investment results may vary.

The Trust is subjectto market risk.

Market risk refers to therisk that the market prices of bitcoin and ether held by the Trust will rise or fall, sometimes rapidly or unpredictably. An investmentin the Shares is subject to market risk, including the possible loss of the entire principal of the investment.

Different from directlyowning bitcoin and ether.

The performance of the Trustwill not reflect the specific return an investor would realize if the investor actually held or purchased bitcoin and ether directly.The differences in performance may be due to factors such as fees and transaction costs. Investors will also forgo certain rights conferredby owning bitcoin and ether directly, such as the right to claim airdrops. See “Shareholders may not receive the benefits ofany forks or “airdrops.”

The Trust is apassive investment vehicle. The Trust is not actively managed and will be affected by a general decline in the prices of bitcoin and ether.

The Sponsor does not activelymanage the bitcoin and ether held by the Trust. This means that the Sponsor does not sell bitcoin and ether at times when their priceis high, or acquire bitcoin and ether at low prices in the expectation of future price increases. It also means that the Sponsor doesnot make use of any of the hedging techniques available to professional bitcoin and ether investors to attempt to reduce the risks oflosses resulting from price decreases. Any losses sustained by the Trust will adversely affect the value of the Shares.

The value of the Shares may beinfluenced by a variety of factors unrelated to the value of bitcoin and ether.

The value of the Shares maybe influenced by a variety of factors unrelated to the prices of bitcoin and ether that may have an adverse effect on the price of theShares. These factors include, but are not limited to, the following:

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

The NAV may notalways correspond to the market prices of bitcoin and ether and, as a result, Baskets may be created or redeemed at a value that is differentfrom the market price of the Shares.

The NAV of the Trust willchange as fluctuations occur in the market price of the Trust’s bitcoin and ether holdings. Shareholders should be aware that thepublic trading price per Share may be different from the NAV for a number of reasons, including price volatility; trading activity; theclosing of digital asset trading platforms due to fraud, failure, security breaches or otherwise; and the fact that supply-and-demandforces at work in the secondary trading market for Shares are related, but not identical, to the supply-and-demand forces influencingthe market price of bitcoin and ether.

An Authorized Participantmay be able to create or redeem a Basket at a discount or a premium to the public trading price per Share, and the Trust will thereforemaintain its intended fractional exposure to a specific amount of bitcoin and ether per Share.

Shareholders also should notethat the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created andredeemed.

When acquiring bitcoin andether, it is possible that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoin and ether by thePricing Benchmarks, the rate used to calculate the Trust’s NAV. This is known as “slippage.” While transactions in anyasset are subject to the risk of slippage, it is possible that transactions in digital assets may be more susceptible. The Trust seeksto minimize the risk of slippage by basing the amount of cash an Authorized Participant is required to deposit to consummate a creationorder for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and ether ascribedby the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippage from timeto time.

The Shares maytrade at a discount or premium in the trading price relative to the NAV as a result of non-concurrent trading hours between the Exchangeand digital asset trading platforms. Non-concurrent trading hours may also result in the Shares gapping at the open of trading on theExchange.

The value of a Share may beinfluenced by non-concurrent trading hours between the Exchange and various digital asset trading platforms, including the ConstituentPlatforms of the Pricing Benchmarks. Additionally, Shares may be traded at other times and in other venues. While U.S. equity marketsare open for trading in the Shares for a limited period each day, the bitcoin and ether markets are a 24-hour marketplace; however, tradingvolume and liquidity on the bitcoin and ether markets are not consistent throughout the day and digital asset trading platforms, includingthe larger-volume markets, have been known to shut down temporarily or permanently due to security concerns, directed denial-of-serviceattacks and other reasons. As a result, during periods when U.S. equity markets are open but large portions of the bitcoin and ether markesare either lightly traded or are closed, trading spreads and the resulting premium or discount on the Shares may widen and, therefore,increase the difference between the price of the Shares and the NAV. Premiums or discounts may have an adverse effect on an investmentin the Shares if a Shareholder sells or acquires its Shares during a period of discount or premium, respectively.

During periods when U.S. equitymarkets are closed but digital asset trading platforms are open, significant changes in the prices of bitcoin and ether could result ina difference in performance between the prices of bitcoin and ether and the most recent Share price. To the extent that the prices ofbitcoin and ether moves significantly in a negative direction after the close of U.S. equity markets, the trading price of the Sharesmay “gap” down to the full extent of such negative price shift when U.S. equity markets reopen. To the extent that the pricesof bitcoin and ether drops significantly during hours in which U.S. equity markets are closed, investors may not be able to sell theirShares until after the “gap” down has been fully realized, resulting in an inability to mitigate losses in a rapidly negativemarket.

Buying and sellingactivity associated with the purchase and redemption of Baskets may adversely affect an investment in the Shares.

There is no limit on the numberof bitcoin and ether the Trust may acquire (other than the overall limit on the number of bitcoin and ether in existence established bythe original bitcoin and ether protocol and any limit on the number of Shares registered by the Trust).

The Sponsor’s purchaseof bitcoin and ether in connection with Basket purchase orders may cause the prices of bitcoin and ether to increase, which will resultin higher prices for the Shares. Increases in the bitcoin and ether prices may also occur as a result of bitcoin and ether purchases byother market participants who attempt to benefit from an increase in the market prices of bitcoin and ether when Baskets are created.The market prices of bitcoin and ether may therefore decline immediately after Baskets are created.

Selling activity associatedwith sales of bitcoin and ether by the Sponsor in connection with redemption orders may decrease the bitcoin and ether prices, which willresult in lower prices for the Shares. Decreases in bitcoin and ether prices may also occur as a result of selling activity by other marketparticipants.

In addition to the effectthat purchases and sales of bitcoin and ether by the Sponsor and other market participants may have on the prices of bitcoin and ether,other exchange-traded products or large private investment vehicles with similar investment objectives (if developed) could representa substantial portion of demand for bitcoin and ether at any given time and the sales and purchases by such investment vehicles may impactthe prices of bitcoin and ether. If the prices of bitcoin and ether declines, the trading price of the Shares will generally also decline.

The inabilityof Authorized Participants and market makers to hedge their bitcoin and ether exposure may adversely affect the liquidity of Shares andthe value of an investment in the Shares.

Authorized Participants andmarket makers will generally want to hedge their exposure in connection with Basket purchase and redemption orders. To the extent AuthorizedParticipants and market makers are unable to hedge their exposure due to market conditions (e.g., insufficient bitcoin and ether liquidityin the market, inability to locate an appropriate hedge counterparty, extreme volatility in the prices of bitcoin and ether, wide spreadsbetween prices quoted on different bitcoin and ether trading platforms, the closing of bitcoin and ether trading platforms due to fraud,failures, security breaches or otherwise etc.), such conditions may make it difficult to purchase or redeem Baskets or cause them to notcreate or redeem Baskets. In addition, the hedging mechanisms employed by Authorized Participants and market makers to hedge their exposureto bitcoin and ether may not function as intended, which may make it more difficult for them to enter into such transactions. Such eventscould negatively impact the market price of Shares and the spread at which Shares trade on the open market. To the extent Authorized Participantswish to use futures to hedge their exposure, note that while growing in recent years, the market for exchange-traded bitcoin and etherfutures has a limited trading history and operational experience and may be less liquid, more volatile and more vulnerable to economic,market and industry changes than more established futures markets. The liquidity of the market will depend on, among other things, theadoption of bitcoin and ether and the commercial and speculative interest in the market.

Arbitrage transactionsintended to keep the price of Shares closely linked to the prices of bitcoin and ether may be problematic if the process for the purchaseand redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares.

If the processes of creationand redemption of Shares (which depend on timely transfers of bitcoin and ether to and by the Bitcoin and Ether Custodian) encounter anyunanticipated difficulties due to, for example, the price volatility of bitcoin and ether, the insolvency, business failure or interruption,default, failure to perform, security breach, or other problems affecting the Prime Execution Agent or Bitcoin and Ether Custodian, theclosing of bitcoin and ether trading platforms due to fraud, failures, security breaches or otherwise, or network outages or congestion,spikes in transaction fees demanded by validators, or other problems or disruptions affecting the Bitcoin and Ethereum networks, thenpotential market participants, such as the Authorized Participants and their customers, who would otherwise be willing to purchase orredeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the pricesof the underlying bitcoin and ether may not take the risk that, as a result of those difficulties, they may not be able to realize theprofit they expect.

Alternatively, in the caseof a network outage or other problems affecting the Bitcoin and Ethereum networks, the processing of transactions on the Bitcoin and Ethereumnetworks may be disrupted, which in turn may prevent Digital Asset Trading Counterparties from depositing or withdrawing bitcoin and etherfrom their custody accounts, which in turn could affect the creation or redemption of Baskets. If this is the case, the liquidity of theShares may decline and the price of the Shares may fluctuate independently of the prices of bitcoin and ether and may fall or otherwisediverge from NAV. Furthermore, in the event that the markets for bitcoin and ether should become relatively illiquid and thereby materiallyrestrict opportunities for arbitraging by delivering bitcoin and ether in return for Baskets, the price of Shares may diverge from thevalue of bitcoin and ether.

Investors maybe adversely affected by purchase or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.

The Trust may, in its discretion,suspend the right of purchase or redemption or may postpone the redemption or purchase settlement date, for (1) for any period duringwhich the Exchange is closed other than customary weekend or holiday closings, or trading on the Exchange is suspended or restricted,(2) any period during which an emergency exists as a result of which the fulfillment of a purchase order or the redemption distributionis not reasonably practicable (for example, as a result of an interruption in services or availability of the Prime Execution Agent, Bitcoinand Ether Custodian, Cash Custodian, 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, internetservices, or network provider services, unavailability of Fedwire, SWIFT or banks’ payment processes, significant technical failure,bug, error, disruption or fork of the Bitcoin and Ethereum networks, hacking, cybersecurity breach, or power, internet, or Bitcoin andEthereum networks outage, or similar event), or (3) such other period as the Sponsor determines to be necessary for the protection ofthe Shareholders of the Trust (for example, where acceptance of the U.S. dollars needed to create each Basket would have certain adversetax consequences to the Trust or its Shareholders). In addition, the Trust may reject a redemption order if the order is not in properform as described in the Authorized Participant Agreement or if the fulfillment of the order might be unlawful. Any such postponement,suspension or rejection could adversely affect a redeeming Authorized Participant. Suspension of creation privileges may adversely impacthow the Shares are traded and arbitraged in the secondary market, which could cause Shares to trade at levels materially different (premiumsand discounts) from the value of their underlying bitcoin and ether.

Investors maybe adversely affected by an overstatement or understatement of the NAV calculation of the Trust due to the valuation method employed onthe date of the NAV calculation.

In certain circumstances,the Trust’s bitcoin and bitcoin and ether investments may be valued using techniques other than reliance on the price establishedby the Pricing Benchmarks. The value established by using the Pricing Benchmarks may be different from what would be produced throughthe use of another methodology. The value of bitcoin and ether or other digital asset investments valued using techniques other than thoseemployed by the Pricing Benchmarks, including “fair valuation measures,” may differ from the value of bitcoin and ether determinedby reference to the Pricing Benchmarks.

If the Pricing Benchmarksare not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect an accurate bitcoinand ether price, the Trust’s holdings may be “fair valued” in accordance with the valuation policies approved by theSponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all available factorsthe Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using third-partyvaluation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted median prices ofbitcoin and ether provided by a Secondary Source. If a Secondary Source is not available or the Sponsor in its sole discretion determinesthe Secondary Sources are unreliable, the price set by the Trust’s principal market as of 4:00 p.m. ET, on the valuation date wouldbe considered for utilization. In the event the principal market price is not available or the Sponsor in its sole discretion determinesthe principal market valuation is unreliable the Sponsor will use its best judgment to determine a good faith estimate of fair value basedupon all available factors. The Sponsor does not anticipate that the need to “fair value” bitcoin and ether will be a commonoccurrence.

As an owner ofShares, you will not have the rights normally associated with ownership of other types of shares.

Shares are not entitled tothe same rights as shares issued by a corporation. By acquiring Shares, you are not acquiring the right to elect directors, to receivedividends, to vote on certain matters regarding the issuer of the Shares or to take other actions normally associated with the ownershipof shares. You will only have the limited rights described under “MANAGEMENT; VOTING BY SHAREHOLDERS.”

The Sponsor andthe Trustee may agree to amend the Trust Agreement or Sponsor Agreement without the consent of the Shareholders.

The Sponsor and the Trusteemay agree to amend the Trust Agreement or Sponsor Agreement without Shareholder consent. The Sponsor shall determine the contents andmanner of delivery of any notice of any Trust Agreement amendment. Such notice may be provided on the Trust’s website, in a prospectussupplement, through a current report on Form 8-K and/or in the Trust’s annual or quarterly reports. If an amendment to the TrustAgreement or Sponsor Agreement imposes new fees and charges or increases existing fees or charges, including the Sponsor Fee (except fortaxes and other governmental charges, registration fees or other such expenses), or prejudices a substantial right of Shareholders, itwill become effective for outstanding Shares 30 days after notice of such amendment is given to registered owners. Shareholders that arenot registered owners (which most Shareholders will not be) may not receive specific notice of a fee increase other than through an amendmentto the Prospectus. Moreover, at the time an amendment becomes effective, by continuing to hold Shares, Shareholders are deemed to agreeto the amendment and to be bound by the Trust Agreement and Sponsor Agreement as amended without specific agreement to such increase.

The Trust is subjectto risks due to its concentration of investments in a single asset class.

Unlike other funds that mayinvest in diversified assets, the Trust’s investment strategy is concentrated in two asset classes: bitcoin and ether. This concentrationmaximizes the degree of the Trust’s exposure to a variety of market risks associated with bitcoin and ether. By concentrating itsinvestment strategy solely on bitcoin and ether, any losses suffered as a result of a decrease in the value of bitcoin and ether can beexpected to reduce the value of an interest in the Trust and will not be offset by other gains if the Trust were to invest in underlyingassets that were diversified.

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

Investors may purchase Sharesto hedge existing bitcoin, ether or other digital asset, commodity or currency exposure or to speculate on the prices of bitcoin and ether.Speculation on the prices of bitcoin and ether may involve long and short exposures. To the extent that aggregate short exposure exceedsthe number of Shares available for purchase (for example, in the event that large redemption requests by Authorized Participants dramaticallyaffect Share liquidity), investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders. Thoserepurchases may, in turn, dramatically increase the price of the Shares until additional Shares are created through the creation process.This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in the Shares thatare not directly correlated to the prices of bitcoin and ether.

As the Sponsorand its management have a limited history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitableto manage the Trust.

The Sponsor has no historyof past performance in managing a bitcoin and ether exchange-traded product, which is a novel type of investment product. In addition,the Sponsor is not, and the Sponsor believes it is not required to be, registered as an investment adviser under the Investment AdvisersAct of 1940 (the “Advisers Act”) or a commodity pool operator or commodity trading adviser under the Commodity Exchange Act.The past performances of the Sponsor’s management in other positions, including their experiences in exchange-traded products thathold bitcoin and ether individually, private funds that hold bitcoin and ether individually and traditional exchange-traded funds investingin securities, are an imperfect indication of their ability to manage an investment vehicle such as the Trust. If the experience of theSponsor and its management is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trustmay be adversely affected.

Security threatsand cyber-attacks 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 price of the Shares.

Security breaches, cyber-attacks,computer malware and computer hacking attacks have been a prevalent concern in relation to digital assets. Multiple thefts of bitcoin,ether and other digital assets from other holders have occurred in the past. Because of the pseudonymous nature of the Bitcoin and Ethereumblockchains, thefts can be difficult to trace, which may make bitcoin and ether particularly attractive targets for theft. Cyber securityfailures or breaches of one or more of the Trust’s service providers (including, but not limited to, the Transfer Agent, the MarketingAgent, the Administrator, the Cash Custodian or the Bitcoin and Ether Custodian) have the ability to cause disruptions and impact businessoperations, potentially resulting in financial losses, violations of applicable privacy and other laws, regulatory fines, penalties, reputationaldamage, reimbursement or other compensation costs, and/or additional compliance costs.

The Trust and its serviceproviders’ use of the internet, technology and information systems (including mobile devices and cloud-based service offerings)may expose the Trust to potential risks linked to cyber-security breaches of those technological or information systems. The Sponsor believesthat the Trust’s bitcoin and ether held in the Trust Bitcoin Account and/or Trust Ether Account at the Bitcoin and Ether Custodianor Trading Balance held with the Prime Execution Agent will be an appealing target to hackers or malware distributors seeking to destroy,damage or steal the Trust’s bitcoin and ether and will only become more appealing as the Trust’s assets grow. To the extentthat the Trust, Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent is unable to identify and mitigate or stop new securitythreats or otherwise adapt to technological changes in the digital asset industry, the Trust’s bitcoin and ether may be subjectto theft, loss, destruction or other attack.

The Sponsor believes thatthe security procedures in place for the Trust, including, but not limited to, offline storage, or cold storage, multiple encrypted privatekey “shards,” and other measures, are reasonably designed to safeguard the Trust’s bitcoin and ether. Nevertheless,the security procedures cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may beborne by the Trust and the security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust’stechnical infrastructure, which could result in theft, loss or damage of its assets. The Sponsor does not control the Bitcoin and EtherCustodian’s or Prime Execution Agent’s operations or implementation of such security procedures and there can be no assurancethat such security procedures will actually work as designed or prove to be successful in safeguarding the Trust’s assets againstall possible sources of theft, loss or damage. Assets not held in cold storage, such as assets held in a trading account, may be morevulnerable to security breach, hacking or loss than assets held in cold storage. Furthermore, assets held in a trading account, includingthe Trust’s Trading Balance at the Prime Execution Agent, are held on an omnibus, rather than segregated basis, which creates greaterrisk of loss.

The security procedures andoperational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of the Sponsor,Prime Execution Agent, Bitcoin and Ether Custodian, or otherwise, and, as a result, an unauthorized party may obtain access to the TrustBitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust’s Trading Balance with the Prime Execution Agent, theprivate keys (and therefore bitcoin and ether) or other data of the Trust. Additionally, outside parties may attempt to fraudulently induceemployees of the Sponsor, Bitcoin and Ether Custodian, Prime Execution Agent or the Trust’s other service providers to disclosesensitive 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 andoften are not recognized until launched against a target, the Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent may be unableto anticipate these techniques or implement adequate preventative measures.

An actual or perceived breachof the Trust Bitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust’s Trading Balance with the Prime ExecutionAgent could harm the Trust’s operations, result in partial or total loss of the Trust’s assets, damage the Trust’s reputationand negatively affect the market perception of the effectiveness of the Trust, all of which could in turn reduce demand for the Shares,resulting in a reduction in the price of the Shares. The Trust may also cease operations, the occurrence of which could similarly resultin a reduction in the price of the Shares.

While the Sponsor and theTrust’s service providers have established business continuity plans and systems that they respectively believe are reasonably designedto prevent cyber attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have notbeen, or cannot be, identified. Service providers may have limited indemnification obligations to the Trust, which could be negativelyimpacted as a result.

If the Trust’s holdingsof bitcoin and ether are lost, stolen or destroyed under circumstances rendering a party liable to the Trust, the responsible party maynot have the financial resources sufficient to satisfy the Trust’s claim. For example, as to a particular event of loss, the onlysource of recovery for the Trust may be limited to the relevant custodian or, to the extent identifiable, other responsible third parties(for example, a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfya valid claim of the Trust. Similarly, as noted below, the Bitcoin and Ether Custodian and Prime Execution Agent have limited liabilityto the Trust, which could adversely affect the Trust’s ability to seek recovery from them, even when the Bitcoin and Ether Custodian’sor Prime Execution Agent’s actions or failure to act are the cause of the Trust’s loss.

It may not be possible, eitherbecause of a lack of available policies or because of prohibitive cost, for the Trust to obtain insurance that would cover losses of theTrust’s bitcoin and ether. If an uninsured loss occurs or a loss exceeds policy limits, the Trust could lose all of its assets.

The Trust’srisk management processes and policies may prove to not be adequate to prevent any loss of the Trust’s bitcoin and ether.

The Sponsor is continuingto monitor and evaluate the Trust’s risk management processes and policies and believes that the current risk management processesand procedures are reasonably designed and effective. The Sponsor believes that the security procedures that the Sponsor, Bitcoin andEther Custodian and Prime Execution Agent utilize, such as hardware redundancy, segregation and offline data storage (i.e., the maintenanceof data on computers and/or storage media that is not directly connected to or accessible from the internet and/or networked with othercomputers, also known as “cold storage”) protocols are reasonably designed to safeguard the Trust’s bitcoin and etherfrom theft, loss, destruction or other issues relating to hackers and technological attack. Despite the number of security proceduresthat the Sponsor, Bitcoin and Ether Custodian and Prime Execution Agent employ, it is impossible to guarantee the prevention of any lossdue to a security breach, software defect, act of God, pandemic or riot that may be borne by the Trust. Notwithstanding the above, theSponsor, Bitcoin and Ether Custodian and Prime Execution Agent are responsible for their own gross negligence, willful misconduct or badfaith. In the event that the Trust’s risk management processes and policies prove to not be adequate to prevent any loss of theTrust’s bitcoin and ether and such loss is not covered by insurance or is otherwise recoverable, the value of the Shares will decreaseas a result and investors would experience a decrease in the value of their investment.

The developmentand commercialization of the Trust is subject to competitive pressures.

The Trust and the Sponsorface competition with respect to the creation of competing products. The Sponsor’s competitors may have greater financial, technicaland 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 largeand established companies. If the SEC were to approve many or all of the currently pending applications for such exchange-traded bitcoinand ether products, many or all of such products, including the Trust, could fail to acquire substantial assets, initially or at all.The Trust’s competitors may also charge a substantially lower fee than the Sponsor Fee in order to achieve initial market acceptanceand scale. Accordingly, the Sponsor’s competitors may commercialize a competing product more rapidly or effectively than the Sponsoris able to, which could adversely affect the Sponsor’s competitive position and the likelihood that the Trust will achieve initialmarket acceptance, and could have a detrimental effect on the scale and sustainability of the Trust. For exchange-traded products similarto the Trust, there have been significant “first-mover” advantages in terms of asset gathering, trading volume and media coverage.In many cases, the first mover in an asset class has been able to maintain these advantages for extended periods. In the event that theSEC were to approve other exchange-traded bitcoin and ether products prior to approving the Trust, the Trust could be significantly negativelyaffected.

If the Trust fails to achievesufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue to cover the costs associated with launchingand maintaining the Trust, and such shortfalls could impact the Sponsor’s ability to properly invest in robust ongoing operationsand 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 numberof Authorized Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount inthe Shares for extended periods and the Trust’s failure to reflect the performance of the prices of bitcoin and ether.

In addition, the Trust willcompete with direct investments in bitcoin and ether, bitcoin and ether futures-based products, other digital assets and other potentialfinancial vehicles, possibly including securities backed by or linked to digital assets and other investment vehicles that focus on otherdigital assets. Market and financial conditions, and other conditions beyond the Trust’s control, may make it more attractive toinvest directly or in other vehicles, which could adversely affect the performance of the Trust.

To the extent that the Trustincurs transaction expenses in connection with the creation and redemption process, litigation expenses, indemnification obligations underthe Trust’s service provider agreements and other extraordinary expenses that are not borne by the Sponsor, such expenses will beborne by the Trust. To the extent that the Trust fails to attract a sufficiently large amount of investors, the effect of such expenseson the value of the Shares may be significantly greater than would be the case if the Trust had attracted more assets.

The lack of activetrading markets for the Shares may result in losses on investors’ investments at the time of disposition of Shares.

Although Shares are expectedto be publicly listed and traded on the Exchange, there can be no guarantee that an active trading market for the Trust will develop orbe maintained. If investors need to sell their Shares at a time when no active market for them exists, the price investors receive fortheir Shares, assuming that investors are able to sell them, likely will be lower than the price that investors would receive if an activemarket did exist and, accordingly, a Shareholder may suffer losses.

Possible illiquidmarkets may exacerbate losses or increase the variability between the Trust’s NAV and its market price.

Ether is a novel asset witha very limited trading history. Therefore, the markets for bitcoin and ether may be less liquid and more volatile than other markets formore established products, such as futures contracts for traditional physical commodities. It may be difficult to execute bitcoin andether trades at a specific price when there is a relatively small volume of buy and sell orders in the bitcoin and ether market. A marketdisruption can also make it more difficult to liquidate a position or find a suitable counterparty at a reasonable cost.

Market illiquidity may causelosses for the Trust. The large size of the positions that the Trust may acquire will increase the risk of illiquidity by both makingthe positions more difficult to liquidate and increasing the losses incurred while trying to do so should the Trust need to liquidateits bitcoin and ether. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Trust will typicallyinvest in bitcoin and ether, which is highly concentrated.

The Trust’sbitcoin and ether may be subject to loss, damage, theft or restriction on access.

There is a risk that partor all of the Trust’s bitcoin and ether could be lost, stolen or destroyed, potentially by the loss or theft of the private keysheld by the Bitcoin and Ether Custodian or Prime Execution Agent associated with Trust’s bitcoin and ether. The Sponsor believesthat the Bitcoin and Ether Custodian’s and Prime Execution Agent’s operations are an appealing target to hackers or malwaredistributors seeking to destroy, damage or steal bitcoin and ether or private keys. Although the Bitcoin and Ether Custodian and PrimeExecution Agent use multiple means and layers of security to minimize the risk of loss, damage and theft, neither the Bitcoin and EtherCustodian, the Prime Execution Agent nor the Sponsor can guarantee that such security will prevent such loss, damage or theft, whethercaused intentionally, accidentally or by act of God. Access to the Trust’s bitcoin and ether could also be restricted by naturalevents (such as an earthquake or flood), human actions (such as a terrorist attack) or security or compliance measures (such as in responseto a hard fork). Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.

Several factorsmay affect the Trust’s ability to achieve its investment objective on a consistent basis.

There is no guarantee thatthe Trust will meet its investment objectives. Factors that may affect the Trust’s ability to meet its investment objective include:(1) the Trust’s ability to purchase and sell bitcoin and ether in an efficient manner to effectuate creation and redemption orders;(2) transaction fees associated with the Bitcoin and Ethereum networks; (3) the bitcoin and ether markets becoming illiquid or disrupted;(4) the Share prices being rounded to the nearest cent and/or valuation methodologies; (5) the need to conform the Trust’s portfolioholdings to comply with investment restrictions or policies or regulatory or tax law requirements; (6) early or unanticipated closingsof the markets on which bitcoin and ether trade, resulting in the inability of the Authorized Participants to execute intended portfoliotransactions; (7) operational or methodological issues with the Pricing Benchmarks that result in the benchmark used by the Trust notaccurately representing the true value of the Trust’s bitcoin and ether holdings; and (8) accounting standards.

The amount ofbitcoin and ether represented by a Share will decline over time.

The amount of bitcoin andether represented by a Share will continue to be reduced during the life of the Trust due to the transfer of the Trust’s bitcoinand ether to pay the Sponsor Fee and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. This dynamic will occurirrespective of whether the trading price of the Shares rises or falls in response to changes in the prices of bitcoin and ether. In addition,in the very rare event that Trade Credits (as defined below) are utilized in connection with the payment of Trust expenses not assumedby the Sponsor, any interest payable on the Trade Credits will be the responsibility of the Trust.

Each outstanding Share representsa unit of undivided beneficial ownership of the Trust. The Trust does not generate any income and transfers bitcoin and ether to pay theSponsor Fee, and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. Therefore, the amount of bitcoin and etherrepresented by each Share will gradually decline over time. This is also true with respect to Shares that are issued in exchange for additionaldeposits of bitcoin and ether or cash used to acquire bitcoin and ether over time, as the amount of bitcoin and ether required to createShares proportionally reflects the amount of bitcoin and ether represented by the Shares outstanding at the time of such Basket beingcreated. Assuming a constant bitcoin and ether prices, the trading price of the Shares is expected to gradually decline relative to theprices of bitcoin and ether as the amount of bitcoin and ether represented by the Shares gradually declines.

Investors should be awarethat the gradual decline in the amount of bitcoin and ether represented by the Shares will occur regardless of whether the trading priceof the Shares rises or falls in response to changes in the price of bitcoin and ether.

Extraordinaryexpenses resulting from unanticipated events may become payable by the Trust, adversely affecting an investment in the Shares.

In consideration for the SponsorFee, the Sponsor has contractually assumed certain operational and periodic expenses of the Trust. See “ADDITIONAL INFORMATION ABOUTTHE TRUST—The Trust’s Fees and Expenses.” Extraordinary, non-recurring expenses that are not assumed by the Sponsorare borne by the Trust and paid through the sale of the Trust’s bitcoin and ether. Any incurring of extraordinary expenses by theTrust could adversely affect an investment in the Shares.

The value of theShares will be adversely affected if the Trust is required to indemnify the Trustee, the Administrator, the Transfer Agent, the Bitcoinand Ether Custodian, the Prime Execution Agent or the Cash Custodian.

Under the Trust Agreementand the Trust’s service provider agreements, each of the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, PrimeExecution Agent, Cash Custodian and Sponsor has a right to be indemnified by the Trust for any liability or expense it incurs, subjectto certain exceptions. Therefore, the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, Prime Execution Agent, CashCustodian or Sponsor may require that the assets of the Trust be sold in order to cover losses or liability suffered by it. Any sale ofthat kind would reduce the net assets of the Trust and the NAV.

Unforeseeable risks.

Bitcoin and ether have gainedcommercial acceptance only within recent years and, as a result, there is little data on their long-term investment potential. Additionally,due to the rapidly evolving nature of the bitcoin and ether markets, including advancements in the underlying technology, changes to bitcoinand ether may expose investors in the Trust to additional risks that are impossible to predict.

Regulatory Risk

Future and currentregulations by a U.S. or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust.

The regulation of bitcoinand ether and related products and services continues to evolve, may take many different forms and will, therefore, impact the Bitcoinand Ethereum networks and bitcoin and ether and their usage in a variety of manners. The inconsistent and sometimes conflicting regulatorylandscape may make it more difficult for bitcoin and ether businesses to provide services, which may impede the growth of the bitcoinand ether economies and have an adverse effect on consumer adoption of bitcoin and ether. There is a possibility of future regulatorychange altering, perhaps to a material extent, the nature of an investment in the Shares or the ability of the Trust to continue to operate.

Changes to current regulatorydeterminations of bitcoin or ether’s status under federal or state securities laws, changes to regulations surrounding bitcoin andether futures or related products, or actions by a U.S. or foreign government or quasi-governmental agency exerting regulatory authorityover bitcoin and ether, the Bitcoin and Ethereum networks, bitcoin and ether trading, or related activities impacting other parts of thedigital asset market, may adversely impact bitcoin and ether and therefore may have an adverse effect on the value of an investment inthe Trust.

The Trust is nota registered investment company and is not subject to the Commodity Exchange Act.

The Trust is not a registeredinvestment company subject to the Investment Company Act of 1940 (“Investment Company Act”). Consequently, Shareholders ofthe Trust do not have the regulatory protections provided to Shareholders in registered and regulated investment companies, which, forexample, require investment companies to have a certain percentage of disinterested directors and regulate the relationship between theinvestment company and certain of its affiliates. Further, the Trust will not hold or trade in commodity futures contracts regulated bythe Commodity Exchange Act, as administered by the CFTC. The Trust will not engage in “retail commodity transactions”—any bitcoin and ether transactions entered into on a leveraged, margined or financed basis (as described above). Such transactions aredeemed to be commodity futures under the Commodity Exchange Act and subject to CFTC jurisdiction. Furthermore, the Sponsor believes thatthe Trust is not a commodity pool for purposes of the Commodity Exchange Act. Consequently, Shareholders will not have the regulatoryprotections provided to Shareholders in Commodity Exchange Act-regulated instruments or commodity pools.

Trading on digitalasset trading platforms outside the United States is not subject to U.S. regulation and may be less reliable than U.S. trading platforms.

To the extent any of the Trust’strading is conducted on digital asset trading platforms outside the United States, trading on such trading platforms is not regulatedby any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. trading platforms. Certain foreign marketsmay be more susceptible to disruption than U.S. trading platforms. These factors could adversely affect the performance of the Trust.

As the Bitcoinand Ethereum networks and the broader digital assets ecosystem have grown, they have begun to attract more regulatory attention aroundthe globe. The future regulatory environment is uncertain and may vary by country or even within countries. Failure to appropriately regulatethe digital assets ecosystem could stifle innovation, which could adversely impact the value of the Shares.

Current and future legislation,CFTC and SEC rulemaking, and other regulatory developments may impact the manner in which bitcoin and ether are treated for classificationand clearing purposes. In particular, bitcoin and ether may be classified by the CFTC as a “commodity interest” under theCommodity Exchange Act and certain transactions in bitcoin and ether may be deemed to be commodity futures or bitcoin and ether may beclassified by the SEC as a “security” under U.S. federal securities laws. As of the date of this Prospectus, the Sponsor isnot aware of any rules that have been proposed to regulate bitcoin and ether as commodity interests or securities. Although several U.S.federal district courts have recently held for certain purposes that bitcoin and ether are commodities (distinguishable from a commodityinterest), these rulings are not definitive and the Sponsor and the Trust cannot be certain as to how future regulatory developments willimpact the treatment of bitcoin and ether under U.S. law. In the face of such developments, the required registrations and compliancesteps may result in extraordinary, non-recurring expenses to the Trust. If the Sponsor decides to terminate the Trust in response to thechanged regulatory circumstances, the Trust may be dissolved or liquidated at a time that is disadvantageous to Shareholders.

The SEC has not asserted regulatoryauthority over bitcoin or ether or trading or ownership of bitcoin or ether and has not expressed the view that bitcoin or ether shouldbe classified or treated as a security for purposes of U.S. federal securities laws. In fact, senior members of the staff of the SEC haveexpressed the view that bitcoin and ether may not be a security under federal securities laws. However, the SEC has commented on bitcoin-and ether-related market developments and has taken action against investment schemes involving bitcoin and ether. For example, in a recentletter regarding the SEC’s review of proposed rule changes to list and trade shares of certain bitcoin- and ether-related investmentvehicles on public markets, the SEC staff stated that it has significant investor protection concerns regarding the markets for digitalassets, including the potential for market manipulation and fraud. In March 2018, it was reported that the SEC was examining as many as100 investment funds with strategies focused on digital assets. The reported focus of the examinations is on the accuracy of risk disclosuresto investors in these funds, digital asset pricing practices, and compliance with rules meant to prevent the theft of investor funds,as well as on information gathering so that the SEC can better understand new technologies and investment products. It has further beenreported that some of these funds have received subpoenas from the SEC’s Enforcement Division. The SEC also has determined thatcertain digital assets are securities under U.S. securities laws. In these determinations, the SEC reasoned that the unregistered offerand sale of digital assets can, in certain circumstances, including ICOs, be considered illegal public offering of securities. A significantamount of funding for digital asset startups has come from ICOs, and if ICOs are halted or face obstacles, or companies that rely on themface legal action or investigation, it could have a negative impact on the value of digital assets, including bitcoin and ether. Finally,the SEC’s Division of Examinations (“Examinations”) has stated that digital assets are an examination priority. In particular,Examinations has expressed its intent to focus its examination on portfolio management of digital assets, safety of client funds and assets,pricing and valuation of client portfolios, compliance and internal controls, and supervision of employee outside business activities.

The SEC has stated that certaindigital assets may be considered “securities” under federal securities laws. The test for determining whether a particulardigital asset is a “security” is complex and the outcome is difficult to predict. In April 2019, the SEC’s StrategicHub for Innovation and Financial Technology published a framework for the analysis of digital assets; however, this framework is not arule, regulation or statement of the Commission and is not binding on the Commission. If Ethereum 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 havematerial adverse consequences for bitcoin and ether as digital assets. For example, it may become more difficult for bitcoin and etherto be traded, cleared and custodied as compared to other digital assets that are not considered to be securities, which could in turnnegatively affect the liquidity and general acceptance of bitcoin and ether and cause users to migrate to other digital assets. Further,if any other digital asset with widespread markets is determined to be a “security” under federal or state securities lawsby the SEC or any other agency, or in a proceeding in a court of law or otherwise, it may have material adverse consequences for bitcoinand ether as digital assets due to negative publicity or a decline in the general acceptance of digital assets. In addition, trading platformsthat feature digital assets that are determined to be securities may face penalties or be required to shut down if they do not have thelicenses required to facilitate electronic markets in securities, which could result in a reduction of the liquidity of bitcoin and ethermarkets. As such, any determination that bitcoin, ether or any other digital asset is a security under federal or state securities lawsmay adversely affect the value of bitcoin and ether and, as a result, the value of the Shares.

To the extent that bitcoinand ether are deemed to fall within the definition of a security under U.S. federal securities laws, the Trust and the Sponsor may besubject to additional requirements under the Investment Company Act and the Advisers Act. The Sponsor or the Trust may be required toregister as an investment adviser under the Advisers Act. Such additional registration may result in extraordinary, recurring and/or non-recurringexpenses of the Trust, thereby materially and adversely impacting the Shares. If the Sponsor and/or the Trust determines not to complywith such additional regulatory and registration requirements, the Sponsor may terminate the Trust. Any such termination could resultin the liquidation of the Trust’s bitcoin and ether at a time that is disadvantageous to Shareholders.

The CFTC has regulatory jurisdictionover the bitcoin and ether futures markets. In addition, because the CFTC has determined that bitcoin and ether are “commodities”under the CEA and the rules thereunder, it has jurisdiction to prosecute fraud and manipulation in the cash, or spot, markets for bitcoinand ether. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactionsinvolving bitcoin and ether that do not utilize collateral, leverage, or financing. The National Futures Association (the “NFA”)is the self-regulatory agency for the U.S. futures industry, and, as such, has jurisdiction over bitcoin and ether futures. However, theNFA does not have regulatory oversight authority for the cash or spot markets for bitcoin and ether trading or transactions.

To the extent that bitcoinand ether are deemed to fall within the definition of a “commodity interest” under the Commodity Exchange Act, the Trust andthe Sponsor may be subject to additional regulation under the Commodity Exchange Act and CFTC regulations. These additional requirementsmay result in extraordinary, recurring and/or non-recurring expenses of the Trust, thereby materially and adversely impacting the Shares.If the Sponsor and/or the Trust determines not to comply with such additional regulatory and registration requirements, the Sponsor mayterminate the Trust. Any such termination could result in the liquidation of the Trust’s bitcoin and ether at a time that is disadvantageousto Shareholders.

Further, if any other digitalasset with widespread markets is determined to be a “commodity interest” under the Commodity Exchange Act, it may have materialadverse consequences for bitcoin and ether as a digital asset due to negative publicity or a decline in the general acceptance of digitalassets. In addition, trading platforms that feature digital assets that are determined to be commodity interests may face penalties orbe required to shut down if they do not have the licenses required to facilitate the trading and clearance of such commodity interests,which could result in a reduction of the liquidity of bitcoin and ether markets.

Bitcoin and Ethereum and otherdigital assets currently face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China, the UnitedKingdom, Australia, Russia, Israel, Poland, India and Canada. Cybersecurity attacks by state actors, particularly for the purpose of evadinginternational economic sanctions, are likely to attract additional regulatory scrutiny to the acquisition, ownership, sale and use ofdigital assets, including bitcoin and ether. The effect of any existing regulation or future regulatory change on the Trust or bitcoinand ether is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Shares. Variousforeign jurisdictions have adopted, and may continue to adopt in the near future, laws, regulations or directives that affect digitalassets, particularly with respect to digital asset exchanges, trading venues and service providers that fall within such jurisdictions’regulatory scope. For example, on May 21, 2021, Chinese Vice Premier Liu He and the State Council issued a statement aiming to crack downon bitcoin mining in China. Over the subsequent weeks, multiple regions began to shut down mining operations, including what was estimatedto be the three largest Chinese mining regions in Xinjiang, Sichuan, and Inner Mongolia. This resulted in a material decrease in the globalbitcoin hash rate. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptanceof digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainabilityof the digital assets economy in these jurisdictions as well as in the United States and elsewhere, or otherwise negatively affect thevalue of digital assets, including bitcoin and ether, and, in turn, the value of the Shares.

In addition to financial regulationof bitcoin and ether, because of the high energy usage required for bitcoin mining, bitcoin may be subject to regulation stemming fromenergy usage and/or climate concerns. For example, as of December 31, 2022, approximately 245 million tera hashes are performed everysecond in connection with mining on the Bitcoin network. Although measuring the electricity consumed by this process is difficult becausethese 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 additionto the direct energy costs of performing calculations on any given digital asset network, there are indirect costs that impact a network’stotal energy consumption, including the costs of cooling the machines that perform these calculations. A number of states and countrieshave adopted, or are considering the adoption of, regulatory frameworks to impede bitcoin mining and/or bitcoin use more broadly. Forexample, on May 26, 2021, Iran placed a temporary ban on bitcoin mining in an attempt to decrease energy usage and help alleviateblackouts. New York State recently failed to pass a bill that would place a moratorium on mining operations for proof-of-work blockchainssuch as bitcoin. Depending on how futures regulations are formulated and applied, such policies could have the potential to negativelyaffect the price of bitcoin, and, in turn, the value of the Shares. Increased regulation and the corresponding compliance cost of theseregulations could additionally result in higher barriers to entry for bitcoin miners, which could increase the concentration of the hashrate, potentially having a negative impact on the price of bitcoin.

Notwithstanding Ethereum’smove to proof-of-stake, if regulators or public utilities take action that restricts or otherwise impacts mining activities generally,such actions could result in decreased security of a digital asset network, including the Bitcoin and Ethereum networks, and consequentlyadversely impact the value of the Shares. This could adversely affect the price of ether, or the operation of the Bitcoin and Ethereumnetworks, and accordingly decrease the value of the Shares, by creating negative sentiment around digital assets generally.

It may be illegalnow, or in the future, to acquire, own, hold, sell or use bitcoin and ether in one or more countries, and ownership of, holding or tradingin the Shares may also be considered illegal and subject to sanction.

Although currently bitcoinand ether are not regulated or is lightly regulated in most countries, including the United States, one or more countries such as China,India or Russia may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use bitcoinand ether or to exchange bitcoin and ether for fiat currency. Such an action may also result in the restriction of ownership, holdingor trading in the Shares. Such a restriction could result in the termination and liquidation of the Trust at a time that is disadvantageousto Shareholders, or may adversely affect an investment in the Shares.

Tax Risk

The IRS may disagreewith or seek to challenge the Trust’s treatment as a grantor trust.

The Sponsor intends to takethe position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes. Assuming that the Trust is agrantor trust, the Trust will not be subject to U.S. federal income tax. Rather, if the Trust is a grantor trust, each beneficial ownerof Shares will be treated as directly owning its pro rata share of the Trust’s assets and a pro rata portion of the Trust’sincome, gain, losses and deductions will “flow through” to each beneficial owner of Shares.

Shareholders couldincur a tax liability without an associated distribution of the Trust.

In the normal course of business,it is possible that the Trust could incur a taxable gain in connection with the sale of bitcoin and ether (including deemed sales of bitcoinand ether as a result of the Trust using bitcoin and ether to pay its expenses, including the Sponsor Fee) that is otherwise not associatedwith a distribution to Shareholders, or in connection with the receipt cash from the Sponsor in connection with the Sponsor’s saleof Incidental Right(s) and/or IR Asset(s). Shareholders may be subject to tax due to the grantor trust status of the Trust even thoughthere is not a corresponding distribution from the Trust.

The tax treatmentof bitcoin and ether and transactions involving bitcoin and ether for U.S. federal income tax purposes may change.

The tax treatment of digitalassets is still evolving and subject to change. Current IRS guidance indicates that bitcoin and ether should be treated as property forfederal income tax purposes and that transactions involving the exchange of bitcoin and ether in return for goods and services shouldbe treated as barter exchanges. Such guidance allows transactions in bitcoin and ether to qualify for beneficial capital gains treatment.However, because bitcoin and ether are new technological innovations, the U.S. federal income tax treatment of an investment in bitcoinand ether or in transactions relating to investments in bitcoin and ether, including without limitation the tax treatment of a fork orairdrop, may evolve and change from those described in this Prospectus, possibly with retroactive effect. For example, current guidanceindicates that digital asset currencies are neither collectibles nor currencies for the purposes of determining the applicable tax rate;however, the IRS has statutory authority to change its position. If the IRS were to determine that digital assets were collectibles ora currency, the tax rate incurred by investors would be higher. Additional disclosure requirements may also apply to an investment indigital assets. Investors should consult their individual tax advisers to determine if such disclosure requirements apply to them.

Any change in the U.S. federalincome tax treatment of bitcoin and ether may have a negative effect on the prices of bitcoin and ether and may adversely affect the valueof the Shares. Whether any additional guidance will adversely affect the U.S. federal income tax treatment of an investment in bitcoinand ether or in transactions relating to investments in bitcoin and ether is unknown. There can be no assurance that the IRS will notalter its position with respect to digital assets in the future or that a court would uphold the treatment set forth in the Notice andthe Rulings & FAQs.

The tax treatmentof bitcoin and ether and transactions involving bitcoin and ether for state and local tax purposes is not settled.

Because bitcoin and etherare new technological innovations, the tax treatment of bitcoin and ether for state and local tax purposes, including without limitationstate and local income and sales and use taxes, is not settled. It is uncertain what guidance, if any, on the treatment of bitcoin andether for state and local tax purposes may be issued in the future. A state or local government authority’s treatment of bitcoinand ether may have negative consequences, including the imposition of a greater tax burden on investors in bitcoin and ether or the impositionof a greater cost on the acquisition and disposition of bitcoin and ether generally. Any such treatment may have a negative effect onthe prices of bitcoin and ether and may adversely affect the value of the Shares.

A “fork”of the Bitcoin and Ethereum blockchains or an airdrop could result in Shareholders incurring a tax liability.

If a fork occurs in the Bitcoinor Ethereum blockchains, the Trust Agreement requires that the Sponsor analyze the transaction according to several criteria and promptlydetermine which digital asset network is generally accepted as the Bitcoin or Ethereum networks and should therefore be considered theappropriate 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 or Ethereum, users, services,businesses, validators and other constituencies, as well as the actual continued acceptance of, validating power on, and community engagementwith, the Bitcoin or Ethereum networks. The outcome of such determination shall determine which asset is “bitcoin” or “ether”and which is the Forked Asset, an IR Asset. Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rightsand IR Assets, including Forked Assets. Such assets are not considered assets of the Trust at any point in time. Once it has been determinedby the Sponsor which asset is bitcoin or ether and which is the Forked Asset, the Sponsor will, as soon as practicable, and, if possible,immediately, distribute the Forked Asset to the Sponsor. Once acquired, the Sponsor may take any lawful action necessary or desirablein connection with its acquisition of such asset. In the event that the Sponsor decides to sell the Forked Asset, it will seek to do sofor cash. This may be a sale of the Forked Asset directly in exchange for cash, or in exchange for another digital asset which may subsequentlybe exchanged for cash. The Sponsor would then contribute that cash back to the Trust, which in turn would distribute the cash to DTC tobe distributed to Shareholders in proportion to the number of Shares owned. The receipt of cash in connection with this distribution maycause Shareholders to incur a U.S. federal, state, local, or foreign tax liability. In addition, the IRS may not accept the Trust’sposition that disclaimed Incidental Rights or IR Assets do not represent a taxable incident. Any tax liability could adversely impactan investment in the Shares and may require Shareholders to prepare and file tax returns. Any tax liability could adversely impact aninvestment in the Shares and may require Shareholders to prepare and file tax returns.

Under the IRS guidance ondigital assets, hard forks, airdrops and similar occurrences with respect to digital assets will under certain circumstances be treatedas taxable events giving rise to ordinary income. In the absence of guidance to the contrary, it is possible that any such income recognizedby a U.S. tax-exempt Shareholder would constitute “unrelated business taxable income” (“UBTI”). A tax-exempt Shareholdershould consult its tax adviser regarding whether such Shareholder may recognize UBTI as a consequence of an investment in Shares.

Non-U.S. Holdersmay be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences.

IRS guidance on digital assetsdoes not address whether income recognized by a non-U.S. person as a result of a fork, airdrop or similar occurrence could be subjectto the 30% withholding tax imposed on U.S.-source “fixed or determinable annual or periodical” income. Non-U.S. Shareholdersshould assume that, in the absence of guidance, a withholding agent (including the Sponsor) is likely to withhold 30% of any such incomerecognized 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 cash in connection with the Sponsor’s saleof an IR Right and/or IR Asset and contributing such cash back to the Trust.

Other Risks

As a new fund,there is no guarantee that an active trading market for the Shares will develop. To the extent that no active trading market developsand the assets of the Trust do not reach a viable size, the liquidity of the Shares may be limited or the Trust may be terminated at theoption of the Sponsor.

As a new fund, there can beno assurance that the Trust will grow to or maintain an economically viable size, in which case the Sponsor may elect to terminate theTrust, which could result in the liquidation of the Trust’s bitcoin and ether at a time that is disadvantageous to an investor inthe Shares. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenueto cover the costs associated with launching and maintaining the Trust, and such shortfalls could impact the Sponsor’s ability toproperly invest in robust ongoing operations and controls of the Trust to minimize the risk of operating events, errors, or other formsof losses to the Shareholders.

In addition, the Trust mayalso fail to attract adequate liquidity in the secondary market due to such competition, resulting in a sub-standard number of AuthorizedParticipants willing to make a market in the Shares, which in turn could result in a significant premium or discount in the Shares forextended periods and the Trust’s failure to reflect the performance of the prices of bitcoin and ether.

The Trust maybe required to terminate and liquidate at a time that is disadvantageous to Shareholders.

If the Trust is required toterminate and liquidate, such termination and liquidation could occur at a time that is disadvantageous to Shareholders, such as whenthe prices of bitcoin and ether are lower than they was at the time when Shareholders purchased their Shares. In such a case, when theTrust’s bitcoin and ether is sold as part of the Trust’s liquidation, the resulting proceeds distributed to Shareholders willbe less than if the prices of bitcoin and ether were higher at the time of sale. See “ADDITIONAL INFORMATION ABOUT THE TRUST—Terminationof the Trust” for more information about the termination of the Trust, including when the termination of the Trust may be triggeredby events outside the direct control of the Sponsor, the Trustee or Shareholders.

The Exchange onwhich the Shares are listed may halt trading in the Shares, which would adversely impact an investor’s ability to sell Shares.

The Shares are listed fortrading on the Exchange under the market symbol “[___].” Trading in Shares may be halted due to market conditions or, in lightof the Exchange rules and procedures, for reasons that, in the view of the Exchange, make trading in Shares inadvisable. In addition,trading is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that requiretrading to be halted for a specified period based on a specified market decline. Additionally, there can be no assurance that the requirementsnecessary to maintain the listing of the Shares will continue to be met or will remain unchanged.

The liquidityof the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the marketprice of the Shares.

In the event that one or moreAuthorized Participants or market makers that have substantial interests in the Shares withdraw or “step away” from participationin the purchase (creation) or sale (redemption) of the Shares, the liquidity of the Shares will likely decrease, which could adverselyaffect the market price of the Shares and result in investors incurring a loss on their investment.

The market infrastructureof the bitcoin and ether spot markets could result in the absence of active Authorized Participants able to support the trading activityof the Trust.

Ether is extremely volatile,and concerns exist about the stability, reliability and robustness of many digital asset trading platforms where bitcoin and ether trade.In a highly volatile market, or if one or more digital asset trading platforms supporting the bitcoin and ether markets face an issue,it could be extremely challenging for any Authorized Participants to provide continuous liquidity in the Shares. There can be no guaranteethat the Sponsor will be able to find an Authorized Participant to actively and continuously support the Trust.

Digital assettrading platforms are not subject to the same regulatory oversight as traditional equity exchanges, which could negatively impact theability of Authorized Participants to implement arbitrage mechanisms.

The trading for bitcoin andether occurs on multiple digital asset trading platforms that have various levels and types of regulation, but are not regulated in thesame manner as traditional stock and bond exchanges. If these digital asset trading platforms do not operate smoothly or face technical,security or regulatory issues, that could impact the ability of Authorized Participants to make markets in the Shares. In such an event,trading in the Shares could occur at a material premium or discount against the NAV.

The AuthorizedParticipants serve in such capacity for several competing exchange-traded bitcoin and ether products, which could adversely affect themarket for the Shares.

Only an Authorized Participantmay engage in creation or redemption transactions directly with the Trust. Some or all of the Trust’s Authorized Participants areexpected to serve as authorized participants or market makers for one or more exchange-traded bitcoin and ether products that competewith the Trust. This may make it more difficult to engage or retain Authorized Participants for the Trust. Furthermore, because thereis no obligation on the part of the Authorized Participants to engage in creation and redemption or market making activities with respectto the Trust’s Shares, decisions by the Authorized Participants to not engage with the Trust or its Shares may result in a declinein the liquidity of the Shares and the price of the Shares may fluctuate independently of the prices of Trust’s bitcoin and ether(i.e., at a greater premium or discount to the Trust’s NAV).

Shareholders thatare not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated withtrading in secondary markets may adversely affect investors’ investment in the Shares.

Only Authorized Participantsmay purchase or redeem Baskets. All other investors that desire to purchase or sell Shares must do so through the Exchange or in othermarkets, if any, in which the Shares may be traded. Shares may trade at a premium or discount to the NAV per Share.

The Sponsor isleanly staffed and relies heavily on key personnel to manage its activities.

The Sponsor is leanly staffedand relies heavily on key personnel to manage its activities. These key personnel intend to allocate their time managing the Trust ina manner that they deem appropriate. If such key personnel were to leave or be unable to carry out their present responsibilities, itmay have an adverse effect on the management of the Sponsor.

Conducting creationsand redemptions for cash has drawbacks.

In the near term, the Trustwill effect all of its creations and redemptions for cash, rather than in kind. The use of cash creations and redemptions may cause Sharesto trade in the market at greater bid-ask spreads or greater premiums or discounts to their NAV per Share. The use of cash for redemptionswill also limit the tax efficiency of the Trust. Additionally, the Trust’s need to purchase bitcoin and ether in connection withcreation orders introduces the possibility that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoinand ether by the Pricing Benchmarks, the rate used to calculate the Trust’s NAV. This is known as “slippage.” Whiletransactions in any asset are subject to the risk of slippage, it is possible that transactions in digital assets may be more susceptible.The Trust seeks to minimize the risk of slippage by basing the amount of cash an Authorized Participant is required to deposit to consummatea creation order for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and etherascribed by the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippagefrom time to time. The Trust will also incur transaction costs it would not otherwise have incurred if it received and distributed bitcoinand ether in kind and was not required to purchase and sell bitcoin and ether in connection with creation and redemption orders.

As of the date of this prospectus,the Trust only creates and redeems Shares in exchange for cash. If the Trust were to create or redeem Shares in exchange for bitcoin andether, the Trust would first need to seek certain regulatory approvals, including an amendment to Exchange’s listing rules and anamendment to the Trust’s registration statement of which this prospectus forms a part. There can be no guarantee that the Trustwill be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successfulin obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders ina prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.

Potential conflictsof interest may arise among the Sponsor or its affiliates and the Trust.

The Trust operations willbe managed by the Sponsor. It is possible that conflicts may arise between the Sponsor, affiliates, the Trust and its Shareholders.

In resolving conflicts ofinterest, the Sponsor is allowed to take into account the interests of other parties. Conflicts of interest may arise as a result of:

By investing in the Shares,investors agree and consent to the provisions set forth in the Trust Agreement.

For a further discussion ofthe conflicts of interest among the Sponsor, Bitcoin and Ether Custodian, Cash Custodian, Trust and others, see “Conflicts ofInterest.”

The Trust is new,and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders.

The Trust is new. If the Trustdoes not attract sufficient assets to remain open, then the Trust could be terminated and liquidated at the direction of the Sponsor.Termination and liquidation of the Trust could occur at a time that is disadvantageous to Shareholders. When the Trust’s assetsare sold as part of the Trust’s liquidation, the resulting proceeds distributed to Shareholders may be less than those that maybe realized in a sale outside of a liquidation context. Investors may be adversely affected by redemption or creation orders that aresubject to postponement, suspension or rejection under certain circumstances.

The Sponsor maydiscontinue its services, which may be detrimental to the Trust.

Sponsor may be unwilling orunable to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities and is unable tobe replaced, the Trust may have to terminate and liquidate the bitcoin and ether held by the Trust. A substitute sponsor’s appointmentwill not guarantee the Trust’s continued operation even if a substitute sponsor is found, the appointment of a substitute sponsormay not necessarily be beneficial to the Trust or an investment in the Shares and the Trust may terminate.

Any of the serviceproviders could resign or be removed by the Trust, which could trigger early termination of the Trust.

Any service provider may resignor be removed under its respective governing agreement. The Trust may dissolve in accordance with the terms of the Trust Agreement ifany service provider resigns or is removed and is unable to be replaced.

The lack of independentadvisers representing investors in the Trust may cause Shareholders to be adversely affected.

Counsel, accountants and otheradvisers have been consulted by the Sponsor regarding the formation and operation of the Trust. Potential investors should consult theirown legal, tax and financial advisers regarding the desirability of an investment in the Shares. No counsel has been appointed to representan investor in connection with the offering of the Shares. Failure to consult with their own legal, tax and financial advisers may leadto Shareholders making an undesirable investment decision with respect to investment in the Shares.

No separate counsel;no responsibility or independent verification.

Chapman and Cutler LLP representsthe Sponsor. The Trust does not have counsel separate and independent from counsel to the Sponsor. Chapman and Cutler LLP does not representShareholders, and no independent counsel has been retained to represent Shareholders. Chapman and Cutler LLP is not responsible for anyacts or omissions of the Sponsor, the Administrator, the Trustee, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime ExecutionAgent, a Digital Asset Trading Counterparty, the Transfer Agent or the Trust (including their compliance with any guidelines, policies,restrictions or applicable law, or the selection, suitability or advisability of their investment activities) or any administrator, accountant,custodian or other service provider to the Sponsor, Trustee or the Trust. This Prospectus was prepared based on information provided bythe Sponsor, the Administrator, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime Execution Agent, the Transfer Agent, andthe Trustee, in good faith and based on reasonable best efforts to ensure the information is accurate as of the date of this Prospectus,and Chapman and Cutler LLP has not independently verified such information.

Shareholders donot have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and bylimited voting and distribution rights.

The Shares have limited votingand distribution rights under the Trust Agreement. For example, except as required under applicable federal law or under the rules orregulations of the Exchange, Shareholders have no voting rights and take no part in the management or control of, and have no voice in,the Trust’s operations or business. The Trust may enact splits or reverse splits without Shareholder approval, and the Trust isnot required to pay regular distributions. The Trust will not have regular Shareholder meetings. The right to authorize actions, appointservice providers or take other actions will not be held by Shareholders, unlike shareholders of other trusts.

An investmentin the Trust may be adversely affected by competition from other investment vehicles focused on bitcoin and ether or other digital assets.

The Trust will compete withdirect investments in bitcoin and ether, other digital assets and other potential financial vehicles, possibly including securities backedby or linked to digital assets and other investment vehicles that focus on other digital assets. Market and financial conditions, andother conditions beyond the Trust’s control, may make it more attractive to invest in other vehicles, which could adversely affectthe performance of the Trust.

Investors cannotbe assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.

Investors cannot be assuredthat the Sponsor will be able to continue to service the Trust for any length of time. If the Sponsor discontinues its activities on behalfof the Trust, the Trust may be adversely affected, as there may be no entity servicing the Trust for a period of time. Such an event couldresult in termination of the Trust.

The liabilityof the Sponsor and the Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required to indemnifythe Trustee or the Sponsor.

Under the Trust Agreement,the Trustee and the Sponsor are not liable, and have the right to be indemnified, for any liability or expense incurred absent gross negligenceor willful misconduct on the part of the Trustee or the Sponsor or breach by the Sponsor of the Trust Agreement, as the case may be. Asa result, the Sponsor may require the assets of the Trust to be sold in order to cover losses or liability suffered by it. Any sale ofthat kind would reduce the NAV of the Trust and the value of its Shares.

Shareholders’limited rights of legal recourse against the Trust, Sponsor, Administrator, Transfer Agent, Cash Custodian, Prime Execution Agent andBitcoin and Ether Custodian and the Trust’s lack of direct insurance protection expose the Trust and its Shareholders to the riskof loss of the Trust’s bitcoin and ether for which no person is liable.

The Trust is not a bankinginstitution and is not a member of the FDIC or Securities Investor Protection Corporation (“SIPC”) and, therefore, investmentsin the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. Likewise, the Bitcoin andEther Custodian is not a depository institution and is not a member of the FDIC or SIPC and, therefore, the Trust’s assets heldwith the Bitcoin and Ether Custodian are not subject to FDIC or SIPC insurance coverage. In addition, neither the Trust nor the Sponsorinsures the Trust’s bitcoin and ether. The Bitcoin and Ether Custodian’s parent, Coinbase Global, Inc. (“Coinbase Global”),maintains a commercial crime insurance policy of up to $320 million, which is intended to cover the loss of client assets held by CoinbaseGlobal and all of its subsidiaries, including the Bitcoin and Ether Custodian and the Prime Execution Agent (collectively, Coinbase Globaland its subsidiaries are referred to as the “Coinbase Insureds”), including from employee collusion or fraud, physical lossincluding theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by Coinbase Globalis shared among all of Coinbase’s customers, is not specific to the Trust or to customers holding bitcoin and ether with the Bitcoinand Ether Custodian or Prime Execution Agent, and may not be available or sufficient to protect the Trust from all possible losses orsources of losses. Coinbase Global’s insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trustmay be forced to share such insurance proceeds with other clients or customers of the Coinbase Insureds, which could reduce the amountof such proceeds that are available to the Trust. In addition, the bitcoin and ether insurance market is limited, and the level of insurancemaintained by Coinbase Global may be substantially lower than the assets of the Trust. While the Bitcoin and Ether Custodian maintainscertain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means tocover client asset losses, the Trust cannot be assured that the Bitcoin and Ether Custodian will maintain capital reserves sufficientto cover actual or potential losses with respect to the Trust’s digital assets.

Furthermore, under the Bitcoinand Ether Custody Agreement, the Bitcoin and Ether Custodian’s liability is limited as follows, among others: (i) other than withrespect to claims and losses arising from spot trading of bitcoin and ether, or fraud or willful misconduct, the Mutually Capped Liabilities(defined below), the Bitcoin and Ether Custodian’s aggregate liability under the Bitcoin and Ether Custody Agreement shall not exceedthe greater of (A) the greater of (x) $5 million and (y) the aggregate fees paid by the Trust to the Bitcoin and Ether Custodian in the12 months prior to the event giving rise to the Bitcoin and Ether Custodian’s liability, and (B) the value of the affected bitcoinand ether or cash giving rise to the Bitcoin and Ether Custodian’s liability; (ii) in respect of the Bitcoin and Ether Custodian’sobligations to indemnify the Trust and its affiliates against third-party claims and losses to the extent arising out of or relating to,among others, the Bitcoin and Ether Custodian’s gross negligence, violation of its confidentiality, data protection and/or informationsecurity obligations, or violation of any law, rule or regulation with respect to the provision of its services (the “Mutually CappedLiabilities”), the Bitcoin and Ether Custodian’s liability shall not exceed the greater of (A) $5 million and (B) the aggregatefees paid by the Trust to the Bitcoin and Ether Custodian in the 12 months prior to the event giving rise to the Bitcoin and Ether Custodian’sliability; and (iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin and EtherCustodian is not liable, even if the Bitcoin and Ether Custodian has been advised of or knew or should have known of the possibility thereof.In general, the Bitcoin and Ether Custodian is not liable under the Bitcoin and Ether Custody Agreement unless in the event of its negligence,fraud, material violation of applicable law or willful misconduct. The Bitcoin and Ether Custodian is not liable for delays, suspensionof operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond thereasonable control of the Bitcoin and Ether Custodian. In the event of potential losses incurred by the Trust as a result of the Bitcoinand Ether Custodian losing control of the Trust’s bitcoin and ether or failing to properly execute instructions on behalf of theTrust, the Bitcoin and Ether Custodian’s liability with respect to the Trust will be subject to certain limitations which may allowit to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Bitcoin andEther Custodian directly caused such losses.

Similarly, under the PrimeExecution Agreement, the Prime Execution Agent’s liability is limited as follows, among others: (i) other than with respect to claimsand losses arising from spot trading of bitcoin and ether, or fraud or willful misconduct, or the PB Mutually Capped Liabilities (definedbelow), the Prime Execution Agent’s aggregate liability shall not exceed the greater of (A) the greater of (x) $5 million and (y)the aggregate fees paid by the Trust to the Prime Execution Agent in the 12 months prior to the event giving rise to the Prime ExecutionAgent’s liability, and (B) the value of the cash or affected bitcoin and ether giving rise to the Prime Execution Agent’sliability; (ii) in respect of the Prime Execution Agent’s obligations to indemnify the Trust and its affiliates against third-partyclaims and losses to the extent arising out of or relating to, among others, the Prime Execution Agent’s gross negligence, violationof its confidentiality, data protection and/or information security obligations, violation of any law, rule or regulation with respectto the provision of its services, or the full amount of the Trust’s assets lost due to the insolvency of or security event at aConnected Trading Venue (as defined below) (the “PB Mutually Capped Liabilities”), the Prime Execution Agent’s liabilityshall not exceed the greater of (A) $5 million and (B) the aggregate fees paid by the Trust to the Prime Execution Agent in the 12 monthsprior to the event giving rise to the Prime Execution Agent’s liability; and (iii) in respect of any incidental, indirect, special,punitive, consequential or similar losses, the Prime Execution Agent is not liable, even if the Prime Execution Agent has been advisedof or knew or should have known of the possibility thereof. In general, with limited exceptions (such as for failing to execute an order),the Prime Execution Agent is not liable under the Prime Execution Agreement unless in the event of its gross negligence, fraud, materialviolation of applicable law or willful misconduct. The Prime Execution Agent is not liable for delays, suspension of operations, failurein performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of thePrime Execution Agent. These and the other limitations on the Prime Execution Agent’s liability may allow it to avoid liabilityfor potential losses or may be insufficient to cover the value of such potential losses, even if the Prime Execution Agent directly causedsuch losses. Both the Trust and the Prime Execution Agent and its affiliates (including the Bitcoin and Ether Custodian) are requiredto indemnify each other under certain circumstances.

Moreover, in the event ofan insolvency or bankruptcy of the Prime Execution Agent (in the case of the Trading Balance) or the Bitcoin and Ether Custodian (in thecase of the Trust Bitcoin and Ether Account) in the future, given that the contractual protections and legal rights of customers withrespect to digital assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Bitcoinand Ether Custodian or Prime Execution Agent in the virtual currency industry, there is a risk that customers’ assets—includingthe Trust’s assets—may be considered the property of the bankruptcy estate of the Prime Execution Agent (in the case of theTrading Balance) or the Bitcoin and Ether Custodian (in the case of the Trust Bitcoin and Ether Account), and customers—includingthe Trust—may be at risk of being treated as general unsecured creditors of such entities and subject to the risk of total lossor markdowns on value of such assets.

The Bitcoin and Ether CustodyAgreement contains an agreement by the parties to treat the bitcoin and ether credited to the Trust Bitcoin and Ether Account as financialassets under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition to stating that the Bitcoin andEther Custodian will serve as fiduciary and custodian on the Trust’s behalf. The Bitcoin and Ether Custodian’s parent, CoinbaseGlobal Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisionsrelating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event theBitcoin and Ether Custodian were to experience insolvency. However, due to the novelty of digital asset custodial arrangements courtshave not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how theywould rule in such a scenario. If the Bitcoin and Ether Custodian became subject to insolvency proceedings and a court were to rule thatthe custodied bitcoin and ether were part of the Bitcoin and Ether Custodian’s general estate and not the property of the Trust,then the Trust would be treated as a general unsecured creditor in the Bitcoin and Ether Custodian’s insolvency proceedings andthe Trust could be subject to the loss of all or a significant portion of its assets. Moreover, in the event of the bankruptcy of theBitcoin and Ether Custodian, an automatic stay could go into effect and protracted litigation could be required in order to recover theassets held with the Bitcoin and Ether Custodian, all of which could significantly and negatively impact the Trust’s operationsand the value of the Shares.

With respect to the PrimeExecution Agreement, there is a risk that the Trading Balance, in which the Trust’s bitcoin and ether and cash is held in omnibusaccounts by the Prime Execution Agent (in the latter case, as described below in “RISK FACTORS—Loss of a critical bankingrelationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust’s ability to createor redeem Baskets, or could cause losses to the Trust”), could be considered part of the Prime Execution Agent’s bankruptcyestate in the event of the Prime Execution Agent’s bankruptcy. The Prime Execution Agreement contains an Article 8 opt-in clausewith respect to the Trust’s assets held in the Trading Balance.

The Prime Execution Agentis not required to hold any of the bitcoin and ether or cash in the Trust’s Trading Balance in segregation. Within the Trading Balance,the Prime Execution Agreement provides that the Trust does not have an identifiable claim to any particular bitcoin and ether (and cash).Instead, the Trust’s Trading Balance represents an entitlement to a pro rata share of the bitcoin and ether (and cash) the PrimeExecution Agent has allocated to the omnibus wallets the Prime Execution Agent holds, as well as the accounts in the Prime Execution Agent’sname that the Prime Execution Agent maintains at Connected Trading Venues (the “Connected Trading Venue”) (which are typicallyheld on an omnibus, rather than segregated, basis). If the Prime Execution Agent suffers an insolvency event, there is a risk that theTrust’s assets held in the Trading Balance could be considered part of the Prime Execution Agent’s bankruptcy estate and theTrust could be treated as a general unsecured creditor of the Prime Execution Agent, which could result in losses for the Trust and Shareholders.Moreover, in the event of the bankruptcy of the Prime Execution Agent, an automatic stay could go into effect and protracted litigationcould be required in order to recover the assets held with the Prime Execution Agent, all of which could significantly and negativelyimpact the Trust’s operations and the value of the Shares.

Under the Trust Agreement,the Sponsor will not be liable for any liability or expense incurred, including, without limitation, as a result of any loss of bitcoinand ether by the Bitcoin and Ether Custodian or Prime Execution Agent, absent gross negligence, bad faith or willful misconduct on thepart of the Sponsor. As a result, the recourse of the Trust or the Shareholders to the Sponsor, including in the event of a loss of bitcoinand ether by the Bitcoin and Ether Custodian or Prime Execution Agent, is limited.

The Shareholders’ recourseagainst the Sponsor and the Trust’s other service providers for the services they provide to the Trust, including, without limitation,those relating to the holding of bitcoin and ether or the provision of instructions relating to the movement of bitcoin and ether, islimited. For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates nor any other party has guaranteedthe assets or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities of any service providerto the Trust, including, without limitation, the Bitcoin and Ether Custodian and Prime Execution Agent. The Prime Execution Agreementand Bitcoin and Ether Custody Agreement provide that neither the Sponsor nor its affiliates shall have any obligation of any kind or naturewhatsoever, by guaranty, enforcement or otherwise, with respect to the performance of any of the Trust’s obligations, agreements,representations or warranties under the Prime Execution Agreement or Bitcoin and Ether Custody Agreement or any transaction thereunder.Consequently, a loss may be suffered with respect to the Trust’s bitcoin and ether that is not covered by Coinbase Global’sinsurance and for which no person is liable in damages. As a result, the recourse of the Trust or the Shareholders, under applicable law,is limited.

During the rareand limited circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. If the Trade Credits are notavailable or become exhausted, the Trust may face delays in buying or selling bitcoin and ether that may adversely impact Shareholders;if the Trust does not repay the Trade Credits on time, its assets may be liquidated by the Trade Credit Lender and its affiliates.

During the rare and limitedcircumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits (defined below). To avoid having to pre-fundpurchases or sales of bitcoin and ether, the Trust may borrow bitcoin, ether or cash as trade credit (“Trade Credit”) fromCoinbase Credit, Inc. (the “Trade Credit Lender”) on a short-term basis pursuant to the Coinbase Credit Committed Trade FinancingAgreement (the “Trade Financing Agreement”). The Trade Credit Lender is only required to extend Trade Credits to the Trustto the extent such bitcoin, ether or cash is actually available to the Trade Credit Lender. To the extent that Trade Credits are not availableor become exhausted, (1) there may be delays in the buying and selling of bitcoin and ether related to cash creations and redemptionsor the selling of bitcoin and ether related to paying Trust expenses not assumed by the Sponsor, to the extent applicable, (2) Trust assetsmay be in held the Trading Balance for a longer duration than if Trade Credits were available, and (3) the execution price associatedwith such trades may deviate significantly from the Pricing Benchmarks price used to determine the NAV of the Trust. To the extent thatthe execution price for purchases and sales of bitcoin and ether deviate significantly from the Pricing Benchmarks price used to determinethe Trust’s NAV, Shareholders may be negatively impacted because the added costs of such price deviations would be incurred by theAuthorized Participants and may be passed onto the Shareholders in the secondary market.

To the extent the Trustutilizes Trade Credits when using the Agent Execution Model, such Trade Credits are secured by the Trust’s assets, including anycash and bitcoin and ether held in the Trading Balance with the Prime Execution Agent and the Trust Bitcoin and Ether Account held withthe Bitcoin and Ether Custodian, and such assets may be liquidated by the Trade Credit Lender to repay Trade Credit debt owed by the Trustin the event the Trust fails to repay the Trade Credit debt.

During the rare and limitedcircumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. The Trust generally must repay Trade Creditsby 6:00 p.m. ET on the calendar day immediately following the day the Trade Credit was extended by the Trade Credit Lender to the Trust(or, if such day is not a business day, on the next business day). Pursuant to the Trade Financing Agreement, the Trust has granted asecurity interest, lien on, and right of set off against all of the Trust’s right, title and interest, in the Trust’s TradingBalance and Trust Bitcoin and Ether Account established pursuant to the Prime Execution Agreement and Bitcoin and Ether Custody Agreement,in order to secure the repayment by the Trust of the Trade Credits and financing fees to the Trade Credit Lender. Upon a Termination forCause, as defined in the Prime Execution Agreement, which includes a failure by the Trust to pay and settle in full its obligations tothe Trade Credit Lender in respect of the financing it provides to the Trust in the form of Trade Credits, the Bitcoin and Ether Custodianand the Prime Execution Agent have agreed to comply with instructions from the Trade Credit Lender with respect to the disposition ofthe assets in the Trust Bitcoin and Ether Account and Trading Balance respectively without further consent by the Trust. If the Trustfails to repay the Trade Credits to the Trade Credit Lender on time and in full, the Trade Credit Lender can take control of the Trust’sassets and liquidate them to repay the Trade Credit debt owed by the Trust to the Trade Credit Lender.

Loss of a criticalbanking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust’s abilityto create or redeem Baskets, or could cause losses to the Trust, in the limited circumstances when the Trust utilizes the Agent ExecutionModel.

The Prime Execution Agentrelies on bank accounts to provide its trading platform services and including temporarily holding any cash related to a customer’spurchase or sale of bitcoin and ether. In particular, the Prime Execution Agent has disclosed that customer cash held by the Prime ExecutionAgent, including the cash associated with the Trust’s Trading Balance, is held in one or more banks’ accounts for the benefitof the Prime Execution Agent’s customers, or in money market funds in compliance with Rule 2a-7 under the Investment Company Actand rated “AAA” by S&P (or the equivalent from any eligible rating service), provided that such investments are held inaccounts in Coinbase’s name for the benefit of customers and are permitted and held in accordance with state money transmitter laws(“Money Market Funds”). The Prime Execution Agent has represented to the Sponsor that it has implemented the following policywith respect to the cash associated with the Trust’s Trading Balance. First, any cash related to the Trust’s purchase or saleof bitcoin and ether will be held in an omnibus account in the Prime Execution Agent’s name for the benefit of (“FBO”)its customers at each of multiple FDIC-insured banks (an “FBO Account”), or in a Money Market Fund. The amount of Trust cashheld at each FBO Account shall be in an amount at each bank that is the lower of (i) the FDIC insurance limit for deposit insurance and(ii) any bank-specific limit set by the Prime Execution Agent for the applicable bank. Deposit insurance does not apply to cash held ina Money Market Fund. The Prime Execution Agent has agreed to title the accounts in a manner designed to enable receipt of FDIC depositinsurance where applicable on a pass-through basis, but does not guarantee that pass-through insurance will apply since such insuranceis dependent on the compliance of the bank. Second, to the extent the Trust’s cash in the Trading Balance in aggregate exceeds theamounts that can be maintained at the banks on the foregoing basis, the Prime Execution Agent has represented that it currently conductsan overnight sweep of the excess into U.S. government money market funds. The Sponsor has not independently verified the Prime ExecutionAgent’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 partnersand the inability of the Prime Execution Agent to utilize other financial institutions may result in a disruption of creation and redemptionactivity of the Trust, or cause other operational disruptions or adverse effects for the Trust. In the future, it is possible that thePrime Execution Agent could be unable to establish accounts at new banking partners or establish new banking relationships, or that thebanks with which the Prime Execution Agent is able to establish relationships may not be as large or well-capitalized or subject to thesame degree of prudential supervision as the existing providers.

The Trust could also sufferlosses in the event that a bank in which the Prime Execution Agent holds customer cash, including the cash associated with the Trust’sTrading Balance (which is used by the Prime Execution Agent to move cash flows associated with the Trust’s orders to sell bitcoinand ether in connection with payment of Trust expenses not assumed by the Sponsor), fails, becomes insolvent, enters receivership, istaken 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 Protectionand Innovation (“DFPI”) announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023, Silicon ValleyBank (“SVB”) was closed by the DFPI, which appointed the FDIC as receiver. Similarly, on March 12, 2023, the New York Departmentof Financial Services took possession of Signature Bank and appointed the FDIC as receiver. A joint statement by the Department of theTreasury, the Federal Reserve and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will have access to all of theirfunds, including funds held in deposit accounts, in excess of the insured amount. On May 1, 2023, First Republic Bank was closed by theCalifornia Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Following a bidding process, the FDICentered into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, to acquire the substantial majority ofthe assets and assume certain liabilities of First Republic Bank from the FDIC.

The Prime Execution Agenthas historically maintained banking relationships with Silvergate Bank and Signature Bank. While the Sponsor does not believe there isa direct risk to the Trust’s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstancesand market conditions, some of which may be beyond the Trust’s or the Sponsor’s control, could impair the Trust’s abilityto access the Trust’s cash held with the Prime Execution Agent in the Trust’s Trading Balance or associated with the Trust’sorders to sell bitcoin and ether in connection with payment of Trust expenses not assumed by the Sponsor. If the Prime Execution Agentwere to experience financial distress or its financial condition is otherwise affected by the failure of its banking partners, the PrimeExecution Agent’s ability to provide services to the Trust could be affected. Moreover, the future failure of a bank at which thePrime Execution Agent maintains customer cash, in the Trust’s Trading Balance associated with the Trust’s orders to sell bitcoinand ether in connection with payment of Trust expenses not assumed by the Sponsor, could result in losses to the Trust, to the extentthe balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Execution Agent is subjector other potential protections. Although the Prime Execution Agent has made certain representations to the Sponsor regarding the PrimeExecution Agent’s maintenance of records in a manner reasonably designed to qualify for FDIC insurance on a pass-through basis inconnection with the accounts in which the Prime Execution Agent maintains cash on behalf of its customers (including the Trust), therecan be no assurance that such pass-through insurance will ultimately be made available. In addition, the Trust may maintain cash balanceswith the Prime Execution Agent that are not insured or are in excess of the FDIC’s insurance limits, or which are maintained bythe Prime Execution Agent at Money Market Funds and subject to the attendant risks (e.g., “breaking the buck”). As a result,the Trust could suffer losses.

The Prime ExecutionAgent routes orders through Connected Trading Venues in connection with trading services under the Prime Execution Agreement. The lossor failure of any such Connected Trading Venues may adversely affect the Prime Execution Agent’s business and cause losses for theTrust.

In connection with tradingservices under the Prime Execution Agreement, the Prime Execution Agent routinely routes customer orders to Connected Trading Venues,which are third-party platforms or other trading venues (including the trading venue operated by the Prime Execution Agent). In connectionwith these activities, the Prime Execution Agent may hold bitcoin and ether with such Connected Trading Venues in order to effect customerorders, including the Trust’s orders. However, the Prime Execution Agent has represented to the Sponsor that no customer cash isheld at Connected Trading Venues. If the Prime Execution Agent were to experience a disruption in the Prime Execution Agent’s accessto these Connected Trading Venues, the Prime Execution Agent’s trading services under the Prime Execution Agreement could be adverselyaffected to the extent that the Prime Execution Agent is limited in its ability to execute order flow for its customers, including theTrust. In addition, while the Prime Execution Agent has policies and procedures to help mitigate the Prime Execution Agent’s risksrelated to routing orders through third-party trading venues, if any of these third-party trading venues experience any technical, legal,regulatory or other adverse events, such as shutdowns, delays, system failures, suspension of withdrawals, illiquidity, insolvency, orloss of customer assets, the Prime Execution Agent might not be able to fully recover the customer’s bitcoin and ether that thePrime Execution Agent has deposited with these third parties. As a result, the Prime Execution Agent’s business, operating resultsand financial condition could be adversely affected, potentially resulting in its failure to provide services to the Trust or performits obligations under the Prime Execution Agreement, and the Trust could suffer resulting losses or disruptions to its operations. Thefailure of a Connected Trading Venue at which the Prime Execution Agent maintains customer bitcoin and ether, including bitcoin and etherassociated with the Trust, could result in losses to the Trust, notwithstanding the regulatory requirements to which the Prime ExecutionAgent is subject or other potential protections.

A loss of confidenceor breach of the Bitcoin and Ether Custodian may adversely affect the Trust and the value of an investment in the Shares.

Custody and security servicesfor the Trust’s bitcoin and ether are provided by Coinbase Custody, although the Trust may retain one or more additional custodiansat a later date. Bitcoin and ether held by the Trust may be custodied or secured in different ways (for example, a portion of the Trust’sbitcoin and ether holdings may be custodied by Coinbase Custody and another portion by another third-party custodian). Over time, theTrust may change the custody or security arrangement for all or a portion of its holdings. The Sponsor will decide the appropriate custodyand arrangements based on, among other factors, the availability of experienced custodians and the Trust’s ability to securely safeguardthe bitcoin and ether.

If the Bitcoinand Ether Custody Agreement or Prime Execution Agreement is terminated or the Bitcoin and Ether Custodian or Prime Execution Agent failsto provide services as required, the Sponsor may need to find and appoint a replacement custodian or prime broker, which could pose achallenge to the safekeeping of the Trust’s bitcoin and ether, and the Trust’s ability to continue to operate may be adverselyaffected.

The Trust is dependent onthe Bitcoin and Ether Custodian, which is Coinbase Custody, and to a lesser extent, the Prime Execution Agent, Coinbase Inc. to operate.Coinbase Custody performs essential functions in terms of safekeeping the Trust’s bitcoin and ether in the Trust Bitcoin and EtherAccount, and its affiliate, Coinbase Inc., in its capacity as Prime Execution Agent under the Agent Execution Model. If Coinbase Custodyor Coinbase Inc. fails to perform the functions they perform for the Trust, the Trust may be unable to operate or create or redeem Baskets,which could force the Trust to liquidate or adversely affect the price of the Shares.

On March 22, 2023, the PrimeExecution Agent and its parent (such parent, “Coinbase Global” and together with Coinbase Inc., the “Relevant CoinbaseEntities”) received a “Wells Notice” from the SEC staff stating that the SEC staff made a “preliminary determination”to recommend that the SEC file an enforcement action against the Relevant Coinbase Entities alleging violations of federal securitieslaws, including the Exchange Act and the 1933 Act. According to Coinbase Global’s public reporting company disclosure, based ondiscussions with the SEC staff, the Relevant Coinbase Entities believe these potential enforcement actions would relate to aspects ofthe Relevant Coinbase Entities’ Coinbase Prime service, spot market, staking service Coinbase Earn, and Coinbase Wallet, and thepotential civil action may seek injunctive relief, disgorgement, and civil penalties. On June 6, 2023, the SEC filed a complaint againstthe Relevant Coinbase Entities in federal district court in the Southern District of New York, alleging, inter alia: (i) that CoinbaseInc. has violated the Exchange Act by failing to register with the SEC as a national securities exchange, broker-dealer, and clearingagency, in connection with activities involving certain identified digital assets that the SEC’s complaint alleges are securities,(ii) that Coinbase Inc. has violated the 1933 Act by failing to register with the SEC the offer and sale of its staking program, and (iii)that Coinbase Global is jointly and severally liable as a control person under the Exchange Act for Coinbase Inc.’s violations ofthe Exchange Act to the same extent as Coinbase Inc. The SEC’s complaint against the Relevant Coinbase Entities does not allegethat bitcoin and ether is a security nor does it allege that Coinbase Inc’s activities involving bitcoin and ether caused the allegedregistration violations, and the Bitcoin and Ether Custodian was not named as a defendant. The SEC’s complaint seeks a permanentinjunction against the Relevant Coinbase Entities to prevent them from violations of the Exchange Act or 1933 Act, disgorgement, civilmonetary penalties, and such other relief as the court deems appropriate or necessary. Coinbase Inc., as Prime Execution Agent, couldbe required, as a result of a judicial determination, or could choose, to restrict or curtail the services it offers, or its financialcondition and ability to provide services to the Trust could be affected. If the Prime Execution Agent were to be required or choose,as a result of a regulatory action (including, for example, the litigation initiated by the SEC), to restrict or curtail the servicesit offers, it could negatively affect the Trust’s ability to operate or process creations or redemptions of Baskets, which couldforce the Trust to liquidate or adversely affect the price of the Shares. While the Bitcoin and Ether Custodian is not named in the complaint,if Coinbase Global, as the parent of the Bitcoin and Ether Custodian, is required, as a result of a judicial determination, or could choose,to restrict or curtail the services its subsidiaries provide to the Trust, or its financial condition is negatively affected, it couldnegatively affect the Trust’s ability to operate.

Alternatively, the Sponsorcould decide to replace Coinbase Custody as the Bitcoin and Ether Custodian with custody of the Trust’s bitcoin and ether, pursuantto the Bitcoin and Ether Custody Agreement. Similarly, Coinbase Custody or Coinbase Inc. could terminate services under the Bitcoin andEther Custody Agreement or the Coinbase Prime Broker Agreement (the “Prime Execution Agreement”), respectively upon providingthe applicable notice to the Trust for any reason, or immediately for Cause (a “Termination for Cause” is defined in the Bitcoinand Ether Custody Agreement as (i) the Trust materially breaching any provision of the Bitcoin and Ether Custody Agreement; (ii) the Trustbecomes bankrupt or insolvent; or (iii) the Trust fails to pay and settle in full its obligations to Coinbase Custody’s affiliate,the Trade Credit Lender (as defined below), which may, from time to time, provide financing to the Trust in the form of Trade Credits).Transferring maintenance responsibilities of the Trust Bitcoin and Ether Account at the Bitcoin and Ether Custodian to another custodianwill likely be complex and could subject the Trust’s bitcoin and ether to the risk of loss during the transfer, which could havea negative impact on the performance of the Shares or result in loss of the Trust’s assets. As Prime Execution Agent, Coinbase Inc.does not guarantee uninterrupted access to the Trading Platform or the services it provides to the Trust as Prime Execution Agent. Undercertain circumstances, Coinbase Inc. is permitted to halt or suspend trading on its trading platform, or impose limits on the amount orsize of, or reject, the Trust’s orders, including in the event of, among others, (a) delays, suspension of operations, failure inperformance, or interruption of service that are directly due to a cause or condition beyond the reasonable control of Coinbase Inc, (b)the Trust has engaged in unlawful or abusive activities or fraud, (c) the acceptance of the Trust’s order would cause the amountof Trade Credits extended to exceed the maximum amount of Trade Credit (as defined below) that the Trust’s agreement with the TradeCredit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is continuing that resultsin Coinbase Inc. being unable to provide trading services or accept the Trust’s order, in each case, subject to certain protectionsfor the Trust. Also, if Coinbase Custody or Coinbase Inc. becomes insolvent, suffers business failure, ceases business operations, defaultson or fails to perform its obligations under its contractual agreements with the Trust, or abruptly discontinues the services it providesprovide to the Trust for any reason, the Trust’s operations would be adversely affected.

The Sponsor may not be ableto find a party willing to serve as the custodian of the Trust’s bitcoin and ether or as the Trust’s prime execution agentunder the same terms as the current Bitcoin and Ether Custody Agreement or Prime Execution Agreement or at all. To the extent that Sponsoris not able to find a suitable party willing to serve as the custodian or prime execution agent, the Sponsor may be required to terminatethe Trust and liquidate the Trust’s bitcoin and ether. In addition, to the extent that the Sponsor finds a suitable party but mustenter into a modified Bitcoin and Ether Custody Agreement or Prime Execution Agreement that is less favorable for the Trust, the valueof the Shares could be adversely affected. If the Trust is unable to find a replacement prime execution agent, its operations could beadversely affected.

Coinbase Custodyserves as the bitcoin and ether custodian and Coinbase Inc. serves as the prime broker for several competing exchange-traded bitcoin andether products, which could adversely affect the Trust’s operations and ultimately the value of the Shares.

The Bitcoin and Ether Custodianand Prime Execution Agent are both affiliates of Coinbase Global. As of the date hereof, Coinbase Global is the largest publicly tradedcrypto asset company in the world by market capitalization and is also the largest crypto asset custodian in the world by assets undercustody. By virtue of its leading market position and capabilities, and the relatively limited number of institutionally capable providersof crypto asset brokerage and custody services, Coinbase Custody serves as the bitcoin and ether custodian and Coinbase Inc. serves asthe prime broker for several competing exchange-traded bitcoin and ether products. Therefore, Coinbase Global has a critical role in supportingthe U.S. spot bitcoin and ether exchange-traded product ecosystem, and its size and market share create the risk that Coinbase Globalmay 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 the Trust needed to utilize the Agent Execution Model to buy or sell bitcoin and etherbecause no Ether Trading Counterparties were willing or able to effectuate the Trust’s transactions, and the Prime Execution Agentwere to favor the interests of certain products over others, it could result in inadequate attention or comparatively unfavorable commercialterms to less favored products, which could adversely affect the Trust’s operations and ultimately the value of the Shares.

The Sponsor mayneed to find and appoint a replacement Bitcoin and Ether Custodian or Cash Custodian quickly, which could pose a challenge to the safekeepingof the Trust’s bitcoin, ether and cash.

The Sponsor may need to replaceCoinbase Custody as the bitcoin and ether custodian of the Trust’s bitcoin and ether or BNY Mellon as the cash custodian of theTrust’s cash and cash equivalents as a result of the insolvency, business failure or interruption, default, failure to perform,security breach or other problems. Transferring maintenance responsibilities of the Trust’s accounts with the Bitcoin and EtherCustodian and/or Cash Custodian to another party will likely be complex and could subject the Trust’s bitcoin and ether to the riskof loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the Trust’sassets. The Sponsor may not be able to find a party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian under the sameterms as the current Bitcoin and Ether Custody Agreement or Cash Custody Agreement, respectively. To the extent that Sponsor is not ableto find a suitable party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian, as applicable, the Sponsor may be requiredto terminate the Trust and liquidate the Trust’s bitcoin and ether. In addition, to the extent that the Sponsor finds a suitableparty but must enter into modified custodial services agreements that cost more, the value of the Shares could be adversely affected.

The Bitcoin andEther Custodian could become insolvent.

The Trust’s assets willbe held in one or more accounts maintained for the Trust by the Bitcoin and Ether Custodian and Cash Custodian. The Bitcoin and EtherCustodian is not a depository institution as it is not insured by the FDIC. The insolvency of the Bitcoin and Ether Custodian or of anybroker, custodian bank or clearing corporation used by the Bitcoin and Ether Custodian, may result in the loss of all or a substantialportion of the Trust’s assets or in a significant delay in the Trust having access to those assets. Additionally, custody of digitalassets presents inherent and unique risks relating to access, loss, theft and means of recourse in such scenarios. These risks are applicableto the Trust’s use of Coinbase Custody.

Bitcoin and Etherheld by the Trust is not subject to FDIC or SIPC protections.

The Trust is not a bankinginstitution or otherwise a member of the FDIC or SIPC and, therefore, deposits held with or assets held by the Trust are not subject tothe protections enjoyed by depositors with FDIC or SIPC member institutions. The undivided interests in the Trust’s bitcoin andether represented by the Shares in the Trust are not insured.

Third partiesmay infringe upon or otherwise violate intellectual property rights or assert that the Sponsor has infringed or otherwise violated theirintellectual property rights, which may result in significant costs and diverted attention.

It is possible that thirdparties might utilize the Trust’s intellectual property or technology, including the use of its business methods and trademarks,without permission. However, the Trust may not have adequate resources to implement procedures for monitoring unauthorized uses of theirtrademarks, proprietary software and other technology. Also, third parties may independently develop business methods, trademarks or proprietarysoftware and other technology similar to that of the Trust or claim that the Trust has violated their intellectual property rights, includingtheir copyrights, trademark rights, trade names, trade secrets and patent rights. As a result, the Trust may have to litigate in the futureto protect its trade secrets, determine the validity and scope of other parties’ proprietary rights, defend itself against claimsthat it has infringed or otherwise violated other parties’ rights, or defend itself against claims that its rights are invalid.Any litigation of this type, even if the Trust is successful and regardless of the merits, may result in significant costs, divert itsresources from the Trust, or require it to change its proprietary software and other technology or enter into royalty or licensing agreements.

Due to the increaseduse of technologies, intentional and unintentional cyber-attacks pose operational and information security risks.

With the increased use oftechnologies such as the internet and the dependence on computer systems to perform necessary business functions, the Trust is susceptibleto operational and information security risks. In general, cyber incidents can result from deliberate attacks or unintentional events.Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assetsor sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that doesnot require gaining unauthorized access, such as causing denial-of-service attacks on websites. Cyber security failures or breaches ofone or more of the Trust’s third-party service providers (including, but not limited to, the Administrator, Transfer Agent, theSponsor, the Bitcoin and Ether Custodian and the Cash Custodian) have the ability to cause disruptions and impact business operations,potentially resulting in financial losses, the inability of the Shareholders to transact business, violations of applicable privacy andother laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliancecosts.

In addition, substantial costsmay be incurred in order to prevent any cyber incidents in the future. The Trust and its Shareholders could be negatively impacted asa result. While the Trust has established business continuity plans, there are inherent limitations in such plans.

The Trust facesrisks related to the novel coronavirus (COVID-19) outbreak, which could negatively impact the value of the Trust’s holdings andsignificantly disrupt its operations.

Health crises caused by theoutbreak of infectious diseases or other public health issues, may exacerbate other pre-existing political, social, economic, market andfinancial risks. The impact of any such events, could negatively affect the global economy, as well as the economies of individual countriesor regions, the financial performance of individual companies, sectors and industries, and the markets in general in significant and unforeseenways. Any such impact could adversely affect the prices and liquidity of the Shares.

For example, an outbreak ofa respiratory disease designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. Thetransmission of COVID-19 and efforts to contain its spread resulted in international, national and local border closings and other significanttravel restrictions and disruptions, significant disruptions to business operations, supply chains and customer activity, event cancellationsand restrictions, service cancellations, reductions and other changes, significant challenges in healthcare service preparation and delivery,and quarantines, as well as general concern and uncertainty that negatively affected the economic environment. These impacts also causedsignificant volatility and declines in global financial markets, including increased volatility and uncertainty in crypto markets, whichhave caused losses for investors. The emergence of new COVID variants or other infectious diseases could result in a substantial economicdownturn or recession.

In addition, the operationsof the Trust, the Sponsor and other service providers may be significantly impacted, or even temporarily or permanently halted, as a resultof government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a publichealth emergency, including its potential adverse impact on the health of any such entity’s personnel. Any disruption of operationscould adversely impact the price and liquidity of the Shares, including, without limitation, the Trust’s ability to process ordersfor Baskets.

Bitcoin AND THEBitcoin MARKET

This section of the Prospectusprovides a more detailed description of bitcoin, including information about the historical development of bitcoin, how a person holdsbitcoin, how to use bitcoin in transactions, how to trade bitcoin, the “spot” trading platform market where bitcoin can bebought, held and sold, the bitcoin over-the-counter (“OTC”) trading market and bitcoin mining.

Bitcoin

Bitcoin is the digital assetthat is native to, and created and transmitted through the operations of, the peer-to-peer Bitcoin network, a decentralized network ofcomputers that operates on cryptographic protocols. No single entity owns or operates the Bitcoin network, the infrastructure of whichis collectively maintained by a decentralized user base. The Bitcoin network allows people to exchange tokens of value, called bitcoin,which are recorded on a public transaction ledger known as the Bitcoin blockchain. Bitcoin can be used to pay for goods and services,or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individualend-user-to-end-user transactions under a barter system. Although nascent in use, bitcoin may be used as a medium of exchange, unit ofaccount or store of value.

The Bitcoin network is decentralizedand does not require governmental authorities or financial institution intermediaries to create, transmit or determine the value of bitcoin.In addition, no party may easily censor transactions on the Bitcoin network. As a result, the Bitcoin network is often referred to asdecentralized and censorship resistant.

The value of bitcoin is determinedby the supply of and demand for bitcoin. New bitcoin are created and rewarded to the parties providing the Bitcoin network’s infrastructure(“miners”) in exchange for their expending computational power to verifying transactions and add them to the Bitcoin blockchain.The Bitcoin blockchain is effectively a decentralized database that includes all blocks that have been solved by miners and it is updatedto include new blocks as they are solved. Each bitcoin transaction is broadcast to the Bitcoin network and, when included in a block,recorded in the Bitcoin blockchain. As each new block records outstanding bitcoin transactions, and outstanding transactions are settledand validated through such recording, the Bitcoin blockchain represents a complete, transparent and unbroken history of all transactionsof the Bitcoin network.

Bitcoin Network

Bitcoin was first describedin a white paper released in 2008 and published under the name “Satoshi Nakamoto.” The protocol underlying Bitcoin was subsequentlyreleased in 2009 as open-source software and currently operates on a worldwide network of computers. The Bitcoin network and its softwarehas been under active development since that time by a group of computer engineers known as core developers, each of whom operates undera volunteer basis and without strict hierarchical administration.

The Bitcoin network utilizesa digital asset known as “bitcoin,” which can be transferred among parties via the Internet. Unlike other means of electronicpayments such as credit card transactions, one of the advantages of bitcoin is that it can be transferred without the use of a centraladministrator or clearing agency. As a central party is not necessary to administer bitcoin transactions or maintain the bitcoin ledger,the term decentralized is often used in descriptions of bitcoin. Unless it is using a third-party service provider, a party transactingin bitcoin is generally not afforded some of the protections that may be offered by intermediaries.

The first step in directlyusing the Bitcoin network for transactions is to download specialized software referred to as a “bitcoin wallet.” A user’sbitcoin wallet can run on a computer or smartphone, and can be used both to send and to receive bitcoin. Within a bitcoin wallet, a usercan generate one or more unique “bitcoin addresses,” which are conceptually similar to bank account numbers. After establishinga bitcoin address, a user can send or receive bitcoin from his or her bitcoin address to another user’s bitcoin address. Sendingbitcoin from one bitcoin address to another is similar in concept to sending a bank wire from one person’s bank account to anotherperson’s bank account; however, such transactions are not managed by an intermediary and erroneous transactions generally may notbe reversed or remedied once sent.

The amount of bitcoin associatedwith each bitcoin address, as well as each bitcoin transaction to or from such bitcoin address, is transparently reflected in the Bitcoinblockchain and can be viewed by websites that operate as “Bitcoin blockchain explorers.” Copies of the Bitcoin blockchainexist on thousands of computers on the Bitcoin network throughout the Internet. A user’s bitcoin wallet will either contain a copyof the Bitcoin blockchain or be able to connect with another computer that holds a copy of the Bitcoin blockchain. The innovative designof the Bitcoin network protocol allows each Bitcoin user to trust that their copy of the Bitcoin blockchain will generally be updatedconsistent with each other user’s copy.

When a Bitcoin user wishesto transfer bitcoin to another user, the sender must first request a Bitcoin address from the recipient. The sender then uses his or herBitcoin wallet software to create a proposed transaction that is confirmed and settles when included in the Bitcoin blockchain. The transactionwould reduce the amount of bitcoin allocated to the sender’s address and increase the amount allocated to the recipient’saddress, in each case by the amount of bitcoin desired to be transferred. The transaction is completely digital in nature, similar toa file on a computer, and it can be sent to other computers participating in the Bitcoin network; however, the use of cryptographic verificationis believed to prevent the ability to duplicate or counterfeit bitcoin.

Bitcoin Protocol

The Bitcoin protocol is builtusing open source software allowing for any developer to review the underlying code and suggest changes. There is no official companyor group that is responsible for making modifications to Bitcoin. There are, however, a number of individual developers that regularlycontribute to the reference software known as “Bitcoin Core,” a specific distribution of Bitcoin software that provides thede-facto standard for the Bitcoin protocol.

Significant changes to theBitcoin protocol are typically accomplished through a so-called “Bitcoin Improvement Proposal” or BIP. Such proposals aregenerally posted on websites, and the proposals explain technical requirements for the protocol change as well as reasons why the changeshould be accepted by users. Because Bitcoin has no central authority, updating the reference software’s Bitcoin protocol will notimmediately change the Bitcoin network’s operations. Instead, the implementation of a change is achieved by users (including transactionvalidators known as “miners”) downloading and running the updated versions of Bitcoin Core or other Bitcoin software thatabides by the new Bitcoin protocol. Users and miners must accept any changes made to the Bitcoin source code by downloading a versionof their Bitcoin software that incorporates the proposed modification of the Bitcoin network’s source code. A modification of theBitcoin network’s source code or protocol is only effective with respect to those Bitcoin users and miners who download it. If anincompatible modification is accepted by a less than overwhelming percentage of users and miners, a division in the Bitcoin network willoccur such that one network will run the pre-modification source code and the other network will run the modified source code. Such adivision is known as a “fork” in the Bitcoin network.

Recent development on theBitcoin network has enabled some functionality other than the transfer of value on the Bitcoin blockchain. Following the recent activationof Segregated Witness on the Bitcoin network, an alpha version of the Lightning Network was released. The Lightning Network is an open-sourcedecentralized network that enables instant off-blockchain transfers of the ownership of bitcoin without the need of a trusted third party.In 2021, the Bitcoin protocol implemented the Taproot upgrade to add enhanced support for complex transactions on the network such asmulti-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. Taproot is intended to reduce the amount of datawritten to a block and makes multi-signature transactions indistinguishable from regular transactions, adding an enhanced layer of privacy.However, Taproot also relaxed certain types of data requirements enforced by the Bitcoin blockchain to facilitate these changes whichled to the launch of the “ordinal protocol.” The ordinal protocol takes advantage of Taproot’s relaxed data requirementsto allow users to add graphic images and other data files to Bitcoin transactions. By the end of 2023, nearly 53 million Ordinals hadbeen inscribed to the Bitcoin blockchain.

Other efforts include increaseduse of smart contracts and distributed registers built into, built atop or pegged alongside the Bitcoin blockchain. The Trust’sactivities will not directly relate to such projects, though such projects may utilize bitcoin as tokens for the facilitation of theirnon-financial uses, thereby potentially increasing the utility of the Bitcoin network as a whole. Conversely, projects that operate andare built within the Bitcoin blockchain may increase the data flow on the Bitcoin network and could either “bloat” the sizeof the Bitcoin blockchain or slow confirmation times. At this time, such projects remain in early stages.

Bitcoin Transactions

A bitcoin transaction is similarin concept to an irreversible digital check. The transaction contains the sender’s bitcoin address, the recipient’s bitcoinaddress, the amount of bitcoin to be sent, a transaction fee and the sender’s digital signature. Bitcoin transactions are securedby cryptography known as “public-private key cryptography,” represented by the bitcoin addresses and digital signature ina transaction’s data file. Each Bitcoin network address, or wallet, is associated with a unique “public key” and “privatekey” pair, both of which are lengthy alphanumeric codes, derived together and possessing a unique relationship.

The use of key pairs is acornerstone of the Bitcoin network technology. This is because the use of a private key is the only mechanism by which a bitcoin transactioncan be signed. If a private key is lost, the corresponding bitcoin is thereafter permanently non-transferable. Moreover, the theft ofa private key provides the thief immediate and unfettered access to the corresponding bitcoin. Bitcoin users must therefore understandthat in this regard, bitcoin is similar to cash: that is, the person or entity in control of the private key corresponding to a particularquantity of bitcoin has de facto control of the bitcoin. For large quantities of bitcoin, holders often embrace sophisticated securitymeasures.

The public key is visibleto the public and analogous to the Bitcoin network address. The private key is a secret and is used to digitally sign a transaction ina way that proves the transaction has been signed by the holder of the public-private key pair, and without having to reveal the privatekey. A user’s private key must be kept safe in accordance with appropriate controls and procedures to ensure it is used only forlegitimate and intended transactions. If an unauthorized third person learns of a user’s private key, that third person could applythe user’s digital signature without authorization and send the user’s bitcoin to their or another bitcoin address, therebystealing the user’s bitcoin. Similarly, if a user loses his private key and cannot restore such access (e.g., through a backup),the user may permanently lose access to the bitcoin associated with that private key and bitcoin address.

To prevent the possibilityof double-spending of bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a “block” inthe Bitcoin blockchain, which is publicly available. Thus, the Bitcoin network provides confirmation against double-spending by memorializingevery transaction in the Bitcoin blockchain, which is publicly accessible and downloaded in part or in whole by all users of the Bitcoinnetwork software program. Any user may validate, through their Bitcoin wallet or a blockchain explorer, that each transaction in the Bitcoinnetwork was authorized by the holder of the applicable private key, and Bitcoin network mining software consistent with reference softwarerequirements validates each such transaction before including it in the Bitcoin blockchain. This cryptographic security ensures that bitcointransactions may not generally be counterfeited, although it does not protect against the “real world” theft or coercion ofuse of a Bitcoin user’s private key, including the hacking of a Bitcoin user’s computer or a service provider’s systems.

A Bitcoin transaction betweentwo parties is recorded if included in a valid block added to the Bitcoin blockchain, when that block is accepted as valid through consensusformation among Bitcoin network participants. Validation of a block is achieved by confirming the cryptographic hash value included inthe block’s data and by the block’s addition to the longest confirmed Bitcoin blockchain on the Bitcoin network. For a transaction,inclusion in a block in the Bitcoin blockchain constitutes a “confirmation” of validity. As each block contains a referenceto the immediately preceding block, additional blocks appended to and incorporated into the Bitcoin blockchain constitute additional confirmationsof the transactions in such prior blocks, and a transaction included in a block for the first time is confirmed once against double-spending.This layered confirmation process makes changing historical blocks (and reversing transactions) exponentially more difficult the furtherback one goes in the Bitcoin blockchain.

To undo past transactionsin a block recorded on the Bitcoin blockchain, a malicious actor would have to exert tremendous hashrate in re-solving each block in theBitcoin blockchain starting with and after the target block and broadcasting all such blocks to the Bitcoin network. The Bitcoin networkis generally programmed to consider the longest Bitcoin blockchain containing solved and valid blocks to be the most accurate Bitcoinblockchain. In order to undo multiple layers of confirmation and alter the Bitcoin blockchain, a malicious actor must re-solve all ofthe old blocks sought to be regenerated and be able to continuously add new blocks to the Bitcoin blockchain at a speed that would haveto outpace that of all of the other miners on the Bitcoin network, who would be continuously solving for and adding new blocks to theBitcoin blockchain. Given the size and speed of the Bitcoin network, it is generally agreed that the cost of amassing such computationalpower exceeds the profit to be obtained by double-spending or attempting to fabricate prior blocks.

If a malicious actor is ableto amass ten (10) percent of the Bitcoin network’s aggregate hashrate, there is estimated to be a 0.1 percent chance that it wouldbe able to overcome six (6) confirmations. Therefore, given the difficulty in amassing such hashrate, six (6) confirmations is an often-citedstandard for the validity of transactions. The Trust has adopted a policy whereby a transaction will be deemed confirmed upon this industrystandard of six (6) confirmations (the “Confirmation Protocol”). As one (1) block is added to the Bitcoin blockchain approximatelyevery six (6) to twelve (12) minutes, a Bitcoin transaction will be, on average, confirmed using the Confirmation Protocol beyond a reasonabledoubt in approximately one (1) hour. Merchants selling high-value goods and services, as well as bitcoin trading platforms and many experiencedusers, are believed to generally use the six (6) confirmations standard. This confirmation system, however, does not mean that merchantsmust always wait for multiple confirmations for transactions involving low-value goods and services. As discussed below, the value ofa successful double-spending attack involving a low-value transaction may, and perhaps likely will, be significantly less than the costinvolved in arranging and executing such double-spending attacks. Furthermore, merchants engaging in low-value transactions may then viewthe reward of quicker transaction settlements with limited or no Bitcoin blockchain confirmation as greater than the related risk of notwaiting for six (6) confirmations with respect to low-value transactions at points of sale. Conversely, for high-value transactions thatare not time sensitive, additional settlement security can be provided by waiting for more than six (6) confirmations.

Bitcoin Mining

The process by which bitcoinare created and bitcoin transactions are verified is called “mining.” To begin mining, a user, or “miner,” candownload and run a mining “client,” which, like regular Bitcoin network software programs, turns the user’s computerinto a “node” on the Bitcoin network, and in this case has the ability to validate transactions and add new blocks of transactionsto the Bitcoin blockchain.

Miners, through the use ofthe bitcoin software program, engage in a set of prescribed complex mathematical calculations in order to verify transactions and competefor the right to add a block of verified transactions to the Bitcoin blockchain and thereby confirm bitcoin transactions included in thatblock’s data. The miner who successfully “solves” the complex mathematical calculations has the right to add a blockof transactions to the Bitcoin blockchain and is then rewarded by a grant of bitcoin, known as a “coinbase,” plus any transactionfees paid for the transactions included in such block.

Confirmed and validated bitcointransactions are recorded in blocks added to the Bitcoin blockchain. Each block contains the details of some or all of the most recenttransactions that are not memorialized in prior blocks, as well as a record of the award of bitcoin to the miner who added the new block.Each unique block can only be solved and added to the Bitcoin blockchain by one miner; therefore, all individual miners and mining poolson the Bitcoin network must engage in a competitive process of constantly increasing their computing power to improve their likelihoodof solving for new blocks. As more miners join the Bitcoin network and its processing power increases, the Bitcoin network adjusts thecomplexity of a block-solving equation to maintain a predetermined pace of adding a new block to the Bitcoin blockchain approximatelyevery ten minutes.

Mathematically Controlled Supply

The method for creating newbitcoin is mathematically controlled in a manner so that the supply of bitcoin grows at a limited rate pursuant to a pre-set schedule.The number of bitcoin awarded for solving a new block is automatically halved every 210,000 blocks. Thus, the current fixed reward forsolving a new block is 3.125 bitcoin per block; the reward decreased from 6.25 bitcoin to 3.125 bitcoin in April 2024. It is estimatedto halve again in 2028. This deliberately controlled rate of bitcoin creation means that the number of bitcoin in existence will neverexceed twenty-one (21) million and that bitcoin cannot be devalued through excessive production unless the Bitcoin network’s sourcecode (and the underlying protocol for bitcoin issuance) is altered. As of July 2024, it was estimated that over 19.7 million bitcoinswere outstanding and the date when the 21 million Bitcoin limitation will be reached is estimated to be the year 2140.

Bitcoin Market and Digital Asset TradingPlatforms

In addition to using bitcointo engage in transactions, investors may purchase and sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or asa long-term investment to diversify their portfolio. The value of bitcoin within the market is determined, in part, by (i) the supplyof and demand for bitcoin in the bitcoin market, (ii) market expectations for the expansion of investor interest in bitcoin and the adoptionof bitcoin by users, (iii) the number of merchants that accept bitcoin as a form of payment, and (iv) the volume of private end-user-to-end-usertransactions.

Although the value of bitcoinis determined by the value that two transacting market participants place on bitcoin through their transaction, the most common meansof determining a reference value is by surveying one or more trading platforms where secondary markets for bitcoin exist. The most prominentdigital asset trading platforms are often referred to as “exchanges”, although they neither report trade information nor arethey regulated in the same way as a national securities exchange. As such, there is some difference in the form, transparency and reliabilityof trading data from digital asset trading platforms. Generally speaking, bitcoin data is available from these trading platforms withpublicly disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S. dollar or Euro (such asthe USD-BTC Pair) or another digital asset such as ether. OTC dealers or market makers do not typically disclose their trade data.

Currently, there are manydigital asset trading platforms operating worldwide and trading platforms represent a substantial percentage of bitcoin buying and sellingactivity, and, therefore, provide large data sets for market valuation of bitcoin. A digital asset trading platform provides investorswith a way to purchase and sell bitcoin, similar to stock exchanges like the New York Stock Exchange or NASDAQ, which provide ways forinvestors to buy stocks and bonds in the so-called “secondary market.” Unlike stock exchanges, which are regulated to monitorsecurities trading activity, digital asset trading platforms are largely regulated as money services businesses (or a foreign regulatoryequivalent) and are required to monitor for and detect money-laundering and other illicit financing activities that may take place onthe platform. Digital asset trading platforms operate websites designed to permit investors to open accounts with the trading platformand then purchase and sell bitcoin.

As with conventional stockexchanges, an investor opening a trading account and wishing to transact at a digital asset trading platform must deposit an acceptedgovernment-issued currency into their account, or a previously acquired digital asset. The process of establishing an account with a digitalasset trading platform and trading bitcoin is different from, and should not be confused with, the process of users sending bitcoin fromone bitcoin address to another bitcoin address, such as to pay for goods and services. This latter process is an activity that occurswholly within the confines of the Bitcoin network, while the former is an activity that occurs largely on private websites and databasesowned by the trading platform.

Although bitcoin was the firstcryptocurrency, since 2009, the number of digital assets, market participants and companies in the space has increased dramatically. Inaddition to bitcoin, other well-known digital assets include ether, bitcoin cash, and litecoin. The digital asset marketplace is stillbeing defined and evolving, including the practices of exchanges, behavior of investors, and the protocols and prominence of particulardigital assets. Prior to 2017, bitcoin accounted for approximately 85% or more of the total market capitalization of all digital assets.

Authorized Participants andthe Trust have the option of purchasing and selling bitcoin used in Basket transactions either on digital asset trading platforms, inthe OTC markets or in direct bilateral transactions. OTC trading of bitcoin is generally accomplished via bilateral agreements on a principal-to-principalbasis. All risks and issues related to creditworthiness are between the parties directly involved in the transaction.

The bitcoin OTC market demonstratesflexibility in terms of quotes, price, size, and other factors. The OTC market has no formal structure and no open-outcry meeting place,and typically involves bilateral agreements on a principal-to-principal basis. Parties engaging in OTC transactions will agree upon aprice – often via phone, email, or chat – and then one of the two parties will initiate the transaction. For example, a sellerof bitcoin could initiate the transaction by sending the bitcoin to the buyer’s bitcoin address. The buyer would then wire US Dollarsto the seller’s bank account. OTC trading tends to occur in large blocks of bitcoin. All risks and issues related to creditworthinessare between the parties directly involved in the transaction. OTC market participants include institutional entities, such as hedge funds,family offices, private wealth managers, high-net-worth individuals that trade bitcoin on a proprietary basis, and brokers that offertwo-sided liquidity for bitcoin.

Bitcoin futures contractsare traded on CME, the Intercontinental Exchange and smaller regulated platforms such as ErisX and LedgerX. Authorized Participants mayutilize bitcoin futures contracts to hedge bitcoin exposure relating to the purchase and redemption of Baskets. Since their launch in2017, bitcoin futures contracts on the CME have seen significant growth in average daily volume traded, open interest, and the numberof large participants. Bitcoin futures contracts on the CME are cash-settled based on the BRR, which shares the same methodology as theBitcoin Pricing Benchmark.

Bitcoin Market Participants

Miners

Miners range from Bitcoinenthusiasts to professional mining operations that design and build dedicated machines and data centers, but the vast majority of miningis now undertaken by parties with access to high grade hardware, favorable electric prices, and industrial data centers. In addition,most mining hashrate is directed by participants in mining pools.

Investment and Speculative Sector

This sector includes the investmentand trading activities of both private and professional investors and speculators. These participants range from exchange-traded products,hedge funds, and day-traders who invest in bitcoin by trading on digital asset trading platforms.

Historically, larger financialservices institutions are publicly reported to have limited involvement in investment and trading in bitcoin; however, this trend appearsto be eroding and more platforms seek to offer exposure to digital assets and more institutional investors seek to deploy capital in thespace. Major financial institutions have cited advisory client demand in adding direct, equity or synthetic means of obtaining digitalasset exposure.

Retail Sector

The retail sector includesusers transacting in direct peer-to-peer Bitcoin transactions through the direct sending of bitcoin over the Bitcoin network. The retailsector also includes transactions between consumers paying for goods or services from commercial or service businesses through directtransactions or third-party service providers such as BitPay, which provides a merchant platform for instantaneous transactions wherebythe consumer sends bitcoin to BitPay, which then provides either the bitcoin or the cash value thereof to the commercial or service businessutilizing the platform. PayPal, Square and Shopify are examples of traditional merchant payment processors or merchant platforms thathave also added Bitcoin payment options for their merchant customers. Payment processing through the Bitcoin network may reduce the transactioncost for merchants, relative to the costs paid for credit card transaction processing, and eliminates the potential for consumer chargebacks.

Service Sector

This sector includes companiesthat provide a variety of services including the buying, selling, payment processing and storing of bitcoin. Coinbase and Fidelity areexamples of multi-service financial institutions that provide wallets that store bitcoin for users and also serve as a retail or exchangegateway whereby users can purchase bitcoin for fiat currency. BitPay is an example of Bitcoin payment processors that allow merchantsto accept bitcoin as payment. As the Bitcoin network continues to grow in acceptance, it is anticipated that service providers will expandthe currently available range of services and that additional parties will enter the service sector for the Bitcoin network.

Ether AND THE EtherMARKET

This section of the Prospectusprovides a more detailed description of ether, including information about the historical development of ether, how a person holds ether,how to use ether in transactions, how to trade ether, the “spot” trading platform market where ether can be bought, held andsold, the ether over-the-counter (“OTC”) trading market and the proof-of-stake concept.

Ether and the Ethereum network

Ether is a digital asset thatis created and transmitted through the operations of the peer-to-peer Ethereum network, a network of computers, known as nodes, that operateson cryptographic computer-code based logic, called a protocol. No single entity owns or operates the Ethereum network, the infrastructureof which is collectively maintained by a distributed user base, a phenomenon known as decentralization. Ether is not issued by governments,banks or any other centralized authority. The Ethereum network allows people to exchange tokens of value, called ether, which are recordedon a public transaction ledger known as the Ethereum blockchain. Ether can be used to pay for goods and services, including computationalpower on the Ethereum network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital assetexchanges or in individual end-user-to-end-user transactions under a barter system.

The Ethereum network allowsusers to write and implement computer programs called smart contracts—that is, general-purpose code that executes on every computerin the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smartcontracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordancewith conditional instructions and create digital assets other than ether on the Ethereum network. Smart contract operations are executedon the Ethereum blockchain in exchange for payment of ether. The Ethereum network is one of a number of projects intended to expand blockchainuse beyond just a peer-to-peer money system.

The Ethereum network is commonlyunderstood to be decentralized and does not require governmental authorities or financial institution intermediaries to create, transmitor determine the value of ether. Rather, following the initial distribution of ether, ether is created, burned and allocated by the Ethereumnetwork protocol through a process that is currently subject to an issuance and burn rate as further described under “Limits onether supply” below. The value of ether is determined by the supply of and demand for ether on the digital asset exchanges or inprivate end-user-to-end-user transactions. There is no hard cap which would limit the number of outstanding ether at any one time to apredetermined maximum.

New ether is created and rewardedto the validators of a block in the Ethereum blockchain for verifying transactions. The Ethereum blockchain is effectively a decentralizeddatabase that includes all blocks that have been validated and it is updated to include new blocks as they are validated. Each ether transactionis broadcast to the Ethereum network and, when included in a block, recorded in the Ethereum blockchain. As each new block records outstandingether transactions, and outstanding transactions are settled and validated through such recording, the Ethereum blockchain representsa complete, transparent and unbroken history of all transactions of the Ethereum network. For further details, see “Creation ofNew Ether.”

Among other things, etheris used to pay for transaction fees and computational services (i.e., smart contracts) on the Ethereum network; users of the Ethereumnetwork pay for the computational power of the machines executing the requested operations with ether. Requiring payment in ether on theEthereum network incentivizes developers to write quality applications and increases the efficiency of the Ethereum network because wastefulcode costs more. It also ensures that the Ethereum network remains economically viable by compensating people for their contributed computationalresources.

Assets in the Ethereum networkare held in accounts. Each account, or “wallet,” is made up of at least two components: a public address and a private key.An Ethereum private key controls the transfer or “spending” of ether from its associated public ether address. An ether “wallet”is a collection of public Ethereum addresses and their associated private key(s). This design allows only the owner of ether to send ether,the intended recipient of ether to unlock it, and the validation of the transaction and ownership to be verified by any third party anywherein the world.

For certain transactions,fees need to be paid in ether to validators in order to facilitate transactions and execute smart contracts. EIP-1559 simplified the transactionfee process. Instead of performing complex calculations to estimate the fee that is charged (“gas”), users instead pay analgorithmically determined transaction fee set by the protocol itself. Gas price is often a small fraction of ether, which is denotedin the unit of Gwei (10^9 Gwei = 1 ether). Gas is essential in sustaining the Ethereum network. It motivates validators to process andverify transactions for a monetary reward. Gas price fluctuates with supply. Gas has another important function in preventing unintentionalwaste of energy. Because the coding language for Ethereum is Turing-complete, there is a possibility of a program running indefinitely,and a transaction can be left consuming a lot of energy. A gas limit is imposed as the maximum price users are willing to pay to facilitatetransactions. When gas runs out, the program will be terminated, and no additional energy would be used.

The Ethereum network recentlyimplemented software upgrades and other changes to its protocol, including the adoption of network upgrades collectively referred to asSerenity, or Ethereum 2.0. Ethereum 2.0 aimed to improve the network’s speed, scalability, efficiency, security, accessibility,and transaction throughput in part by reducing its energy footprint and decreasing transaction times for the network. As part of Ethereum2.0, in mid-September 2022, a shift from the proof-of-work to the proof-of-stake model occurred. Ethereum 2.0 also encompassed the additionof other new features, such as “sharding.” Sharding is a multi-phase upgrade to improve Ethereum’s scalability and capacity.Shard chains spread the network’s load across numerous new chains splitting the data processing responsibility among many nodesand allowing for parallel processing and validation of transactions. Sharding makes it easier to run a node by keeping hardware requirementslow. A digital asset network’s consensus mechanism is an aspect of its source code, and any failure to properly implement such achange could have a material adverse effect on the value of ether and the value of the Shares. The move to proof-of-stake may subjectEthereum and ether to new and unexpected vulnerabilities not applicable to proof-of-work consensus models.

History of Ethereum

The Ethereum network was originallydescribed in a 2013 white paper by Vitalik Buterin, a programmer involved with bitcoin, with the goal of creating a peer-to-peer, open-sourcenetwork enabling users to create so-called decentralized applications powered by smart contracts, which are general-purpose code thatexecutes on the Ethereum network. By combining the Ethereum blockchain with a flexible scripting language that is designed to be capableof implementing sophisticated logic and execute a wide variety of instructions, the Ethereum network was designed to act as a programmableinfrastructure layer that would enable users to create their own rules for ownership, transaction formats and state transition functionsthat they could build into custom software programs of their own creation. The formal development of the Ethereum network began througha Swiss firm called Ethereum Switzerland GmbH (“EthSuisse”) in conjunction with several other entities. Subsequently, theEthereum Foundation, a Swiss non-profit organization, was set up to oversee the protocol’s development. The Ethereum network wentlive on July 30, 2015. Decentralized applications may be controlled by a single user or small group. See “RISK FACTORS—RisksRelated to Digital Assets.” Smart contracts, including those relating to DeFi applications, are a new technology and their ongoingdevelopment and operation may result in problems, which could reduce the demand for ether or cause a wider loss of confidence in the Ethereumnetwork, either of which could have an adverse impact on the value of ether.

Ether is the digital assetthat powers the Ethereum network and serves as the network’s native unit of account used to pay transaction fees to the protocolitself and to validators. Unlike other digital assets, such as bitcoin, which are solely created through a progressive mining process,72.0 million ether were created in connection with the launch of the Ethereum network. For additional information on the initial distribution,see “Creation of New Ether.” Coinciding with the network launch, it was decided that EthSuisse would be dissolved, designatingthe Ethereum Foundation as the sole organization dedicated to protocol development.

Smart Contracts and Development on the EthereumNetwork

Smart contracts are programsthat run on a blockchain that can execute automatically when certain conditions are met. Smart contracts facilitate the exchange of anythingrepresentative of value, such as money, information, property, or voting rights. Using smart contracts, users can send or receive digitalassets, create markets, store registries of debts or promises, represent ownership of property or a company, move funds in accordancewith conditional instructions and create new digital assets, among other actions.

Development on the Ethereumnetwork involves building more complex tools on top of smart contracts, such as DApps; organizations that are autonomous, known as decentralizedautonomous organizations (“DAOs”); and entirely new decentralized networks. For example, a company that distributes charitabledonations on behalf of users could hold donated funds in smart contracts that are paid to charities only if the charities satisfy certainpre-defined conditions.

Moreover, the Ethereum networkhas also been used as a platform for creating new digital assets and conducting their associated initial coin offerings. As of May 29,2024, it is believed that a majority of digital assets not issued as the native token on their own blockchains were built on the Ethereumnetwork, with such assets representing a significant amount of the total market value of all digital assets.

More recently, the Ethereumnetwork has been used for DeFi or open finance platforms, which seek to democratize access to financial services, such as borrowing, lending,custody, trading, derivatives and insurance, by removing third-party intermediaries. DeFi can allow users to lend and earn interest ontheir digital assets, exchange one digital asset for another and create derivative digital assets such as stablecoins, which are digitalassets pegged to a reserve asset such as fiat currency. Over the course of 2023, between $32.1 billion and $67.1 billion worth of digitalassets were locked up as collateral on DeFi platforms on the Ethereum network.

In addition, the Ethereumnetwork and other smart contract platforms have been used for creating NFTs. Unlike digital assets native to smart contract platformswhich are fungible and enable the payment of fees for smart contract execution. Instead, NFTs allow for digital ownership of assets thatconvey certain rights to other digital or real world assets. This new paradigm allows users to own rights to other assets through NFTs,which enable users to trade them with others on the Ethereum network. For example, an NFT may convey rights to a digital asset that existsin an online game or a DApp, and users can trade their NFTs in the DApp or game, and carry them to other digital experiences, creatingan entirely new free-market internet-native economy that can be monetized in the physical world.

The DAO and Ethereum Classic

In July 2016, the Ethereumnetwork experienced what is referred to as a permanent hard fork that resulted in two different versions of its blockchain: Ethereum andEthereum Classic.

In April 2016, a blockchainsolutions company known as Slock.it announced the launch of a decentralized autonomous organization, known as “The DAO” onthe Ethereum network. The DAO was designed as a decentralized crowdfunding model, in which anyone could contribute ether tokens to TheDAO in order to become a voting member and equity stakeholder in the organization. Members of The DAO could then make proposals aboutdifferent projects to pursue and put them to a vote. By committing to profitable projects, members would be rewarded based on the termsof a smart contract and their proportional interest in The DAO. As of May 27, 2016, $150 million, or approximately 14% of all ether outstanding,was contributed to, and invested in, The DAO.

On June 17, 2016, an anonymoushacker exploited The DAO’s smart contract code to syphon approximately $60 million, or 3.6 million ether, into a segregated account.Upon the news of the breach, the price of ether was quickly cut in half as investors liquidated their holdings and members of the Ethereumcommunity worked to determine a solution.

In the days that followed,several attempts were made to retrieve the stolen funds and secure the Ethereum network. However, it soon became apparent that directinterference with the protocol (i.e., a hard fork) would be necessary. The argument for the hard fork was that it would create an entirelynew version of the Ethereum blockchain, erasing any record of the theft, and restoring the stolen funds to their original owners. Thecounterargument was that it would be antithetical to the core principle of immutability of the Ethereum blockchain.

The decision over whetheror not to hard fork the Ethereum blockchain was put to a vote of Ethereum community members. A majority of votes were cast in favor ofa hard fork. On July 15, 2016, a hard fork specification was implemented by the Ethereum Foundation. On July 20, 2016, the Ethereum networkcompleted the hard fork, and a new version of the blockchain, without recognition of the theft, was born.

Many believed that after thehard fork the original version of the Ethereum blockchain would dissipate entirely. However, a group of validators continued to mine theoriginal Ethereum blockchain for philosophical and economic reasons. On July 20, 2016, the original Ethereum protocol was rebranded asEthereum Classic, and its native token as ether classic (ETC), preserving the untampered transaction history (including The DAO theft).Following the hard fork of Ethereum, each holder of ether automatically received an equivalent number of ETC tokens.

Overview of the Ethereum Network’sOperations

In order to own, transferor use ether directly on the Ethereum network on a peer-to-peer basis (as opposed to through an intermediary, such as a custodian or centralizedexchange), a person generally must have internet access to connect to the Ethereum network. Ether transactions may be made directly betweenend-users without the need for a third-party intermediary. To prevent the possibility of double-spending ether, a user must notify theEthereum network of the transaction by broadcasting the transaction data to its network peers. The Ethereum network provides confirmationagainst double-spending by memorializing every peer-to-peer transaction in the Ethereum blockchain, which is publicly accessible and transparent.This memorialization and verification against double-spending of peer-to-peer transactions is accomplished through the Ethereum networkvalidation process, which adds “blocks” of data, including recent transaction information, to the Ethereum blockchain.

Summary of an Ether Transaction

A “transaction request”refers to a request to the Ethereum network made by a user, in which the requesting user (the “sender”) asks the Ethereumnetwork to send some ether or execute some code. A “transaction” refers to a fulfilled transaction request and the associatedchange in the Ethereum network’s state. An Ethereum Client is a software application that implements the Ethereum network specificationand communicates with the Ethereum network. A node is a computer or other device, such as a mobile phone, running an individual EthereumClient that is connected to other computers also running their own Ethereum Clients, which collectively form the Ethereum network. Nodescan be full nodes (meaning they host a local copy of the entire Ethereum blockchain) or light nodes, which only host a local copy of asub-portion of the full Ethereum blockchain with reduced data. Nodes may (but do not have to) be validators, which requires them to downloadan additional piece of software in the node’s Ethereum Client and stake a certain amount of ether, which is discussed below.

Any user can broadcast a transactionrequest to the Ethereum network from a node located on the network. A user can run its own node, or it can connect to a node operatedby others. For the transaction request to actually result in a change to the current state of the Ethereum network, it must be validated,executed, and “committed to the network” by another node (specifically, a validator node). Execution of the transaction requestby the validator results in a change to the state of the Ethereum network once the transaction is broadcast to all other nodes acrossthe Ethereum network. Transactions can include, for example, sending ether from one account to another, as discussed below; publishinga new smart contract onto the Ethereum network; or activating and executing the code of an existing smart contract, in accordance withthe terms and conditions specified in the sender’s transaction request.

The Ethereum blockchain canbe thought of as a ledger recording a history of transactions and the balances associated with individual accounts, each of which hasan address on the Ethereum network. An Ethereum network account can be used to store ether. There are two types of Ethereum accounts:“externally owned accounts,” which are controlled by a private key, and “smart contract accounts,” which are controlledby their own code. Externally owned accounts are controlled by users, do not contain executable code, and are associated with a unique“public key” and “private key” pair, commonly referred to as a “wallet,” with the private key beingused to execute transactions. Smart contract accounts contain, and are controlled by, their own executable code: every time the smartcontract account receives a transaction from, or is “called” by, another user, the smart contract account’s code activates,allowing it to read and write to internal storage, send ether, or perform other operations. Both externally owned accounts and smart contractaccounts can be used to send, hold, or receive ether, and both can interact with other smart contracts. However, only externally ownedaccounts have the power to initiate transactions; smart contract accounts can only send transactions of their own after they are firstactivated or called by another transaction. An externally owned account is associated with both a public address on the Ethereum networkand a private key, while a smart contract account is only associated with a public address. While a smart contract account does not usea private key to authorize transactions, including transfers of ether, the developer of a smart contract may hold an “admin key”to the smart contract account, or have special access privileges, allowing the developer to make changes to the smart contract, enableor disable features on the smart contract, or change how the smart contract receives external inputs and data, among others.

Accounts depend on nodes toaccess the peer-to-peer Ethereum network. Through the node’s Ethereum Client, a user’s Ethereum wallet and its associatedEthereum network address enable the user to connect to the Ethereum network and transfer ether to, and receive ether from, other users,and interact with smart contracts, on a peer-to-peer basis. A user with an externally owned account can either run its own node (and itsown Ethereum Client) and connect that node to its Ethereum wallet, allowing it to make transactions from its Ethereum wallet on the Ethereumnetwork, or a user’s wallet can connect to third-party nodes operated as a service (e.g., Infura) and access the Ethereum networkthat way. Multiple accounts can access the Ethereum network through one node.

Each user’s Ethereumwallet is associated with a unique “public key” and “private key” pair. To receive ether in a peer-to-peer transaction,the ether recipient must provide its public key to the sender. This activity is analogous to a recipient for a transaction in U.S. dollarsproviding a routing address in wire instructions to the payor so that cash may be wired to the recipient’s account. The sender approvesthe transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient’s publickey with the private key of the address from which the sender is transferring the ether. The recipient, however, does not make publicor provide to the sender the recipient’s related private key, only its public key.

Neither the recipient northe sender reveals its private keys in a peer-to-peer transaction, because the private key authorizes transfer of the funds in that addressto other users. Therefore, if a user loses its private key, the user may permanently lose access to the ether contained in the associatedaddress. Likewise, ether is irretrievably lost if the private key associated with it is deleted and no backup has been made. When sendingether, a user’s Ethereum wallet must sign the transaction with the sender’s associated private key. In addition, since everycomputation on the Ethereum network requires processing power, there is a mandatory transaction fee involved with the transfer that ispaid by the sender to the Ethereum network itself (“base fee”), plus additional transaction fees the sender can elect (ornot) to pay at their discretion to the validators who validate their transaction (“tip”). The resulting digitally signed transactionis sent by the user’s Ethereum wallet, via a node (whether run by the user or operated by others), to other Ethereum network nodes,who in turn broadcast it on a peer-to-peer basis to validators to allow transaction confirmation.

Ethereum network validatorsrecord and confirm transactions when they validate and add blocks of information to the Ethereum blockchain. Validators operate throughnodes whose Ethereum Clients have an extra piece of software that permits the node to perform validation transactions. In a proof-of-stakeconsensus protocol like that used by the Ethereum network, validators compete to be randomly selected to validate transactions. A validatormust stake 32 ether to become a validator, which allows it to activate a unique validator key pair (consisting of a public and privatevalidator key). Each stake of 32 ether results in issuance of a validator key pair, meaning that multiple validators can operate througha single validator node (including a validator node operated by a third party as a service). There are two types of validators, thosewho propose blocks (“proposers”) and those who participate in a committee that approves the block (“attesters”).Staking more ether (in chunks of 32 ether) can increase the numerical chances that a given validator will be randomly selected. When avalidator is randomly selected by the protocol’s algorithm to propose a block, it creates that block, which includes data relatingto (i) the verification of newly submitted transaction requests submitted by senders and (ii) a reference to the prior block in the Ethereumblockchain to which the new block is being added. The proposing validator becomes aware of outstanding transaction requests through peer-to-peerdata packet transmission and distribution enforced by the Ethereum protocol rules, which connects the proposer to users who want transactionsrecorded. If—once created—the proposing validator’s block is confirmed by a committee of randomly selected attesters,the block is broadcast to the Ethereum network and added to the Ethereum blockchain. Any smart contract code that has been called by thetransaction request is also executed (provided the base fee is paid for the Ethereum network’s computational power associated withexecuting the code, and up to the amount of the base fee). Upon the addition of a block included in the Ethereum blockchain, an adjustmentto the ether balance in both the sender and recipient’s Ethereum network public key will occur, completing the ether transaction.Once a transaction is confirmed on the Ethereum blockchain, it is irreversible.

As a reward for their servicesin adding the block to the Blockchain, both the proposing validator and the attesting validators receive newly minted ether from the Ethereumnetwork. If the proposing validator’s block is determined by the approving validator committee to be faulty or to break protocolrules, the proposer is penalized by having its staked ether reduced. Validators can also be penalized for attesting to transactions thatbreak protocol rules or are inconsistent with the majority of other validators, or for inactivity or missing attestations that the Ethereumnetwork protocol assigned to them. In extreme cases, a proposing or attesting validator can be “slashed,” meaning forciblyejected by other validators, with its staked ether continuously drained, potentially up to the loss of its entire stake. In this way,the Ethereum network attempts to reduce double-spend and other attacks by validators and incentivize validator integrity.

Some ether transactions areconducted “off-blockchain” and are therefore not recorded in the Ethereum blockchain. Some “off-blockchain transactions”involve the transfer of control over, or ownership of, a specific digital wallet holding ether or the reallocation of ownership of certainether in a pooled-ownership digital wallet, such as a digital wallet owned by a digital asset exchange. If a transaction can also takeplace through a centralized digital asset exchange or a custodian’s internal books and records, it is not broadcast to the Ethereumnetwork or recorded on the Ethereum blockchain. In contrast to on-blockchain transactions, which are publicly recorded on the Ethereumblockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchaintransactions are not peer-to-peer ether transactions in that they do not involve a transaction on the Ethereum network and do not reflecta movement of ether between addresses recorded in the Ethereum blockchain. For these reasons, off-blockchain transactions are not immutableor irreversible as any such transfer of ether ownership is not cryptographically protected by the protocol behind the Ethereum networkor recorded in, and validated through, the blockchain mechanism.

Ether has generally exhibitedhigh price volatility relative to more traditional asset classes. One volatility measure, standard deviation, is based on the variabilityof historical price returns. A higher standard deviation indicates a wider dispersion of past price returns and thus greater historicalvolatility.

Ethereum Markets and Exchanges

Ether can be transferred indirect peer-to-peer transactions through the direct sending of ether over the Ethereum blockchain from one ether address to another. Amongend-users, ether can be used to pay other members of the Ethereum network for goods and services under what resembles a barter system.Consumers can also pay merchants and other commercial businesses for goods or services through direct peer-to-peer transactions on theEthereum blockchain or through third-party service providers.

In addition to using etherto engage in transactions, investors may purchase and sell ether to speculate as to the value of ether in the ether market, or as a long-terminvestment to diversify their portfolio. The value of ether within the market is determined, in part, by the supply of and demand forether in the global ether market, market expectations for the adoption of ether as a store of value, the number of merchants that acceptether as a form of payment, and the volume of peer-to-peer transactions, among other factors.

Ether spot markets typicallypermit investors to open accounts with the market and then purchase and sell ether via websites or through mobile applications. Pricesfor trades on ether spot markets are typically reported publicly. An investor opening a trading account must deposit an accepted government-issuedcurrency into its account with the spot market, or a previously acquired digital asset, before they can purchase or sell assets on thespot market. The process of establishing an account with an ether market and trading ether is different from, and should not be confusedwith, the process of users sending ether from one ether address to another ether address on the Ethereum blockchain. This latter processis an activity that occurs on the Ethereum network, while the former is an activity that occurs entirely within the order book operatedby the spot market. The spot market typically records the investor’s ownership of ether in its internal books and records, ratherthan on the Ethereum blockchain. The spot market ordinarily does not transfer ether to the investor on the Ethereum blockchain unlessthe investor makes a request to the exchange to withdraw the ether in its exchange account to an off-exchange ether wallet.

Outside of the spot markets,ether can be traded OTC. The OTC market is largely institutional in nature, and OTC market participants generally consist of institutionalentities, such as firms that offer two-sided liquidity for ether, investment managers, proprietary trading firms, high-net-worth individualsthat trade ether on a proprietary basis, entities with sizeable ether holdings, and family offices. The OTC market provides a relativelyflexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of ether. The OTC markethas no formal structure and no open-outcry meeting place. Parties engaging in OTC transactions will agree upon a price—often viaphone or email—and then one of the two parties will then initiate the transaction. For example, a seller of ether could initiatethe transaction by sending the ether to the buyer’s ether address. The buyer would then wire U.S. dollars to the seller’sbank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on ether spot markets.

In addition, ether futuresand options trading occurs on exchanges in the United States regulated by the CFTC. The market for CFTC-regulated trading of ether derivativeshas developed substantially. As of March 28, 2024, regulated ether futures represented approximately $837 million in notional tradingvolume on Chicago Mercantile Exchange (“CME”). Ether futures on the CME traded around $562 million per day in the one yearending March 28, 2024 and represented around $546 million in open interest per day. Through the common membership of the Exchange andthe CME Ethereum Futures market in the Intermarket Surveillance Group (the “ISG”), the Exchange may obtain information regardingtrading in the Shares and listed ether derivatives from the CME Ethereum Futures market via the ISG and from other exchanges who are membersor affiliates of the ISG. Such an arrangement with the ISG and the CME Ethereum Futures market allows for the surveillance of ether futuresmarket conditions and price movements on a real-time and ongoing basis in order to detect and prevent price distortions, including pricedistortions caused by manipulative efforts. The sharing of surveillance information between the Exchange and the CME Ethereum Futuresmarket regarding market trading activity, clearing activity and customer identity assists in detecting, investigating and deterring fraudulentand manipulative misconduct, as well as violations of the Exchange’s rules and the applicable federal securities laws and rules.The Exchange has also implemented surveillance procedures to monitor the trading of the Shares on the Exchange during all trading sessionsand to deter and detect violations of Exchange rules and the applicable federal securities laws.

As discussed in more detailbelow, barring the liquidation of the Trust or extraordinary circumstances, the Trust will not directly purchase or sell ether, althoughthe Sponsor may direct the Ether Custodian to sell ether to pay certain expenses. Instead, Authorized Participants will deliver etherto the Trust’s account with the Ether Custodian in exchange for Shares of the Trust, and the Trust, through the Ether Custodian,will deliver ether to Authorized Participants when those Authorized Participants redeem Shares.

Creation of New Ether

Initial Creation of Ether

Unlike other digital assets,such as bitcoin, which are solely created through a progressive mining process, 72.0 million ether were created in connection with thelaunch of the Ethereum network. The initial 72.0 million ether were distributed as follows:

Initial Distribution:60.0 million ether, or 83.33% of the supply, was sold to the public in a crowd sale conducted between July and August 2014 that raisedapproximately $18 million.

Ethereum Foundation:6.0 million ether, or 8.33% of the supply, was distributed to the Ethereum Foundation for operational costs.

Ethereum Developers:3.0 million ether, or 4.17% of the supply, was distributed to developers who contributed to the Ethereum network.

Developer Purchase Program:3.0 million ether, or 4.17% of the supply, was distributed to members of the Ethereum Foundation to purchase at the initial crowd saleprice.

Followingthe launch of the Ethereum network, ether supply initially increased through a progressive validation process. Following the introductionof EIP-1559, described below, ether supply and issuance rates vary based on factors such as recent use of the network.

Proof-of-Work Validation Process

Prior to September 2022, Ethereumoperated using a proof-of-work consensus mechanism. Under proof-of-work, in order to incentivize those who incurred the computationalcosts of securing the network by validating transactions, there was a reward given to the computer (under proof-of-work, validators wereknown as “miners”) that was able to create the latest block on the chain. Every 12 seconds, on average, a new block was addedto the Ethereum blockchain with the latest transactions processed by the network, and the miner that generated this block was awardeda variable amount of ether, depending on use of the network at the time. In certain validation scenarios, ether was sometimes sent fromone miner to another if it was also able to find a solution but its block was not included. This is referred to as an “uncle/auntreward.” Due to the nature of the algorithm for block generation, this process (generating a “proof-of-work”) was guaranteedto be random. Prior to the Merge upgrade, described below, miners on the Ethereum network engaged in a set of prescribed complex mathematicalcalculations in order to add a block to the Ethereum blockchain and thereby confirm ether transactions included in that block’sdata.

Proof-of-Stake Process

Inthe second half of 2020, the Ethereum network began the first of several stages of an upgrade that was initially known as “Ethereum2.0” and eventually became known as the “Merge” to transition the Ethereum network from a proof-of-work consensus mechanismto a proof-of-stake consensus mechanism. The Merge was completed on September 15, 2022, and the Ethereum network has operated on a proof-of-stakemodel since such time.

Unlikeproof-of-work, in which validators expend computational resources to compete to validate transactions and are rewarded coins in proportionto the amount of computational resources expended, in proof-of-stake, validators risk or “stake” coins to compete to be randomlyselected to validate transactions and are rewarded coins in proportion to the amount of coins staked. Any malicious activity, such asvalidating multiple blocks, disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or“slashing” of a portion of the staked coins. Proof-of-stake is believed by some to be more energy efficient and scalable thanproof-of-work. Approximately every 12 seconds, a new block is added to the Ethereum blockchain with the latest transactions processedby the network, and the validator that generated this block is awarded ether.

Limitson Ether Supply

Therate at which new ether are issued and put into circulation is expected to vary. In September 2022 the Ethereum network converted fromproof-of-work to a new proof-of-stake consensus mechanism. Following the Merge, approximately 1,700 ether are issued per day, thoughthe issuance rate varies based on the number of validators on the network. In addition, the issuance of new ether could be partiallyor completely offset by the burn mechanism introduced by the EIP-1559 modification, under which ether are removed from supply at a ratethat varies with network usage. See “Modifications to the Ethereum Protocol.” On many occasions, the ether supply has beendeflationary over 24-hour periods as a result of the burn mechanism. The attributes of the new consensus algorithm are subject to change,but in sum, the new consensus algorithm and related modifications reduced total new ether issuances and may turn the ether supply deflationaryover the long term.

Asof September 1, 2024, approximately 120.3 million ether were outstanding.

Modificationsto the Ethereum Protocol

TheEthereum network is an open-source project with no official developer or group of developers that controls it. However, historicallythe Ethereum network’s development has been overseen by the Ethereum Foundation and other core developers. The Ethereum Foundationand core developers are able to access and alter the Ethereum network source code and, as a result, they are responsible for quasi-officialreleases of updates and other changes to the Ethereum network’s source code. However, the release of proposed updates to the Ethereumnetwork’s source code by core developers does not guarantee that the updates will be automatically adopted. Nodes must accept anychanges made to the Ethereum source code by choosing to download the proposed modification of the Ethereum network’s source codein their individual Ethereum Client, and ultimately a critical mass (in practice, a substantial majority) of validators and users—suchas DApp and smart contract developers, as well as users of DApps and smart contracts, and anyone else who transacts on the Ethereum blockchainor Ethereum network—must support the shift, or the upgrades will lack adoption. A modification of the Ethereum network’ssource code is only effective with respect to the Ethereum nodes that download it and modify their Ethereum Clients accordingly, andin practice such decisions are heavily influenced by the preferences of validators and users. If a modification is accepted only by apercentage of nodes, a division in the Ethereum network will occur such that one network will run the pre-modification source code andthe other network will run the modified source code. Such a division is known as a “fork.” See “RISK FACTORS—RisksRelated to Digital Assets.” A temporary or permanent “fork” of the Ethereum blockchain could adversely affect the valueof the Shares. Consequently, as a practical matter, a modification to the source code becomes part of the Ethereum network only if acceptedby a sufficiently broad cross-section of the Ethereum network’s participants.

Forexample, in 2019 the Ethereum network completed a network upgrade called Metropolis that was designed to enhance the usability of theEthereum network and was introduced in two stages. The first stage, called Byzantium, was implemented in October 2017. The purposes ofByzantium were to increase the network’s privacy, security, and scalability and to reduce the block reward for validators (at thattime, validators on the proof-of-work consensus version of Ethereum were known as “miners”) who created new blocks in proof-of-workconsensus from 5.0 ether to 3.0 ether. The second stage, called Constantinople, was implemented in February 2019, along with anotherupgrade, called St. Petersburg. Another network upgrade, called Istanbul, was implemented in December 2019. The purpose of Istanbul wasto make the network more resistant to denial-of-service attacks, to enable greater ether and Zcash interoperability as well as otherEquihash-based proof-of-work digital assets, and to increase the scalability and performance for solutions on zero-knowledge privacytechnology like SNARKs and STARKs. The purposes of these upgrades were to prepare the Ethereum network for the introduction of a proof-of-stakealgorithm and reduce the block reward from 3.0 ether to 2.0 ether.

Inthe second half of 2020, the Ethereum network began the first of several stages of an upgrade culminating in the Merge. The Merge amendedthe Ethereum network’s consensus mechanism to include proof-of-stake and was intended to address the perceived shortcomings ofthe proof-of-work consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (knownunder proof-of-work as “miners”) who did not win the race, under proof of work, to be the first in time to solve the cryptographicpuzzle that would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which wasonly given to the first validator to successfully solve the puzzle and hash a given block, and not to others).

Followingthe Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increasespeed, throughput and scalability and also improve existing or next-generation uses. Future upgrades to the Ethereum protocol and Ethereumblockchain to address scaling issues—such as network congestion, slow throughput and periods of high transaction fees owing tospikes in network demand—have been discussed by network participants, such as sharding. The purpose of sharding, which has beendiscussed for years, is to increase scalability of the Ethereum blockchain by splitting the blockchain into subsections, called shards,and dividing validation responsibility so that a defined subset of validators would be responsible for each shard, rather than all validatorsbeing responsible for the entire blockchain, allowing for parallel processing and validation of transactions. However, there appearsto be uncertainty and a lack of existing widespread consensus among network participants about how to solve the scaling challenges facedby the Ethereum network.

Therapid development of other competing scalability solutions, such as those which would rely on handling the bulk of computational workrelating to transactions or smart contracts and DApps outside of the main Ethereum network and Ethereum blockchain, has caused alternativesto sharding to emerge. “Layer 2” is a collective term for solutions that are designed to help increase throughput and reducetransaction fees by handling or validating transactions off the main Ethereum network (known as “Layer 1”) and then attemptingto take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by uploading the transactions validatedon the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer2 technologies and implementations. For example, “rollups” perform transaction execution outside the Layer 1 blockchain andthen post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. “Zero knowledge rollups”are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proofof validity of a batch of transactions (not the entire transactions themselves). By contrast, “optimistic rollups” assumetransactions are valid by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scalingsolutions include, among others, “state channels,” which are designed to allow participants to run a large number of transactionson the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction openingthe state channel, and the transaction closing the channel); and “side chains,” in which an entire Layer 2 blockchain networkwith similar capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereumblockchain and allows smart contracts and DApps to run on the Layer 2 side chain without burdening the main Layer 1 network, and others.To date, the Ethereum network community has not coalesced overwhelmingly around any particular Layer 2 solution, though this could change.

Apartfrom solutions designed to address scalability challenges, there have been other upgrades as well. In 2021, the Ethereum networkimplemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate the fees paid to validators. EIP-1559 resulted inthe splitting of fees into two components: a base fee and tip. Ether used to pay the base fee as a result of EIP-1559 is removed fromcirculation, or “burnt,” and the tip is paid to validators. EIP-1559 has reduced the total net issuance of ether fees tovalidators. Future updates may impact the supply of or demand for ether or its price.

TheTrust’s activities will not directly relate to scalability or upgrade projects, though such projects may potentially increase demandfor ether and the utility of the Ethereum network as a whole. Conversely, if they are unsuccessful or they cause users or applicationor smart contract developers to migrate away from the Ethereum blockchain, demand for ether could potentially be reduced. Also, projectsthat operate and are built within the Layer 1 Ethereum blockchain and network may increase the data flow on the Ethereum network andcould either “bloat” the size of the Ethereum blockchain or slow confirmation times.

Formsof Attack Against the Ethereum Network

Allnetworked systems are vulnerable to various kinds of attacks. As with any computer network, the Ethereum network contains certain flaws.For example, the Ethereum network is currently vulnerable to a “51% attack” whereby, if a validator or group of validatorsacting in concert were to gain control of more than 50% of the staked ether, a malicious actor would be able to gain full control ofthe network and the ability to manipulate the Ethereum blockchain. As of the date of this Prospectus, the top three largest staking poolscontrolled nearly 50% of the ether staked on the Ethereum network.

Manydigital asset networks have been subjected to a number of denial-of-service attacks, which has led to temporary delays in block creationand in the transfer of Ethereum. Any similar attacks on the Ethereum network that impact the ability to transfer ether could have a materialadverse effect on the price of ether and the value of the Shares.

Thisis not intended as an exhaustive list of all forms of attack against the Ethereum network. For additional information, see the “RISKFACTORS” section of this Prospectus.

MarketParticipants

Validators

Inproof-of-stake, validators risk or stake coins to compete to be randomly selected to validate transactions and are rewarded for performingtheir responsibilities and behaving in accordance with protocol rules. Any malicious activity, such as validating multiple blocks, disagreeingwith the eventual consensus or otherwise violating protocol rules, results in the penalization or, in extreme cases, slashing of a portionof the staked coins.

Validatorsrange from Ethereum enthusiasts to professional operations that design and build dedicated machines and data centers. On the Ethereumnetwork, a validator must stake 32 ether in order to participate in maintaining the network. When a validator confirms a transaction,the validator receives fees, including a base fee and a discretionary tip. During the course of ordering transactions and validatingblocks, validators may be able to prioritize certain transactions in return for increased transaction fees, particularly tips, an incentivesystem known as “Maximal Extractable Value,” or MEV. For example, in blockchain networks that facilitate DeFi protocols inparticular, such as the Ethereum network, users may attempt to gain an advantage over other users by increasing offered transaction feesto incentivize validators to give their submitted transaction requests priority. Certain software services, such as Flashbots, have beendeveloped to facilitate validators in capturing MEV produced by these increased fees.

Investmentand Speculative Sector

Thissector includes the investment and trading activities of both private and professional investors and speculators. Historically, largerfinancial services institutions are publicly reported to have limited involvement in investment and trading in digital assets, althoughthe participation landscape is beginning to change. Currently, there is relatively limited use of digital assets in the retail and commercialmarketplace in comparison to relatively extensive use by speculators, and a significant portion of demand for digital assets is generatedby speculators and investors seeking to profit from the short- or long-term holding of digital assets.

RetailSector

Theretail sector includes users transacting in direct peer-to-peer ether activity through the direct sending of ether over the Ethereumnetwork. The retail sector also includes transactions in which consumers pay for goods or services from commercial or service businessesthrough direct transactions or third-party service providers, although the use of ether as a means of payment is still developing andhas not been accepted in the same manner as bitcoin due to ether’s relative nascency and because ether has a generally differentpurpose than bitcoin.

ServiceSector

Thissector includes companies that provide a variety of services including the buying, selling, payment processing and storing of ether.For example, Coinbase, Kraken, Bitstamp, Gemini, and LMAX Digital are some of the largest digital asset exchanges by volume traded. CoinbaseCustody Trust Company, LLC, the Custodian of the Trust, is a digital asset custodian that provides custodial accounts that store etherfor users. As the Ethereum network continues to grow in acceptance, it is anticipated that service providers will expand the currentlyavailable range of services and that additional parties will enter the service sector for the Ethereum network.

Competition

Asof December 31, 2023, more than 8,000 other digital assets, as tracked by CoinMarketCap.com, have been developed since the inceptionof bitcoin, which is currently the most developed digital asset because of the length of time it has been in existence, the investmentin the infrastructure that supports it, and the network of individuals and entities that are using bitcoin in transactions. While etherhas enjoyed some success in its limited history, the aggregate value of outstanding ether is smaller than that of bitcoin and may beeclipsed by the more rapid development of other digital assets. In addition, while ether was the first digital asset with a network thatserved as a smart contracts platform, a number of newer digital assets also function as smart contracts platforms, including Solana,Avalanche and Cardano. Some industry groups are also creating private, permissioned blockchain versions of Ethereum.

REGULATIONOF BITCOIN AND ETHER

Asdigital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (includingFinancial Crimes Enforcement Network (“FinCEN”),SEC, CFTC, the Financial Industry Regulatory Authority (“FINRA”), the Consumer Financial Protection Bureau (“CFPB”),the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial institutionand securities regulators) have been examining the operations of digital asset networks, digital asset users and the digital asset markets,with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminalor terrorist enterprises, and the safety and soundness of exchanges or other service providers that hold or have custody of digital assetsfor users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed to investors by digitalassets. President Biden’s March 9, 2022 Executive Order, asserting that technological advances and the rapid growth of the digitalasset markets “necessitate an evaluation and alignment of the United States Government approach to digital assets,” signalsan ongoing focus on digital asset policy and regulation in the United States. A number of reports issued pursuant to the Executive Orderhave focused on various risks related to the digital asset ecosystem and have recommended additional legislation and regulatory oversight.Furthermore, federal and state agencies, and other countries and international bodies, have issued rules or guidance about the treatmentof digital asset transactions or requirements for businesses engaged in digital asset activity.

Manyof these state and federal agencies have brought enforcement actions and issued advisories and rules relating to digital asset markets.Ongoing and future regulatory actions with respect to digital assets generally or any single digital asset in particular may alter, perhapsto a materially adverse extent, the nature of an investment in the Shares and/or the ability of the Trust to continue to operate. Forexample, the events of 2022, including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, CelsiusNetwork, Voyager Digital, Genesis, BlockFi and others, and other developments in the digital asset markets, have resulted in calls forheightened scrutiny and regulation of the digital asset industry, with a specific focus on intermediaries such as digital asset exchanges,platforms, and custodians. Federal and state legislatures and regulatory agencies may introduce and enact new laws and regulations toregulate crypto asset intermediaries, such as digital asset exchanges 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, or similar future events,may amplify and/or accelerate these trends. On January 3, 2023, the federal banking agencies issued a joint statement on crypto-assetrisks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraudand scams, legal uncertainties, significant volatility, and contagion risk. Although banking organizations are not prohibited from crypto-assetrelated activities, the agencies have expressed significant safety and soundness concerns with business models that are concentratedin crypto-asset related activities or have concentrated exposures to the crypto-asset sector.

U.S.federal and state regulators, as well as the White House, have issued reports and releases concerning digital assets, including bitcoin,ether and digital asset markets. Further, in 2023 the House of Representatives formed two new subcommittees: the Digital Assets, FinancialTechnology and Inclusion Subcommittee and the Commodity Markets, Digital Assets, and Rural Development Subcommittee, each of which wereformed in part to analyze issues concerning crypto assets and demonstrate a legislative intent to develop and consider the adoption offederal legislation designed to address the perceived need for regulation of and concerns surrounding the digital asset industry. However,the extent and content of any forthcoming laws and regulations are not yet ascertainable with certainty, and it may not be ascertainablein the near future. A divided Congress makes any prediction difficult.

FinCENrequires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply withthe anti-money laundering regulations applicable to money transmitters. In 2015, FinCEN assessed a $700,000 fine against a sponsor ofa digital asset for violating several requirements of the Bank Secrecy Act by acting as a money services business and selling the digitalasset without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering program. In 2017, FinCENassessed a $110 million fine against BTC-e, a now defunct digital asset exchange, for similar violations. The requirement that exchangersthat do business in the U.S. register with FinCEN and comply with anti-money laundering regulations may increase the cost of buying andselling bitcoin and therefore may adversely affect the price of bitcoin and an investment in the Shares. In a March 2018 letter fromFinCEN’s assistant secretary for legislative affairs to U.S. Senator Ron Wyden, the assistant secretary indicated that under currentlaw both the developers and the exchanges involved in the sale of tokens in an initial coin offering (“ICO”) may be requiredto register with FinCEN as money transmitters and comply with the anti-money laundering regulations applicable to money transmitters.

TheOffice of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury (the “U.S. Treasury Department”)has added digital currency addresses, including addresses on the Bitcoin Network to the list of Specially Designated Nationals whoseassets are blocked, and with whom U.S. persons are generally prohibited from dealing. Such actions by OFAC, or by similar organizationsin other jurisdictions, may introduce uncertainty in the market as to whether bitcoin that has been associated with such addresses inthe past can be easily sold. This “tainted” bitcoin may trade at a substantial discount to untainted bitcoin. Reduced fungibilityin the Bitcoin markets may reduce the liquidity of bitcoin and therefore adversely affect their price.

Underregulations from the New York State Department of Financial Services (“NYDFS”), businesses involved in digital asset businessactivity for third parties in or involving New York, excluding merchants and consumers, must apply for a license, commonly known as aBitLicense, from the NYDFS and must comply with anti-money laundering, cyber security, consumer protection, and financial and reportingrequirements, among others. As an alternative to a BitLicense, a firm can apply for a charter to become a limited purpose trust companyunder New York law qualified to engage in digital asset business activity. Other states have considered or approved digital asset businessactivity statutes or rules, passing, for example, regulations or guidance indicating that certain digital asset business activities constitutemoney transmission requiring licensure.

Theinconsistency in applying money transmitting licensure requirements to certain businesses may make it more difficult for these businessesto provide services, which may affect consumer adoption of bitcoin and its price. In an attempt to address these issues, the UniformLaw Commission passed a model law in July 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similaritiesto the BitLicense and features a multistate reciprocity licensure feature, wherein a business licensed in one state could apply for acceleratedlicensure procedures in other states. It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.

Inaddition, the chair of the SEC has stated that the SEC has authority under existing laws to regulate the digital asset sector and theSEC, U.S. state securities regulators and several foreign governments have issued warnings and instituted legal proceedings in whichthey argue that certain digital assets may be classified as securities and that both those digital assets and any related initial coinofferings are subject to securities regulations. The outcomes of these proceedings, as well as ongoing and future regulatory actions,may alter, perhaps to a materially adverse extent, the nature of an investment in the Shares or the ability of the Trust to continueto operate. Additionally, U.S. state and federal, and foreign, regulators and legislatures have taken action against virtual currencybusinesses or enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemmingfrom virtual currency activity.

InJune 2023, the SEC filed lawsuits against Coinbase and Binance, two large U.S. digital asset trading platforms, alleging that Coinbaseand Binance had been operating as unregistered securities exchanges, brokers and clearing agencies in violation of U.S. federal securitieslaws. While the SEC has not alleged that bitcoin is a security, the outcome of these enforcement actions and others may result in thesubstantial restructuring of the digital asset market in the United States. However, the SEC has recently faced setbacks in U.S. courtsin its attempt to regulate the digital asset markets. In July 2023, the U.S. District Court for the Southern District of New York ruledon the SEC’s action against Ripple Labs, Inc. The court found that offers and sales of XRP, a digital token, to institutions andsophisticated individuals constituted securities transactions, but that offers and sales of XRP on crypto exchanges, distributions toemployees, and other third-party developers were not securities transactions. More recently, the D.C. Circuit Court found that the SEC’sdenial of the Grayscale Bitcoin Trust’s listing was “arbitrary and capricious” under the Administrative ProceduresAct in light of the SEC’s approval of two similar bitcoin futures-based ETPs. Nonetheless, until the SEC’s numerous actionsagainst digital asset market participants are resolved, the structure of the digital asset market in the United States will remain subjectto substantial regulatory risk, which may impact the demand for digital assets and the continued availability of existing exchanges andofferings.

TheSEC has also recently proposed amendments to the custody rules under Rule 406(4)-2 of the Investment Advisers Act. The proposed rulechanges would amend the definition of a “qualified custodian” under Rule 206(4)-2(d)(6) and expand the current custodyrule under Rule 406(4)-2 to cover digital assets and related advisory activities. If enacted as proposed, these rules would likely imposeadditional regulatory requirements with respect to the custody and storage of digital assets and could lead to additional regulatoryoversight of the digital asset ecosystem more broadly. In addition, it is possible the market turbulence in late 2022, which led to thefailure of FTX Trading Ltd. (“FTX”) in November 2022 and the resulting market turmoil, could lead to increased SEC, CFTC,or other governmental investigations, enforcement, and/or other regulatory activity across the digital asset ecosystem.

TheCFTC has regulatory jurisdiction over the bitcoin and ether futures markets. In addition, because the CFTC has determined that bitcoinand ether are each a “commodity” under the CEA and the rules thereunder, it has jurisdiction to prosecute fraud and manipulationin the cash, or spot, market for bitcoin and ether. The CFTC has pursued enforcement actions relating to fraud and manipulation involvingbitcoin, ether and bitcoin and ether markets. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash orspot market exchanges or transactions involving bitcoin or ether that do not use collateral, leverage, or financing.

Variousforeign jurisdictions have adopted and may continue in the near future to adopt laws, regulations or directives that affect a digitalasset network, the digital asset markets, and their users, particularly digital asset exchanges and service providers that fall withinsuch jurisdictions’ regulatory scope. For example:

Thetransparency of blockchains has in the past facilitated investigations by law enforcement agencies. However, certain privacy-enhancingfeatures have been or are expected to be introduced to a number of digital asset networks, and these features may provide law enforcementagencies with less visibility into transaction histories. Although no regulatory action has been taken to treat privacy-enhancing digitalassets differently, this may change in the future.

Theeffect of any future regulatory change on the Trust or the bitcoin or ether held by the Trust is impossible to predict, but such changecould be substantial and adverse to the Trust and the value of the Shares.

THETRUST AND BITCOIN and ETHER PRICES

Overviewof the Trust

TheTrust’s investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expensesof the Trust’s operations. On the inception date of the Trust, ______, 2025, each Share represented _____ bitcoin and _____ ether.In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and will value its net assets and the Shares dailybased on the Pricing Benchmarks. Bitcoin and ether will be the only digital assets held by the Trust. The Trust’s allocation ofits assets to bitcoin and ether will approximate the relative market capitalization of bitcoin and ether to one another.

TheSponsor believes that the Trust will provide a cost-efficient way for investors to implement strategic and tactical asset allocationstrategies that use bitcoin and ether by investing in the Shares rather than purchasing, holding and trading bitcoin and ether directly.The latter alternative would require an investor to acquire bitcoin or ether by selecting a digital asset trading platform and openingan account or arranging a private transaction, and initiating a fiat transaction to initiate or settle such acquisition. An investorwould then also be required to custody such bitcoin or ether by selecting a retail or institutional custodial platform or establishinga personal computer or hardware security module-based system capable of transacting directly on the blockchain, and incurring the riskassociated with cybersecurity and maintaining a private key that is irrecoverable if lost, among other difficulties.

Purchaseand Sale of Bitcoin and Ether

Becausethe Trust will conduct creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin and etherin connection with those creation and redemption orders. The Trust may also be required to sell bitcoin and ether to pay certain extraordinary,non-recurring expenses that are not assumed by the Sponsor. To the extent that the Trust is required to sell bitcoin and ether to payfor such expenses, the Sponsor, on behalf of the Trust, will sell bitcoin and ether on a pro rata basis based upon the relative amountof bitcoin and ether held by the Trust.

TheSponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable PricingBenchmark as practical. When choosing between potential counterparties, the Sponsor may consider factors other than simply the most favorableprice. However, the most favorable price will be the predominant factor in determining the counterparty with which the Sponsor effectuatesthe contemplated transaction. Other factors that the Sponsor may consider include the size of the proposed order, as well as a counterparty’sexecution capabilities, reliability and responsiveness.

TheTrust’s purchase and sale of bitcoin and ether may be conducted pursuant to either of two models: (i) the “Trust-DirectedTrade Model”; or the (ii) the “Agent Execution Model.” The Trust intends to utilize the Trust-Directed Trade Modelfor all purchases and sales of bitcoin and ether and will only utilize the Agent Execution Model in the event that no Digital Asset TradingCounterparty is able or willing to effectuate the Trust’s purchase or sale of bitcoin or ether.

Whetherutilizing either the Trust-Directed Trade Model or the Agent Execution Model, the Authorized Participants will deliver only cash to createShares and will receive only cash when redeeming Shares. Further, Authorized Participants will not directly or indirectly purchase, hold,deliver, or receive bitcoin or ether as part of the creation or redemption process or otherwise direct the Trust or a third party withrespect to purchasing, holding, delivering, or receiving bitcoin or ether as part of the creation or redemption process. Additionally,under both the Trust-Directed Trade Model and the Agent Execution Model, the Trust will create Shares by receiving bitcoin or ether froma third party that is not the Authorized Participant, and the Sponsor, on behalf of the Trust—not the Authorized Participant—isresponsible for selecting the third party to deliver the bitcoin or ether. Moreover, the third party will not be acting as an agent ofthe Authorized Participant with respect to the delivery of the bitcoin or ether to the Trust or acting at the direction of the AuthorizedParticipant with respect to the delivery of the bitcoin or ether to the Trust. Additionally, the Trust will redeem Shares by deliveringbitcoin or ether to a third party that is not the Authorized Participant and the Sponsor, on behalf of the Trust—not the AuthorizedParticipant—is responsible for selecting the third party to receive the bitcoin or ether. The third party will also not be actingas an agent of the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust or acting at the directionof the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust.

Trust-DirectedTrade Model

Underthe Trust-Directed Trade Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin from a bitcoin trading counterpartythat has been approved by the Sponsor (a Bitcoin Trading Counterparty) and ether from an ether trading counterparty that has been approvedby the Sponsor (an Ether Trading Counterparty, and with the Bitcoin Trading Counterparties, the Digital Asset Trading Counterparties).The Sponsor has entered into contractual agreements with the Digital Asset Trading Counterparties, and these agreements set forth thegeneral parameters under which a transaction in bitcoin and/or ether will be effectuated, should any transaction with a Digital AssetTrading Counterparty occur. These agreements do not require the Sponsor to utilize any particular Digital Asset Trading Counterparty,and do not create any contractual obligations on the part of any Digital Asset Trading Counterparty to participate in cash orders forcreations or redemptions. All transactions between the Sponsor, on behalf of the Trust, and a Digital Asset Trading Counterparty willbe done on an arm’s-length basis.

Whileit is expected and intended that the Digital Asset Trading Counterparties are unaffiliated third-parties, it is possible that a DigitalAsset Trading Counterparty may on any given day be or become considered an affiliate of the Trust if it acquires Shares in an amountthat would cause it to become considered an affiliate of the Trust, as the Shares are publicly traded. Digital Asset Trading Counterpartiesare not required to have a custody account with the Bitcoin and Ether Custodian. When seeking to purchase or sell bitcoin or ether onbehalf of the Trust, the Sponsor will typically seek to buy and sell bitcoin or ether at a price as close to the applicable Pricing Benchmarkas practical from any of the approved Digital Asset Trading Counterparties. Upon notification that the Trust needs to purchase or sellbitcoin or ether, the Sponsor will obtain indicative prices from multiple Digital Asset Trading Counterparties at which they would bewilling to execute the contemplated transaction. The Sponsor then determines the Digital Asset Trading Counterparty with which it wishesto transact and records the rationale for that determination. Once agreed upon, the transaction will generally occur on an “over-the-counter”basis. Transfers of bitcoin or ether to and from the Trust Digital Asset Accounts to the Digital Asset Trading Counterparty are “on-chain”transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Transfer fees with respect to this on-chaintransfer of bitcoin or ether will be paid by the Bitcoin and Ether Custodian.

TheSponsor maintains a process for approving and monitoring Digital Asset Trading Counterparties, which is overseen by the Bitwise PortfolioOversight Committee, which is responsible for investment activities and related risk, as well as counterparty risk. All Digital AssetTrading Counterparties must be approved by the Bitwise Portfolio Oversight Committee before the Sponsor, on behalf of the Trust, willengage in transactions with the entity. The Bitwise Portfolio Oversight Committee continuously reviews all approved Digital Asset TradingCounterparties at its quarterly meetings and will reject the approval of any previously approved Digital Asset Trading Counterparty ifnew information arises regarding the entity that puts the appropriateness of that entity as an approved ether trading counterparty indoubt. In considering which Digital Asset Trading Counterparties to approve, the Bitwise Portfolio Oversight Committee has institutedrigorous policies and procedures that include, but are not limited to, (i) a review of all sanctioned entities, including, but not limitedto, the various categories of sanctioned persons and entities identified by the Office of Foreign Assets Control; (ii) a review of allpublicly available information regarding the entity, including a review of all information that has been filed pursuant to the requirementsof U.S. or non-U.S. regulators, with a particular emphasis on the identity of the entity’s owners, disclosure events and reportsof disciplinary action; and (iii) a review of the entity’s policies and procedures regarding various topics, including, but notlimited to, anti-money laundering and “know-your-customer” requirements, trade surveillance, auditing and testing and cybersecuritycapabilities.

Asof __________, 2025, _________________, _________________, _________________ and _________________ have been approved as Digital AssetTrading Counterparties.

AgentExecution Model

Inthe event that every Digital Asset Trading Counterparty is either unable or unwilling to effectuate the Trust’s purchase or saleof bitcoin or ether, the Sponsor, on behalf of the Trust, may execute the trade using the Agent Execution Model.

Underthe Agent Execution Model, the Prime Execution Agent, an affiliate of the Bitcoin and Ether Custodian, acting in an agency capacity,conducts bitcoin and ether purchases and sales on behalf of the Trust with third parties through its Coinbase Prime service pursuantto the Prime Execution Agreement. To avoid having to pre-fund purchases or sales of bitcoin and ether, the Trust may borrow bitcoin orether or cash as Trade Credit from the Trade Credit Lender on a short-term basis pursuant to the Trade Financing Agreement. As the Trustintends to conduct nearly all purchases and sales of bitcoin and ether pursuant to the Trust-Directed Trade Model, under normal conditions,it expects to keep very little or no bitcoin or ether in the Trading Balance with the Prime Execution Agent.

Inthe case of a purchase of bitcoin or ether, the extension of Trade Credits allows the Trust to purchase bitcoin or ether through thePrime Execution Agent on the date the Trust wishes to effectuate the transaction (for instance, on the evening of the day when an orderto create Shares is received), with such bitcoin or ether being deposited in the Trust’s Trading Balance. On the day followinga trade when Trade Credits have been utilized, the Trust uses cash (for instance, from the Authorized Participant who submitted the creationorder) to repay the Trade Credits borrowed from the Trade Credit Lender. The bitcoin or ether purchased by the Trust is then swept fromthe Trust’s Trading Balance with the Prime Execution Agent to the applicable Trust Digital Asset Account with the Bitcoin and EtherCustodian pursuant to a regular end-of-day sweep process. Transfers of bitcoin and ether into the Trust’s Trading Balance are off-chaintransactions and transfers from the Trust’s Trading Balance to the Trust Digital Asset Accounts are “on-chain” transactionsrepresented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit Lender is deemedpart of trade execution costs and embedded in the trade price for each transaction.

Inthe case of a sale of bitcoin or ether, the Trust enters into a transaction to sell ether through the Prime Execution Agent for cash.The Trust’s Trading Balance with the Prime Execution Agent may not be funded with bitcoin or ether on the date the Trust wishesto effectuate the transaction (for instance, on the evening a day when an order to redeem Shares is received) because the bitcoin orether remains in the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian. In those circumstances the Trust may borrow TradeCredits in the form of bitcoin or ether from the Trade Credit Lender, which allows the Trust to sell bitcoin or ether through the PrimeExecution Agent at the desired time, and the cash proceeds are deposited in the Trust’s Trading Balance with the Prime ExecutionAgent. On the business day following the trade, the Trust will use the bitcoin or ether that is moved from the Trust Digital Asset Accountwith the Bitcoin and Ether Custodian to the Trading Balance with the Prime Execution Agent to repay the Trade Credits borrowed from theTrade Credit Lender. Transfers of bitcoin or ether from the Trust Digital Asset Account to the Trust’s Trading Balance are “on-chain”transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade CreditLender is deemed part of trade execution costs and embedded in the trade price for each transaction.

ThePricing Benchmarks

Ona daily basis, to calculate the aggregate U.S. dollar value of the bitcoin held by the Trust (the Trust Bitcoin Value), the Trust referencesthe value of one bitcoin in U.S. dollars provided by the CME CF Bitcoin Reference Rate– New York Variant, the Bitcoin Pricing Benchmark.Similarly, on a daily basis, to calculate the aggregate U.S. dollar value of the ether held by the Trust (the Trust Ether Value), theTrust references the value of one ether in U.S. dollars provided by the CME CF Ether – Dollar Reference Rate – New York Variant,the Ether Pricing Benchmark.

TheAdministrator uses the Trust Bitcoin Value and the Trust Ether Value to calculate the Trust’s NAV, which is the aggregate of theTrust Bitcoin Value and Trust Ether Value, based on the Bitcoin Pricing Benchmark and Ether Pricing Benchmark respectively, less theTrust’s liabilities and expenses.

“NAVper Share” is calculated by dividing NAV by the number of Shares currently outstanding. NAV and NAV per Share are not measurescalculated in accordance with GAAP. NAV is not intended to be a substitute for the Trust’s Principal Market NAV calculated in accordancewith GAAP, and NAV per Share is not intended to be a substitute for the Trust’s Principal Market NAV per Share calculated in accordancewith GAAP.

Additionalinformation regarding the Pricing Benchmarks is set forth below.

TheCME CF Bitcoin Reference Rate – New York Variant

TheTrust’s bitcoin holdings are valued on a daily basis with reference to the CME CF Bitcoin Reference Rate– New York Variant,the Bitcoin Pricing Benchmark, a standardized reference rate published by CF Benchmarks Ltd., the Benchmark Provider, that is designedto reflect the performance of bitcoin in U.S. dollars. The Bitcoin Pricing Benchmark was created to facilitate financial products basedon bitcoin. It serves as a once-a-day benchmark rate of the U.S. dollar price of one bitcoin (USD/BTC), calculated as of 4:00 p.m. ET.The Bitcoin Pricing Benchmark aggregates the trade flow of several major bitcoin trading venues, during an observation window between3:00 p.m. and 4:00 p.m. ET into the U.S. dollar price of one bitcoin at 4:00 p.m. ET. The Bitcoin Pricing Benchmark currently uses substantiallythe same methodology as the CME CF Bitcoin Reference Rate, the BRR, including utilizing the same constituent bitcoin exchanges, whichis the underlying rate to determine settlement of CME bitcoin futures contracts, except that the Bitcoin Pricing Benchmark is calculatedas of 4:00 p.m. ET, whereas the BRR is calculated as of 4:00 p.m. London time. Bitcoin Pricing Benchmark, which was introduced on February28, 2022, is based on materially the same methodology (except calculation time) as the BRR, which was first introduced on November 14, 2016.

TheSponsor, in its sole discretion, may cause the Trust to price its portfolio of bitcoin based upon an index, benchmark or standard otherthan the Bitcoin Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsorbelieves that another index, benchmark or standard better aligns with the Trust’s investment objective and strategy. The Sponsormay make this decision for a number of reasons, including, but not limited to, a determination that the Bitcoin Pricing Benchmark priceof bitcoin differs materially from the global market price of bitcoin and/or that third parties are able to purchase and sell bitcoinon public or private markets not included among the Constituent Platforms, and such transactions may take place at prices materiallyhigher or lower than the Bitcoin Pricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changesin any circumstance. In the event that the Sponsor intends to establish the Trust Bitcoin Value by reference to an index, benchmark orstandard other than the Bitcoin Pricing Benchmark, it will provide Shareholders with notice in a prospectus supplement and/or througha current report on Form 8-K or in the Trust’s annual or quarterly reports.

BitcoinPricing Benchmark Methodology

TheBitcoin Pricing Benchmark is calculated based on the “Relevant Transactions” (as defined below) of all of its constituentbitcoin trading venues (the Constituent Platforms) as follows:

Asof September 3, 2024, the Constituent Platforms included in the Bitcoin Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,and LMAX Digital.

Anoversight function is implemented by the Benchmark Provider in seeking to ensure that the Bitcoin Pricing Benchmark is administered throughthe Benchmark Provider’s codified policies for index integrity. The Bitcoin Pricing Benchmark is administered through the BenchmarkProvider’s codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountabilityframework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subjectto a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.

TheBitcoin Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprisedof at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the BenchmarkProvider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. TheCME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee’s Founding Charter and quarterlymeeting minutes are publicly available.

Inthe event that there are errors or irregularities in the calculation and publication of the Bitcoin Pricing Benchmark, including delayed,missing data or erroneous data, the Benchmark Provider will apply the “Contingency Calculation Rules” as they relate to theBitcoin Pricing Benchmark that are set forth on the Benchmark Provider’s website. Such rules dictate how the Benchmark Providerwill calculate the Bitcoin Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no RelevantTransaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platformbut cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Bitcoin PricingBenchmark for that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactionsthat have been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in thecalculation of the Bitcoin Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculateand publish the Bitcoin Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informingBitcoin Pricing Benchmark users, including the Trust, the calculation and publication have been delayed.

Sincethe creation of the Bitcoin Pricing Benchmark, there have been several changes to Constituent Platforms comprising the Bitcoin PricingBenchmark, most recently in May 2022. Once it has actual knowledge of changes to the Constituent Platforms used to calculate the BitcoinPricing Benchmark, or other material changes to the Bitcoin Pricing Benchmark calculation methodology, the Trust will notify Shareholdersin a prospectus supplement and a current report on Form 8-K or in its annual or quarterly reports.

Atrading venue is eligible as a “Constituent Platform” in any of the CME CF Cryptocurrency Pricing Products if it offers amarket that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including marketswhere the quote asset is made fungible with Accepted Assets (the “Relevant Pair”) and makes trade data and order data availablethrough an Automatic Programming Interface (“API”) with sufficient reliability, detail and timeliness. The CME CF OversightCommittee considers a trading venue to offer sufficiently reliable, detailed and timely trade data and order data through an API when:(i) the API for the “Constituent Platform” does not fall or become unavailable to a degree that impacts the integrity ofthe Bitcoin Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmarkcan be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrievalat the required frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.

Furthermore,it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:

Additionally,a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or theOversight Committee.

BitcoinPricing Benchmark data and the description of the Bitcoin Pricing Benchmark are based on information made publicly available by the BenchmarkProvider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider’s website is incorporatedby reference into this Prospectus.

Thesix Constituent Platforms that contribute transaction data to the Bitcoin Pricing Benchmark with the aggregate volumes traded on theirrespective BTC-USD markets over the preceding four calendar quarters are listed in the table below:

Themarket share for BTC-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below:

CFBENCHMARKS LTD. DATA IS USED UNDER LICENSE AS A SOURCE OF INFORMATION FOR THE TRUST’S PRODUCTS. CF BENCHMARKS LTD., ITS AGENTSAND LICENSORS HAVE NO OTHER CONNECTION TO THE TRUST’S PRODUCTS AND SERVICES AND DOES NOT SPONSOR, ENDORSE, RECOMMEND OR PROMOTEANY OF THE TRUST’S PRODUCTS OR SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS HAVE NO OBLIGATION OR LIABILITY IN CONNECTIONWITH THE TRUST’S PRODUCTS AND SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESSOF ANY INDEX LICENSED TO THE TRUST AND SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.

TheCME CF Ether – Dollar Reference Rate – New York Variant

TheTrust’s ether holdings are valued on a daily basis with reference to the CME CF Ether – Dollar Reference Rate – NewYork Variant, the Ether Pricing Benchmark, a standardized reference rate published by CF Benchmarks Ltd., the Benchmark Provider, thatis designed to reflect the performance of ether in U.S. dollars. The Ether Pricing Benchmark was created to facilitate financial productsbased on ether. It serves as a once-a-day benchmark rate of the U.S. dollar price of ether (USD/ETH), calculated as of 4:00 p.m. ET.The Ether Pricing Benchmark aggregates the trade flow of several major ether trading venues, during an observation window between 3:00p.m. and 4:00 p.m. ET into the U.S. dollar price of one ether at 4:00 p.m. ET. The Ether Pricing Benchmark currently uses substantiallythe same methodology as the CME CF Ether Reference Rate, the ERR, including utilizing the same constituent ether exchanges, which isthe underlying rate to determine settlement of CME ether futures contracts, except that the Ether Pricing Benchmark is calculated asof 4:00 p.m. ET, whereas the ERR is calculated as of 4:00 p.m. London time. The Ether Pricing Benchmark, which was introduced on February28, 2022, is based on materially the same methodology (except calculation time) as the ERR, which was first introduced on June 4, 2018.The Ether Pricing Benchmark is designed based on the IOSCO Principals for Financial Benchmarks.

TheSponsor, in its sole discretion, may cause the Trust to price its portfolio based upon an index, benchmark or standard other than theEther Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor believes thatanother index, benchmark or standard better aligns with the Trust’s investment objective and strategy. The Sponsor may make thisdecision for a number of reasons, including, but not limited to, a determination that the Ether Pricing Benchmark price of ether differsmaterially from the global market price of ether and/or that third parties are able to purchase and sell ether on public or private marketsnot included among the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the EtherPricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the eventthat the Sponsor intends to establish the Trust’s NAV by reference to an index, benchmark or standard other than the Ether PricingBenchmark, it will provide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in theTrust’s annual or quarterly reports.

EtherPricing Benchmark Methodology

TheEther Pricing Benchmark is calculated based on the “Relevant Transactions” (as defined below) of all of its constituent ethertrading venues (the Constituent Platforms) as follows:

Asof September 3, 2024, the Constituent Platforms included in the Ether Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,and LMAX Digital.

Anoversight function is implemented by the Benchmark Provider in seeking to ensure that the Ether Pricing Benchmark is administered throughthe Benchmark Provider’s codified policies for index integrity. The Ether Pricing Benchmark is administered through the BenchmarkProvider’s codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountabilityframework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subjectto a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.

TheEther Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprisedof at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the BenchmarkProvider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. TheCME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee’s Founding Charter and quarterlymeeting minutes are publicly available.

Inthe event that there are errors or irregularities in the calculation and publication of the Ether Pricing Benchmark, including delayed,missing data or erroneous data, the Benchmark Provider will apply the “Contingency Calculation Rules” as they relate to theEther Pricing Benchmark that are set forth on the Benchmark Provider’s website. Such rules dictate how the Benchmark Provider willcalculate the Ether Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no RelevantTransaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platformbut cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Ether Pricing Benchmarkfor that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions thathave been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the calculationof the Ether Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate and publish theEther Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informing Ether PricingBenchmark users, including the Trust, the calculation and publication have been delayed.

Sincethe creation of the Ether Pricing Benchmark, there have been several changes to Constituent Platforms comprising the Ether Pricing Benchmark,most recently in May 2022. Once it has actual knowledge of changes to the Constituent Platforms used to calculate the Ether Pricing Benchmark,or other material changes to the Ether Pricing Benchmark calculation methodology, the Trust will notify Shareholders in a prospectussupplement and a current report on Form 8-K or in its annual or quarterly reports.

Atrading venue is eligible as a “Constituent Platform” in any of the CME CF Cryptocurrency Pricing Products if it offers amarket that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including marketswhere the quote asset is made fungible with Accepted Assets (the “Relevant Pair”) and makes trade data and order data availablethrough an Automatic Programming Interface (“API”) with sufficient reliability, detail and timeliness. The CME CF OversightCommittee considers a trading venue to offer sufficiently reliable, detailed and timely trade data and order data through an API when:(i) the API for the “Constituent Platform” does not fall or become unavailable to a degree that impacts the integrity ofthe Ether Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmarkcan be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrievalat the required frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.

Furthermore,it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:

Additionally,a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or theOversight Committee.

EtherPricing Benchmark data and the description of the Ether Pricing Benchmark are based on information made publicly available by the BenchmarkProvider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider’s website is incorporatedby reference into this Prospectus.

Thesix Constituent Platforms that contribute transaction data to the Ether Pricing Benchmark with the aggregate volumes traded on theirrespective ETH-USD markets over the preceding four calendar quarters are listed in the table below:

Themarket share for ETH-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below: