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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">As filed with the Securities and Exchange Commission
on November 26, 2024</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Registration No. 333-_______</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></FONT><BR>
<B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>FORM S-1</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 14pt"><B>Bitwise Bitcoin&nbsp;&amp; Ethereum ETF</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

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  <TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 49%; font-size: 10pt; text-align: center"><B>Delaware</B></TD>
    <TD STYLE="padding-bottom: 1.5pt; width: 2%; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 49%; font-size: 10pt; text-align: center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(State or other jurisdiction of</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">incorporation or organization)</P></TD>
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center">(I.R.S. Employer <BR>
Identification No.)</TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>c/o Bitwise Investment Advisers, LLC</B><BR>
<B>250 Montgomery Street, Suite 200</B><BR>
<B>San Francisco, California 94104</B><BR>
<B>(415) 707-3663</B><BR>
(Address, including zip code, and telephone number, including<BR>
area code, of registrant&rsquo;s principal executive offices and for service of process purposes)</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Copies to:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Richard Coyle, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>James Audette, Esq.</B><BR>
<B>Chapman and Cutler LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>320 South Canal Street, 27<SUP>th</SUP> Floor</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Chicago, Illinois 60606</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(312) 845-3724</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Katherine Dowling, Esq.</B><BR>
<B>Bitwise Investment Advisers, LLC</B><BR>
<B>250 Montgomery Street, Suite 200</B><BR>
<B>San Francisco, California 94104</B><BR>
<B>(415) 707-3663</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Approximate date of commencement of proposed sale
to the public: As soon as practicable after the effective date of this Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:
&#9746;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering: &#9744;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. &#9744;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. &#9744;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of &ldquo;large, accelerated filer,&rdquo; &ldquo;accelerated filer,&rdquo; &ldquo;smaller reporting company,&rdquo;
and &ldquo;emerging growth company&rdquo; in Rule 12b-2 of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 25%; padding-right: -4.2pt">Large accelerated filer </TD>
    <TD STYLE="width: 35%">&#9744;</TD>
    <TD STYLE="width: 25%">Accelerated filer</TD>
    <TD STYLE="width: 15%"> &#9744;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>Non-accelerated filer</TD>
    <TD>&#9746;</TD>
    <TD>Smaller reporting company</TD>
    <TD> &#9746;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Emerging growth company</TD>
    <TD> &#9746;</TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. &#9746;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: Red">The information in this
Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: Red">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: Red"><B>Subject to Completion</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: Red"><B>Preliminary Prospectus
dated November 26, 2024</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>PROSPECTUS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Shares</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Bitwise
Bitcoin &amp; Ethereum ETF</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Bitwise Bitcoin &amp; Ethereum ETF (the &ldquo;Trust&rdquo;)
is an exchange-traded product that issues common shares of beneficial interest (&ldquo;Shares&rdquo;) that are anticipated to be listed
on the NYSE Arca, Inc. (the &ldquo;Exchange&rdquo;) under the ticker symbol &ldquo;_____.&rdquo; The Trust&rsquo;s investment objective
is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust&rsquo;s operations
and other liabilities. The Trust&rsquo;s allocation of its assets to bitcoin and ether will approximate the relative market capitalization
of 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 (&ldquo;NAV&rdquo;)
by reference to the CME CF Bitcoin &ndash; New York Variant for its bitcoin holdings (the &ldquo;Bitcoin Pricing Benchmark&rdquo;) and
to the CME CF Ether &ndash; Dollar Reference Rate &ndash; New York Variant for its ether holdings (the &ldquo;Ether Pricing Benchmark,&rdquo;
and, with the Bitcoin Pricing Benchmark, the &ldquo;Pricing Benchmarks&rdquo;). The Pricing Benchmarks are calculated by CF Benchmarks
Ltd. based on an aggregation of executed trade flow of major bitcoin and ether trading platforms. The Trust is sponsored and managed by
Bitwise Investment Advisers, LLC (the &ldquo;Sponsor&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Trust will pay to the Sponsor a unitary management
fee of 0.___% per annum of the Trust&rsquo;s bitcoin and ether holdings (the &ldquo;Sponsor Fee&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When the Trust creates or redeems its Shares,
it will do so in blocks of 10,000 Shares (each, a &ldquo;Basket&rdquo;) based on the quantity of bitcoin and ether attributable to each
Share of the Trust (net of accrued but unpaid expenses and liabilities) multiplied by the number of Shares (10,000) comprising a Basket
(the &ldquo;Basket Amount&rdquo;). For an order to create (purchase) a Basket, the purchase shall be in the amount of U.S. dollars needed
to purchase the Basket Amount (plus a per-order transaction fee), as calculated by the Administrator (as defined below). For an order
to 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-order
transaction fee) distributed. The Trust only creates and redeems Baskets in transactions with financial firms that are authorized to purchase
or redeem Shares with the Trust (each, an &ldquo;Authorized Participant&rdquo;). Shares initially comprising the same Basket but offered
by the Authorized Participants to the public at different times may have different offering prices that depend on various factors, including
the supply and demand for Shares, the value of the Trust&rsquo;s assets, and market conditions at the time of a transaction. Investors
who 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitwise Asset Management, Inc., the parent of
the Sponsor, served as seed capital investor to the Trust (the &ldquo;Seed Capital Investor&rdquo;). The Seed Capital Investor agreed
to purchase $___ in Shares on _________, and on ________ took delivery of __ Shares at a per-Share price of $___ (the &ldquo;Seed Shares&rdquo;).
The $____ the Trust received in consideration for the sale of the Seed Shares served as the basis of the audit described in the sections
entitled &ldquo;REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM&rdquo; and &ldquo;STATEMENT OF FINANCIAL CONDITION.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitwise Investment Manager, LLC, an affiliate
of the Sponsor, is expected to purchase the initial Baskets of Shares for $____________, at a per-Share price of $__ for these ________
Shares (the &ldquo;Seed Baskets&rdquo;). Such proceeds are expected to be used by the Trust to purchase ether at or prior to the listing
of Shares on the Exchange. Bitwise Investment Manager, LLC will act as a statutory underwriter in connection with the initial purchase
of the Seed Baskets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Neither the Trust, nor the Sponsor, nor the Bitcoin
and Ether Custodian (defined below), nor any other person associated with the Trust will, directly or indirectly, engage in actions where
any portion of the Trust&rsquo;s ether becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ether or
generate income or other earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Investors who decide to buy or sell Shares of
the Trust will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to this
offering, there has been no public market for the Shares. Investing in the Trust involves risks similar to those involved with an investment
directly in ether and other significant risks. <B>See &ldquo;RISK FACTORS&rdquo; beginning on page 14</B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The offering of the Shares is registered with
the U.S. Securities and Exchange Commission (&ldquo;SEC&rdquo;) in accordance with the Securities Act of 1933 (the &ldquo;1933 Act&rdquo;).
The Trust intends to issue Shares on a continuous basis and is registering an indeterminate number of Shares. The offering is intended
to be a continuous offering. The Trust is not a fund registered or subject to regulation under the Investment Company Act of 1940. The
Trust is not a commodity pool for purposes of the Commodity Exchange Act of 1936, and the Sponsor is not subject to regulation by the
Commodity Futures Trading Commission as a commodity pool operator or a commodity trading adviser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>AN INVESTMENT IN THE TRUST MAY NOT BE SUITABLE
FOR INVESTORS THAT ARE NOT IN A POSITION TO ACCEPT MORE RISK THAN MAY BE INVOLVED WITH OTHER EXCHANGE-TRADED PRODUCTS THAT DO NOT HOLD
BITCOIN AND ETHER OR INTERESTS RELATED TO BITCOIN AND ETHER. THE SHARES ARE SPECULATIVE SECURITIES. THEIR PURCHASE INVOLVES A HIGH DEGREE
OF RISK AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CONSIDER ALL RISK FACTORS BEFORE INVESTING IN THE TRUST. PLEASE REFER TO
&ldquo;RISK FACTORS&rdquo; BEGINNING ON PAGE 14.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The date of this Prospectus is _____________,
2025</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: -0.5in"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P>



<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%">
  <TR STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: center"><B>Page</B></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="width: 90%; text-align: left"><A HREF="#a_001"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Prospectus Summary</FONT></A></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="width: 9%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">1</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_002"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Risk Factors</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">14</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_003"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Bitcoin AND THE Bitcoin MARKET</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">82</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_004"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">ETHER AND THE ETHER MARKET</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">87</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_005"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">REGULATION OF BITCOIN AND ETHER</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">98</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_006"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">THE TRUST AND BITCOIN and ETHER PRICES</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">101</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_007"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Calculation of NAV</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">111</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_008"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">ADDITIONAL INFORMATION ABOUT THE TRUST</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">113</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_009"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">The Trust&rsquo;s Service Providers</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">118</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_010"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Custody of the Trust&rsquo;s Assets</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">120</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_011"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">THE PRIME EXECUTION AGENT AND the TRADE CREDIT LENDER</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">122</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_012"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Form of Shares</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">129</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_013"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Transfer of Shares</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">129</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_014"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">SEED CAPITAL INVESTOR</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">130</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_015"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Plan of Distribution</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">130</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_016"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Creation and Redemption of Shares</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">131</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_017"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Use of Proceeds</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">137</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_018"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">OWNERSHIP OR BENEFICIAL INTEREST IN THE TRUST</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">137</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_019"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Conflicts of Interest</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">137</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_020"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">FIDUCIARY AND REGULATORY DUTIES AND OBLIGATIONS OF THE SPONSOR</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">138</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_021"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Liability and Indemnification</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">140</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_022"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Provisions of Law</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">141</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_023"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Management; Voting by Shareholders</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">142</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_024"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Meetings</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">142</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_025"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Books and Records</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">142</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_026"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">STATEMENTS, FILINGS, AND REPORTS TO SHAREHOLDERS</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">143</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_027"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Fiscal Year</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">143</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_028"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">GOVERNING LAW; CONSENT TO DELAWARE JURISDICTION</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">143</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_029"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Legal Matters</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">143</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_030"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Experts</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">143</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_031"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Material Contracts</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">144</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_032"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-weight: normal">UNITED STATES FEDERAL INCOME TAX CONSEQUENCES</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">150</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_033"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Purchases By Employee Benefit Plans</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">1</FONT>55</TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_034"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Information You Should Know</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">157</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_035"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">SUMMARY OF PROMOTIONAL AND SALES MATERIAL</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">157</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_036"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Intellectual Property</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">157</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_037"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Where You Can Find More Information</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">158</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_038"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Privacy Policy</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">158</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><A HREF="#a_039"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">f-1</FONT></TD></TR>
  <TR STYLE="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; text-transform: uppercase; background-color: White">
    <TD STYLE="text-align: left"><A HREF="#a_040"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">Statement of financial condition</FONT></A></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-weight: normal">F-2</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Prospectus contains information you should
consider when making an investment decision about the Shares. You may rely on the information contained in this Prospectus. The Trust
and the Sponsor have not authorized any person to provide you with different information and, if anyone provides you with different or
inconsistent information, you should not rely on it. This Prospectus is not an offer to sell the Shares in any jurisdiction where the
offer or sale of the Shares is not permitted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until __________, 2024 (25 days after the date
of this Prospectus), all dealers effecting transactions in the Shares, whether or not participating in this distribution, may be required
to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters
and with respect to unsold allotments or subscriptions. The Sponsor first intends to use this Prospectus on ___________, 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Shares are not registered for public sale
in any jurisdiction other than the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify">This Prospectus includes &ldquo;forward-looking
statements&rdquo; that generally relate to future events or future performance. In some cases, you can identify forward-looking statements
by terminology such as &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;expect,&rdquo; &ldquo;plan,&rdquo; &ldquo;anticipate,&rdquo;
&ldquo;believe,&rdquo; &ldquo;estimate,&rdquo; &ldquo;predict,&rdquo; &ldquo;potential,&rdquo; or the negative of these terms or other
comparable 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&rsquo;s
operations, the Sponsor&rsquo;s plans, and references to the Trust&rsquo;s future success and other similar matters, are forward-looking
statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain
assumptions and analyses 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Whether or not actual results and developments
will conform to the Sponsor&rsquo;s expectations and predictions is subject to a number of risks and uncertainties, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            special considerations discussed in this Prospectus;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
                                            economic, market and business conditions;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">technology
                                            developments regarding the use of bitcoin, ether and other digital assets, including the
                                            systems used by the Sponsor and the Trust&rsquo;s custodian in their provision of services
                                            to the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in laws or regulations, including those concerning taxes, made by governmental authorities
                                            or regulatory bodies; and</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">other
                                            world economic and political developments, including, without limitation, global pandemics
                                            and the societal and government responses thereto.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&ldquo;RISK FACTORS.&rdquo; Consequently, all the forward-looking statements made in this prospectus are qualified by these cautionary
statements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized or, even if
substantially realized, that they will result in the expected consequences to, or have the expected effects on, the Trust&rsquo;s operations
or the value of the Shares. Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conform
such statements to actual results or to reflect a change in the Sponsor&rsquo;s expectations or predictions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">EMERGING
GROWTH COMPANY STATUS</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is an <FONT STYLE="text-transform: uppercase">&ldquo;</FONT>emerging growth company<FONT STYLE="text-transform: uppercase">&rdquo;
</FONT>as that term is used in the Jumpstart Our Business Startups Act (the <FONT STYLE="text-transform: uppercase">&ldquo;</FONT>JOBS
Act<FONT STYLE="text-transform: uppercase">&rdquo;)</FONT> 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:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">provide
                                            an auditor&rsquo;s attestation report on management&rsquo;s assessment of the effectiveness
                                            of its system of internal control over financial reporting pursuant to Section 404(b) of
                                            the Sarbanes-Oxley Act of 2002;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">comply
                                            with any new requirements adopted by the Public Company Accounting Oversight Board (&ldquo;PCAOB&rdquo;)
                                            requiring mandatory auditor rotation or a supplement to the auditor&rsquo;s report in which
                                            the auditor would be required to provide additional information about the audit and the financial
                                            statements of the issuer;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">comply
                                            with any new audit rules adopted by the PCAOB after April 5, 2012, unless the Securities
                                            and Exchange Commission determines otherwise;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">provide
                                            certain disclosure regarding executive compensation required of larger public companies;
                                            or</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtain
                                            shareholder approval of any golden parachute payments not previously approved.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The Trust will cease to be an &ldquo;emerging
growth company&rdquo; upon the earliest of (i) when it has $1.235 billion or more in annual revenues; (ii) when it is deemed to be a large
accelerated filer under Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934; (iii) when it issues more than $1.0 billion
of non-convertible debt over a three-year period; or (iv) the last day of the fiscal year following the fifth anniversary of its initial
public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">In addition, Section 107 of the JOBS Act provides
that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act of 1933 for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies; however, the Trust is choosing to &ldquo;opt
out&rdquo; of such extended transition period, and as a result, the Trust will comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides
that the Trust&rsquo;s decision to opt out of the extended transition period for complying with new or revised accounting standards is
irrevocable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<DIV STYLE="padding: 3pt; border: Black 1.5pt solid; width: 98%">

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_001"></A>Prospectus Summary</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify"><I>This is only a summary of the Prospectus and,
while it contains material information about the Trust and its Shares, it does not contain or summarize all of the information about the
Trust and the Shares contained in this Prospectus that is material and/or which may be important to you. You should read this entire Prospectus
before making an investment decision about the Shares.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: justify"><I>As used below, Bitcoin with an uppercase &ldquo;B&rdquo;
is used to describe the software and network system as a whole that is involved in maintaining the ledger of bitcoin ownership and facilitating
the transfer of bitcoin among parties. When referring to the cryptocurrency within and native to the Bitcoin network, bitcoin is written
with a lower case &ldquo;b.&rdquo; &ldquo;Ethereum&rdquo; with an uppercase &ldquo;E&rdquo; is used to describe the system as a whole
that is involved in maintaining the ledger of ether ownership and facilitating the transfer of ether among parties. When referring to
the digital asset within the Ethereum network, &ldquo;ether&rdquo; is written with a lowercase &ldquo;e.&rdquo;</I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Overview of the Trust</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitwise Bitcoin &amp;
Ethereum ETF (the &ldquo;Trust&rdquo;) is an exchange-traded product that issues common shares of beneficial interest (&ldquo;Shares&rdquo;)
that are anticipated to be listed on the NYSE Arca, Inc. (the &ldquo;Exchange&rdquo;) under the ticker symbol &ldquo;______.&rdquo; The
Trust&rsquo;s investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses
of the Trust&rsquo;s operations and other liabilities. The Trust&rsquo;s allocation of its assets to bitcoin and ether will approximate
the relative market capitalization of 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 (&ldquo;NAV&rdquo;) by reference to the CME CF Bitcoin &ndash;New York Variant for its bitcoin holdings (the &ldquo;Bitcoin
Pricing Benchmark&rdquo;) and to the CME CF Ether &ndash; Dollar Reference Rate &ndash; New York Variant for its ether holdings (the &ldquo;Ether
Pricing Benchmark,&rdquo; and, with the Bitcoin Pricing Benchmark, the &ldquo;Pricing Benchmarks&rdquo;). The Pricing Benchmarks are calculated
by CF Benchmarks Ltd. (the &ldquo;Benchmark Provider&rdquo;). The Trust is sponsored and managed by Bitwise Investment Advisers,&nbsp;LLC
(the &ldquo;Sponsor&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin and ether are each
relatively new digital assets with the potential to provide a globally exchangeable unit of value that can be transferred on a peer-to-peer
basis. Bitcoin and ether are both decentralized, meaning that the supply of bitcoin and ether are not determined by a central government,
but rather by software protocols that limit the total amount of bitcoin and ether that will be produced and the rate at which such bitcoin
and ether is released into the network. In addition, the official ledger or record of who owns what bitcoin and ether is not maintained
by any central entity, but rather, is maintained by multiple different independent computers and entities simultaneously. Bitcoin and
ether have certain features associated with several types of assets, most notably commodities and currencies. U.S. regulators have made
limited pronouncements regarding the treatment of bitcoin, the Bitcoin network and ether and the Ethereum network under federal and state
laws; however, the Sponsor believes that, on balance, the important features of bitcoin and ether are those that are characteristics of
commodities and therefore has referred to and discussed these assets as such. This interpretation is supported by regulatory actions and
court determinations that regard bitcoin as a commodity under the Commodity Exchange Act of 1936 (the &ldquo;Commodity Exchange Act&rdquo;)
and the Commodity Futures Trading Commission (&ldquo;CFTC&rdquo;) regulations thereunder. In addition, the Sponsor is not aware of any
current U.S. court or regulatory interpretation that regards bitcoin or ether as either legal tender &ndash; although it may be used as
a medium of exchange or form of money &ndash; or a security. It is not known whether all U.S. or foreign regulators or courts will share
this view, adopt a single, different view or espouse a variety of differing views.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, while bitcoin and
the Bitcoin network and ether and the Ethereum network share the similarities detailed above, they also have key differences, particularly
in their intended applications and use cases, which are reflective of how the blockchains are designed. For instance, the primary use
cases of bitcoin today are as a decentralized store of value and as a peer-to-peer tool for transferring value. By comparison, many of
the primary use cases of ether are reflective of the Ethereum network&rsquo;s ability to process complex smart contracts, which allow
it to be used as a platform to create markets, store registries of debts or promises, represent the ownership of property, move funds
in accordance with conditional instructions and create digital assets other than ether on the Ethereum network, among other uses. The
Bitcoin network and Ethereum network differ in other ways, as well. In particular, the Ethereum network has historically adopted significant
upgrades in its software at a faster pace than the Bitcoin network, which allows for more flexibility, but also creates a higher risk
that software bugs or other issues may be introduced into the protocol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As bitcoin and ether remain
relatively new assets, buying, holding and selling bitcoin and ether is very different from buying, holding and selling more conventional
investments like stocks and bonds or other physical commodities. For example, bitcoin generally may be acquired through the process of
&ldquo;mining,&rdquo; purchased or received as consideration in a private transaction, or purchased on a digital asset trading platform.
Ether, on the other hand, may generally be acquired through the process of &ldquo;validation,&rdquo; purchased or received as consideration
in a private transaction, or purchased on a digital asset trading platform. Private transactions may be difficult to arrange, and involve
complex and potentially risky procedures around safekeeping, transferring and holding bitcoin or ether. Meanwhile, there are also currently
over 200 digital asset trading platforms from which to choose, the quality and regulation of which vary significantly. Purchasing bitcoin
or ether on a trading platform generally requires choosing a platform, opening an account, and transferring money or a different digital
asset to the trading platform in order to purchase bitcoin or ether. Some trading platforms have been &ldquo;hacked,&rdquo; resulting
in significant losses to the platform or its users.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust intends to provide
direct exposure to the value of the bitcoin and ether held by the Trust with <FONT STYLE="background-color: white">Coinbase Custody Trust
Company, LLC (&ldquo;Coinbase Custody&rdquo; or </FONT>the &ldquo;Bitcoin and Ether Custodian&rdquo;). The Bitcoin and Ether Custodian
is chartered as a New York State limited liability trust company that provides custody services for digital assets. The Bitcoin and Ether
Custodian is not insured by the Federal Deposit Insurance Corporation (the &ldquo;FDIC&rdquo;)-insured but carries insurance provided
by private insurance carriers. The net assets of the Trust and its Shares are valued on a daily basis with reference to the Pricing Benchmarks,
each a standardized reference rate published by the Benchmark Provider that is designed to reflect the performance of bitcoin or ether
in U.S. dollars, as applicable. The Pricing Benchmarks are calculated by the Benchmark Provider based on an aggregation of executed trade
flow of major bitcoin and ether trading platforms (&ldquo;Constituent Platforms&rdquo;). The Pricing Benchmarks each utilize the same
Constituent Platforms. As of September 3, 2024, the Constituent Platforms were: Bitstamp, Coinbase, Gemini, itBit, LMAX and Kraken. The
value of the Pricing Benchmarks is calculated as of 4:00 p.m. Eastern time (&ldquo;ET&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust provides investors
with the opportunity to access the market for bitcoin and ether through a traditional brokerage account without the potential barriers
to entry or risks involved with acquiring and holding bitcoin or ether directly. The Trust will not use derivatives that could subject
the Trust to additional counterparty and credit risks. The Sponsor believes that the design of the Trust will enable certain investors
to more effectively and efficiently implement strategic and tactical asset allocation strategies that use ether by investing in the Shares
rather than purchasing, holding and trading bitcoin and ether directly.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin and the Bitcoin Network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin is based on the decentralized,
open-source protocol of a peer-to-peer network and associated blockchain ledger (the &ldquo;Bitcoin blockchain, and together, the &ldquo;Bitcoin
network&rdquo;) first described in 2008 and launched in 2009. No single entity owns or administers the Bitcoin network, and bitcoin are
not issued by governments, banks or similar organizations. The infrastructure of the Bitcoin network is collectively maintained by a decentralized
user base and developers who donate their time to maintain and improve the network. The Bitcoin network is accessed through software,
and software protocols govern the creation, movement, and ownership of bitcoin, as reflected on the distributed ledger of transactions
known as the Bitcoin blockchain. The value of bitcoin is determined, in part, by the supply of, and demand for, bitcoin in global trading
markets, market expectations for the adoption of bitcoin as a decentralized store of value, the number of merchants and/or institutions
that accept bitcoin as a form of payment and the volume of private end-user-to-end-user transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin transaction and ownership
records are reflected on the Bitcoin blockchain, which is a digital public record or ledger of all transactions completed on the Bitcoin
network. This ledger is decentralized, meaning that a copy is stored and updated continuously on the computers of each Bitcoin network
node (a node is a computer or other device running a version of the Bitcoin network software that maintains a copy of the Bitcoin blockchain
and directly communicates transactions to other nodes on the Bitcoin network). Commentators have identified Bitcoin&rsquo;s primary innovation
as the ability to trust that the Bitcoin blockchain is updated properly for each node without having to trust any single party to ensure
the integrity of the ledger or the network. Transaction data is permanently recorded on the Bitcoin blockchain in files called &ldquo;blocks,&rdquo;
which reflect transactions that have been recorded and authenticated by Bitcoin network participants. The Bitcoin network software includes
protocols that govern the creation of bitcoin and the cryptographic system that secures and verifies bitcoin transactions. By operating
Bitcoin network software, users agree to and contribute to consensus around such software protocols.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While the Bitcoin network
and trading markets for bitcoin are still relatively new, the Sponsor believes that various objective factors indicate that the Bitcoin
ecosystem has matured, including, without limitation, the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">increased
                                            certainty regarding the regulation of the Bitcoin network and the uses thereof;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            launch of futures contracts for bitcoin on major, established and regulated commodity futures
                                            exchanges in the United States (&ldquo;U.S.&rdquo;);</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            subsequent growth of significant trading volume in bitcoin futures;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">increased
                                            participation by institutional investors;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            arrival of major, established market makers that rely on sophisticated and technologically
                                            enabled trading systems to arbitrage bitcoin price discrepancies that may appear between
                                            different trading platforms;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            development of a robust bitcoin lending market;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            significant expansion in the availability of institutional-quality custody services from
                                            regulated third-party custodians; and</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            advent and increasing ubiquity of significant insurance on custodied assets held at third-party
                                            custodians.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor believes that
these factors have combined to improve the efficiency of the bitcoin market, creating a dynamic, institutional-quality, two-sided market
(discussed below). For more information on bitcoin and the Bitcoin network, see &ldquo;BITCOIN AND THE BITCOIN MARKET&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ether and the Ethereum Network</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether is a digital asset that
is created and transmitted through the operations of the Ethereum peer-to-peer network and associated blockchain ledger (the &ldquo;Ethereum
blockchain, and together, the &ldquo;Ethereum network&rdquo;), a decentralized network of computers that operates on cryptographic protocols.
No single entity owns or operates the Ethereum network, the infrastructure of which is collectively maintained by a decentralized user
base. The Ethereum network allows people to exchange tokens of value, called &ldquo;ether&rdquo; or &ldquo;ETH,&rdquo; which are recorded
on a public transaction ledger known as a blockchain. Ether can be used to pay for goods and services, including computational power on
the Ethereum network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading
platforms or in individual end-user-to-end-user transactions under a barter system. Furthermore, the Ethereum network also allows users
to write and implement smart contracts&mdash;that is, general-purpose code that executes on every computer in the network and can instruct
the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts, users can create
markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional instructions
and create digital assets other than ether on the Ethereum network. Smart contract operations are executed on the Ethereum blockchain
in exchange for payment of ether. The Ethereum network is one of a number of projects intended to expand blockchain use beyond just a
peer-to-peer money system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although there are many alternatives,
the Ethereum network is the longest-running and largest smart contract platform in terms of market cap, availability of decentralized
applications (&ldquo;DApps&rdquo;), and development activity. Smart contracts can be utilized across several different applications ranging
from art to finance. Currently, one of the most popular applications is the use of smart contracts for underpinning the operability of
decentralized financial services (&ldquo;DeFi&rdquo;). DeFi, which consists of numerous highly interoperable protocols and applications,
offers many opportunities for innovation and has the potential to create an open, transparent, and immutable financial infrastructure,
with democratized access.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network was originally
described in a 2013 white paper by Vitalik Buterin, a programmer involved with bitcoin, with the goal of creating a global platform for
decentralized applications powered by smart contracts. The formal development of the Ethereum network began through a Swiss firm called
Ethereum Switzerland GmbH (&ldquo;EthSuisse&rdquo;), in conjunction with several other entities. Subsequently, the Ethereum Foundation,
a Swiss non-profit organization, was set up to oversee the protocol&rsquo;s development. The Ethereum network went live on July 30, 2015.
Unlike other digital assets, such as bitcoin, which are solely created through a progressive digital mining process, 72.0 million ether
or &ldquo;ETH&rdquo; were created in connection with the launch of the Ethereum network. The initial 72.0 million ether were distributed
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"><U>Initial Distribution</U>:
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 raised
approximately $18 million which was used to fund the development of the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"><U>Ethereum Foundation</U>:
6.0 million ether, or 8.33% of the supply, was distributed to the Ethereum Foundation for operational costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"><U>Ethereum Developers</U>:
3.0 million ether, or 4.17% of the supply, was distributed to developers who contributed to the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"><U>Developer Purchase
Program</U>: 3.0 million ether, or 4.17% of the supply, was distributed to members of the Ethereum Foundation to purchase at the initial
crowd sale price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the launch of the
Ethereum network, ether supply initially increased through a progressive validation process. After the introduction of EIP-1559, described
below, ether supply and issuance rate vary based on factors such as recent use of the network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Coinciding with the network
launch, it was decided that EthSuisse would be dissolved, designating the Ethereum Foundation as the sole organization dedicated to protocol
development. The Ethereum network is decentralized in that it does not require governmental authorities or financial institution intermediaries
to create, transmit or determine the value of ether. Rather, following the initial distribution of ether, ether is created, burned and
allocated by the Ethereum network protocol through a process that is currently subject to an issuance and burn rate. Among other things,
ether is used to pay for transaction fees and computational services (i.e., smart contracts) on the Ethereum network; users of the Ethereum
network pay for the computational power of the machines executing the requested operations with ether. Requiring payment in ether on the
Ethereum network incentivizes developers to write quality applications and increases the efficiency of the Ethereum network because wasteful
code costs more. It also ensures that the Ethereum network remains economically viable by compensating people for their contributed computational
resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because the Ethereum network
has no central authority, the release of updates to the network&rsquo;s source code by developers does not guarantee that the updates
will be automatically adopted by the other participants. Users and validators must accept any changes made to the source code by downloading
the proposed modification and that modification is effective only with respect to those users and validators who choose to download it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a modification is accepted
by only a percentage of users and validators, a division will occur such that one network will run the pre-modification source code and
the other network will run the modified source code. Such a division is known as a &ldquo;fork.&rdquo; A fork may be intentional, as when
EIP-1559, known as the Ethereum &ldquo;Merge,&rdquo; was implemented on September 15, 2022. The Merge represents the Ethereum network&rsquo;s
shift from proof-of-work to proof-of-stake. This means that instead of being required to solve complex mathematical problems in order
to validate data on the blockchain ledger, validators are required to stake ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust will not benefit
from any forks or airdrops occurring on the Ethereum network. A right to receive any such benefit of a fork or airdrop is referred to
as an &ldquo;Incidental Right&rdquo; and any digital asset acquired <FONT STYLE="font-family: Times New Roman, Times, Serif">through</FONT>
an Incidental Right is known as an &ldquo;IR Assets.&rdquo; Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental
Rights and IR Assets. Such assets are not considered assets of the Trust at any point in time and will not be taken into account for purposes
of determining the Trust&rsquo;s NAV and the NAV per Share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">New ether is created as a
result of &ldquo;staking,&rdquo; or posting collateral, of ether by validators. Validators are required to stake ether in order to be
selected to perform validation activities and then, once selected, as a reward, they earn newly created ether. Validation activities include
verifying transactions, storing data, and adding to the Ethereum blockchain. Holders of ether must stake at least 32 ether to become an
Ethereum validator. The Ethereum network provides the ability to execute peer-to-peer transactions to realize, via smart contracts, automatic,
conditional transfers of value and information, including money, voting rights, and property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Neither the 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&rsquo;s ether becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ether
or generate income or other earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Assets in the Ethereum network
are held in accounts. Each account, or &ldquo;wallet,&rdquo; is made up of at least two components: a public address and a private key.
An Ethereum private key controls the transfer or &ldquo;spending&rdquo; of ether from its associated public ether address. An ether &ldquo;wallet&rdquo;
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 anywhere
in the world.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether may be regarded as a
currency or digital commodity depending on its specific use in particular transactions. Ether may be used as a medium of exchange or unit
of account. Although a number of large and small retailers accept ether as a form of payment in the United States and foreign markets,
there is relatively limited use of ether for commercial and retail payments. Similarly, ether may be used as a store of value (<I>i.e.</I>,
an asset that maintains its value rather than depreciating), although it has experienced significant periods of price volatility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of ether is determined
by the value that various market participants place on ether through their transactions. Price discovery occurs through secondary market
trading on ether exchanges, over-the-counter trading desks and direct peer-to-peer payments. Many ether exchanges are open 24 hours a
day, 7 days a week. Ether exchanges and over-the-counter trading desks have a relatively limited history, limited liquidity and limited
trading across exchange-order books, which has resulted in periods of high volatility and price divergence among exchanges. Furthermore,
during high volatility periods, in addition to price divergences, some ether exchanges have experienced issues related to account access
and trade execution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information on ether
and the Ethereum network, see &ldquo;ETHER AND THE ETHER MARKET&rdquo; below.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Trust&rsquo;s Investment Objective and
Strategies</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s investment
objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust&rsquo;s operations.
The Trust&rsquo;s allocation of its assets to bitcoin and ether will approximate the relative market capitalization of bitcoin and ether
to one another. In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and accrue the Sponsor&rsquo;s management
fee (the &ldquo;Sponsor Fee&rdquo;) in U.S. dollars. The Trust will value its bitcoin and ether holdings, net assets and the Shares daily
based on the Pricing Benchmarks. The Trust is passively managed and does not pursue active management investment strategies, and the Sponsor
does not actively manage the bitcoin or ether held by the Trust. Nonetheless, the Sponsor believes that the Trust&rsquo;s allocation to
bitcoin and ether will generally approximate the relative market capitalization of bitcoin and ether to one another, although this cannot
be guaranteed. Additionally, the Sponsor does not sell bitcoin or ether at times when the price of bitcoin or ether is high, nor does
it acquire bitcoin or ether at low prices in the expectation of future price increases. The Sponsor does not make use of any of the hedging
techniques available to professional bitcoin and ether investors to attempt to reduce the risks of losses resulting from price decreases.
The Trust will not utilize leverage or any similar arrangements in seeking to meet its investment objective. Bitcoin and ether will be
the only digital assets held by the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the Shares are not
the exact equivalent of a direct investment in bitcoin and ether, they provide investors with an alternative that constitutes a relatively
cost-effective way to obtain bitcoin and ether exposure through the securities market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When the Trust creates or
redeems its Shares, it will do so in blocks of 10,000 Shares (each, a &ldquo;Basket&rdquo;) based on the quantity of bitcoin and ether
attributable to each Share of the Trust (net of accrued but unpaid expenses and liabilities) multiplied by the number of Shares (10,000)
comprising a Basket (the &ldquo;Basket Amount&rdquo;). For an order to create (purchase) a Basket, the purchase shall be in the amount
of U.S. dollars needed to purchase the Basket Amount (plus a per-order transaction fee), as calculated by the Administrator (as defined
below). For an order to redeem a Basket, the Sponsor shall arrange for the Basket Amount to be sold and the cash proceeds (minus a per-order
transaction fee) distributed. The Trust only creates and redeems Baskets in transactions with financial firms that are authorized to purchase
or redeem Shares with the Trust (each, an &ldquo;Authorized Participant&rdquo;). Shares initially comprising the same Basket but offered
by the Authorized Participants to the public at different times may have different offering prices that depend on various factors, including
the supply and demand for Shares, the value of the Trust&rsquo;s assets, and market conditions at the time of a transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Basket Amount required
to create each Basket changes from day to day. On each day that the Exchange is open for regular trading, the Administrator adjusts the
quantity of bitcoin and ether constituting the Basket Amount as appropriate to reflect accrued expenses and any loss of bitcoin and ether
that may occur. The computation is made by the Administrator each business day prior to the commencement of trading on the Exchange. The
Administrator determines the bitcoin included in the Basket Amount for a given day by dividing the number of bitcoin held by the Trust
as of the close of business on the prior business day, adjusted for the amount of bitcoin constituting estimated accrued but unpaid fees
and expenses of the Trust as of the close of business on the prior business day, by the quotient of the number of Shares outstanding at
the opening of business, multiplied by 10,000. The same procedure (except substituting ether for bitcoin) would be followed to determine
the number of ether to include in the Basket Amount. Fractions of a bitcoin smaller than a satoshi (0.00000001 bitcoin) and fractions
of ether smaller than 0.00000000001 are disregarded for purposes of the computation of the Basket Amount. The Basket Amount so determined
is communicated via electronic mail message to all Authorized Participants and made available on the Sponsor&rsquo;s website for the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 and
ether, the Trust would first need to seek certain regulatory approvals, including an amendment to Exchange&rsquo;s listing rules and an
amendment to the Trust&rsquo;s registration statement, of which this prospectus forms a part. There can be no guarantee that the Trust
will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful
in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in
a prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Purchases and Sales of Bitcoin
and Ether</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because the Trust will conduct
creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin and ether in 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 pay for such expenses, the
Sponsor, on behalf of the Trust, will sell bitcoin and ether on a pro rata basis based upon the relative amount of bitcoin and ether held
by the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor, on behalf of
the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing Benchmark as practical.
Such purchase and sale transactions may be conducted pursuant to two models: (i)&nbsp;the &ldquo;Trust-Directed Trade Model&rdquo;; and
(ii)&nbsp;the &ldquo;Agent Execution Model.&rdquo; The Trust intends to utilize the Trust-Directed Trade Model for all purchases and sales
of bitcoin and ether and will only utilize the Agent Execution Model in the event that no Digital Asset Trading Counterparty (as defined
below) is willing or able to effectuate the Trust&rsquo;s purchase or sale of ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Trust-Directed Trade
Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin and ether from a trading counterparty that has been approved
by the Sponsor (each, a &ldquo;Digital Asset Trading Counterparty&rdquo;). As of _______, 2025, ____________, ____________, ____________,
____________ and ____________ have been approved as Digital Asset Trading Counterparties. The Sponsor has entered into contractual agreements
with the Digital Asset Trading Counterparties, and these agreements set forth the general parameters under which a transaction in bitcoin
and ether will be effectuated, should any transaction with a Digital Asset Trading 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 for creations or redemptions. All transactions between the Sponsor,
on behalf of the Trust, and a Digital Asset Trading Counterparty will be done on an arm&rsquo;s-length basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Agent Execution
Model, Coinbase, Inc. (&ldquo;Coinbase Inc.&rdquo; or the &ldquo;Prime Execution Agent,&rdquo; which is an affiliate of the Ether Custodian),
acting in an agency capacity, conducts ether purchases and sales on behalf of the Trust with third parties through its Coinbase Prime
service pursuant to an agreement (the &ldquo;Prime Execution Agreement&rdquo;). To utilize the Agent Execution Model, the Trust may maintain
some bitcoin, ether or cash in a trading account (the &ldquo;Trading Balance&rdquo;) with the Prime Execution Agent. To avoid having to
pre-fund purchases or sales of bitcoin or ether in connection with cash creations and redemptions and sales of bitcoin or ether to pay
Trust expenses not assumed by the Sponsor, to the extent applicable, the Trust may borrow bitcoin, ether or cash as trade credit (&ldquo;Trade
Credit&rdquo;) from Coinbase Credit, Inc. (the &ldquo;Trade Credit Lender&rdquo;) on a short-term basis pursuant to the Coinbase Credit
Committed Trade Financing Agreement (the &ldquo;Trade Financing Agreement&rdquo;).</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Pricing Benchmarks</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On a daily basis, to calculate
the aggregate U.S. dollar value of the bitcoin held by the Trust (the &ldquo;Trust Bitcoin Value&rdquo;), the Trust references the value
of one bitcoin in U.S. dollars provided by the CME CF Bitcoin Reference Rate&ndash; 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 &ldquo;Trust Ether Value&rdquo;), the
Trust references the value of one ether in U.S. dollars provided by the CME CF Ether &ndash; Dollar Reference Rate &ndash; New York Variant,
the Ether Pricing Benchmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Administrator uses the
Trust Bitcoin Value and the Trust Ether Value to calculate the Trust&rsquo;s NAV, which is the aggregate of the Trust Bitcoin Value and
Trust Ether Value, based on the Bitcoin Pricing Benchmark and Ether Pricing Benchmark, respectively, less the Trust&rsquo;s liabilities
and expenses. &ldquo;NAV per Share&rdquo; is calculated by dividing NAV by the number of Shares currently outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additional information regarding
the Pricing Benchmarks is set forth below.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The CME CF Bitcoin Reference Rate &ndash;
New York Variant</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CME CF Bitcoin Reference
Rate &ndash; New York Variant, the Bitcoin Pricing Benchmark, was designed to provide a daily, 4:00 p.m. ET reference rate of the U.S.
dollar price of one bitcoin that may be used to develop financial products. The Bitcoin Pricing Benchmark uses the same methodology as
the CME CF Bitcoin Reference Rate (&ldquo;BRR&rdquo;), which was designed by the CME Group and the Benchmark Provider to facilitate the
cash settlement of bitcoin futures contracts traded on the Chicago Mercantile Exchange (&ldquo;CME&rdquo;). The only material difference
between the Bitcoin Pricing Benchmark and the BRR is that the BRR measures the U.S. dollar price of one bitcoin as of 4:00 p.m. London
time and the Bitcoin Pricing Benchmark measures the U.S. dollar price of one bitcoin as of 4:00 p.m. ET. The CME Group also publishes
the CME CF Bitcoin Real Time Index (the &ldquo;CME Bitcoin Real Time Price&rdquo;), which is a continuous measure of the U.S. dollar price
of one bitcoin calculated once per second. Each of the Bitcoin Pricing Benchmark, BRR and the CME Bitcoin Real Time Price are representative
of the bitcoin trading activity on the Constituent Platforms, which include, as of October&nbsp;1,&nbsp;2024, Bitstamp, Coinbase, Gemini,
itBit, LMAX and Kraken.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When calculating the value
of its bitcoin when determining its indicative trust value (&ldquo;ITV&rdquo;), the Trust uses the CME Bitcoin Real Time Price. The ITV
is intended to provide additional information not otherwise available to the public that may be useful to investors and market professionals
in connection with the trading of the Shares on the Exchange. It is calculated by using the prior day&rsquo;s holdings at close of business
and the most recently reported price level of the CME Bitcoin Real Time Price and, as discussed below, the CME Ether Real Time Price.
The ITV will be disseminated on a per-Share basis every 15 seconds during regular Exchange trading hours of 9:30 a.m. to 4:00 p.m. ET.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information on the
Bitcoin Pricing Benchmark, BRR and CME Bitcoin Real Time Price, see &ldquo;THE TRUST AND BITCOIN AND ETHER PRICES&rdquo; below.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The CME CF Ether &ndash; Dollar Reference
Rate &ndash; New York Variant</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CME CF Ether &ndash; Dollar
Reference Rate &ndash; New York Variant, the Ether Pricing Benchmark, was designed to provide a daily, 4:00 p.m. ET reference rate of
the U.S. dollar price of one ether that may be used to develop financial products. The Ether Pricing Benchmark uses the same methodology
as the CME CF Ether-Dollar Reference Rate (&ldquo;ERR&rdquo;), which was designed by the CME Group and the Benchmark Provider to facilitate
the cash settlement of ether futures contracts traded on the CME. The only material difference between the Ether Pricing Benchmark and
the ERR is that the ERR measures the U.S. dollar price of one ether as of 4:00 p.m. London time and the Ether Pricing Benchmark measures
the U.S. dollar price of one ether as of 4:00 p.m. ET. The CME Group also publishes the CME CF Ether Real Time Index (the &ldquo;CME Ether
Real Time Price&rdquo;), which is a continuous measure of the U.S. dollar price of one ether calculated once per second. Each of the Ether
Pricing Benchmark, the ERR and the CME Ether Real Time Price is representative of the ether trading activity on the Constituent Platforms,
which include, which include, as of September&nbsp;3,&nbsp;2024, Bitstamp, Coinbase, Gemini, itBit, LMAX and Kraken. As of October 1,
2024, the Bitcoin Pricing Benchmark, BRR, CME Bitcoin Real Time Price, Ether Pricing Benchmark, ERR and CME Ether Real Time Price each
utilize the same Constituent Platforms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When calculating the value
of its ether to determine its ITV, the Trust uses the CME Ether Real Time Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information on the
Ether Pricing Benchmark, the ERR and the CME Ether Real Time Price, see &ldquo;THE TRUST AND BITCOIN AND ETHER PRICES&rdquo; below.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

</DIV>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Trust&rsquo;s Legal Structure</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is a Delaware statutory
trust, formed pursuant to the Delaware Statutory Trust Act (the &ldquo;DSTA&rdquo;). The Trust continuously issues common shares (Shares)
representing units of undivided beneficial ownership of the Trust that may be purchased and sold on the Exchange. The Trust operates pursuant
to the First Amended and Restated Declaration of Trust and Trust Agreement (the &ldquo;Trust Agreement&rdquo;), dated as of __________,
2025. Delaware Trust Company, a Delaware trust company, is the Delaware trustee of the Trust (the &ldquo;Trustee&rdquo;). The Trust is
managed and controlled by the Sponsor pursuant to the terms of the Trust Agreement and the Sponsor Agreement, dated as of ___________,&nbsp;2025,
between the Trust and the Sponsor. The Sponsor is a limited liability company formed in the State of Delaware on June 4, 2018. Except
as required under applicable federal law or under the rules or regulations of the Exchange, shareholders of the Trust (&ldquo;Shareholders&rdquo;)
do not have any voting rights and take no part in the management or control of, and have no voice in, the Trust&rsquo;s operations or
business.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Trust&rsquo;s Service Providers</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Sponsor</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitwise Investment Advisers,
LLC serves as the Sponsor for the Trust. The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration
of the Shares for their public offering in the United States and the listing of the Shares on the Exchange. The Sponsor will develop a
marketing plan for the Trust, will prepare marketing materials regarding the Shares, and will operate the marketing plan of the Trust
on an ongoing basis. The Sponsor also oversees the additional service providers of the Trust and exercises managerial control of the Trust
as permitted under the Trust Agreement.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Trustee</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Delaware Trust Company serves
as the Trustee, as required to create a Delaware statutory trust in accordance with the Trust Agreement and the DSTA.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Administrator</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bank of New York Mellon
(&ldquo;BNY Mellon&rdquo;) serves as the Trust&rsquo;s administrator (in such capacity, the &ldquo;Administrator&rdquo;). Under the Trust
Administration and Accounting Agreement, the Administrator provides necessary administrative, tax and accounting services and financial
reporting for the maintenance and operations of the Trust. In addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services. The Administrator&rsquo;s principal address is 240 Greenwich Street, New York,
New York 10286.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Transfer Agent</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">BNY Mellon serves as the transfer
agent for the Trust (in such capacity, the &ldquo;Transfer Agent&rdquo;). The Transfer Agent: (1) issues and redeems Shares of the Trust;
(2) responds to correspondence by Shareholders and others relating to its duties; (3) maintains Shareholder accounts; and (4) makes periodic
reports to the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Bitcoin and Ether Custodian</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">Coinbase
Custody Trust Company, LLC</FONT> serves as the Trust&rsquo;s Bitcoin and Ether Custodian pursuant to an agreement between it and the
Trust (the &ldquo;Bitcoin and Ether Custody Agreement&rdquo;). The Bitcoin and Ether Custodian is a fiduciary under &sect; 100 of the
New York Banking Law. Under the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian is responsible for safekeeping the
bitcoin and ether owned by the Trust. The Bitcoin and Ether Custodian was selected by the Sponsor. The Bitcoin and Ether Custodian has
responsibility for opening a special account that holds the Trust&rsquo;s bitcoin (the &ldquo;Trust Bitcoin Account&rdquo;) and responsibility
for opening a special account that holds the Trust&rsquo;s ether (the &ldquo;Trust Ether Account,&rdquo; and together with the Trust Bitcoin
Account, the &ldquo;Trust Digital Asset Accounts&rdquo;) and implementing the controls designed by the Sponsor for the Trust Digital Asset
Accounts, as well as facilitating the transfer of bitcoin and ether required for the operation of the Trust. The Bitcoin and Ether Custodian
will also enter into an agreement with the Sponsor to open custody accounts to receive payment of the Sponsor Fee (the &ldquo;Sponsor
Accounts&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<DIV STYLE="padding: 3pt; border: Black 1.5pt solid; width: 98%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin and Ether Custodian
is a third-party limited-purpose trust company that was chartered in 2018 upon receiving a trust charter from the New York Department
of Financial Services. The Bitcoin and Ether Custodian has one of the longest track records in the industry of providing custodial services
for digital asset private keys. The Sponsor believes that the Bitcoin and Ether Custodian&rsquo;s policies, procedures, and controls for
safekeeping, exclusively possessing, and controlling the Trust&rsquo;s bitcoin and ether holdings are consistent with industry best practices
to protect against theft, loss, and unauthorized and accidental use of the private keys. The Trust Digital Asset Accounts and Sponsor
Accounts are segregated accounts and are therefore not commingled with corporate or other customer assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust may retain additional
bitcoin/ether custodians from time to time pursuant to a bitcoin/ether custodian agreement to perform certain services that are typical
of a bitcoin/ether custodian. The Sponsor may, in its sole discretion, add or terminate bitcoin/ether custodians at any time.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Cash Custodian</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bank of New York Mellon
also serves as the Cash Custodian pursuant to an agreement between it and the Trust (the &ldquo;Cash Custody Agreement&rdquo;). The Cash
Custodian is the custodian of the Trust&rsquo;s cash holdings. The Trust may retain additional cash custodians from time to time pursuant
to a cash custodian agreement to perform certain services that are typical of a cash custodian. The Sponsor may, in its sole discretion,
add or terminate cash custodians at any time.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">The Marketing Agent</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Foreside Fund Services, LLC
(the &ldquo;Marketing Agent&rdquo;) is responsible for: (1) working with the Transfer Agent to review and approve, or reject, purchase
and redemption orders of Shares placed by Authorized Participants with the Transfer Agent; and (2) reviewing and approving the marketing
materials prepared by the Trust for compliance with applicable U.S. Securities and Exchange Commission (&ldquo;SEC&rdquo;) and Financial
Industry Regulatory Authority (&ldquo;FINRA&rdquo;) advertising laws, rules, and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except for the specific, limited
circumstance and time in which the Trust is using the Agent Execution Model, the Trust, the Sponsor and the service providers will not
loan or pledge the Trust&rsquo;s assets, nor will the Trust&rsquo;s assets serve as collateral for any loan or similar arrangement. During
the specific, limited circumstance and time when the Trust is using the Agent Execution Model, the Trust&rsquo;s ether may be subject
to a lien to secure outstanding Trade Credits in favor of the Trade Credit Lender, as is discussed in further detail below.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Trust&rsquo;s Fees and Expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust will pay the unitary
Sponsor Fee of 0.___% per annum of the Trust&rsquo;s bitcoin and ether holdings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor Fee is paid by
the Trust to the Sponsor as compensation for services performed under the Trust Agreement and Sponsor Agreement. Except during periods
in which all or a portion of the Sponsor Fee is being waived, the Sponsor Fee will accrue daily and will be payable in bitcoin and ether
monthly in arrears.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Administrator will calculate
the Sponsor Fee on a daily basis by applying a 0.__% annualized rate to the Trust Bitcoin Value (by reference to the Bitcoin Pricing Benchmark)
and to the Trust Ether Value (by reference to the Ether Pricing Benchmark). The amount of bitcoin and ether payable in respect of each
such daily accrual shall also be determined by reference to the Bitcoin Pricing Benchmark and Ether Pricing Benchmark, respectively. The
NAV of the Trust is reduced each day by the amount of the Sponsor Fee calculated each day. On or about the last day of each month, an
amount of bitcoin and ether will be transferred from the Trust Bitcoin Account or Trust Ether Account, as applicable, to the Sponsor Accounts
equal to the sum of all daily Sponsor Fees accrued in bitcoin for the month in U.S. dollars divided by the Bitcoin Pricing Benchmark on
the last day of the month and the sum of all daily Sponsor Fees accrued in ether for the month in U.S. dollars divided by the Ether Pricing
Benchmark on the last day of the month. The Trust is not responsible for paying any fees or costs associated with the transfer of bitcoin
or ether to the Sponsor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is not responsible
for paying any fees or costs associated with the transfer of bitcoin or ether to the Sponsor. The Sponsor, from time to time, may temporarily
waive all or a portion of the Sponsor Fee in its sole discretion. To the extent not already disclosed in the Prospectus, the Sponsor may
notify Shareholders of its intent to commence, or cease, waiving the Sponsor Fee on the Trust&rsquo;s website, in a prospectus supplement,
through a current report on Form 8-K and/or in the Trust&rsquo;s annual or quarterly reports.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In exchange for the Sponsor
Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee&rsquo;s monthly fee
and out-of-pocket expenses, the fees of the Trust&rsquo;s regular service providers (Cash Custodian, Ether Custodian, Prime Execution
Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing
and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole
discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor will also pay the costs of the
Trust&rsquo;s organization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust may incur certain
extraordinary, non-recurring expenses that are not assumed by the Sponsor, including, but not limited to, taxes and governmental charges,
any applicable brokerage commissions, financing fees, Bitcoin network fees, Ethereum network fees and similar transaction fees, expenses
and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the
Trust or the Shareholders (including, for example, in connection with any fork of the Bitcoin blockchain or Ethereum blockchain, any Incidental
Rights (as defined below) and any IR Asset (as defined below)), any indemnification of the Cash Custodian, Ether Custodian, Prime Execution
Agent, Transfer Agent, Administrator or other agents, service providers or counterparties of the Trust, and extraordinary legal fees and
expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.
The Administrator and/or the Sponsor will direct the Bitcoin and Ether Custodian to transfer bitcoin and ether from the applicable Trust
Digital Asset Account to the applicable Sponsor Account to pay the Sponsor Fee and any other Trust expenses not assumed by the Sponsor.
To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the
Trust&rsquo;s bitcoin and ether as necessary to pay such expenses. The Sponsor will sell bitcoin and ether to pay such expenses on a pro
rata basis based upon the relative amount of bitcoin and ether held by the Trust.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Custody of the Trust&rsquo;s Assets</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s Bitcoin
and Ether Custodian will maintain custody of all of the Trust&rsquo;s bitcoin and ether, other than that which is maintained in a trading
account (the &ldquo;Trading Balance&rdquo;) with Coinbase, Inc. (&ldquo;Coinbase Inc.&rdquo; or the &ldquo;Prime Execution Agent,&rdquo;
which is an affiliate of the Bitcoin and Ether Custodian), in the Trust Digital Asset Accounts. The Trading Balance will only be used
in the limited circumstances in which the Trust is using the Agent Execution Model to effectuate the purchases and sales of bitcoin or
ether. The Bitcoin and Ether Custodian provides safekeeping of digital assets using a multi-layer cold storage security platform designed
to provide offline security of the digital assets held by the Bitcoin and Ether Custodian. However, the Bitcoin and Ether Custodian is
not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (the &ldquo;FDIC&rdquo;) and, therefore,
deposits held with or assets held by the Bitcoin and Ether Custodian are not insured by the FDIC. In addition, neither the Trust nor the
Sponsor insures the Trust&rsquo;s bitcoin or ether. The Bitcoin and Ether Custodian has insurance coverage as a subsidiary under its parent
company, Coinbase Global, Inc., which procures fidelity (e.g., crime) insurance to protect the organization from risks such as theft of
funds. Specifically, the fidelity program provides coverage for the theft of funds held in hot or cold storage. The insurance program
is provided by a syndicate of industry-leading insurers. The insurance program does not cover, insure or guarantee the performance of
the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The bitcoin and ether in the
Trust Digital Asset Accounts may be held across multiple wallets, any of which will feature the following safety and security measures
to be implemented by the Bitcoin and Ether Custodian:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Cold
                                            Storage</I>: Cold storage in the context of ether means keeping the reserve of bitcoin and
                                            ether offline, which is a widely used security precaution, especially when dealing with a
                                            large amount of bitcoin and ether. Bitcoin and ether held under custodianship with the Bitcoin
                                            and Ether Custodian will be kept in high-security, offline, multi-layer cold storage vaults.
                                            This means that the private keys, the cryptographic component that allows a user to access
                                            bitcoin or ether, are stored offline on hardware that has never been connected to the internet.
                                            Storing the private key offline minimizes the risk of the bitcoin or ether being stolen.
                                            The Sponsor expects that all of the Trust&rsquo;s bitcoin and ether will be held in cold
                                            storage of the Bitcoin and Ether Custodian on an ongoing basis. In connection with creations
                                            or redemptions, the Trust will, under most circumstances, process redemptions by selling
                                            bitcoin and ether from the portion of its bitcoin and ether held in cold storage.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Private
                                            Keys</I>: All private keys are securely stored using multiple layers of high-quality encryption
                                            and in Bitcoin and Ether Custodian-owned offline hardware vaults in secure environments.
                                            No customers or third parties are given access to the Bitcoin and Ether Custodian&rsquo;s
                                            private keys.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

</DIV>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<DIV STYLE="padding: 3pt; border: Black 1.5pt solid; width: 98%">

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Whitelisting</I>:
                                            Transactions are only sent to vetted, known addresses. The Bitcoin and Ether Custodian&rsquo;s
                                            platform supports pre-approval and test transactions. The Bitcoin and Ether Custodian requires
                                            authentication when adding or removing addresses for whitelisting. All instructions to initiate
                                            a whitelist addition or removal must be submitted via the Coinbase Custody platform. When
                                            a whitelist addition or removal request is initiated, the initiating user will be prompted
                                            to authenticate its request using a two-factor authentication key. A consensus mechanism
                                            on the Coinbase Custody platform dictates how many approvals are required in order for the
                                            consensus to be achieved to add or remove a whitelisted address. Only when the consensus
                                            is met is the underlying transaction considered officially approved. An account&rsquo;s roster
                                            and user roles are maintained by the Bitcoin and Ether Custodian in a separate log, an Authorized
                                            User List (&ldquo;AUL&rdquo;). Any changes to the account&rsquo;s roster must be reflected
                                            on an updated AUL first and executed by an authorized signatory.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Audit
                                            Trails</I>: Audit trails exist for all movement of bitcoin and ether within Bitcoin and Ether
                                            Custodian-controlled bitcoin and ether wallets and are audited annually for accuracy and
                                            completeness by an independent external audit firm.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the above measures,
in accordance with the Bitcoin and Ether Custody Agreement, bitcoin and ether held in custody with the Bitcoin and Ether Custodian will
be segregated from both the proprietary property of the Bitcoin and Ether Custodian and the assets of any other customer in accounts that
clearly identify the Trust as the owner of the accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the rare and limited
circumstances when the Trust is utilizing the Agent Execution Model to acquire bitcoin or ether, a portion of the Trust&rsquo;s bitcoin,
ether or cash holdings may be held with the Prime Execution Agent in the Trading Balance. The Trust will only utilize the Agent Execution
Model when the Trust-Directed Trading Model is unavailable. Within the Trust&rsquo;s Trading Balance, the Prime Execution Agreement provides
that the Trust does not have an identifiable claim to any particular bitcoin or ether (or cash). Instead, the Trust&rsquo;s Trading Balance
represents an entitlement to a pro rata share of the bitcoin and ether (and cash) the Prime Execution Agent holds on behalf of customers
who hold similar entitlements against the Prime Execution Agent. In this way, the Trust&rsquo;s Trading Balance represents an omnibus
claim on the Prime Execution Agent&rsquo;s bitcoin and ether (and cash) held on behalf of the Prime Execution Agent&rsquo;s customers.
The Prime Execution Agent holds the bitcoin and ether associated with customer entitlements across a combination of omnibus cold wallets,
omnibus &ldquo;hot&rdquo; wallets (meaning wallets whose private keys are generated and stored online, in internet-connected computers
or devices) or in omnibus accounts in the Prime Execution Agent&rsquo;s name on a trading venue (including third-party venues and the
Prime Execution Agent&rsquo;s own execution venue) where the Prime Execution Agent executes orders to buy and sell bitcoin or ether on
behalf of its clients. Within such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor
that it keeps the majority of assets in cold wallets, to promote security, while the balance of assets is kept in hot wallets to facilitate
rapid withdrawals. However, the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the
Sponsor, the percentage of bitcoin and ether that the Prime Execution Agent holds for customers holding similar entitlements as the Trust,
which are kept in omnibus cold wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent&rsquo;s name
on a trading venue. The Prime Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot
storage is determined by ongoing risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated
liquidity needs for its customers as a class against the anticipated greater security of cold storage.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that the Trust
engages an additional Bitcoin and Ether Custodian in the future (a &ldquo;Future Bitcoin Ether Custodian,&rdquo; and with Coinbase Custody,
the &ldquo;Bitcoin and Ether Custodians&rdquo;), other than the bitcoin and ether held with the Prime Execution Agent in the Trust&rsquo;s
Trading Balance, the Sponsor will allocate the Trust&rsquo;s bitcoin and ether between the Trust Digital Asset Accounts at Coinbase Custody
and the special accounts that hold the Trust&rsquo;s bitcoin or ether at the Future Bitcoin and Ether Custodian (the &ldquo;Future Trust
Digital Asset Accounts,&rdquo; and with the Trust Digital Asset Accounts, the &ldquo;Trust Digital Asset Accounts&rdquo;). In determining
the amount and percentage of the Trust&rsquo;s bitcoin and ether to allocate to each Trust Digital Asset Account, the Sponsor will consider
(i) the concentration of the Trust&rsquo;s bitcoin and ether at each Bitcoin and Ether Custodian, (ii) the Sponsor&rsquo;s assessment
of the safety and security policies and procedures of each Bitcoin and Ether Custodian, (iii) the insurance policies of each Bitcoin and
Ether Custodian, (iv) the fees and expenses associated with the storage of the Trust&rsquo;s bitcoin and ether at each Bitcoin and Ether
Custodian, (v) the fees and expenses associated with the transfer to or from the Trust Digital Asset Account at each Bitcoin and Ether
Custodian, and (vi) any other factor the Sponsor deems relevant in making the allocation determination. The Sponsor does not intend to
disclose the amount or percentage of the Trust&rsquo;s bitcoin or ether held at either Coinbase Custody or any Future Bitcoin and Ether
Custodian, and the Sponsor may change the allocation between the Bitcoin and Ether Custodians at any time and without notice to Shareholders.
The fees and expenses associated with the transfer of bitcoin and ether between the Trust Digital Asset Accounts at each Bitcoin and Ether
Custodian will be borne by the Sponsor, not the Trust or the Shareholders. Any transfer of bitcoin and ether between the Trust Digital
Asset Accounts at each Bitcoin and Ether Custodian will occur &ldquo;on-chain&rdquo; over the Bitcoin network or Ethereum network, as
applicable. On-chain transactions are subject to all of the risks of the Bitcoin network and Ethereum network, as applicable, including
the risk that transactions will be made erroneously and are generally irreversible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<DIV STYLE="padding: 3pt; border: Black 1.5pt solid; width: 98%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust relies on the Cash
Custodian to hold any cash related to the creation and redemption of Shares, purchase or sale of bitcoin or ether or held for payment
of expenses not assumed by the Sponsor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Transfer Agent will facilitate
the settlement of Shares in response to the placement of purchase and redemption orders from Authorized Participants.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Plan of Distribution</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When the Trust sells or redeems
its Shares, it will do so in Baskets. The Trust only creates and redeems Baskets in transactions with Authorized Participants. In connection
with an order to purchase Shares, an Authorized Participant shall deliver to the Transfer Agent the amount of U.S. dollars needed to purchase
the Basket Amount of bitcoin and ether, as well as the per-order transaction fee. In connection with an order to redeem Shares, an Authorized
Participant shall deliver to the Trust&rsquo;s account at DTC the Basket(s) to be redeemed and the Sponsor shall arrange for the Basket
Amount of bitcoin and ether to be sold and the resulting U.S. dollars to be distributed to the Authorized Participant. BNY Mellon will
facilitate the processing of purchase and redemption orders in Baskets from the Trust in its capacity as Transfer Agent and will custody
the Trust&rsquo;s cash holdings in its capacity as Cash Custodian.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Authorized Participants may
then offer Shares to the public at prices that depend on various factors, including the supply and demand for Shares, the value of the
Trust&rsquo;s assets, and market conditions at the time of a transaction. Investors who 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors who decide to buy
or sell Shares will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to
this offering, there has been no public market for the Shares. The Shares are expected to be listed for trading, subject to notice of
issuance, on the Exchange under the ticker symbol &ldquo;_______.&rdquo;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Federal Income Tax Considerations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Owners of Shares are treated,
for U.S. federal income tax purposes, as if they owned a proportionate share of the assets of the Trust. They are also viewed as if they
directly received a proportionate share of any income of the Trust, or as if they had incurred a proportionate share of the expenses of
the Trust. Consequently, each sale of ether by the Trust (which includes under current Internal Revenue Service (&ldquo;IRS&rdquo;) guidance
using ether to pay expenses of the Trust) constitutes a taxable event to Shareholders. See &ldquo;UNITED STATES FEDERAL INCOME TAX CONSEQUENCES&mdash;Taxation
of U.S. Shareholders.&rdquo;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Use of Proceeds</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proceeds received by the Trust
from Purchase Orders of Baskets will be used to acquire bitcoin and ether. Such deposits of cash are held by the Cash Custodian on behalf
of the Trust until (i) used to acquire bitcoin and ether, (ii) accrued and distributed to pay Trust expenses and liabilities not assumed
by the Sponsor, (iii) distributed to Authorized Participants in connection with redemptions of Baskets, or (iv) disposed of in a liquidation
of the Trust.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Principal Investment Risks of an Investment
in the Trust</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An investment in the Trust
involves risks. Investors may choose to use the Trust as a means of investing indirectly in bitcoin or ether. Because the value of the
Shares is correlated with the value of the bitcoin and ether held by the Trust, it is important to understand the investment attributes
of, and the market for, bitcoin and ether. As noted, there are significant risks and hazards inherent in the bitcoin and ether market
that may cause the price of bitcoin or ether to widely fluctuate. Investors considering a purchase of Shares should carefully consider
how much of their total assets should be exposed to the bitcoin and ether market, and should fully understand, be willing to assume, and
have the financial resources necessary to withstand, the risks involved in the Trust&rsquo;s investment strategy, and be in a position
to bear the potential loss of their entire investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin and ether are a relatively
new technological innovation with a limited history. There is no assurance that usage of the Bitcoin network and bitcoin, or the Ethereum
network and ether, will continue to grow. A contraction in the use or adoption of bitcoin or ether may result in increased volatility
or a reduction in the price of bitcoin or ether, which could adversely impact the value of the Shares. Sales of newly created bitcoin
or ether may cause the price of bitcoin or ether to decline, which could negatively affect an investment in the Shares. Bitcoin and ether
markets have a limited history, bitcoin and ether trading prices have exhibited high levels of volatility, and in some cases such volatility
has been sudden and extreme. Because of such volatility, Shareholders could lose all or substantially all of their investment in the Trust.
Regulation of the use of bitcoin, ether, the Bitcoin network or the Ethereum network continues to evolve both in the United States and
in foreign jurisdictions, which may restrict the use of bitcoin or ether or otherwise impact the demand for bitcoin or ether. Disruptions
at digital asset trading platforms could adversely affect the availability of bitcoin or ether and the ability of Authorized Participants
to purchase or sell bitcoin or ether and, therefore, their ability to create and redeem Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Custody of digital assets
such as bitcoin and ether includes unique risks of loss. The loss or destruction of private keys could prevent the Trust from accessing
its bitcoin or ether. Loss of these private keys may be irreversible and could result in the loss of all or substantially all of an investment
in the Trust. Similarly, transactions on both the Bitcoin network and Ethereum network generally may not be reversed or corrected, meaning
that errors in transactions from the Trust Digital Asset Accounts could result in the loss of all or substantially all of an investment
in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no assurance as to
whether the Trust will be profitable or whether the Trust will meet its expenses and liabilities. Any investment made in the Trust may
result in a total loss of the investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s return may
not match the performance of the Pricing Benchmarks because the Trust incurs operating expenses. The NAV of the Trust may not always correspond
to the market price of its Shares for a number of reasons, including price volatility, trading activity, normal trading hours for the
Trust, the calculation methodology of the NAV, and/or the closing of digital asset trading platforms due to fraud, failure, security breaches
or otherwise. As a result, Baskets may be created or redeemed at a U.S. dollar value that differs from the market price of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>


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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_002"></A>Risk Factors</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>You should consider carefully
the 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. These
risk factors may be amended, supplemented or superseded from time to time by risk factors contained in any periodic report, prospectus
supplement, post-effective amendment or in other reports filed with the SEC in the future.</I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Related to Digital Assets and Digital
Asset Networks</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>The trading prices
of 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 effect
on the value of the Shares and the Shares could lose all or substantially all of their value.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading prices of many
digital 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 steep
drawdowns throughout 2018 in digital asset trading prices, including for bitcoin and ether. These drawdowns notwithstanding, digital asset
prices, including bitcoin and ether, increased significantly again during 2019, decreased significantly again in the first quarter of
2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder
of 2020 and the first quarter of 2021. Digital asset prices, including bitcoin and ether, continued to experience significant and sudden
changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022, and digital asset prices
have continued to fluctuate through 2023 and to date in 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Extreme volatility in the
future, including further declines in the trading price of bitcoin and ether, could have a material adverse effect on the value of the
Shares and the Shares could lose all or substantially all of their value. Furthermore, negative perception and a lack of stability and
standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatility
in the price of bitcoin and ether and other digital assets, including a depreciation in value. The Trust is not actively managed and will
not take any actions to take advantage, or mitigate the impacts, of volatility in the price of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of bitcoin and ether as digital assets, including
the fact that digital assets are bearer instruments and loss, theft, or compromise of the associated private keys could result in permanent
loss of the asset, and the capabilities and development of blockchain technologies such as the Bitcoin and Ethereum blockchains.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital assets were only introduced
in 2009, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development
of blockchain technologies, such as the recentness of their development, their dependence on the internet and other technologies, their
dependence on the role played by users, developers and validators 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Digital
                                            asset networks, including the Bitcoin network and Ethereum network, and the software used
                                            to operate them are in the early stages of development. Given the recentness of the development
                                            of digital asset networks, digital assets may not function as intended and parties may be
                                            unwilling to use digital assets, which would dampen the growth, if any, of digital asset
                                            networks. Because bitcoin and ether are each a digital asset, the value of the Shares is
                                            subject to a number of factors relating to the fundamental investment characteristics of
                                            digital assets, including the fact that digital assets are bearer instruments and loss, theft,
                                            compromise, or destruction of the associated private keys could result in permanent loss
                                            of the asset.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Digital
                                            assets, including bitcoin and ether, are controllable only by the possessor of both the unique
                                            public key and private key or keys relating to the Bitcoin or Ether network address, or &ldquo;wallet,&rdquo;
                                            at which the digital asset is held. Private keys must be safeguarded and kept private in
                                            order to prevent a third party from accessing the digital asset held in such wallet. The
                                            loss, theft, compromise or destruction of a private key required to access a digital asset
                                            may be irreversible. If a private key is lost, stolen, destroyed or otherwise compromised
                                            and no backup of the private key is accessible, the owner would be unable to access the digital
                                            asset corresponding to that private key and the private key will not be capable of being
                                            restored by the digital asset network resulting in the total loss of the value of the digital
                                            asset linked to the private key.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Digital
                                            asset networks are dependent upon the internet. A disruption of the internet or a digital
                                            asset network, such as the Bitcoin network or Ethereum network, would affect the ability
                                            to transfer digital assets, including bitcoin and ether, and, consequently, a disruption
                                            may impact their value.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>A decline in the adoption
of digital assets generally, and bitcoin and ether specifically, could negatively impact the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor will not adopt
or employ any strategy that seeks to increase the usage of digital assets generally, or that seeks to spur further development of either
bitcoin and the Bitcoin network or ether and the Ethereum network. However, a lack of expansion in usage of bitcoin and the Bitcoin network
or ether and the Ethereum network could adversely affect an investment in Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 that
employs 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 technological
innovations continue to develop and evolve.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Today, there is limited use
of bitcoin or ether in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant portion
of users. Certain merchants and major retail and commercial businesses have only recently begun accepting bitcoin or ether as a means
of payment for goods and services. This pattern may contribute to outsized price volatility, which in turn can make bitcoin and ether
less attractive to merchants and commercial parties as a means of payment. A lack of expansion by bitcoin or ether into retail and commercial
markets or a contraction of such use may result in a reduction in the price of bitcoin or ether, which could adversely affect an investment
in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, there is no assurance
that bitcoin or ether will maintain its value over the long term. The value of both bitcoin and ether is subject to risks related to its
usage. Even if growth in Bitcoin or Ethereum network adoption occurs in the near or medium term, there is no assurance that bitcoin or
ether usage will continue to grow over the long term. A contraction in the use of bitcoin or ether may result in increased volatility
or a reduction in the price of bitcoin or ether, which would adversely impact the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin&rsquo;s adoption has
been 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 some
respects when compared with the increase in the price of bitcoin. The continued adoption of bitcoin will require growth in its usage and
in the usage of the Bitcoin network for various applications, as well as an accommodating regulatory environment, including with respect
to the tax treatment of transactions denominated in bitcoin. In addition, alternative forms of digital assets and innovations in legacy
payments systems may reduce use of the Bitcoin network and demand for bitcoin. A lack of expansion in usage of bitcoin and the Bitcoin
network could adversely affect the market for bitcoin and may have a negative impact on an investment in the Shares. Even if growth in
bitcoin 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 impact
the value of an investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Similarly, the further development
and acceptance of the Ethereum network is subject to a variety of factors that are difficult to evaluate. For example, the Ethereum network
faces 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, stopping
or reversing of the development, acceptance or usage of the Ethereum network and associated smart contracts may adversely affect the price
of ether and therefore an investment in the Shares. The further adoption of ether will require growth in its usage and in the Ethereum
network. Adoption of ether will also require an accommodating regulatory environment.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Digital assets represent
a new and rapidly evolving industry, and the value of the Shares depends on the acceptance of bitcoin and ether.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The
first digital asset, bitcoin, was launched in 2009. The Ethereum network launched in 2015 (though some ether was sold in a pre-mine in
2014). 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 the
issuance of digital assets, represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to
evaluate. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitcoin
                                            and ether are only selectively accepted as a means of payment by retail and commercial outlets,
                                            and use of bitcoin and ether by consumers to pay such retail and commercial outlets remains
                                            limited. Banks and other established financial institutions may refuse to process funds for
                                            bitcoin or ether transactions; refuse to process wire transfers to or from digital asset
                                            exchanges, bitcoin- and ether-related companies or service providers; or refuse to maintain
                                            accounts for persons or entities transacting in bitcoin or ether. As a result, the price
                                            of bitcoin and ether may be influenced to a significant extent by speculators, thus contributing
                                            to price volatility that makes retailers less likely to accept bitcoin or ether in the future.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Banks
                                            may not provide banking services, or may cut off banking services, to businesses that provide
                                            digital asset-related services or that accept digital assets as payment, which could dampen
                                            liquidity in the market and damage the public perception of digital assets generally or any
                                            one digital asset in particular, such as bitcoin and ether, and their or its utility as a
                                            payment system, which could decrease the price of digital assets generally or individually.
                                            Further, the lack of availability of banking services could prevent the Trust from being
                                            able to complete creations and redemptions of Baskets, the timely liquidation of bitcoin
                                            or ether and withdrawal of assets from the Bitcoin and Ether Custodian even if the Sponsor
                                            determined that such liquidation was appropriate or suitable, or otherwise disrupt the Trust&rsquo;s
                                            operations.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
                                            privacy-preserving features have been or are expected to be introduced to digital asset networks,
                                            including the Bitcoin network and Ethereum network. For example, some prominent contributors
                                            to the Ethereum network have proposed the concept of &ldquo;privacy pools,&rdquo; zero-knowledge
                                            proofs, and other privacy-preserving features. If any such features are introduced to the
                                            Bitcoin network or Ethereum network, any digital asset trading platforms or businesses that
                                            facilitate transactions in bitcoin or ether may be at an increased risk of criminal or civil
                                            lawsuits, or of having banking services cut off if there is a concern that these features
                                            interfere with the performance of anti-money laundering duties and economic sanctions checks
                                            or facilitate illicit financing or crime.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Users,
                                            protocol and application developers and validators may otherwise switch to or adopt certain
                                            digital assets at the expense of their engagement with other digital asset networks, which
                                            may negatively impact those networks, including the Bitcoin network or Ethereum network.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The
Trust is not actively managed and will not have any formal strategy relating to the development of the Bitcoin network or Ethereum network.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Recent developments
in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants
of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Beginning
in the fourth quarter of 2021, and continuing throughout 2022 and 2023, digital asset prices fell precipitously. This has led to volatility
and disruption in the digital asset markets and financial difficulties for several prominent industry participants, including digital
asset trading platforms, hedge funds and lending platforms. For example, in the first half of 2022, digital asset lenders Celsius Network
LLC 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 assets
more broadly, and market-wide declines in digital asset trading prices and liquidity.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Thereafter,
in November 2022, FTX, the third largest digital asset trading platform by volume at the time, halted customer withdrawals amid rumors
of the company&rsquo;s liquidity issues and likely insolvency. Shortly thereafter, FTX&rsquo;s CEO resigned and FTX and numerous affiliates
of FTX filed for bankruptcy. The U.S. Department of Justice subsequently brought criminal charges, including charges of fraud, violations
of federal securities laws, money laundering, and campaign finance offenses, against FTX&rsquo;s former CEO and others. Subsequently,
in November 2023, FTX&rsquo;s CEO was found guilty by a federal jury on all seven criminal counts against him, including fraud and conspiracy
to 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 various
regulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experienced
extreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the
SEC, the CFTC, the White House and Congress. Following FTX&rsquo;s bankruptcy filing, several other entities in the digital asset industry
filed for bankruptcy, such as BlockFi Inc. and Genesis Global Capital, LLC. Additionally, in November 2023, the U.S. Department of the
Treasury settled charges against Binance for violations of U.S. anti-money laundering and sanctions laws. The SEC also brought charges
against Genesis Global Capital, LLC and Gemini Trust Company, LLC on January 12, 2023, for their alleged unregistered offer and sale of
securities to retail investors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The
collapse of TerraUSD and the bankruptcy filings of FTX, Celsius, Voyager and BlockFi have resulted in calls for heightened scrutiny and
regulation of the digital asset industry, with a specific focus on digital asset trading platforms, and custodians. Federal and state
legislatures 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&mdash;namely the Federal Reserve Board, the U.S. Congress
and certain U.S. agencies (e.g., the SEC, the CFTC, the Financial Crimes Enforcement Network (&ldquo;FinCEN&rdquo;), the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Bureau of Investigation) as well as the White House&mdash;have
issued reports and releases concerning digital assets, including ether and digital asset markets. However, the extent and content of any
forthcoming laws and regulations are not yet ascertainable with certainty and may not be ascertainable in the near future. It is possible
that new laws and increased regulation and regulatory scrutiny may require the Trust to comply with certain regulatory regimes, which
could result in new costs for the Trust. The Trust may have to devote increased time and attention to regulatory matters, which could
increase costs to the Trust. New laws, regulations and regulatory actions could significantly restrict or eliminate the market for, or
uses of, digital assets including ether, which could have a negative effect on the value of ether, which in turn would have a negative
effect on the value of the Trust&rsquo;s Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">These
events 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 to
the Sponsor and the Trust and their respective affiliates and/or the Trust&rsquo;s third-party service providers, or to the digital asset
industry as a whole.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Continued
disruption and instability in the digital asset markets as these events develop, including further declines in the trading prices and
liquidity of ether, could have a material adverse effect on the value of the Shares, and the Shares could lose all or substantially all
of their value.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Digital assets may
have concentrated ownership, and large sales or distributions by holders of such digital assets could have an adverse effect on the market
price of such digital assets.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">The
largest 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 bitcoin
or ether, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the same
person or entity. As a result of this concentration of ownership, large sales or distributions by such holders could have an adverse effect
on the market price of bitcoin and ether.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes in the
governance of a digital asset network may not receive sufficient support from users and miners or validators, which may negatively affect
that digital asset network&rsquo;s ability to grow and respond to challenges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The governance of decentralized
networks, such as the Bitcoin network and Ethereum network, is by voluntary consensus and open competition. As a result, there may be
a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network&rsquo;s
utility and ability to grow and face challenges. The foregoing notwithstanding, the protocols for some decentralized networks, such as
the Bitcoin network and Ethereum network, are informally managed by a group of core developers that propose amendments to the relevant
network&rsquo;s source code. Core developers&rsquo; roles evolve over time, largely based on self-determined participation. If a significant
majority of users and miners/validators adopt amendments to a decentralized network based on the proposals of such core developers, such
network will be subject to new protocols that may adversely affect the value of the relevant digital asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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, on
digital asset networks.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The loss or destruction
of a private key required to access a digital asset may be irreversible. The Bitcoin and Ether Custodian&rsquo;s loss of access to a private
key associated with the Trust&rsquo;s bitcoin or ether could adversely affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Transfers of digital assets,
including bitcoin and ether, among users are accomplished via digital asset transactions (<I>i.e.</I>, sending bitcoin or ether from one
user to another). The creation of a digital asset transaction requires the use of a unique numerical code known as a &ldquo;private key.&rdquo;
In the absence of the correct private key corresponding to a holder&rsquo;s particular digital asset, the digital asset is inaccessible.
The custody of the Trust&rsquo;s bitcoin and ether is handled by the Bitcoin and Ether Custodian, and the transfer of bitcoin and ether
to and from Authorized Participants is directed by the Sponsor. The Sponsor has evaluated the procedures and internal controls of the
Trust&rsquo;s Bitcoin and Ether Custodian to safeguard the Trust&rsquo;s bitcoin and ether holdings. If the Bitcoin and Ether Custodian&rsquo;s
internal procedures and controls are inadequate to safeguard the Trust&rsquo;s bitcoin and ether holdings, and the Trust&rsquo;s private
key(s) is(are) lost, destroyed or otherwise compromised and no backup of the private key(s) is(are) accessible, the Trust will be unable
to access its bitcoin and ether, which could adversely affect an investment in the Shares. In addition, if the Trust&rsquo;s private key(s)
is(are) misappropriated and the Trust&rsquo;s bitcoin and ether holdings are stolen, the Trust could lose some or all of its bitcoin and
ether holdings, which could adversely impact an investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competition from
central bank digital currencies (&ldquo;CBDCs&rdquo;) and emerging payments initiatives involving financial institutions could adversely
affect the value of bitcoin, ether and other digital assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Central banks in various countries
have introduced digital forms of legal tender (&ldquo;CBDCs&rdquo;). China&rsquo;s CBDC project, known as Digital Currency Electronic
Payment, has reportedly been tested in a live pilot program conducted in multiple cities in China. Central banks representing at least
130 countries have published retail or wholesale CBDC work ranging from research to pilot projects. Whether or not they incorporate blockchain
or 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 announced
cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce
friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently
announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their
payments and settlement activities, which could compete with, or reduce the demand for, bitcoin and ether. As a result of any of the foregoing
factors, the value of bitcoin and ether could decrease, which could adversely affect an investment in the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The price of digital
assets, including bitcoin and ether, may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers
and their regulatory treatment.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">While
the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for digital asset markets. Stablecoins
are digital assets designed to have a stable value over time as compared to typically volatile digital assets, and are typically marketed
as being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to be
stable, their market value may fluctuate. This volatility has in the past apparently impacted the price of bitcoin and ether. Stablecoins
are a relatively new phenomenon and it is impossible to know all of the risks that they could pose to participants in the bitcoin and
ether markets. In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backing
in a way that, when the stablecoin is used to pay for bitcoin or ether, could cause artificial rather than genuine demand for such digital
asset, artificially inflating the digital asset&rsquo;s price, and also argue that those associated with certain stablecoins may be involved
in laundering money. On February 17, 2021, the New York Attorney General entered into an agreement with Tether&rsquo;s operators, requiring
them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements
made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether&rsquo;s operators in which
they agreed to pay $42.5 million in fines to settle charges that, among others, Tether&rsquo;s claims that it maintained sufficient U.S.
dollar reserves to back every Tether stablecoin in circulation with the &ldquo;equivalent amount of corresponding fiat currency&rdquo;
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 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 record ERC-20
Tether transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could cause the
price of ether to decrease, affecting the value of the Shares.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">USDC
is 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 reserves
were held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Stablecoins are reliant on the U.S. banking system
and U.S. treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adversely
affect the value of the Shares. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDC
were 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 record
ERC-20 USDC transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could cause
the price of ether to decrease, affecting the value of the Shares.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Given
the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact on
the broader digital asset market, including the market for bitcoin and ether. Because a large portion of the digital asset market still
depends 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 to
dramatic 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 manipulative
activity when unbacked stablecoins are used to pay for other digital assets (including bitcoin and ether), or regulatory concerns about
stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, could impact individuals&rsquo; willingness to trade
on 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.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Anonymity and
illicit financing risk.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although transaction details
of peer-to-peer bitcoin and ether transactions are recorded on the Bitcoin and Ethereum blockchains, a buyer or seller of bitcoin or ether
on a peer-to-peer basis directly on the Bitcoin and Ethereum networks may never know to whom the public key belongs or the true identity
of 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 custody
of digital assets. The opaque nature of the market poses asset verification challenges for market participants, regulators and auditors
and gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump-and-dump
schemes. Digital assets have in the past been used to facilitate illicit activities. If bitcoin or ether was used to facilitate illicit
activities, businesses that facilitate transactions in bitcoin or ether could be at increased risk of potential criminal or civil liability
or lawsuits, or of having banking or other services cut off, and bitcoin or ether could theoretically be removed from digital asset trading
platforms. Any of the aforementioned occurrences could adversely affect the price of bitcoin or ether, the attractiveness of the Bitcoin
network or Ethereum network and an investment in the Shares. If the Trust or the Sponsor were to transact with a sanctioned entity, the
Trust or the Sponsor would be at risk of potential criminal or civil lawsuits or liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust takes measures with
the objective of reducing illicit financing risks in connection with the Trust&rsquo;s activities. However, illicit financing risks are
present in the digital asset markets, including markets for bitcoin and ether. There can be no assurance that the measures employed by
the Trust will prove successful in reducing illicit financing risks, and the Trust is subject to the complex illicit financing risks and
vulnerabilities present in the digital asset markets. If such risks eventuate, the Trust, the Sponsor or their respective affiliates could
face civil or criminal liability, fines, penalties, or other punishments; be subject to investigation; have their assets frozen; lose
access to banking services or services provided by other service providers; or suffer disruptions to their operations, any of which could
negatively affect the Trust&rsquo;s ability to operate or could cause losses in value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust and the Sponsor
have adopted and implemented policies and procedures that are designed to comply with applicable anti-money laundering laws and sanctions
laws and regulations, including applicable know-your-customer (&ldquo;KYC&rdquo;) laws and regulations. The Sponsor and the Trust will
only interact with known third-party service providers with respect to whom the Sponsor or its affiliates have engaged in a thorough due
diligence process and/or a thorough KYC process, such as the Authorized Participants, Digital Asset Trading Counterparties, Prime Execution
Agent and Bitcoin and Ether Custodian. The Prime Execution Agent and Bitcoin and Ether Custodian must undergo counterparty due diligence
by the Sponsor. Each Authorized Participant must undergo onboarding by the Sponsor prior to placing creation or redemption orders with
respect to the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, Authorized Participants,
as broker-dealers, and the Prime Execution Agent and Bitcoin and Ether Custodian, as entities licensed to conduct virtual currency business
activity by the New York Department of Financial Services and as limited-purpose trust companies subject to New York Banking Law, respectively,
are &ldquo;financial institutions&rdquo; subject to the U.S. Bank Secrecy Act, as amended (&ldquo;BSA&rdquo;), and U.S. economic sanctions
laws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust that
they 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 or
by execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime Execution
Agent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to comply
with applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customers
as 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 deposits
to, and withdrawals from, the Trust&rsquo;s Trading Balance, as required by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution Agent
and Bitcoin and Ether Custodian have adopted and implemented anti-money laundering and sanctions compliance programs that provide additional
protections to ensure that the Sponsor and the Trust do not transact with a sanctioned party. Notably, the Prime Execution Agent and Bitcoin
and Ether Custodian perform screening using blockchain analytics to identify, detect, and mitigate the risk of transacting with a sanctioned
or other unlawful actor. Pursuant to the Bitcoin and Ether Custodian&rsquo;s and Prime Execution Agent&rsquo;s blockchain analytics screening
programs, any bitcoin or ether that is delivered to the Trust Bitcoin and Ether Account or the Trust&rsquo;s Trading Balance will undergo
screening designed to assess whether the origins of that ether are illicit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution Agreement
provides, among others, that if the Prime Execution Agent conducts blockchain analytics screening on a bitcoin or ether transaction deposited
by an Authorized Participant and such screening results in the bitcoin or ether transaction being suspected or determined to be in violation
of 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&rsquo;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&rsquo;s account at the Prime Execution
Agent and the Trust&rsquo;s account(s) involves such bitcoin or ether, so long as permitted by applicable law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">However, there is no guarantee
that such procedures will always prove to be effective or that the Prime Execution Agent and its affiliates will always perform their
obligations. 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 Trust
to attest that it has performed its own due diligence on the Digital Asset Trading Counterparties it has contracted with to source bitcoin
and ether from and has confirmed that the Digital Asset Trading Counterparties have implemented policies, procedures and controls designed
to comply with applicable anti-money laundering and applicable sanctions laws. Although the Sponsor arranges for such diligence to be
performed, including by the Trust&rsquo;s service providers, there is no guarantee such diligence will prove effective in identifying
all possible sources of illicit financing risks. Digital Asset Trading Counterparties represent to the Sponsor that they conduct due diligence
on their own counterparties from whom they source the bitcoin and ether they deposit with the Trust, and that they have formed a reasonable
belief that such bitcoin and ether being transferred by the Digital Asset Trading Counterparty to the Trust was not derived from, or associated
with, unlawful or criminal activity. However, there is the risk that Digital Asset Trading Counterparties may not conduct sufficient due
diligence 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&rsquo;s procedures
or diligence proves to be ineffective, violations of such laws could result, which could result in regulatory liability for the Trust
or the Sponsor under such laws, including governmental fines, penalties, and other punishments, as well as potential liability to or cessation
of services by the Prime Execution Agent and its affiliates, including the Bitcoin and Ether Custodian, under the Prime Execution Agreement
and Bitcoin and Ether Custody Agreement. Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust&rsquo;s
ability to operate.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A temporary or
permanent &ldquo;fork&rdquo; of the Bitcoin blockchain or Ethereum blockchain could adversely affect an investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin blockchain and
Ethereum blockchain both utilize open-source software. Any user can download the software, modify it and then propose that bitcoin users
and miners or ether users and validators adopt the modification. Bitcoin and Ethereum software updates are user driven, meaning they are
adopted when users of the software choose to update their software, in contrast to centralized software solutions where a development
company might &ldquo;push&rdquo; out mandatory software updates to the user community. When a change is proposed that modifies the operation
of the Bitcoin or Ethereum networks and a substantial majority of bitcoin users and miners or ether users and validators consent to the
modification, the change is implemented and the Bitcoin or Ethereum networks remain uninterrupted. However, if less than a substantial
majority of bitcoin users and miners or ether users and validators consent to the proposed modification, and the modification is nonetheless
implemented by some bitcoin users and miners or ether users and validators and the modification is not compatible or fully interoperable
with the software prior to its modification, the consequence would be what is known as a &ldquo;fork&rdquo; (<I>i.e.</I>, &ldquo;split&rdquo;)
of the Bitcoin or Ethereum networks (and the Bitcoin or Ethereum blockchains), with one version running the pre-modified software and
the other running the modified software. The effect of such a fork would be the existence of two (or more) versions of the Bitcoin network
or Ethereum network running in parallel (and the Bitcoin or Ethereum blockchains), but with each version&rsquo;s bitcoin or ether tokens
lacking interchangeability across the respective networks. A party owning bitcoin or ether at the time of the fork would hold equal amounts
of both bitcoin or ether and the alternative forked digital asset (a &ldquo;Forked Asset&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Forks have occurred already
to both the Bitcoin network and Ethereum network. A Bitcoin network fork in August 2017 was related to a several-year dispute over how
to increase the rate of transactions that the Bitcoin network can process. This fork resulted in the creation of the &ldquo;Bitcoin Cash&rdquo;
network and a new Forked Asset (bitcoin cash). Bitcoin Cash is an example of an intentional fork to create a new digital asset network
with differentiated features. To the extent such digital assets compete with bitcoin or ether, such competition could impact demand for
bitcoin or ether and could adversely impact the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Forks may also occur as a
network community&rsquo;s response to a significant security breach. For example, in July 2016, Ethereum &ldquo;forked&rdquo; into Ethereum
and a new digital asset, Ethereum Classic, as a result of the Ethereum network community&rsquo;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 ether
held by The DAO, a distributed autonomous organization, into a segregated account. In response to the hack, most participants in the Ethereum
community elected to adopt a &ldquo;fork&rdquo; that effectively reversed the hack. However, a minority of users continued to develop
the original blockchain, referred to as &ldquo;Ethereum Classic,&rdquo; with the digital asset on that blockchain now referred to as &ldquo;ETC.&rdquo;
ETC now trades on several digital asset exchanges. A fork may also occur as a result of an unintentional or unanticipated software flaw
in the various versions of otherwise compatible software that users run. Such a fork could lead to users and miners or validators abandoning
the digital asset and associated network with the flawed software. It is possible, however, that a substantial number of users and miners
or 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The only digital assets that
will 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 &ldquo;forked&rdquo; asset following the hard
fork. However, the Pricing Benchmarks do not track forks involving bitcoin or ether. The Trust may receive or claim rights to any digital
assets created by a fork of the Bitcoin or Ethereum networks that are supported by the Custodian and for which the Trust&rsquo;s trading
counterparties support a secondary market. Furthermore, the Pricing Benchmarks do not track airdrops involving bitcoin or ether or the
Bitcoin or Ethereum networks. Accordingly, the Trust will disclaim, and the Sponsor will cause the Trust to irrevocably abandon, all rights
to digital assets airdropped to holders of bitcoin and ether. By investing in the Trust rather than directly in bitcoin and ether, you
forgo potential economic benefits associated with airdrops. Before the Trust claims any digital asset resulting from a fork in the Bitcoin
or 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&rsquo;s registration statement of which this Prospectus is a part, and approval of an application
by the Exchange to amend its listing rules. If such approvals are not obtained, the Sponsor will cause the Trust to irrevocably abandon
such digital asset.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event of
a hard fork of the Bitcoin network or Ethereum network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion
to determine which network should be considered the appropriate network for the Trust&rsquo;s purposes, and in doing so may adversely
affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event of a hard fork
of the Bitcoin network or Ethereum network, the Sponsor will use its discretion to determine, promptly and in good faith, which digital
asset network is generally accepted as the Bitcoin network or Ethereum network and should therefore be considered the appropriate network
for the Trust&rsquo;s purposes. The Sponsor will base its determination on a variety of then-relevant factors, including, but not limited
to, the Sponsor&rsquo;s beliefs regarding expectations of the core developers of bitcoin or ether, users, services, businesses, miners
or validators and other constituencies, as well as the actual continued acceptance of, and miner or validator and community engagement
with, the Bitcoin network or Ethereum network, along with market capitalization and trading activity. There is no guarantee that the Sponsor
will choose the digital asset that is ultimately the most valuable fork, and the Sponsor&rsquo;s decision may adversely affect the value
of the Shares as a result. The Sponsor may also disagree with Shareholders, the Bitcoin and Ether Custodian, security vendors and the
Benchmark Provider on what is generally accepted as bitcoin and ether and should therefore be considered &ldquo;bitcoin&rdquo; or &ldquo;ether&rdquo;
for the Trust&rsquo;s purposes, which may also adversely affect the value of the Shares as a result.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event of
a hard fork of the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian&rsquo;s operations may be interrupted or subject
to additional security risks that could disrupt the Trust&rsquo;s ability to process creations and redemptions of Shares or otherwise
threaten the security of the Trust&rsquo;s bitcoin or ether holdings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event of a hard fork
of the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian may temporarily halt the ability of customers (including the
Trust) to deposit, withdraw or transfer bitcoin or ether on the Bitcoin and Ether Custodian&rsquo;s platform. Such a delay may be intended
to permit the Bitcoin and Ether Custodian to assess the resulting versions of the Bitcoin network or Ethereum network, to determine how
best to securely &ldquo;split&rdquo; the bitcoin or ether from the Forked Asset, and to prevent malicious users from conducting &ldquo;replay
attacks&rdquo; (<I>i.e.</I>, broadcasting transactions on both versions of the forked networks to put Bitcoin and Ether Custodian assets
at risk). As a result, the Trust is likely to suspend creations and redemptions during a period in which the Bitcoin and Ether Custodian&rsquo;s
operations are halted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, any losses experienced
by 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders will
not receive the benefits of any forks or &ldquo;airdrops.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to forks, a digital
asset, including bitcoin and ether, may become subject to a similar occurrence known as an &ldquo;airdrop.&rdquo; In an airdrop, the promotors
of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the
new 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 holders
of set amounts of bitcoin and ether or to particular public addresses on the Bitcoin and Ethereum networks. Airdrops may involve a user
being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. A user
entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholders
may not receive the benefits of any forks; the Trust may not choose, or be able, to participate in an airdrop; and the timing of receiving
any benefits from a fork, airdrop or similar event is uncertain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A right to receive any such
benefit of a fork or airdrop is referred to as an &ldquo;Incidental Right&rdquo; and any digital asset acquired through an Incidental
Right is known as an &ldquo;IR Assets.&rdquo; Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rights
and IR Assets. Such assets are not considered assets of the Trust at any point in time and will not be taken into account for purposes
of determining the Trust&rsquo;s NAV and the NAV per Share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 desirable
in 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 in
exchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash back to the
Trust, which in turn would distribute the cash to the Depository Trust Company (&ldquo;DTC&rdquo;) to be distributed to Shareholders in
proportion to the number of Shares owned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 contribute
such 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&rsquo;s ability to realize a benefit from any such
Incidental Right(s) and/or IR Asset(s). The Sponsor may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-case
basis in consultation with its legal advisers, tax consultants and custodian. In determining whether to attempt to acquire and/or retain
any 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            availability of a safe and practical way to take custody of the Incidental Right or IR Asset;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            cost or operational burden of taking possession and/or maintaining ownership of the Incidental
                                            Right or IR Asset and whether such cost or burden exceeds the benefits of owning such Incidental
                                            Rights or IR Asset or the proceeds that would be realized from a sale thereof;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">whether
                                            there are any legal or regulatory restrictions on or risks or consequences arising from,
                                            or tax implications with respect to, the acceptance, retention, ownership, sale, transfer,
                                            abandonment, distribution or disposal or disposition of the Incidental Right or IR Asset,
                                            regardless of whether there is a safe and practical way to take custody of and secure such
                                            Incidental Right or IR Asset;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            existence of a suitable market into which the Incidental Right or IR Asset may be sold; and</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">whether
                                            claiming, owning, selling, or otherwise taking any action in respect of Incidental Right
                                            or IR Asset may create legal or regulatory risks, liability, or burdens of any kind for the
                                            Sponsor (including, without limitation, if such Incidental Right or IR Asset is, or may be,
                                            a security under federal securities laws or a commodity interest under the Commodity Exchange
                                            Act).</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor is under no obligation
to 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 Trust
claims any Incidental Right(s) and/or IR Asset(s) resulting from a fork or airdrop in the Bitcoin or Ethereum networks (other than bitcoin
or ether), the Trust would need to seek and obtain certain regulatory approvals, including an amendment to the Trust&rsquo;s registration
statement of which this Prospectus is a part and approval of an application by the Exchange to amend its listing rules.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the unregulated
nature 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset markets, including
spot markets for bitcoin and ether, are growing rapidly. The digital asset trading platforms through which bitcoin, ether and other digital
assets trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national and
international and include a broadening range of digital assets and participants. Significant trading may occur on systems and platforms
with minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or suspend
withdrawals entirely, rendering the exchange of digital assets for fiat currency difficult or impossible. Participation in spot markets
requires users to take on credit risk by transferring digital assets from a personal account to a third party&rsquo;s account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset trading platforms
do not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms, such as national
securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate without
extensive supervision by governmental authorities, and do not provide the public with significant information regarding their ownership
structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the United
States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital asset
trading platforms may be out of compliance with existing regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result, trading activity
on or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securities
and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digital
asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the
platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of digital assets such as bitcoin and
ether on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditional
exchanges. 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 marketplace
may lose confidence in, or may experience problems relating to, these venues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No digital asset trading platform
on which bitcoin and ether trade is immune from these risks. The closure or temporary shutdown of digital asset trading platforms due
to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the bitcoin and Ethereum networks
and can slow down the mass adoption of bitcoin and ether. Further, digital asset trading platform failures or the failure of any other
major component of the digital asset ecosystems can have an adverse effect on digital asset markets and the price of digital assets, including
bitcoin and ether, and could therefore have a negative impact on the performance of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Negative perception, a lack
of stability in the digital asset trading platforms, manipulation of digital asset trading platforms by customers and/or the closure or
temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may
reduce confidence in digital assets generally and result in greater volatility in the market price of digital assets and the Shares of
the Trust. Furthermore, the closure or temporary shutdown of a digital asset trading platform may impact the Trust&rsquo;s ability to
determine the value of its bitcoin and ether holdings or for Authorized Participants to effectively arbitrage Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset
trading platforms may be exposed to security breaches.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The nature of the assets held
at digital asset trading platforms makes them appealing targets for hackers and a number of digital asset trading platforms have been
victims of cybercrimes. Over the past several years, some digital asset trading platforms have been closed due to security breaches. In
many of these instances, the customers of such digital asset trading platforms were not compensated or made whole for the partial or complete
losses of their account balances in such digital asset trading platforms. While, generally speaking, smaller digital asset trading platforms
are less likely to have the infrastructure and capitalization that make larger digital asset trading platforms more stable, larger digital
asset trading platforms are more likely to be appealing targets for hackers and malware. For example, the collapse of Mt. Gox, which filed
for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset trading platforms could be
subject to abrupt failure with consequences both for users of digital asset trading platforms and for the digital asset industry as a
whole. In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the value of one
bitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in January 2015, Bitstamp
announced that approximately 19,000 bitcoin had been stolen from its operational or &ldquo;hot&rdquo; 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 value
of bitcoin and other digital assets immediately decreased by more than 10% following reports of the theft at Bitfinex. In July 2017, FinCEN
assessed a $110 million fine against BTC-e, a now-defunct digital asset exchange, for facilitating crimes such as drug sales and ransomware
attacks. In December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filed
for bankruptcy following a hack that resulted in a loss of 17% of Yapian&rsquo;s assets. Following the hack, Youbit users were allowed
to withdraw approximately 75% of the digital assets in their exchange accounts, with any potential further distributions to be made following
Yapian&rsquo;s pending bankruptcy proceedings. In January 2018, the Japanese digital asset trading platform, Coincheck was hacked, resulting
in losses of approximately $535 million, and in February 2018, the Italian digital asset trading platform Bitgrail was hacked, resulting
in approximately $170 million in losses. In May 2019, one of the world&rsquo;s largest digital asset trading platforms, Binance, was hacked,
resulting in losses of approximately $40 million.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset
trading platforms may be exposed to fraud and market manipulation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The blockchain infrastructure
could be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dump
and fraud across different systems, platforms or geographic locations. As a result of reduced oversight, these schemes may be more prevalent
in digital asset markets than in the general market for financial products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC has identified possible
sources of fraud and manipulation in the digital asset market generally, including, among others, (1) &ldquo;wash trading&rdquo;; (2)
persons with a dominant position in a digital asset manipulating such digital asset&rsquo;s pricing; (3) hacking of the a digital asset
network 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 demand
for the digital asset, etc.) or based on the dissemination of false and misleading information; (6) manipulative activity involving purported
&ldquo;stablecoins,&rdquo; including Tether; and (7) fraud and manipulation at digital asset trading platforms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 of
such digital asset trading platforms were not compensated or made whole for the partial or complete losses of their account balances in
such digital asset trading platforms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2019, there were reports
claiming that 80.95% of bitcoin trading volume on digital asset trading platforms was false or noneconomic in nature, with specific focus
on unregulated exchanges located outside of the United States. Such reports alleged that certain overseas exchanges have displayed suspicious
trading activity suggestive of a variety of manipulative or fraudulent practices. Other academics and market observers have put forth
evidence to support claims that manipulative trading activity has occurred on certain digital asset exchanges. For example, in a 2017
paper titled &ldquo;Price Manipulation in the Bitcoin Ecosystem&rdquo; sponsored by the Interdisciplinary Cyber Research Center at Tel
Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction data from a 2014 Mt. Gox security
breach, to identify and analyze the impact of &ldquo;suspicious trading activity&rdquo; 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 &ldquo;Spoofy&rdquo; was placing large orders on Bitfinex
without actually executing them, presumably in order to influence other investors into buying or selling by creating a false appearance
that greater demand existed in the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex&rsquo;d) cited
publicly available trading data to support his or her claim that a trading bot nicknamed &ldquo;Picasso&rdquo; was pursuing a paint-the-tape-style
manipulation strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts in order to create the appearance of
substantial trading activity and thereby influence the price of such assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In November 2022, FTX, one
of the largest digital asset trading platforms by volume at the time, halted customer withdrawals amid rumors of the company&rsquo;s liquidity
issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX&rsquo;s CEO resigned and FTX and
many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar
proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and
CFTC brought civil securities and commodities fraud charges, against certain of FTX&rsquo;s and its affiliates&rsquo; senior executives,
including its former CEO. Around the same time, there were reports that approximately $300 million to $600 million of digital assets were
removed from FTX. The full facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, or
other improper behavior.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The potential consequences
of a digital asset trading platform&rsquo;s failure or failure to prevent market manipulation could adversely affect the value of the
Shares. Any market abuse, and a loss of investor confidence in bitcoin and ether, may adversely impact pricing trends in bitcoin and ether
markets broadly, as well as an investment in Shares of the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset
trading platforms may be exposed to wash trading.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset trading platforms
on which bitcoin and ether trade may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for other
than 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 attractiveness
to investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek
the most liquid and high-volume exchanges on which to list their coins. Results of wash trading may include unexpected obstacles to trade
and erroneous investment decisions based on false information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States, there
have been allegations of wash trading even on regulated trading venues. Any actual or perceived false trading in the digital asset trading
venue market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of bitcoin and ether and/or
negatively affect the market perception of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that wash trading
either occurs or appears to occur on trading platforms on which bitcoin and ether trade, investors may develop negative perceptions about
bitcoin, 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset
trading platforms may be exposed to front-running.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset trading platforms
on which bitcoin and ether trade may be susceptible to &ldquo;front-running,&rdquo; which refers to the process when someone uses technology
or market advantage to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralized
digital asset trading platforms. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of
the forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of a
front 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Momentum pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The market value of bitcoin
and ether is not based on any kind of claim, nor is it backed by any physical asset. Instead, the market value depends on the expectation
of being usable in future transactions and continued interest from investors. This strong correlation between an expectation and market
value is the basis for the current (and probable future) volatility of the market value of bitcoin and ether and may increase the likelihood
of momentum pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Momentum pricing typically
is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation
in value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices
and leads to increased volatility. As a result, bitcoin and ether may be more likely to fluctuate in value due to changing investor confidence
in future appreciation or depreciation in prices, which could adversely affect the price of bitcoin and ether and, in turn, an investment
in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of bitcoin and ether
as 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 previously
resulted, 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 investment
in Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some market observers have
asserted that in time, the value of bitcoin and ether will fall to a fraction of its current value, or even to zero. Neither bitcoin nor
ether has been in existence long enough for market participants to assess these predictions with any precision, but if these observers
are even partially correct, an investment in the Shares may turn out to be substantially worthless.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Political or economic
crises may motivate large-scale sales of bitcoin and ether, which could result in a reduction in the price of bitcoin and ether and adversely
affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As an alternative to fiat
currencies that are backed by central governments, digital assets are subject to supply and demand forces based upon the desirability
of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be
impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of digital
assets, including bitcoin and ether, either globally or locally. Large-scale sales of bitcoin and ether would result in a reduction in
the price of bitcoin and ether and adversely affect an investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ownership of digital
assets, including bitcoin and ether, is pseudonymous, and the supply of accessible bitcoin and ether is unknown. Entities with substantial
holdings in bitcoin and ether may engage in large-scale sales or distributions, either on nonmarket terms or in the ordinary course, which
could result in a reduction in the price of bitcoin and ether and adversely affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no registry showing
which 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 of
the bitcoin and ether that has been created to date. There are no regulations in place that would prevent a large holder of bitcoin and
ether from selling the bitcoin and ether it holds. To the extent such large holders of bitcoin and ether engage in large-scale sales or
distributions, either on nonmarket terms or in the ordinary course, it could result in a reduction in the price of bitcoin and ether and
adversely affect an investment in the Shares. For example, in March 2018, it was reported that the trustee overseeing the bankruptcy of
the Mt. Gox exchange had sold roughly $400 million worth of bitcoin and bitcoin cash belonging to the Mt. Gox bankruptcy estate. While
the trustee has publicly stated that the sale was conducted in a manner that would avoid affecting the market price, others have speculated
that corresponding reductions in the trading price of bitcoin were a result of these large sales. A significant quantity of bitcoin and
bitcoin cash remain in the Mt. Gox bankruptcy estate, and the process for selling the estate&rsquo;s remaining bitcoin and bitcoin cash
has not yet been determined. Further large-scale sales or distributions, either by the Mt. Gox bankruptcy estate or other entities with
substantial holdings, could result in selling pressure that may reduce the price of bitcoin and adversely affect an investment in the
Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Irrevocable nature of
blockchain-recorded transactions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset transactions
recorded on the Bitcoin and Ethereum blockchains are not, from an administrative perspective, reversible without the consent and active
participation of the recipient of the transaction or, in theory, control or consent <FONT STYLE="background-color: white">of a majority
of the nodes on the Bitcoin network or </FONT>of a majority of the Ethereum network&rsquo;s aggregate hash rate. Once a transaction has
been verified and recorded in a block that is added to the blockchain, an incorrect transfer of bitcoin and ether or a theft of bitcoin
and ether generally will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer or theft. It
is possible that, through computer or human error, or through theft or criminal action, the Trust&rsquo;s bitcoin and ether could be transferred
from custody accounts in incorrect quantities or to unauthorized third parties. To the extent that the Trust is unable to seek a corrective
transaction with such third party or is incapable of identifying the third party that has received the Trust&rsquo;s bitcoin and ether
through error or theft, the Trust will be unable to revert or otherwise recover incorrectly transferred bitcoin and ether. To the extent
that the Trust is unable to seek redress for such error or theft, such loss could adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>A disruption of the
internet may affect digital asset network operations, which may adversely affect the bitcoin and ether industries and an investment in
the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset networks, including
the Bitcoin and Ethereum networks, rely on the internet. A significant disruption of internet connectivity could disrupt a digital asset
network&rsquo;s functionality until such disruption is resolved. A disruption in the internet could adversely affect an investment in
the Trust or the ability of the Trust to operate. In particular, some variants of digital assets have experienced a number of denial-of-service
attacks, which have led to temporary delays in block creation and digital asset transfers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital assets are also susceptible
to border gateway protocol hijacking (&ldquo;BGP hijacking&rdquo;). Such an attack can be a very effective way for an attacker to intercept
traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one another
to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and
other security issues. If BGP hijacking occurs on the Bitcoin network or Ethereum network, participants may lose faith in the security
of bitcoin or ether, which could affect such digital asset's value and consequently the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any internet failures or internet
connectivity-related attacks that impact the ability to transfer bitcoin or ether could have a material adverse effect on the price of
such digital asset and the value of an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Potential amendments
to a digital asset network&rsquo;s protocols and software could, if accepted and authorized by the digital asset network community, adversely
affect an investment in the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin and Ethereum networks
use cryptographic protocols to govern the interactions within the Bitcoin and Ethereum networks. A loose community known as the core developers
has evolved to informally manage the source code for the protocol. Membership in the community of core developers evolves over time, largely
based on self-determined participation in the resource section dedicated to Bitcoin and Ethereum networks on Github.com. The core developers
can propose amendments to the Bitcoin and Ethereum networks&rsquo; source code that could alter the protocols and software of the Bitcoin
and Ethereum networks and the properties of ether. These alterations would occur through software upgrades and could potentially include
changes to the irreversibility of transactions and limitations on the mining of new bitcoin or the issuance of new ether or changes to
the ether supply, which could undermine the appeal and market value of bitcoin and ether. Alternatively, software upgrades and other changes
to 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 networks
or bitcoin and ether. As a result, the Bitcoin and Ethereum networks could be subject to changes to their protocols and software in the
future that may adversely affect an investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Decentralized governance
of digital asset networks could have a negative impact on the performance of the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Governance of decentralized
networks, 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 agreement
other than through overwhelming consensus. The lack of clarity on governance may adversely affect bitcoin and ether&rsquo;s utility and
ability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-term
problems. For example, a seemingly simple technical issue once divided the Bitcoin and Ethereum networks community: namely, whether to
increase the block size of the blockchain or implement another change to increase the scalability of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent lack of clarity
in corporate governance of the Bitcoin and Ethereum networks leads to ineffective decision-making that slows development and growth, the
value of the Shares may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Double-spending risks.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A malicious actor may attempt
to double spend (<I>i.e.</I>, 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 release
of such attack block so that it is added to the blockchain before a target user&rsquo;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-confirmation
acceptance tend to be prone to these types of attacks. Accordingly, traders and merchants may execute instantaneous/zero-confirmation
transactions only if they are of sufficiently low value. Users and merchants can take additional precautions by adjusting their network
software programs to connect only to other well-connected participants in the Bitcoin and Ethereum networks and to disable incoming connections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Flaws in source code.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the past, flaws in the
source code for digital asset networks have been exposed and exploited, including flaws that disabled some functionality for users, exposed
users&rsquo; personal information and/or resulted in the theft of users&rsquo; digital assets. Discovery of flaws in or exploitations
of the source code that allow malicious actors to take or create money in contravention of known network rules have occurred. The cryptography
underlying bitcoin and ether could prove to be flawed or ineffective, or developments in mathematics and/or technology, such as advances
in digital computing, algebraic geometry and quantum computing, could make cryptography ineffective. In any of these circumstances, a
malicious actor may be able to steal bitcoin and ether held by others, which could adversely affect the demand for bitcoin and ether and
therefore adversely impact the price of bitcoin and ether and the value of the Shares. Even if a digital asset other than bitcoin or ether
was affected by similar circumstances, any reduction in confidence in the robustness of the source code or cryptography underlying digital
assets generally could negatively affect the demand for all digital assets, including bitcoin and ether, and therefore adversely affect
the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Congestion or delay
in a digital asset network may delay purchases or sales of bitcoin or ether by the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The size of each block on
digital asset networks, including the Bitcoin network and Ethereum network, 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 digital asset networks. Moreover, unforeseen system failures, disruptions in operations, or poor connectivity may
also result in delays in the recording of transactions on digital asset networks. Any delay in the Bitcoin and Ethereum networks could
affect an Authorized Participant&rsquo;s ability to buy or sell bitcoin and ether at an advantageous price resulting in decreased confidence
in the respective network. Over the longer term, delays in confirming transactions could reduce the attractiveness to merchants and other
commercial parties as a means of payment. As a result, the Bitcoin and Ethereum networks and the value of the Trust would be adversely
affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any name change
and any associated rebranding initiative by the core developers of bitcoin or ether may not be favorably received by the digital asset
community, which could negatively impact the value of bitcoin or ether and the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time, digital
assets may undergo name changes and associated rebranding initiatives. For example, Bitcoin Cash may sometimes be referred to as Bitcoin
ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi&rsquo;s Vision, and in the third quarter
of 2018, the team behind ZEN rebranded and changed the name of ZenCash to &ldquo;Horizen.&rdquo; The Sponsor cannot predict the impact
of any name change and any associated rebranding initiative on ether. After a name change and an associated rebranding initiative, a digital
asset may not be able to achieve or maintain brand-name recognition or status that is comparable to the recognition or status previously
enjoyed by such digital asset. The failure of any name change and any associated rebranding initiative by a digital asset may result in
such 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.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Associated with Bitcoin and the Bitcoin
network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of bitcoin and the capabilities and development
of the Bitcoin blockchain.</I></B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Bitcoin
has 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 the
capabilities and development of the Bitcoin blockchain, such as the recentness of its development, its dependence on the internet and
other 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:</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            acceptance of software patches or upgrades by a significant, but not overwhelming, percentage
                                            of the users and miners in a digital asset network, such as the Bitcoin network, could result
                                            in a &ldquo;fork&rdquo; in such network&rsquo;s blockchain, resulting in the operation of
                                            multiple separate networks.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the digital asset award for mining blocks and transaction fees for recording transactions
                                            on the Bitcoin network are not sufficiently high to incentivize miners, or if certain jurisdictions
                                            continue to limit mining activities, miners may cease expanding processing power or demand
                                            high transaction fees, which could negatively impact the value of bitcoin and the value of
                                            the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Governance
                                            of the Bitcoin network is by voluntary consensus and open competition. As a result, governance
                                            challenges such as lack of consensus may stymie the Bitcoin network&rsquo;s utility and ability
                                            to grow and face challenges. In particular, it may be difficult to find solutions or martial
                                            sufficient effort to overcome any future problems on the Bitcoin network, especially long-term
                                            problems.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%">
<TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="text-align: left; width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Bitcoin network&rsquo;s protocol is informally managed by a group of core developers that
                                            propose amendments to the Bitcoin network&rsquo;s source code. The core developers evolve
                                            over time, largely based on self- determined participation. To the extent that a significant
                                            majority of users and miners adopt amendments to the Bitcoin network, the Bitcoin network
                                            will be subject to new protocols that may adversely affect the value of bitcoin. In addition,
                                            if a digital asset network has high-profile contributors, a perception that such contributors
                                            will no longer contribute to the network could have an adverse effect on the market price
                                            of the related digital asset.</FONT></TD>
</TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Over
                                            the past several years, digital asset mining operations, including those mining bitcoin,
                                            have evolved from individual users mining with computer processors, graphics processing units
                                            and first-generation application specific integrated circuit machines to &ldquo;professionalized&rdquo;
                                            mining operations using proprietary hardware or sophisticated machines. If the profit margins
                                            of digital asset mining operations are not sufficiently high, including due to an increase
                                            in electricity costs or a decline in the market price of the relevant digital asset issued
                                            as a mining reward, or if digital asset mining operations are unable to arrange alternative
                                            sources of financing (e.g., if lenders refuse to make loans to such miners), digital asset
                                            miners are more likely to immediately sell tokens earned by mining or sell more such digital
                                            assets than they otherwise would, resulting in an increase in liquid supply of that digital
                                            asset, which would generally tend to reduce that digital asset&rsquo;s market price.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
                                            the reward earned by miners for mining a block on the Bitcoin network is 3.125 bitcoins.
                                            This reward size is reduced by 50% every 210,000 blocks, which occurs roughly every four
                                            years. The most recent reward halving event occurred in April 2024, and the next reward halving
                                            event is expected to occur in or around March 2028, at which time the reward earned per block
                                            will fall to 1.5625. The reduction in mining rewards of bitcoin could be inadequate to incentivize
                                            miners to continue to perform mining activities, thereby jeopardizing the security of the
                                            Bitcoin network, which could harm the value of the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
                                            reduction in the processing power expended by miners on the Bitcoin network could increase
                                            the likelihood of a malicious actor or botnet (a volunteer or hacked collection of computers
                                            controlled by networked software coordinating the actions of the computers) obtaining control.
                                            See &ldquo;&mdash;If a malicious actor or botnet obtains control of more than 50% of the
                                            processing power on the Bitcoin network, or otherwise obtains control over the Bitcoin network
                                            through its influence over core developers or otherwise, such actor or botnet could manipulate
                                            the Bitcoin blockchain to adversely affect the value of the Shares or the ability of the
                                            Trust to operate.&rdquo;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Miners
                                            have historically accepted relatively low transaction confirmation fees on most digital asset
                                            networks. If miners demand higher transaction fees for recording transactions in the Bitcoin
                                            blockchain or a software upgrade automatically charges fees for all transactions on the Bitcoin
                                            network, the cost of using bitcoin may increase and the marketplace may be reluctant to accept
                                            bitcoin as a means of payment. Alternatively, miners could collude in an anti-competitive
                                            manner to reject low transaction fees on the Bitcoin network and force users to pay higher
                                            fees, thus reducing the attractiveness of the Bitcoin network. Higher transaction confirmation
                                            fees resulting through collusion or otherwise may adversely affect the attractiveness of
                                            the Bitcoin network, the value of bitcoin and the value of the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            the extent that any miners cease to record transactions that do not include the payment of
                                            a transaction fee in mined blocks or do not record a transaction because the transaction
                                            fee is too low, such transactions will not be recorded on the Bitcoin blockchain until a
                                            block is mined by a miner who does not require the payment of transaction fees or is willing
                                            to accept a lower fee. Also, some miners have financed the acquisition of mining equipment
                                            or the development or construction of infrastructure to perform mining activities by borrowing.
                                            If such miners experience financial difficulties and are unable to pay back their borrowings,
                                            their mining capacity could become unavailable to the Bitcoin network, which could conceivably
                                            result in disruptions in recording transactions on the Bitcoin network. Any widespread delays
                                            or disruptions in the recording of transactions could result in a loss of confidence in the
                                            Bitcoin network and could prevent the Trustee from completing transactions associated with
                                            the day-to-day management of the Trust, including creations and redemptions of the Shares
                                            in exchange for cash with Authorized Participants.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Digital
                                            asset mining operations can consume significant amounts of electricity, which may have a
                                            negative environmental impact and give rise to public opinion against allowing, or government
                                            regulations restricting, the use of electricity for mining operations. Additionally, miners
                                            may be forced to cease operations during an electricity shortage or power outage, or if electricity
                                            prices increase where the mining activities are performed. This could adversely affect the
                                            price of bitcoin and the value of the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            open-source structure of many digital asset network protocols, such as the protocol for the
                                            Bitcoin network, means that developers and other contributors are generally not directly
                                            compensated for their contributions in maintaining and developing such protocols. As a result,
                                            the developers and other contributors of a particular digital asset may lack a financial
                                            incentive to maintain or develop the network, or may lack the resources to adequately address
                                            emerging issues. Alternatively, some developers may be funded by companies whose interests
                                            are at odds with other participants in a particular digital asset network. A failure to properly
                                            monitor and upgrade the protocol of the Bitcoin network could damage that network.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network
faces significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">As
of October 2024, the Bitcoin network handled approximately seven transactions per second. In an effort to increase the volume of transactions
that can be processed on a given digital asset network, many digital assets are being upgraded with various features to increase the speed
and throughput of digital asset transactions. For example, in August 2017, the Bitcoin network was upgraded with a technical feature known
as &ldquo;Segregated Witness&rdquo; 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 increase
transaction throughput (i.e., millions of transactions per second). Wallets and &ldquo;intermediaries,&rdquo; or connecting nodes that
facilitate 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.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">In
2021, the Bitcoin protocol implemented the Taproot upgrade to add enhanced support for complex transactions on the network such as multi-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 data written 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 which led to the
launch of the &ldquo;ordinal protocol.&rdquo; The ordinal protocol takes advantage of Taproot&rsquo;s relaxed data requirements to allow
users to add graphic images and other data files to bitcoin transactions (&ldquo;Ordinals&rdquo;). By the end of 2023, nearly 53&nbsp;million
Ordinals had been inscribed to the Bitcoin blockchain.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">As
corresponding increases in throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase
considerably. For example, the Bitcoin network has been, at times, at capacity, which has led to increased transaction fees. Since January
1, 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&nbsp;31, 2022, bitcoin transaction fees were $1.17 per transaction, on average. Increased
fees and decreased settlement speeds could preclude certain uses for bitcoin (e.g., micropayments), and could reduce demand for, and the
price of, bitcoin, which could adversely impact the value of the Shares. In May 2023, events related to the adoption of Ordinals caused
transaction fees to temporarily spike above $30 per transaction. As of January 1, 2025, bitcoin transaction fees were averaging $____
per transaction.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">There
is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of transactions in bitcoin
will be effective, or how long these mechanisms will take to become effective, which could adversely impact an investment in the Shares.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operational cost
may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin
network.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">The
Bitcoin network is designed to periodically reduce the fixed award given to miners for solving new blocks (the &ldquo;block reward&rdquo;),
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 during
2028. As the block reward continues to decrease over time, the mining incentive structure may transition to a higher reliance on transaction
confirmation fees in order to incentivize miners to continue to dedicate processing power to the blockchain. If transaction confirmation
fees become too high, the marketplace may be reluctant to use bitcoin. Increased transaction fees may motivate market participants, such
as merchants or commercial institutions, to switch from bitcoin to another digital asset or back to fiat currency as their preferred medium
of exchange. Decreased demand for bitcoin may adversely affect its price, which may adversely affect an investment in the Trust.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Ultimately,
if the awards of new bitcoin for solving blocks declines and transaction fees for recording transactions are not sufficiently high to
incentivize 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 network
and could adversely affect the value of the bitcoin held by the Trust.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Miners
ceasing operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the confirmation
process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the blockchain until the next scheduled
adjustment in difficulty for block solutions) and make the Bitcoin network more vulnerable to a malicious actor or botnet obtaining sufficient
control to manipulate the blockchain and hinder transactions. Any reduction in confidence in the confirmation process or processing power
of the Bitcoin network may adversely affect the value of the Shares.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent
that any miners exclude some or all transactions, significant increases in fees and widespread delays in the recording of transactions
could result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in Shares.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">To
the extent that any miners solve blocks that exclude some or all transactions that have been transmitted to the Bitcoin network, such
transactions will not be recorded on the blockchain until another miner solves a block that incorporates those transactions. Some in the
bitcoin community have suspected that certain technologies (for example, before segregated witness was activated, ASICBoost) enhance speed
and 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 could
result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in the Shares.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Miners could act
in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Bitcoin
miners collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions
to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to
confirm 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 of
transaction fees. Miners have historically accepted relatively low transaction confirmation fees because miners have a very low marginal
cost of validating unconfirmed transactions. If miners collude in an anticompetitive manner to reject low transaction fees, then bitcoin
users could be forced to pay higher fees, thus reducing the attractiveness of the Bitcoin network, or to wait longer times for their transactions
to be validated by a miner who does not require the payment of a transaction fee. Bitcoin mining occurs globally and it may be difficult
for authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact an investment
in the Trust or the ability of the Trust to operate.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As technology
advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline
in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Miners
may be unable to acquire the proper mining equipment or suitable amounts of equipment necessary to continue their operations or develop
and launch their operations. In addition, because successful mining of a digital asset that uses &ldquo;proof of work&rdquo; validation
requires maintaining or exceeding a certain level of computing power relative to other validators, miners will need to upgrade their mining
hardware periodically to keep up with their competition. The development of supercomputers with disproportionate computing power may threaten
the integrity of the bitcoin market by concentrating mining power, which would make it unprofitable for other miners to mine. The expense
of purchasing or upgrading new equipment may be substantial and diminish returns to miners dramatically. A decline in miners may result
in a decrease in the value of bitcoin and the value of the Trust.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If profit margins
of bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in
the price of bitcoin that could adversely affect an investment in the Trust.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Bitcoin
network mining operations have rapidly evolved over the past several years from individual users mining with computer processors, graphics
processing units and first-generation ASIC (application-specific integrated circuit) machines. New processing power is predominantly added
to the Bitcoin network currently by &ldquo;professionalized&rdquo; mining operations. Such operations may use proprietary hardware or
sophisticated 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 the
mining farms. As a result, professionalized mining operations are of a greater scale than prior Bitcoin network validators and have more
defined, regular expenses and liabilities. In past years, individual miners are believed to have been more likely to hold newly mined
bitcoin for extended periods.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">A
professional mining operation operating at a low profit margin may be more likely to sell a higher percentage of its newly mined bitcoin
rapidly, and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higher
percentage of the new bitcoin mined each day will be sold into the bitcoin market more rapidly, thereby reducing bitcoin prices. The network
effect of reduced profit margins resulting in greater sales of newly mined bitcoin could result in a reduction in the price of bitcoin
that could adversely affect an investment in the Trust.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">New competing
digital assets may pose a challenge to bitcoin&rsquo;s current market dominance, resulting in a reduction in demand for bitcoin, which
could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">The
Bitcoin network and bitcoin, as an asset, hold a &ldquo;first-to-market&rdquo; advantage over other digital assets. This first-to-market
advantage has resulted in the Bitcoin network having the broadest adoption and the estimated value of existing bitcoin is greater than
the aggregate value of any digital asset. The Bitcoin network enjoys the largest user base and has more mining power in use to secure
the Bitcoin blockchain than any other digital asset network. Having a large mining network provides users greater confidence in the security
and long-term stability of the Bitcoin network. This greater security may create a snowball effect that inures to the benefit of the Bitcoin
network &ndash; namely, the advantage of more users and miners makes a digital asset more secure, which potentially makes it more attractive
to new users and miners, resulting in a network effect that potentially strengthens the first-to-market advantage. However, despite the
marked first-mover advantage of the Bitcoin network over other digital assets, it is possible that real or perceived shortcomings in the
Bitcoin network, or technological, regulatory or other developments, could result in a decline in popularity and acceptance of bitcoin
and the Bitcoin network, and other digital assets and digital asset networks could become more widely accepted and used than the Bitcoin
network. In addition, central bank digital currencies may be attractive to some users due to lesser perceived volatility, greater trustworthiness
and/or any applicable federal insurance. </FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">For
example, 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 &ldquo;hard fork&rdquo; of the Bitcoin network require overwhelming consensus and upgrade
acceptance 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 &ldquo;smart contract&rdquo;
programming language in Bitcoin led to certain developers launching the newer Ethereum virtual machine network in 2015. Similarly, a delay
in the integration and inability to reach consensus on scaling solutions led to several hard forks of digital asset networks that had
greater block sizes on their blockchains (e.g., Bitcoin Cash in 2017). While projects such as Rootstock and Blockstream have sought to
augment the slow pace of core software upgrades with &ldquo;second-layer&rdquo; or &ldquo;side-chain&rdquo; solutions for the Bitcoin
network, digital asset networks with features that are differentiated from Bitcoin may attract developers, investors and users, which
may have a negative impact on an investment in the Shares.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The scheduled
creation of newly mined bitcoin and their subsequent sale may cause the price of bitcoin to decline, which could negatively affect an
investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Newly created bitcoin (&ldquo;newly
mined bitcoin&rdquo;) are generated through a process referred to as &ldquo;mining.&rdquo; As of the date of this prospectus, the Bitcoin
network creates 3.125 bitcoin with each block added to the Bitcoin blockchain; these newly mined bitcoin are awarded to the bitcoin miner
that has added the block to the Bitcoin blockchain, which occurs on average approximately every 10 minutes. When the recipient makes newly
mined bitcoin available for sale, there can be downward pressure on the price of bitcoin as the new supply is introduced into the Bitcoin
market. A bitcoin mining operation may be more likely to sell a higher percentage of its newly created bitcoin, and more rapidly so, if
it is operating at a low profit margin, thus reducing the price of bitcoin. Lower bitcoin prices may result in further tightening of profit
margins for miners and decreasing profitability, thereby potentially causing even further selling pressure. Diminishing profit margins
and increasing sales of newly mined bitcoin could result in a reduction in the price of bitcoin, which could adversely impact an investment
in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, bitcoin mining
is highly sensitive to energy prices and bitcoin market prices. To mine bitcoin, a bitcoin miner acquires specialized computers that consume
significant amounts of energy. As energy prices fluctuate, the marginal cost of bitcoin mining increases and decreases. Conversely, the
price of bitcoin and amount of &ldquo;hashrate&rdquo; being expended by other bitcoin miners will impact the profitability and likelihood
of solving a block and receiving newly mined bitcoin. If the marginal cost of bitcoin mining exceeds the expected profit, miners may cease
to expend energy to mine bitcoin. If a material number of miners turn off their mining hardware, the speed of transaction processing on
the Bitcoin network may experience a temporary slowdown and the overall security of the Bitcoin network against a 51% attack (as described
below) may be reduced.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Environmental
concerns could slow or curtail the supply of bitcoin or the acceptance of bitcoin in payment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mining for the Bitcoin network
is 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&rsquo;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 they
are replaced with faster models. Increased awareness of these issues has led some companies, notably Tesla and Greenpeace, to refuse acceptance
of bitcoin in payment. Certain localities, such as China, have recently banned mining altogether, while others seek to halt mining temporarily
until environmental impact studies can be conducted. These concerns could result in increased mining bans, as well as a slowing or decrease
in bitcoin payment acceptance, affecting both the supply of, and demand for, bitcoin.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network
requires significant electricity to mine and it is possible that certain jurisdictions will implement regulations regarding the energy
consumption of the Bitcoin network, which could result in a significant reduction in mining activity and adversely affect the security
of the Bitcoin network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to financial regulation,
concerns have been raised about the electricity required to secure and maintain the Bitcoin network. The &ldquo;proof of work&rdquo; validation
mechanism 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 these
operations 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&rsquo;s
total energy consumption, including the costs of cooling the machines that perform these calculations. The availability and cost of electricity
will restrict the geographic locations of mining activities. High costs of electricity may incentivize miners to redirect their resources
to other validation protocols, such as proof-of-stake blockchains, or abandon their validation activities entirely. A significant decrease
in the computational resources dedicated to the Bitcoin network&rsquo;s validation protocol could reduce the security of the network which
may erode bitcoin&rsquo;s viability as a store of value or means of exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to concerns around energy
consumption 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 moratoriums
would impede bitcoin mining and/or bitcoin use more broadly. For example, in November 2022, New York imposed a two-year moratorium on
new proof-of-work mining permits at fossil fuel plants in the state and, on May 26, 2021, Iran placed a temporary ban on bitcoin mining
in an attempt to decrease energy usage and help alleviate blackouts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depending on how futures regulations
are formulated and applied, such policies could have the potential to negatively affect the price of bitcoin, and, in turn, the value
of the Shares. Increased regulation and the corresponding compliance cost of these regulations could additionally result in higher barriers
to entry for bitcoin miners, which could increase the concentration of the hash rate, potentially having a negative impact on the price
of bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The open-source structure
of the Bitcoin network protocol means that the core developers and other contributors are generally not directly compensated for their
contributions in maintaining and developing the Bitcoin network protocol. A failure to properly monitor and upgrade the Bitcoin network
protocol could damage the Bitcoin network and an investment in the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network operates
based on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource section
dedicated to development of the Bitcoin network. As the Bitcoin network protocol is not sold or made available subject to licensing or
subscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated for
maintaining and updating the Bitcoin network protocol. Consequently, there is a lack of financial incentive for developers to maintain
or develop the Bitcoin network and the core developers may lack the resources to adequately address emerging issues with the Bitcoin network
protocol. Although the Bitcoin network is currently supported by the core developers, there can be no guarantee that such support will
continue or be sufficient in the future. Alternatively, entities whose interests are at odds with other participants in the Bitcoin network
may seek to obtain control over the Bitcoin network by influencing core developers. For example, malicious actors could attempt to bribe
a core developer or group of core developers to propose certain changes to the network core developers. To the extent that material issues
arise with the Bitcoin network protocol and the core developers and open-source contributors are unable to address the issues adequately
or in a timely manner, the Bitcoin network and an investment in the Trust may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Decentralized governance
of the Bitcoin network could have a negative impact on the performance of the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Governance of decentralized
networks, such as the Bitcoin network, is achieved through voluntary consensus and open competition. In other words, the Bitcoin network
has 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&rsquo;s utility and ability to grow and face challenges, both of which
may require solutions and directed effort to overcome problems, especially long-term problems. For example, a seemingly simple technical
issue once divided the Bitcoin network community: namely, whether to increase the block size of the blockchain or implement another change
to increase the scalability of bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent lack of clarity
in corporate governance of the Bitcoin network leads to ineffective decision- making that slows development and growth, the value of the
Shares may be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Mathematical or technological
advances could undermine the Bitcoin network&rsquo;s consensus mechanism.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network is premised
on multiple persons competing to solve cryptographic puzzles quickly. It is possible that mathematical or technological advances, such
as the development of quantum computers with significantly more power than computers presently available, could undermine or vitiate the
cryptographic consensus mechanism underpinning the Bitcoin blockchain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Large-Scale Sales or
Distributions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some entities hold large amounts
of bitcoin relative to other market participants, and to the extent such entities engage in large-scale hedging, sales or distributions
on non-market terms, or sales in the ordinary course, it could result in a reduction in the price of bitcoin and adversely affect the
value 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 reduce
the price of bitcoin and adversely affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 wallets
are controlled by the same person or entity. Moreover, it is possible that other persons or entities control multiple wallets that collectively
hold a significant number of bitcoin, even if each wallet individually only holds a small amount. As a result of this concentration of
ownership, large sales by such holders could have an adverse effect on the market price of bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Congestion or delay
in the Bitcoin network may delay purchases or sales of bitcoin by the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The size of each block on
the 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 transactions
on the Bitcoin network. Any delay in the Bitcoin network could affect the Authorized Participant&rsquo;s ability to buy or sell bitcoin
at an advantageous price resulting in decreased confidence in the Bitcoin network. Over the longer term, delays in confirming transactions
could reduce the attractiveness to merchants and other commercial parties as a means of payment. As a result, the Bitcoin network and
the value of the Trust would be adversely affected.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Associated with Ether and the Ethereum
network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of ether and the capabilities and development
of the Ethereum blockchain.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether has only been in existence
since 2015 and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development
of the Ethereum blockchain, such as the recentness of its development, its dependence on the internet and other technologies, its dependence
on the role played by users, developers and validators 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:</P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            acceptance of software patches or upgrades by some, but not all, nodes, users and validators
                                            in the Ethereum network could result in a &ldquo;fork&rdquo; in the Ethereum blockchain,
                                            resulting in the operation of multiple separate networks.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Governance
                                            of the Ethereum network is by voluntary consensus and open competition. As a result, there
                                            may be a lack of consensus or clarity on the governance of the Ethereum network, which may
                                            stymie the Ethereum network&rsquo;s utility and ability to grow and face challenges. In particular,
                                            it may be difficult to find solutions or martial sufficient effort to overcome any future
                                            problems on the Ethereum network, especially long-term problems.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Ethereum network&rsquo;s protocol is informally overseen by a collective of core developers
                                            who, along with members of the Ethereum community, can introduce proposals, known as Ethereum
                                            Improvement Proposals (&ldquo;EIPs&rdquo;), for updating the Ethereum network. The core developers
                                            evolve over time, largely based on self-determined participation. An Ethereum client (&ldquo;Ethereum
                                            Client&rdquo;) is a software application that implements the Ethereum network specification
                                            and communicates with the Ethereum network. A &ldquo;node&rdquo; is a computer or other device
                                            that has downloaded the Ethereum Client and is connected to other computers also running
                                            the Ethereum Client software, together forming the Ethereum network. To the extent that node
                                            operators update their individual Ethereum Client to new specifications, the Ethereum network
                                            could be subject to changes that may adversely affect the value of ether. In addition, if
                                            a digital asset network has high-profile contributors, a perception that such contributors
                                            will no longer contribute to the network could have an adverse effect on the market price
                                            of the related digital asset.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Over
                                            the past several years, digital asset validator operations have evolved from individual users
                                            to &ldquo;professionalized&rdquo; validating operations using proprietary hardware or sophisticated
                                            machines. If the profit margins of digital asset validating operations are not sufficiently
                                            high, including due to a decrease in transaction fees, validators are more likely to immediately
                                            sell tokens earned by validating, resulting in an increase in liquid supply of that digital
                                            asset, which would generally tend to reduce that digital asset&rsquo;s market price.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            the extent that any validators cease to record transactions that do not include the payment
                                            of a transaction fee in solved blocks or do not record a transaction because the transaction
                                            fee is too low, such transactions will not be recorded on the Ethereum blockchain until a
                                            block is validated by a validator who does not require the payment of transaction fees or
                                            is willing to accept a lower fee. Any widespread delays in the recording of transactions
                                            could result in a loss of confidence in a digital asset network.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Ethereum network faces significant scaling challenges and may periodically be upgraded with
                                            various features designed to increase the speed of digital asset transactions and the number
                                            of transactions that can processed in a given period (known as &ldquo;throughput&rdquo;).
                                            These attempts to increase the volume of transactions may not be effective or may result
                                            in unforeseen problems or issues, and such upgrades may fail, resulting in potentially irreparable
                                            damage to the Ethereum network and the value of ether.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the past, bugs, defects, and flaws in the source code for digital assets have been exposed
                                            and exploited, including flaws that disrupted normal Ethereum network, Ethereum Client, or
                                            dApp and smart contract operations or disabled related functionality for users, exposed users&rsquo;
                                            personal information and/or resulted in the theft of users&rsquo; digital assets. For example,
                                            in May 2023, the main Ethereum network itself reportedly suffered outages or bugs that for
                                            a short time prevented transactions from finalizing and being recorded in blocks twice in
                                            two days. Major Ethereum Clients which nodes use to access the Ethereum network, such as
                                            Geth, Besu and Nethermind, have in the past suffered outages or disruptions due to bugs.
                                            For more on an unplanned fork involving Geth clients, see &ldquo;&mdash;A temporary or permanent
                                            &ldquo;fork&rdquo; could adversely affect the value of the Shares.&rdquo; The cryptography
                                            underlying the Ethereum network or ether as an asset could prove to be flawed or ineffective,
                                            or developments in mathematics and/or technology, including advances in digital computing,
                                            algebraic geometry and quantum computing, could result in such cryptography becoming ineffective.
                                            In any of these circumstances, a malicious actor may be able to compromise the security of
                                            the Ethereum network or take the Trust&rsquo;s ether, which would adversely affect the value
                                            of the Shares. Moreover, normal operations and functionality of the Ethereum network may
                                            be negatively affected. Such losses of functionality could lead to the Ethereum network losing
                                            attractiveness to users, nodes, validators, or other stakeholders, thereby dampening demand
                                            for ether. Even if another digital asset other than ether were affected by similar circumstances,
                                            any reduction in confidence in the source code or cryptography underlying digital assets
                                            generally could negatively affect the demand for digital assets and therefore adversely affect
                                            the value of the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Ethereum network has been in the process of implementing a series of software upgrades and other changes to its protocol, which were
previously referred to collectively as &ldquo;Ethereum 2.0&rdquo; and some of which were implemented during 2022, such as the Bellatrix
and Paris planned forks (defined below) that transitioned the Ethereum network from a proof-of-work consensus mechanism to a proof-of-stake
consensus mechanism (&ldquo;the Merge&rdquo;). These upgrades have resulted in, and are expected to continue to result in, changes to
the Ethereum network. Many of the contemplated upgrades to the Ethereum network will include updates to material aspects of its source
code. Although some of these upgrades have been successfully implemented, such as the Merge, which was completed in September 2022, there
is no guarantee that there are not undiscovered flaws that will emerge in the future even in upgrades previously considered successful,
and previously successful upgrades do not guarantee that future upgrades will be successful. Any such undiscovered flaws, or the failure
to properly implement future changes, could have a material adverse effect on the value of ether and the value of the Shares. One completed
upgrade is known as the &ldquo;Shanghai&rdquo; upgrade, which allows users to unstake their ether and remove it from the relevant smart
contract. As a result of this or future upgrades, it is possible that significant volumes of currently locked and illiquid ether becomes
unlocked and sold, which could increase volatility in ether prices or have a material adverse effect on the value of ether and the value
of the Shares. Upgrades currently being considered to increase throughput and promote scaling, such as &ldquo;sharding&rdquo; the Layer
1 Ethereum network or greater reliance on so-called &ldquo;Layer 2&rdquo; solutions, could have effects which are difficult to anticipate
at this time, but could &ndash; if unsuccessfully implemented, or if they contain undiscovered flaws &ndash; materially adversely impact
or even effectively eliminate the value of ether, and therefore impact the price of the Shares. In addition, the acceptance of software
patches or upgrades by a significant, but not overwhelming, percentage of the users and validators in a digital asset network could result
in a &ldquo;fork&rdquo; in such network&rsquo;s blockchain, resulting in the operation of multiple separate networks.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Ethereum network is still in the process of developing and making significant decisions that will affect policies that govern the supply
and issuance of ether as well as other Ethereum network protocols. For example, the Ethereum network has on three occasions reduced the
quantity of ether rewarded per block and may make additional changes in the future, see &ldquo;Overview of the Ethereum Industry&mdash;Creation
of New Ether&rdquo; for additional information. The open-source nature of many digital asset network protocols, such as the protocol
for the Ethereum network, means that developers and other contributors are generally not directly compensated for their contributions
in maintaining and developing such protocols. As a result, the developers and other contributors of a particular digital asset may lack
a financial incentive to maintain or develop the network, or may lack the resources to adequately address emerging issues. Alternatively,
some developers may be funded by companies whose interests are at odds with other participants in a particular digital asset network.
If the Ethereum network does not successfully develop its policies on supply and issuance and other major design decisions, or does so
in a manner that is not attractive to network participants, it could lead to a decline in adoption of the Ethereum network and price
of ether.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Decentralized
application and smart contract developers depend on being able to obtain ether to be able to run their programs and operate their businesses.
In particular, decentralized applications and smart contracts require ether in order to pay the gas fees needed to power such applications
and smart contracts and execute transactions. As such, they represent a significant source of demand for ether. Ether&rsquo;s price volatility
(particularly where ether prices increase), or the Ethereum network&rsquo;s wider inability to meet the demands of decentralized applications
and smart contracts in terms of inexpensive, reliable, and prompt transaction execution (including during congested periods), or to solve
its scaling challenges or increase its throughput, may discourage such decentralized application and smart contract developers from using
the Ethereum network as the foundational infrastructure layer for building their applications and smart contracts. If decentralized application
and smart contract developers abandon the Ethereum blockchain for other blockchain or digital asset networks or protocols for whatever
reason, the value of ether could be negatively affected.</FONT></TD>
</TR></TABLE>

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<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The Ethereum network
faces significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many digital asset networks,
including the Ethereum network, face significant scaling challenges due to the fact that public blockchains generally face a tradeoff
between security and scalability. One means through which public blockchains achieve security is decentralization, meaning that no intermediary
is responsible for securing and maintaining these systems. For example, a greater degree of decentralization generally means a given digital
asset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a given
digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible
for maintaining a copy of the entire state of the network. As a result, a digital asset network may be limited in the number of transactions
it can process by the fact that all validators participate in validating in each block and the capabilities of each single fully participating
node.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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&rsquo;s
consensus mechanism to a process known as proof-of-stake, and was intended to address the perceived shortcomings of the proof-of-work
consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known under proof-of-work
as &ldquo;miners&rdquo;) who did not win the race, under proof of work, to be the first in time to solve the cryptographic puzzle that
would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was only given
to the first validator to successfully solve the puzzle and hash a given block, and not to others). Instead, under proof-of-stake, a single
validator is randomly selected to solve the cryptographic puzzle needed to validate a block, which it proposes to a committee of other
validators, who vote for whether to include the block (or not), which reduces the computational work performed &ndash; and energy expended
&ndash; to validate each block compared to proof-of-work. See &ldquo;Overview of the Ethereum Industry&mdash;Creation of New Ether&rdquo;
and &ldquo;&mdash;Modifications to the Ether Protocol&rdquo; for additional information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the Merge, core
development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput
and scalability and also improve existing or next generation uses. Future upgrades to the Ethereum protocol and Ethereum blockchain to
address scaling issues &ndash; such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network
demand &ndash; have been discussed by network participants, such as sharding. The purpose of sharding 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 validators being responsible for the entire blockchain, allowing
for parallel processing and validation of transactions. However, there appears to be uncertainty and a lack of existing widespread consensus
among network participants about how to solve the scaling challenges faced by the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The rapid development of other
competing scalability solutions, such as those which would rely on handling the bulk of computational work relating to transactions or
smart contracts and applications built on the Ethereum network (consistent with common usage, all such applications are referred to as
&ldquo;decentralized applications&rdquo; or &ldquo;dApps&rdquo;, whether or not decentralized in fact) outside of the main Ethereum network
and Ethereum blockchain, has caused alternatives to sharding to emerge. &ldquo;Layer 2&rdquo; is a collective term for solutions which
are designed to help increase throughput and reduce transaction fees by handling or validating transactions off the main Ethereum network
(known as &ldquo;Layer 1&rdquo;) and then attempting to take advantage of the perceived security and integrity advantages of the Layer
1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of
how this is done vary significantly between different Layer 2 technologies and implementations. For example, &ldquo;rollups&rdquo; perform
transaction execution outside the Layer 1 Ethereum network and then post the data, typically in batches, back to the Layer 1 Ethereum
network where consensus is reached. &ldquo;Zero knowledge rollups&rdquo; are generally designed to run the computation needed to validate
the transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactions
themselves) that is recorded on the Layer 1 Ethereum network. By contrast, &ldquo;optimistic rollups&rdquo; assume transactions are valid
by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling solutions include,
among others, &ldquo;state channels&rdquo;, which are designed to allow participants to run a large number of transactions on the Layer
2 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), &ldquo;side chains&rdquo;, in which an entire Layer 2 blockchain network with similar capabilities
to the existing Layer 1 Ethereum network runs in parallel with the existing Layer 1 Ethereum network 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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no guarantee that
any of the mechanisms in place or being explored for increasing the speed and throughput of settlement of Ethereum network transactions
will be effective, or how long these mechanisms will take to become effective, which could cause the Ethereum network to not adequately
resolve scaling challenges and adversely impact the adoption of ether and the Ethereum network and the value of the Shares. There is no
guarantee that any potential scaling solution, whether a change to the Layer 1 Ethereum network like sharding or the introduction of a
Layer 2 solution like rollups, state channels or side chains, will achieve widespread adoption. It is possible that proposed changes to
the Layer 1 Ethereum network could divide the community, potentially even causing a hard fork, or that the decentralized governance of
the Ethereum network causes network participants to fail to coalesce overwhelmingly around any particular solution, causing the Ethereum
network to suffer reduced adoption or causing nodes, users or validators to migrate to other blockchain networks. It is also possible
that scaling solutions could fail to work as intended or could introduce bugs, coding defects or flaws, security risks, or other problems
that could cause them to suffer operational disruptions. For example, in April 2024, Starknet, a Layer 2 built on the Layer 1 Ethereum
network, suffered an outage reportedly caused by a rounding error bug that halted production of new blocks on Starknet&rsquo;s Layer 2
blockchain network. Similar outages, bugs, defects, or other problems could affect Layer 2s in the future. Similarly, in multiple instances
throughout 2022 and 2023, the Arbitrum Layer 2 network experienced outages due to failures in its primary node responsible for submitting
transactions 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 widely
used Layer 2 network were to fail, it could reduce demand for ether because it would eliminate a source of demand for using ether to record
transactions from the Layer 2 onto the Layer 1 Ethereum network. Any of the foregoing could adversely affect the price of ether or the
value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of ________, 2025, the
Ethereum network handled approximately [13] transactions per second (according to Dune analytics). In an effort to increase the volume
of transactions that can be processed on a given digital asset network, many digital assets are being upgraded with various features to
increase the speed and throughput of digital asset transactions. As corresponding increases in throughput lag behind growth in the use
of digital asset networks, average fees and settlement times may increase considerably. For example, the Ethereum network has been, at
times, at capacity, which has led to increased transaction fees. In December 2017, the popularity of the blockchain-based game Cryptokitties
led to significant network congestion on the Ethereum network. The game, which allows players to trade and create virtual kitties, represented
by non-fungible tokens (&ldquo;NFTs&rdquo;), was reported by some sources to have accounted for more than 10% of the entire Ethereum network
traffic at the time causing increases in transaction fees and delays in transaction processing times, and driving Ethereum network traffic
to a reported then-all time high. Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction fees
per 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 preclude
certain uses for ether (<I>e.g.</I>, micropayments), and could reduce demand for, and the price of, ether, which could adversely impact
the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>If the digital asset
award or transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or if
certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding validating power or
demand high transaction fees, which could negatively impact the value of ether and the value of the Shares.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2021, the Ethereum network
implemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate transaction fees paid to ether validators in such
a manner that reduced the total net issuance of ether fees paid to validators. If the digital asset awards for validating blocks or the
transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or if certain
jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating power to validate
blocks and confirmations of transactions on the Ethereum blockchain could be slowed. For example, the realization of one or more of the
following risks could materially adversely affect the value of the Shares:</P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
reduction in the processing power expended by validators on the Ethereum network could increase the likelihood of a malicious actor or
botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtaining
control. See &ldquo;&mdash;If a malicious actor or botnet obtains control of more than 50% of the validating power on the Ethereum network,
or otherwise obtains control over the Ethereum network through its influence over core developers or otherwise, such actor or botnet
could manipulate the Ethereum blockchain to adversely affect the value of the Shares or the ability of the Trust to operate.&rdquo;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Validators
                                            have historically accepted relatively low transaction confirmation fees on most digital asset
                                            networks. If validators demand higher transaction fees for recording transactions in the
                                            Ethereum blockchain or a software upgrade automatically charges fees for all transactions
                                            on the Ethereum network, the cost of using ether may increase and the marketplace may be
                                            reluctant to accept ether as a means of payment. Alternatively, validators could collude
                                            in an anti-competitive manner to reject low transaction fees on the Ethereum network and
                                            force users to pay higher fees, thus reducing the attractiveness of the Ethereum network.
                                            Higher transaction confirmation fees resulting through collusion or otherwise may adversely
                                            affect the attractiveness of the Ethereum network, the value of ether and the value of the
                                            Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            the extent that any validators cease to record transactions that do not include the payment
                                            of a transaction fee in blocks or do not record a transaction because the transaction fee
                                            is too low, such transactions will not be recorded on the Ethereum blockchain until a block
                                            is validated by a validator who does not require the payment of transaction fees or is willing
                                            to accept a lower fee. Any widespread delays or disruptions in the recording of transactions
                                            could result in a loss of confidence in the Ethereum network and could prevent the Trust
                                            from completing transactions associated with the day-to-day operations of the Trust, including
                                            creations and redemptions of the Shares in exchange for ether with Authorized Participants.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
                                            the course of the block validation processes, validators exercise the discretion to select
                                            which transactions to include within a block and in what order to include these transactions.
                                            Beyond the standard block reward and transaction fees, validators have the ability to extract
                                            what is known as Maximal Extractable Value (&ldquo;MEV&rdquo;) by strategically choosing,
                                            reordering, or excluding certain transactions during block production in return for increased
                                            transaction fees or other forms of profit for such validators. In blockchain networks that
                                            facilitate DeFi protocols in particular, such as the Ethereum network, users may attempt
                                            to gain an advantage over other users by offering additional fees to validators for effecting
                                            the order or inclusions of transactions within a block. Certain software solutions, such
                                            as MEV Boost by Flashbots, have been developed which facilitate validators and other parties
                                            in the ecosystem in capturing MEV. The presence of MEV may incentivize associated practices
                                            such as sandwich attacks or front running that can have negative repercussions on DeFi users.
                                            A &ldquo;sandwich attack&rdquo; is executed by placing two transactions around a large, detected
                                            transaction to capitalize on the expected price impact. For instance, a market participant
                                            might identify a sizable transaction within the publicly visible so-called memory pool (&ldquo;mempool&rdquo;)
                                            of pending but unexecuted transactions awaiting validation that will significantly alter
                                            an asset&rsquo;s price on a decentralized exchange. The participant could then for example
                                            orchestrate a transaction bundle: one transaction to acquire the asset prior to the detected
                                            transaction, followed by the large transaction itself, and a final transaction to sell the
                                            asset after the market price has increased due to the large transaction&rsquo;s execution.
                                            Such transaction bundles can be submitted to validators through mechanisms like MEV-Boost,
                                            with validators receiving a share of the profits as an incentive to include the specific
                                            transaction bundle in the block. In the context of MEV, &ldquo;front running&rdquo; is said
                                            to occur when a user spots a transaction in the mempool, and then pays a high transaction
                                            fee to a validator to have their transaction executed on a priority basis in a manner designed
                                            to profit from the pending but unexecuted transaction that is still in the mempool. MEV may
                                            also compromise the predictability of transaction execution, which may deter usage of the
                                            network as a whole. Although based on widely available information given that transactions
                                            in the mempool are publicly visible, any potential perception of MEV as unfair manipulation
                                            may also discourage users and other stakeholders from engaging with DeFi protocols or the
                                            Ethereum network in general. In addition, it is possible regulators or legislators could
                                            enact rules which restrict practices associated with MEV, which could diminish the popularity
                                            of the Ethereum network among users and validators. Any of these or other outcomes related
                                            to MEV may adversely affect the value of ether and the value of the Shares.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>If a malicious actor
or botnet obtains control of more than 33% of the validating stake on the Ethereum network, or otherwise obtains control over the Ethereum
network through its influence over core developers or otherwise, such actor or botnet could delay or manipulate the Ethereum blockchain
in the short term, which could adversely affect the value of the Shares or the ability of the Trust to operate.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the Merge and the
switch to proof-of-stake validation, the Ethereum network is currently vulnerable to several types of attacks, including:</P>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;&gt;33%
                                            attack&rdquo; where, if a validator or group of validators were to gain control of more than
                                            33% of the total staked ether on the Ethereum network, a malicious actor could temporarily
                                            impede or delay block confirmation or even cause a temporary fork in the blockchain. This
                                            is believed to be temporary, as the Ethereum network&rsquo;s inactivity leak would be expected
                                            to eventually penalize the attacker enough for the chain to finalize again (i.e., the honest
                                            majority would be expected to reclaim 2/3rd stake as the attacker&rsquo;s stake is penalized).
                                            However, it is not believed that with 33% control, a malicious actor could engage in double-spending
                                            or fraudulent block propagation.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;&gt;50%
                                            attack&rdquo; where, if a validator or group of validators acting in concert were to gain
                                            control of more than 50% of the total staked ether on the Ethereum network, a malicious actor
                                            would be able to gain full control of the Ethereum network and the ability to manipulate
                                            future transactions on the blockchain, including censoring transactions, double-spending
                                            and fraudulent block propagation, potentially for an extended period or even permanently.
                                            In theory, the minority non-attackers might reach social consensus to reject blocks proposed
                                            by the malicious majority attacker, reducing the attacker's ability to engage in malicious
                                            activity, but there can be no assurance this would happen or that non-attackers would be
                                            able to coordinate effectively.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;&gt;66%
                                            attack&rdquo; where, if a validator or group of validators acting in concert were to gain
                                            control of more than 66% of the total staked ether on the Ethereum network, a malicious actor
                                            could permanently and irreversibly manipulate the blockchain, including censorship, double-spending
                                            and fraudulent block propagation. The attacker could finalize their preferred chain without
                                            any consideration for the votes of other stakers and could also revert finalized blocks.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 ether
rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious
actor or botnet could also control, exclude or modify the ordering of transactions. Although the malicious actor or botnet would not be
able to generate new tokens or transactions using such control, it could &ldquo;double-spend&rdquo; its own tokens (i.e., spend the same
tokens in more than one transaction) and prevent the confirmation of other users&rsquo; 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 network
or the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum blockchain may
not be possible. If the malicious actor were to gain control of more than 33% of the total staked ether on the Ethereum network, they
could temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain, but it is not believed that they
could in double-spending or fraudulent block propagation. Even without 33% control, a malicious actor or botnet could create a flood of
transactions in order to slow down the Ethereum network (similar to a denial-of-service attack).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 the
processing power of the Ethereum Classic Network. The attacks resulted in reorganizations of the Ethereum Classic Blockchain that allowed
the attacker or attackers to reverse previously recorded transactions in excess of $5.0 million and $1.0 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 unknown
miner 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 the
two attacks described above took place on proof-of-work-based networks, it is possible that a similar attack may occur on the proof-of-stake
Ethereum network, which could negatively impact the value of ether and the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although there are no known
reports of malicious activity on, or control of, the Ethereum network, it is possible that certain groups of coordinating or connected
ether holders may together have more than 50% of outstanding ether, which if staked and if the users run validators, would permit them
to exert authority over the validation of ether transactions. This risk is heightened if over 50% of the processing power on the network
falls within the jurisdiction of a single governmental authority. If network participants, including the core developers and the administrators
of validating pools, do not act to ensure greater decentralization of ether, the feasibility of a malicious actor obtaining control of
the validating power on the Ethereum network will increase, which may adversely affect the value of the Shares. See also&ldquo;&mdash;Liquid
staking applications pose centralization concerns&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A malicious actor may also
obtain control over the Ethereum network through its influence over core developers by gaining direct control over a core developer or
an otherwise influential programmer. To the extent that nodes, users and validators accept amendments to the source code proposed by the
controlled core developer, other core developers do not counter such amendments, and such amendments enable the malicious exploitation
of 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 the
initial or current core developer group, or are otherwise influential members of the Ethereum community. To the extent that the initial
or current core developer groups also control more than 50% of outstanding ether, as some believe, the risk of and arising from this particular
group of users obtaining control of the validating power on the Ethereum network will be even greater, and should this materialize, it
may adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Liquid staking applications
pose centralization concerns.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Validators must 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>i.e.</I>,
vote on its view of the chain). For every 32 ether deposit that is staked, a unique validator key pair is generated. An application built
on the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that provides
a so-called &ldquo;liquid staking&rdquo; solution which permits holders of ether to deposit them with Lido, which stakes the ether while
issuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing
32 staked ether) divided across over 30 node operators. At times, Lido has reportedly controlled around or in excess of 33% of the total
staked ether on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transaction
finality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus
lost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most of
the third party node operators where its ether is staked, and finally since the occurrence of such manipulation of the Ethereum network&rsquo;s
consensus 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 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A temporary or
permanent&nbsp;&ldquo;fork&rdquo;&nbsp;in the Ethereum network could adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network operates
using open-source protocols, meaning that any user can become a node by downloading the Ethereum Client and participating in the Ethereum
network, and no permission of a central authority or body is needed to do so. In addition, anyone can propose a modification to the Ethereum
network's source code and then propose that the Ethereum network community support the modification. These proposed modifications to the
Ethereum network&rsquo;s source code, if adopted, can lead to forks (referred to as &ldquo;planned forks&#750; because they take place
through a formal process).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 network
source code and, as a result, they are typically responsible for proposing quasi-official or widely publicized releases of updates and
other changes to the Ethereum network&rsquo;s source code called EIPs. Any user can propose an idea for modifying the Ethereum network's
source code, and the core developers are responsible for merging the proposed idea into the EIP repository on GitHub, where it formally
becomes an EIP. However, the release of proposed updates to the Ethereum network&rsquo;s source code by core developers does not guarantee
that the updates will be automatically adopted. The developers of each Ethereum Client must agree to implement the EIP&rsquo;s changes
to the Ethereum network in the source code for their respective client software, nodes must accept the changes made available by the developers
of the Ethereum Client software they use by choosing to individually download the modified Ethereum Client software, and ultimately a
critical mass of validators and users &ndash; 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 &ndash; must support the shift, or the upgrades will lack
adoption.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Typically in the case of a
planned fork, once the EIPs are formally introduced by being merged into the EIP repository on GitHub, a robust debate within the Ethereum
community as to the advisability of the proposed change ordinarily follows. Assuming the core developers at the protocol level and the
developers of individual Ethereum Clients reach a broad consensus among themselves in favor of introducing the change into the respective
source code they are responsible for developing and maintaining, the source code modification will be introduced and made available to
download. A modification of the Ethereum network&rsquo;s source code is only effective with respect to the Ethereum nodes that download
it and modify their Ethereum Clients accordingly, and in practice such decisions are heavily influenced by the preferences of validators
and users. Typically, after a modification is introduced and if a sufficiently broad critical mass of users and validators support the
modification and nodes download the modification into their individual Ethereum Clients, the change is implemented and the Ethereum network
continues to operate uninterrupted, assuming there are no software issues (e.g., bugs, outages, etc.). However, if less than a sufficiently
broad critical mass (in practice, amounting to a substantial majority) of users and validators support the proposed modification and nodes
refuse to download the modification to their Ethereum Clients, and the modification is not backwards compatible with the Ethereum blockchain
or network or the Ethereum Clients of nodes prior to their modification, the consequence would be what is known as a &ldquo;hard fork&rdquo;
of the Ethereum network, with one group of nodes running the pre-modified software, with users and validators continuing to use the pre-modified
software, while the other group would adopt and run the modified software. The effect of such a hard fork would be the existence of two
versions 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 possible
result of a hard fork is an inherent decrease in the level of security due to significant amounts of validating power remaining on one
network or migrating instead to the new forked network. After a hard fork, it may become easier for an individual validator or validating
pool&rsquo;s validating power to exceed 50% of the total on either network, thereby making them both more susceptible to attack.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A future fork in the Ethereum
network could adversely affect the value of the Shares or the ability of the Trust to operate. A fork could also adversely affect the
price of ether at the time of announcement or adoption or subsequently. For example, the announcement of a hard fork could lead to increased
demand for the pre-fork digital asset, in anticipation that ownership of the pre-fork digital asset would entitle holders to a new digital
asset following the fork. The increased demand for the pre-fork digital asset may cause the price of the digital asset to rise. After
the hard fork, it is possible the aggregate price of the two versions of the digital asset running in parallel would be less than the
price of the digital asset immediately prior to the fork. Alternatively, as with any change to software code, software upgrades and other
changes 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 which
has a negative effect on the Ethereum network&rsquo;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-fork
network or blockchain, the digital assets associated with the affected network could lose some or all of their value. Furthermore, while
the Sponsor will, as permitted by the terms of the Trust Agreement, determine which network is generally accepted as the Ethereum network
and should therefore be considered the appropriate network for the Trust&rsquo;s purposes, and there is no guarantee that the Sponsor
will choose the network and the associated digital asset that is ultimately the most valuable fork. Any of these events could therefore
adversely impact the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 13, 2024, the Ethereum
network underwent a planned fork called &ldquo;Dencun&#750; implementing a series of EIPs. EIP 4844, which some commentators perceive
to be the most significant EIP within the Dencun series, is intended to improve the economics of Layer 2s by reducing transaction fees
for 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 Ethereum
network. Among other objectives, the Dencun software upgrade was designed to provide Layer 2 scaling solutions a designated storage space
on the Layer 1 Ethereum network, called Binary Large Objects (&ldquo;blobs&#750;), which attach large data chunks to transactions on the
Layer 1 Ethereum network and are recorded on its blockchain. The data in blobs become inaccessible on the Layer 1 Ethereum network after
a 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 to
be substantially lower than the cost of storing the data on the Ethereum Layer 1 network permanently, making Layer 2s more cost-efficient
to operate and, some commentators hope, making them more attractive as a scaling solution. Immediately following the upgrade, some Layer
2s reportedly experienced reduced transaction fees when batching transactions to the main Layer 1 Ethereum network, which in turn lowered
the transaction costs for executing transactions on such Layer 2s, but this also is believed to have resulted in ether prices (ether being
the native asset of the Layer 1 Ethereum network) dropping as well due, in part, to the reduced demand for ether to pay the transaction
costs 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 restored
afterward. As with any change to software code, planned forks such as Dencun could introduce bugs, coding defects, unanticipated or undiscovered
problems, flaws, security risks, problematic incentive structures, or otherwise fail to work as intended or achieve the expected benefits
that proponents hope for in the short term or the long term, which could also have an adverse effect on adoption of the Ethereum network
and the value of ether, and therefore the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2022, the Ethereum
network transitioned to a proof-of-stake consensus model, in an upgrade referred to as the &ldquo;Merge.&rdquo; Following the Merge, a
hard fork of the Ethereum network occurred, as a small number of Ethereum validators and network participants planned to maintain the
proof-of-work consensus mechanism that was removed as part of the Merge. This version of the network, which is not backwards compatible
with the Ethereum Layer 1 blockchain, is considered a forked branch and was rebranded as &ldquo;Ethereum Proof-of-Work.&rdquo; To the
extent significant developer talent, users or validators abandon the Ethereum Layer 1 network and adopt the Ethereum Proof-of-Work blockchain
instead, the value of the Shares could be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As illustrated by Dencun and
the Merge, the Ethereum network regularly implements planned forks in an effort to achieve its development roadmap, advance the scalability
process, and to improve the network generally. For example, in connection with the Ethereum development roadmap, the Ethereum network
executed planned forks to transition from the initial Frontier development stage into the Homestead development stage in 2016; to transition
from the Homestead development stage to the first sub-stage, Byzantium, of the Metropolis development stage in 2017; to transition from
the Byzantium sub-stage to the St. Petersburg sub-stage in early 2019; and to transition from the St. Petersburg sub-stage to the Istanbul
sub-phase, in late 2019. In April 2021, the Ethereum network underwent the Berlin and Altair planned forks, among others. In 2022, Ethereum
underwent the Bellatrix and Paris planned forks in connection with the Merge. In 2023, Ethereum underwent the Capella and Shanghai planned
forks (collectively, &ldquo;Shapella&rdquo;), which enabled withdrawals of staked assets to the Ethereum Layer 1 blockchain mainnet for
the first time (they had previously been locked on the Beacon Chain testnet following the Merge). Any of these or future planned forks
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 which has a negative effect on the Ethereum network&rsquo;s nodes, 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. Alternatively, such hard forks could be contentious, leading to a split and fracture in the Ethereum community to its
collective detriment, as discussed above. Any such outcomes could adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Forks may also occur as a
digital asset network community&rsquo;s response to a significant security breach. For example, in July 2016, Ethereum underwent a hard
fork between the Layer 1 Ethereum network and a new digital asset running on a &ldquo;forked&rdquo; branch of the network, Ethereum Classic,
as a result of the Ethereum network community&rsquo;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 ether held by The DAO, a distributed autonomous
organization, into a segregated account. In response to the hack, and after a contentious debate, most participants in the Ethereum community
elected to adopt a hard fork that effectively reversed the hack, and this network constitutes the Layer 1 Ethereum network. However, a
minority of users continued to develop the original blockchain, now referred to as &ldquo;Ethereum Classic&rdquo;, which is not backwards
compatible with the Layer 1 Ethereum network and is considered a forked branch, with the native digital asset on that blockchain now referred
to as Ethereum Classic, or ETC. ETC now trades on several digital asset platforms. Following the July 2016 hard fork between the Ethereum
and Ethereum Classic networks, new security concerns surfaced. Replay attacks, in which transactions from one network were rebroadcast
to nefarious effect on the other network, plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced in
July 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks. Similar replay attack
concerns occurred in connection with the Bitcoin Cash and Bitcoin Satoshi&rsquo;s Vision networks split in November 2018, and security
concerns could similarly surface in connection with future hard forks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An unplanned fork may also
occur as a result of an unintentional or unanticipated software flaw in the various versions of Ethereum Client software that nodes run
and use to access the Ethereum network. For example, such an unplanned fork reportedly occurred in the Go-Ethereum (&ldquo;Geth&rdquo;)
client, which is a popular Ethereum Client that many nodes use to access the Ethereum network and whose developers are financially supported
by 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 Ethereum
blockchain than the patched Geth nodes and nodes using other Ethereum Clients. This temporarily created two conflicting versions of the
Ethereum blockchain, causing the nodes using the non-patched Geth version to be unable to reach consensus with the rest of the nodes on
the Ethereum blockchain, interrupting the non-patch Geth nodes&rsquo; access to the Ethereum network. For example, Infura, which is a
node 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&rsquo;s Geth client-running nodes reportedly
used the outdated, non-patched Geth version initially, which is said to have caused those nodes to be on the minority blockchain, impacting
transaction execution, validation, and recording on the main Layer 1 Ethereum network for Infura&rsquo;s customers &ndash; such as Ethereum-based
smart contracts, wallet providers like MetaMask, ether trading platforms, etc. &ndash; until Infura was able to apply the software update
released by the Geth client developers to Infura&rsquo;s nodes that use Geth as their Ethereum Client. Ultimately, the problem was reportedly
fixed by releasing a new upgraded version of Geth that all nodes using the Geth client were to promptly download. This reportedly harmonized
the conflicting versions and restored synchronization among Geth nodes, fixing the problem and restoring access to the Ethereum network,
including for Infura and its customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the future, if an accidental
or unintentional fork similar to what happened within the Geth client in November 2020 were to reoccur within Geth (or any other major
Ethereum Client), or were to happen to the Ethereum network as a whole (instead of being limited to a single Ethereum Client, in this
case Geth), such a fork could lead to nodes, users and validators losing confidence in the Ethereum network and abandoning it in favor
of other blockchain protocols. Furthermore, it is possible that, in a future unplanned fork, a substantial number of nodes, users and
validators could adopt an incompatible version of the digital asset while resisting community-led efforts to merge the two chains, resulting
in a permanent fork. Moreover, following the Merge, nodes on the Ethereum network must run two Ethereum Clients, <I>i.e.</I>, an Execution
Client and a Consensus Client paired together, with the implementations selected at the discretion of the node operator. There are multiple
groups independently developing and implementing their respective Execution Clients and Consensus Clients; while some individual Execution
Clients or Consensus Clients are more popular or widely adopted than others, there remains heterogeneity among Ethereum Clients. Each
Execution Client and Consensus Client needs to interoperate effectively with each other Execution Client and Consensus Client. Although
this 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 Execution
Client to fail to interoperate effectively with any other individual Execution Client or any Consensus Client, the Ethereum network as
a whole could suffer an unplanned fork, major disruption, catastrophic outage, system failure, loss of confidence or adoption among users
or validators, or a variety of other problems. Any of these events could cause ether to decline in value, adversely affecting the price
of Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 &ldquo;clone&rdquo;
is a copy of a protocol&rsquo;s codebase, but results in an entirely new blockchain and new genesis block. Tokens are created solely from
the new &ldquo;clone&rdquo; network and, in contrast to forks, holders of tokens of the existing network that was cloned do not receive
any tokens of the new network. A &ldquo;clone&rdquo; results in a competing network that has characteristics substantially similar to
the network it was based on, subject to any changes as determined by the developer(s) that initiated the clone. For example, following
the DAO hack in July 2016, holders of Ethereum voted on-chain to reverse the hack, effectively causing a hard fork. For the days following
the 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 Classic
block 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 version
of the Zcash Network that eliminated the Founders&rsquo; Reward. For the days following the date the first Zclassic block was mined, the
price 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 beginning
immediately after the Zcash Network launch on October 28, 2016.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moving from Proof-of-Work
(PoW) to Proof-of-Stake (PoS) Consensus Mechanism.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">In
September 2022, the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism called Serenity, or Ethereum 2.0. Unlike
proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion
to the amount of computational resources expended, in proof-of-stake, validators risk or &ldquo;stake&rdquo; coins to compete to be randomly
selected to validate transactions and are rewarded coins in proportion to the total amount of coins staked. Any malicious activity, such
as disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or &ldquo;slashing&rdquo;
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 guarantee
that the Ethereum community will embrace Ethereum 2.0, and the new protocol may never fully scale.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">The
possibility exists that Ethereum 2.0 may never achieve the goals of the Ethereum community, which may have a negative impact on the market
value of ether, and consequently on the NAV of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>The open-source structure
of the Ethereum network protocol means that the core developers and other contributors are generally not directly compensated for their
contributions in maintaining and developing the Ethereum network protocol. A failure to properly monitor and upgrade the Ethereum network
protocol could damage the Ethereum network and an investment in the Trust.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network operates
based on an open-source protocol maintained by the core developers and other contributors, largely on the GitHub resource section dedicated
to Ethereum network development. As new ether are rewarded solely for validator activity (other than the 2014 pre-mine) and are not sold
on an ongoing basis to generate revenue to support development activity, and the Ethereum network protocol itself is made available for
free rather than sold or made available subject to licensing or subscription fees and its use does not generate revenues for its development
team, 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 developers
may lack the resources to adequately address emerging issues with the Ethereum network protocol. Although the Ethereum network is currently
supported 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&rsquo;s
source code in the GitHub repository is relatively small, although there are believed to be a larger number of developers who contribute
to the overall development of the source code of the Ethereum network. The perception that high-profile contributors may no longer contribute
to the network may have an adverse effect on the market price of any related digital assets. For example, in June 2017, an unfounded rumor
circulated 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 contribute
to the Ethereum network due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is valid, it could
negatively affect the price of ether, which could adversely impact the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Alternatively, some developers
may be funded by entities whose interests are at odds with other participants in the Ethereum network. In addition, a bad actor could
also 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 unable
to address the issues adequately or in a timely manner, the Ethereum network and an investment in the Trust may be adversely affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 adverse
impact on the value of ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Smart contracts are programs
running on the Ethereum blockchain that execute automatically when certain conditions are met. Since smart contracts typically cannot
be stopped or reversed, vulnerabilities in their programming can have damaging effects. For example, in June 2016, a vulnerability in
the smart contracts underlying The DAO allowed an attack by a hacker to syphon approximately $60 million worth of ether from The DAO&rsquo;s
accounts into a segregated account. In the aftermath of the theft, certain core developers and contributors pursued a &ldquo;hard fork&rdquo;
of the Ethereum network in order to erase any record of the theft. Despite these efforts, the price of ether reportedly dropped approximately
35% in the aftermath of the attack and subsequent hard fork. In addition, in July 2017, a vulnerability in a smart contract for a multi-signature
wallet software developed by Parity led to a reportedly $30 million theft of ether, and in November 2017, a new vulnerability in Parity&rsquo;s
wallet 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 number
of smart contract tokens, causing multiple crypto asset platforms worldwide to shut down ERC20-compatible token trading. Similarly, in
March 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, such
as bridges between blockchain networks and decentralized finance (&ldquo;DeFi&rdquo;) protocols, have also been manipulated, exploited
or used in ways that were not intended or envisioned by their creators such that attackers syphoned over $3.8 billion worth of digital
assets from smart contracts in 2022. Problems with the development, deployment, and operation of smart contracts may have an adverse effect
on the value of ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In some cases, smart contracts
can be controlled by one or more &ldquo;admin keys&rdquo; or users with special privileges, or &ldquo;super users.&rdquo; These super
users may have the ability to unilaterally make changes to the smart contract, enable or disable features on the smart contract, change
how the smart contract receives external inputs and data or transmits ether or other digital assets, and make other changes to the smart
contract. Furthermore, in some cases inadequate public information may be available about certain smart contracts or applications, and
information asymmetries may exist, even with respect to open-source smart contracts or applications; certain participants may have hidden
informational or technological advantages, making for an uneven playing field. There may be opportunities for bad actors to perpetrate
fraudulent schemes and engage in illicit activities and other misconduct, such as exit scams and rug pulls (orchestrated by developers
and/or influencers who promote a smart contract or application and, ultimately, escape with the money at an agreed time), or Ponzi or
similar fraud schemes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many DeFi applications are
currently deployed on the Ethereum network, and smart contracts relating to DeFi applications currently represent a significant source
of 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 facilitate
these transactions. These investments may earn interest for the investor based on the rates at which borrowers repay the loan, and can
generally be withdrawn by the investor. For smart contracts that hold a pool of digital asset reserves, smart contract super users or
admin key holders may be able to extract funds from the pool, liquidate assets held in the pool, or take other actions that decrease the
value of the digital assets held by the smart contract in reserves. Even for digital assets that have adopted a decentralized governance
mechanism, such as smart contracts that are governed by the holders of a governance token, such governance tokens can be concentrated
in 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, features
and value of the smart contract and its related digital assets may be harmed. In addition, assets held by the smart contract in reserves
may be stolen, misused, burnt, or locked up or otherwise become unusable and irrecoverable. Super users can also become targets of hackers
and malicious attackers. If an attacker is able to access or obtain the super user privileges of a smart contract, or if a smart contract&rsquo;s
super users or core community members take actions that adversely affect the smart contract, users who transact with the smart contract
may experience decreased functionality of the smart contract or may suffer a partial or total loss of any digital assets they have used
to 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 could
cause the DeFi application to be the subject of negative publicity. Because DeFi applications may be built on the Ethereum network and
represent a significant source of demand for ether, public confidence in the Ethereum network itself could be negatively affected, such
sources 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Validators may
suffer losses due to staking, which could make the Ethereum network less attractive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Validation on the Ethereum
network requires ether to be transferred into smart contracts on the underlying blockchain networks not under the Trust&rsquo;s or anyone
else&rsquo;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 types
of sanctions for validator misbehavior or inactivity, which would result in a portion of their staked ether being destroyed or &ldquo;burned&rdquo;:
penalties, slashing and inactivity leaks. A validator may face penalties if it fails to take certain actions, such as providing a timely
attestation to a block proposed by another validator. Under this scenario, a validator&rsquo;s staked ether could be burned in an amount
equal to the reward to which it would have been entitled for performing the actions. A more severe sanction (i.e., &ldquo;slashing&rdquo;)
is imposed if a validator commits malicious acts related to the proposal or attestation of blocks with invalid transactions. Slashing
can result in the validator having a portion of its staked ether immediately confiscated, withdrawn or burned by the network, resulting
in losses to them. After this initial slashing, the validator is queued for forceful removal from the Ethereum network&rsquo;s validator
&ldquo;pool,&rdquo; and more of the validator&rsquo;s stake is burned over a period of approximately 36 days with the exact amount of
ether burned and time period determined by the network regardless of whether the validator makes any further slashable errors, at which
point the validator is automatically removed from the validator pool. Staked ether may also be burned through a process known as an &ldquo;inactivity
leak,&rdquo; which is triggered if the Ethereum network has gone too long without finalizing a new block. For a new block to be successfully
added to the blockchain, validators that account for at least two-thirds of all staked ether must agree on the validity of a proposed
block. 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 &ldquo;bleed away&rdquo; until these
inactive validators represent less than one-third of the total stake, thereby allowing the remaining active validators to finalize proposed
blocks. This provides a further incentive for validators to remain online and continue performing validation activities. Within the post-Merge
network, as part of the &ldquo;activating&rdquo; and &ldquo;exiting&rdquo; processes of staking, staked ether will be inaccessible for
a variable period of time determined by a range of factors, including network congestion, resulting in potential inaccessibility during
those periods. &ldquo;Activation&rdquo; is the funding of a validator to be included in the active set, thereby allowing the validator
to participate in the Ethereum network&rsquo;s proof-of-stake consensus protocol. &ldquo;Exit&rdquo; is the request to exit from the active
set and no longer participate in the Ethereum network&rsquo;s proof-of-stake consensus protocol. As part of these &ldquo;activating&rdquo;
and &ldquo;exiting&rdquo; processes of staking on the Ethereum network, any staked ether will be inaccessible for a period of time. The
duration 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 and
the practice of paying tips is common, and such fees can become significant as the amount and complexity of the transaction grows, depending
on 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&rsquo; willingness to participate in validation, discourage existing and future validators from
serving as such, and adversely impact the Ethereum network&rsquo;s adoption or the price of ether. Any disruption of validation on the
Ethereum network could interfere with network operations 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. The limited liquidity during the &ldquo;activation&rdquo;
or &ldquo;exiting&rdquo; processes could dissuade potential validators from participating, which could interfere with network operations
or 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Proof-of-stake
blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of
time as traditional proof-of-work blockchains.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Certain
digital assets, such as bitcoin, use a &ldquo;proof-of-work&rdquo; consensus algorithm. The genesis block on the Bitcoin blockchain was
mined in 2009, and Bitcoin&rsquo;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 &ldquo;proof-of-stake.&rdquo;
While their proponents believe that they may have certain advantages, the &ldquo;proof-of-stake&rdquo; consensus mechanisms and governance
systems underlying many newer blockchain protocols, including the Ethereum network following the Merge, and their associated digital assets&mdash;including
the ether held by the Trust&mdash;have not been tested at scale over as long of a period of time or been subject to as widespread use
or adoption as, for example, bitcoin&rsquo;s proof-of-work consensus mechanism has. This could lead to these blockchains, and their associated
digital 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 as
intended, could lead to outright failure to function entirely causing a total outage or disruption of network activity, or could cause
the blockchains to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value
of the associated digital assets, including the Trust&rsquo;s assets. Over the long term, there can be no assurance that the proof-of-stake
blockchain on which the Trust&rsquo;s assets rely will achieve widespread scale or adoption or perform successfully; any failure to do
so could negatively impact the value of the Trust&rsquo;s assets.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust will
not directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards or
other income.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Neither
the 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&rsquo;s ether becomes subject to the Ethereum proof-of-stake validation or is used to
earn additional ether or generate rewards or other income. The Trust&rsquo;s inability to participate in staking will cause the Trust
to forgo any additional ether, rewards or other income from which the Trust could have benefitted had the Trust been able to stake the
Trust&rsquo;s ether. Accordingly, the Trust may underperform other pooled investment vehicles holding ether that may participate in staking.&nbsp;
Investors who seek to participate in staking rewards should consider other investment options.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Liquid staking
applications pose centralization concerns.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Validators
must deposit 32 ether to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake
(</FONT><FONT STYLE="font-weight: normal">i.e.<FONT STYLE="font-style: normal">, vote on its view of the chain). For every 32 ether deposit
that is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, can
manage many validator key pairs. For example, Lido, an application that provides a so-called &ldquo;liquid staking&rdquo; solution which
permits holders of ether to deposit them with Lido, which stakes the ether while issuing the holder a transferrable token, is reported
by some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ether) divided across over 30 node
operators. At times, Lido has reportedly controlled around or in excess of 33% of the total staked ether on the Ethereum network. While
it is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using its
reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliated
with Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where its
ether is staked, and finally since the occurrence of such manipulation of the Ethereum network&rsquo;s consensus process by Lido or any
other actor would likely cause ether to lose substantial value (which would 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 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.</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I></I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Competition from the
emergence or growth of other digital assets or methods of investing in ether could have a negative impact on the price of ether and adversely
affect the value of the Shares.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of October 1, 2024, ether
was the second largest digital asset by market capitalization as tracked by CoinMarketCap.com. As of October 1, 2024, there were over
8,000 alternative digital assets tracked by CoinMarketCap.com, having a total market capitalization of approximately $2.15 trillion (including
the 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 into
private or permissioned smart contracts platforms rather than open platforms like the Ethereum network. Competition from the emergence
or growth of alternative digital assets and smart contracts platforms, such as Solana, Avalanche or Cardano, could have a negative impact
on the demand for, and price of, ether and thereby adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, some digital
asset 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 called
Ethereum Classic. As a result, some users of the Ethereum Classic network may harbor ill will toward the Ethereum network. These users
may attempt to negatively impact the use or adoption of the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors may invest in ether
through means other than the Shares, including through direct investments in ether and other potential financial vehicles, possibly including
securities backed by or linked to ether and digital asset financial vehicles similar to the Trust, or ether futures-based products. Market
and financial conditions, and other conditions beyond the Sponsor&rsquo;s control, may make it more attractive to invest in other financial
vehicles or to invest in ether directly, which could limit the market for, and reduce the liquidity of, the Shares. In addition, to the
extent digital asset financial vehicles other than the Trust tracking the price of ether are formed and represent a significant proportion
of the demand for ether, large purchases or redemptions of the securities of these digital asset financial vehicles, or private funds
holding ether, could negatively affect the Ether Pricing Benchmark, the Trust&rsquo;s ether holdings, the price of the Shares, and the
NAV of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust and the Sponsor
face competition with respect to the creation of competing exchange-traded ether products. If the SEC were to approve many or all of the
currently pending applications for such exchange-traded ether products, many or all of such products, including the Trust, could fail
to acquire substantial assets, initially or at all. The Trust&rsquo;s competitors may also charge a substantially lower fee than the Sponsor&rsquo;s
Fee in order to achieve initial market acceptance and scale. Accordingly, the Sponsor&rsquo;s competitors may commercialize a competing
product more rapidly or effectively than the Sponsor is able to, which could adversely affect the Sponsor&rsquo;s competitive position
and the likelihood that the Trust will achieve initial market acceptance, and could have a detrimental effect on the scale and sustainability
of the Trust. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue
to cover the costs associated with launching and maintaining the Trust and such shortfalls could impact the Sponsor&rsquo;s ability to
properly invest in robust ongoing operations and controls of the Trust to minimize the risk of operating events, errors, or other forms
of 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 significant
premium or discount in the Shares for extended periods and the Trust&rsquo;s failure to reflect the performance of the price of ether.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Associated with the Pricing Benchmarks,
BRR, ERR, CME Bitcoin Real Time Price and CME Ether Real Time Price</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Pricing Benchmarks,
BRR, ERR, CME Bitcoin Real Time Price and CME Ether Real Time Price each have a limited history.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 was
first 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 calculation
time) 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 reference
rate calculated using volume-weighted trading price data from the Constituent Platforms. A longer history of actual performance through
various economic and market conditions would provide greater and more reliable information for an investor to assess the Pricing Benchmarks&rsquo;
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&rsquo;s NAV. The Benchmark Provider does not have any obligation
to take into consideration the needs of the Trust, the Shareholders, or anyone else in connection with such changes. There is no guarantee
that the methodology currently used in calculating the Pricing Benchmarks will appropriately track the price of bitcoin and ether in the
future. Neither the CME Group nor the Benchmark Provider has any obligation to take into consideration the needs of the Trust or the Shareholders
in determining, composing, or calculating the Pricing Benchmarks or in the selection of the Constituent Platforms used. The Constituent
Platforms are chosen by the Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the Pricing Benchmarks
are intended to accurately capture the market prices 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 Platforms, and such transactions may take place at prices materially
higher or lower than the Pricing Benchmarks&rsquo; prices. Moreover, there may be variances in the price of bitcoin and ether on the various
Constituent 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 bitcoin
and ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform may not be equal to the value
of bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoin and ether on the Constituent Platforms
could be materially higher or lower than the prices of the Pricing Benchmarks. To the extent the prices of the Pricing Benchmarks differ
materially from the actual prices available on a Constituent Platform, or from the global market prices of bitcoin and ether, the price
of the Shares may no longer track, whether temporarily or over time, the global market prices of bitcoin and ether, which could adversely
affect an investment in the Trust by reducing investors&rsquo; confidence in the Shares&rsquo; ability to track the market prices 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&rsquo; ability to track the market prices of bitcoin and ether, which could adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The pricing sources (Constituent
Platforms) used by the Pricing Benchmarks are digital asset trading venues that facilitate the buying and selling of bitcoin, ether and
other digital assets. Although many pricing sources refer to themselves as &ldquo;exchanges,&rdquo; they are not registered with, or supervised
by, 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 disruptions
due to various factors, including the lack of liquidity in the markets and government regulation and intervention. These circumstances
could affect the prices of bitcoin and ether used in Pricing Benchmarks calculations and, therefore, could adversely affect the bitcoin
and ether prices as reflected by the Pricing Benchmarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Constituent Platforms
have changed over time. For example, effective April 2017, Bitfinex and OKcoin were removed from the Bitcoin Pricing Benchmark due to
trading restrictions and on January 25, 2019, itBit was suspended from the Pricing Benchmarks due to data quality issues, which suspension
was lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify the
errors 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 Constituent
Platforms in the future at its discretion. For more information on the inclusion criteria for Constituent Platforms in the Pricing Benchmarks,
see &ldquo;THE TRUST AND BITCOIN AND ETHER PRICES.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Pricing Benchmarks are
based on various inputs which may include price data from various third-party digital asset trading platforms. Neither the CME Group nor
the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust utilizes the Pricing
Benchmarks to establish its NAV and NAV per Share. In the event that the Pricing Benchmarks are incorrectly calculated, is not timely
calculated or changes its calculation methodology in the future, such an occurrence may adversely impact an investment in the Shares or
the Trust&rsquo;s operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CME Bitcoin Real Time
Price and CME Ether Real Time Price also have a limited history and share some of the same structural and methodological features and
risks 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 and
ether market price of ether, Shareholders may use the ITV as a data point in their assessment of the value of the Shares. In the event
that the CME Bitcoin Real Time Price and CME Ether Real Time Price are incorrectly calculated, is not timely calculated or changes its
calculation methodology in the future, such an occurrence may adversely impact the utility of the ITV to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the Pricing Benchmarks
and 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 Platforms
of the Pricing Benchmarks and CME Ether Real Time Price, and such transactions may take place at prices materially higher or lower than
the level of the Pricing Benchmarks used to establish the NAV. To the extent such prices differ materially from the level of the Pricing
Benchmarks used to establish the NAV, investors may lose confidence in the Shares&rsquo; ability to track the market price of bitcoin
and ether, which could adversely affect an investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Benchmark
Provider could experience systems failures or errors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the computers or other
facilities of the Benchmark Provider, data providers and/or relevant stock exchange malfunction for any reason, calculation and dissemination
of the Pricing Benchmarks may be delayed. Errors in Pricing Benchmarks data, the Pricing Benchmarks computations and/or construction may
occur 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 on
the Trust and the Shareholders. Any of the foregoing may lead to errors in the Pricing Benchmarks, which may lead to a different investment
outcome for the Trust and its Shareholders than would have been the case had such events not occurred. The Pricing Benchmarks are the
reference price for calculating the Trust&rsquo;s NAV. Consequently, losses or costs associated with the Pricing Benchmarks&rsquo; errors
or other risks described above will generally be borne by the Trust and the Shareholders and neither the Sponsor nor its affiliates or
agents make any representations or warranties regarding the foregoing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Pricing Benchmarks
are not available, the Trust&rsquo;s holdings may be fair valued in accordance with the policy approved by the Sponsor. If the Pricing
Benchmarks are not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect accurate
bitcoin and ether prices, the Trust&rsquo;s holdings may be &ldquo;fair valued&rdquo; in accordance with the valuation policies approved
by the Sponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all available
factors the Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using
third-party valuation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted median
price of bitcoin and ether provided by a secondary pricing source (&ldquo;Secondary Source&rdquo;). If a Secondary Source is not available
or the Sponsor in its sole discretion determines the Secondary Sources are unreliable, the price set by the Trust&rsquo;s principal market
as of 4:00 p.m. ET, on the valuation date would be considered for utilization. In the event the principal market price is not available
or the Sponsor in its sole discretion determines the principal market valuation is unreliable the Sponsor will use its best judgment to
determine a good faith estimate of fair value based upon all available factors. The Sponsor does not anticipate that the need to &ldquo;fair
value&rdquo; bitcoin and ether will be a common occurrence.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent the valuation
determined 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 could
adversely affect an investment in the Trust by reducing investors&rsquo; confidence in the Shares&rsquo; ability to track the global market
price of bitcoin and ether. To the extent such prices differ materially from the market price for bitcoin and ether, investors may lose
confidence in the Shares&rsquo; ability to track the market price of bitcoin and ether, which could adversely affect the value of the
Shares. The Sponsor does not anticipate that the need to &ldquo;fair value&rdquo; bitcoin and ether will be a common occurrence.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Pricing Benchmarks
could fail to track the global bitcoin and ether prices, and a failure of the Pricing Benchmarks could adversely affect the value of the
Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the Pricing Benchmarks
are intended 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 Platforms, and such transactions may take place at prices materially higher
or lower than the prices of the Pricing Benchmarks. Moreover, there may be variances in the price of bitcoin and ether on the various
Constituent 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-weighted
price of bitcoin and ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform or pricing
source may not be equal to the value of bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoin
and ether on the Constituent Platforms could be materially higher or lower than the prices of the Pricing Benchmarks. To the extent the
prices of the Pricing Benchmarks differs materially from the actual prices available on a Constituent Platform, or from the global 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 could adversely affect an investment in the Trust by reducing investors&rsquo; confidence in the Shares&rsquo;
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&rsquo; ability to track the market price of bitcoin and ether, which could adversely affect
the value of the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor can
discontinue using the Pricing Benchmarks and use a different pricing or valuation methodology instead.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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, with
prior notice to the Shareholders, if investment conditions change or the Sponsor believes that another index, benchmark or standard better
aligns with the Trust&rsquo;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 prices
of bitcoin and ether and/or that third parties are able to purchase and sell bitcoin and ether on public or private markets not included
among the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the price of the Pricing
Benchmarks. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the event that the Sponsor
intends to establish the Trust&rsquo;s NAV by reference to an index, benchmark or standard other than the Pricing Benchmarks, it will
provide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in the Trust&rsquo;s annual
or quarterly reports.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Pricing Benchmarks
price used to calculate the value of the Trust&rsquo;s bitcoin and ether may be volatile, adversely affecting the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The price of bitcoin and ether
on public digital asset trading platforms has a limited history, and during this history, bitcoin and ether prices on the digital asset
markets 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 digital
asset trading platforms, the prices of the Pricing Benchmarks, and the prices of bitcoin and ether generally, remains subject to volatility
experienced by digital asset exchanges, and such volatility could adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, because the number
of liquid and credible digital asset trading platforms is limited, the Pricing Benchmarks will necessarily be composed of a limited number
of 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 could
skew the price of bitcoin and ether as represented by the Pricing Benchmarks. Trading on a limited number of digital asset trading platforms
may result in less favorable prices and decreased liquidity of bitcoin and ether and, therefore, could have an adverse effect on the value
of the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The prices of
the Pricing Benchmarks being used to determine the NAV of the Trust may not be consistent with GAAP. To the extent that the Trust&rsquo;s
financial statements are determined using a different pricing source that is consistent with GAAP, the NAV reported in the Trust&rsquo;s
periodic financial statements may differ, in some cases significantly, from the Trust&rsquo;s NAV determined using the Pricing Benchmarks
pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust will determine the
NAV of the Trust on each business day based on the value of bitcoin and ether as reflected by the Pricing Benchmarks. The methodology
used to calculate the prices of the Pricing Benchmarks to value bitcoin and ether in determining the NAV of the Trust may not be deemed
consistent with GAAP. To the extent the methodology used to calculate the Pricing Benchmarks is deemed inconsistent with GAAP, the Trust
will utilize an alternative GAAP-consistent pricing source for purposes of the Trust&rsquo;s periodic financial statements. Creation and
redemption of Baskets, the Sponsor Fee and other expenses borne by the Trust will be determined using the Trust&rsquo;s NAV determined
daily based on the Pricing Benchmarks. Such NAV of the Trust determined using the prices of the Pricing Benchmarks may differ, in some
cases significantly, from the NAV reported in the Trust&rsquo;s periodic financial statements.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Risks Related to Pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s portfolio
will 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The NAV of the Trust will
change as fluctuations occur in the market price of the Trust&rsquo;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, including
price 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-demand
forces influencing the market price of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders also should note
that the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created and
redeemed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event that the value
of the Trust&rsquo;s bitcoin and ether holdings or bitcoin and ether holdings per Share is incorrectly calculated, neither the Sponsor
nor the Administrator will be liable for any error and such misreporting of valuation data could adversely affect the value of the Shares.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Associated with Investing in the Trust</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 25pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Investment-Related Risks</I>.</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-style: normal; font-weight: normal">Investing
in bitcoin and ether and, consequently, the Trust, is speculative. The prices of bitcoin and ether are volatile, and market movements
of bitcoin and ether are difficult to predict. Supply-and-demand changes rapidly are affected by a variety of factors, including regulation
and 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&rsquo;s investment
program will be successful, that the Trust will achieve its investment objective or that there will be any return of capital invested
to investors in the Trust, and investment results may vary.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is subject
to market risk.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Market risk refers to the
risk that the market prices of bitcoin and ether held by the Trust will rise or fall, sometimes rapidly or unpredictably. An investment
in the Shares is subject to market risk, including the possible loss of the entire principal of the investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Different from directly
owning bitcoin and ether</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The performance of the Trust
will 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 conferred
by owning bitcoin and ether directly, such as the right to claim airdrops. See <I>&ldquo;Shareholders may not receive the benefits of
any forks or &ldquo;airdrops.&rdquo;</I></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is a
passive investment vehicle. The Trust is not actively managed and will be affected by a general decline in the prices of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor does not actively
manage the bitcoin and ether held by the Trust. This means that the Sponsor does not sell bitcoin and ether at times when their price
is high, or acquire bitcoin and ether at low prices in the expectation of future price increases. It also means that the Sponsor does
not make use of any of the hedging techniques available to professional bitcoin and ether investors to attempt to reduce the risks of
losses resulting from price decreases. Any losses sustained by the Trust will adversely affect the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 25pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 25pt; text-align: justify"><B><I>The value of the Shares may be
influenced by a variety of factors unrelated to the value of bitcoin and ether.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of the Shares may
be influenced by a variety of factors unrelated to the prices of bitcoin and ether that may have an adverse effect on the price of the
Shares. These factors include, but are not limited to, the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">Unanticipated problems or issues with respect to the mechanics
of the Trust&rsquo;s operations and the trading of the Shares may arise, in particular due to the fact that the mechanisms and procedures
governing the creation and offering of the Shares and storage of bitcoin and ether have been developed specifically for this product;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Trust could experience difficulties in operating and maintaining
its technical infrastructure, including in connection with expansions or updates to such infrastructure, which are likely to be complex
and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Trust could experience unforeseen issues relating to the
performance and effectiveness of the security procedures used to protect the Trust&rsquo;s account with the Custodian, or the security
procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust&rsquo;s technical infrastructure,
which could result in theft, loss or damage of its assets; or</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">Service providers may decide to terminate their relationships
with the Trust due to concerns that the introduction of privacy-enhancing features to the Bitcoin and Ethereum networks may increase
the potential for bitcoin and ether to be used to facilitate crime, exposing such service providers to potential reputational harm.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of these factors could
affect the value of the Shares, either directly or indirectly through their effect on the Trust&rsquo;s assets.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The NAV may not
always correspond to the market prices of bitcoin and ether and, as a result, Baskets may be created or redeemed at a value that is different
from the market price of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The NAV of the Trust will
change as fluctuations occur in the market price of the Trust&rsquo;s bitcoin and ether holdings. Shareholders should be aware that the
public trading price per Share may be different from the NAV for a number of reasons, including price volatility; trading activity; the
closing of digital asset 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-demand forces influencing
the market price of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An Authorized Participant
may 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 therefore
maintain its intended fractional exposure to a specific amount of bitcoin and ether per Share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders also should note
that the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created and
redeemed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When acquiring bitcoin and
ether, it is possible that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoin and ether by the
Pricing Benchmarks, the rate used to calculate the Trust&rsquo;s NAV. This is known as &ldquo;slippage.&rdquo; While transactions 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 consummate a creation
order for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and ether ascribed
by the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippage from time
to time.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Shares may
trade at a discount or premium in the trading price relative to the NAV as a result of non-concurrent trading hours between the Exchange
and digital asset trading platforms. Non-concurrent trading hours may also result in the Shares gapping at the open of trading on the
Exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of a Share may be
influenced by non-concurrent trading hours between the Exchange and various digital asset trading platforms, including the Constituent
Platforms of the Pricing Benchmarks. Additionally, Shares may be traded at other times and in other venues. While U.S. equity markets
are open for trading in the Shares for a limited period each day, the bitcoin and ether markets are a 24-hour marketplace; however, trading
volume and liquidity on the bitcoin and ether markets are not consistent throughout the day and digital asset trading platforms, including
the larger-volume markets, have been known to shut down temporarily or permanently due to security concerns, directed denial-of-service
attacks and other reasons. As a result, during periods when U.S. equity markets are open but large portions of the bitcoin and ether markes
are 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 investment
in the Shares if a Shareholder sells or acquires its Shares during a period of discount or premium, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During periods when U.S. equity
markets are closed but digital asset trading platforms are open, significant changes in the prices of bitcoin and ether could result in
a difference in performance between the prices of bitcoin and ether and the most recent Share price. To the extent that the prices of
bitcoin and ether moves significantly in a negative direction after the close of U.S. equity markets, the trading price of the Shares
may &ldquo;gap&rdquo; down to the full extent of such negative price shift when U.S. equity markets reopen. To the extent that the prices
of bitcoin and ether drops significantly during hours in which U.S. equity markets are closed, investors may not be able to sell their
Shares until after the &ldquo;gap&rdquo; down has been fully realized, resulting in an inability to mitigate losses in a rapidly negative
market.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Buying and selling
activity associated with the purchase and redemption of Baskets may adversely affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no limit on the number
of bitcoin and ether the Trust may acquire (other than the overall limit on the number of bitcoin and ether in existence established by
the original bitcoin and ether protocol and any limit on the number of Shares registered by the Trust).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor&rsquo;s purchase
of bitcoin and ether in connection with Basket purchase orders may cause the prices of bitcoin and ether to increase, which will result
in higher prices for the Shares. Increases in the bitcoin and ether prices may also occur as a result of bitcoin and ether purchases by
other 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Selling activity associated
with sales of bitcoin and ether by the Sponsor in connection with redemption orders may decrease the bitcoin and ether prices, which will
result in lower prices for the Shares. Decreases in bitcoin and ether prices may also occur as a result of selling activity by other market
participants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the effect
that 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 represent
a substantial portion of demand for bitcoin and ether at any given time and the sales and purchases by such investment vehicles may impact
the prices of bitcoin and ether. If the prices of bitcoin and ether declines, the trading price of the Shares will generally also decline.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The inability
of Authorized Participants and market makers to hedge their bitcoin and ether exposure may adversely affect the liquidity of Shares and
the value of an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Authorized Participants and
market makers will generally want to hedge their exposure in connection with Basket purchase and redemption orders. To the extent Authorized
Participants and market makers are unable to hedge their exposure due to market conditions (e.g., insufficient bitcoin and ether liquidity
in the market, inability to locate an appropriate hedge counterparty, extreme volatility in the prices of bitcoin and ether, wide spreads
between 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 not
create or redeem Baskets. In addition, the hedging mechanisms employed by Authorized Participants and market makers to hedge their exposure
to bitcoin and ether may not function as intended, which may make it more difficult for them to enter into such transactions. Such events
could negatively impact the market price of Shares and the spread at which Shares trade on the open market. To the extent Authorized Participants
wish to use futures to hedge their exposure, note that while growing in recent years, the market for exchange-traded bitcoin and ether
futures 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, the
adoption of bitcoin and ether and the commercial and speculative interest in the market.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Arbitrage transactions
intended to keep the price of Shares closely linked to the prices of bitcoin and ether may be problematic if the process for the purchase
and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the processes of creation
and redemption of Shares (which depend on timely transfers of bitcoin and ether to and by the Bitcoin and Ether Custodian) encounter any
unanticipated 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, the
closing 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, then
potential market participants, such as the Authorized Participants and their customers, who would otherwise be willing to purchase or
redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the prices
of the underlying bitcoin and ether may not take the risk that, as a result of those difficulties, they may not be able to realize the
profit they expect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Alternatively, in the case
of a network outage or other problems affecting the Bitcoin and Ethereum networks, the processing of transactions on the Bitcoin and Ethereum
networks may be disrupted, which in turn may prevent Digital Asset Trading Counterparties from depositing or withdrawing bitcoin and ether
from their custody accounts, which in turn could affect the creation or redemption of Baskets. If this is the case, the liquidity of the
Shares may decline and the price of the Shares may fluctuate independently of the prices of bitcoin and ether and may fall or otherwise
diverge from NAV. Furthermore, in the event that the markets for bitcoin and ether should become relatively illiquid and thereby materially
restrict opportunities for arbitraging by delivering bitcoin and ether in return for Baskets, the price of Shares may diverge from the
value of bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors may
be adversely affected by purchase or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 during
which 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 distribution
is not reasonably practicable (for example, as a result of an interruption in services or availability of the Prime Execution Agent, Bitcoin
and 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, internet
services, or network provider services, unavailability of Fedwire, SWIFT or banks&rsquo; payment processes, significant technical failure,
bug, error, disruption or fork of the Bitcoin and Ethereum networks, hacking, cybersecurity breach, or power, internet, or Bitcoin and
Ethereum networks outage, or similar event), or (3) such other period as the Sponsor determines to be necessary for the protection of
the Shareholders of the Trust (for example, where acceptance of the U.S. dollars needed to create each Basket would have certain adverse
tax consequences to the Trust or its Shareholders). In addition, the Trust may reject a redemption order if the order is not in proper
form 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 impact
how the Shares are traded and arbitraged in the secondary market, which could cause Shares to trade at levels materially different (premiums
and discounts) from the value of their underlying bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors may
be adversely affected by an overstatement or understatement of the NAV calculation of the Trust due to the valuation method employed on
the date of the NAV calculation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In certain circumstances,
the Trust&rsquo;s bitcoin and bitcoin and ether investments may be valued using techniques other than reliance on the price established
by the Pricing Benchmarks. The value established by using the Pricing Benchmarks may be different from what would be produced through
the use of another methodology. The value of bitcoin and ether or other digital asset investments valued using techniques other than those
employed by the Pricing Benchmarks, including &ldquo;fair valuation measures,&rdquo; may differ from the value of bitcoin and ether determined
by reference to the Pricing Benchmarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Pricing Benchmarks
are not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect an accurate bitcoin
and ether price, the Trust&rsquo;s holdings may be &ldquo;fair valued&rdquo; in accordance with the valuation policies approved by the
Sponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all available factors
the Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using third-party
valuation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted median prices of
bitcoin and ether provided by a Secondary Source. If a Secondary Source is not available or the Sponsor in its sole discretion determines
the Secondary Sources are unreliable, the price set by the Trust&rsquo;s principal market as of 4:00 p.m. ET, on the valuation date would
be considered for utilization. In the event the principal market price is not available or the Sponsor in its sole discretion determines
the principal market valuation is unreliable the Sponsor will use its best judgment to determine a good faith estimate of fair value based
upon all available factors. The Sponsor does not anticipate that the need to &ldquo;fair value&rdquo; bitcoin and ether will be a common
occurrence.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As an owner of
Shares, you will not have the rights normally associated with ownership of other types of shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shares are not entitled to
the same rights as shares issued by a corporation. By acquiring Shares, you are not acquiring the right to elect directors, to receive
dividends, to vote on certain matters regarding the issuer of the Shares or to take other actions normally associated with the ownership
of shares. You will only have the limited rights described under &ldquo;MANAGEMENT; VOTING BY SHAREHOLDERS.&rdquo;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor and
the Trustee may agree to amend the Trust Agreement or Sponsor Agreement without the consent of the Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor and the Trustee
may agree to amend the Trust Agreement or Sponsor Agreement without Shareholder consent. The Sponsor shall determine the contents and
manner of delivery of any notice of any Trust Agreement amendment. Such notice may be provided on the Trust&rsquo;s website, in a prospectus
supplement, through a current report on Form 8-K and/or in the Trust&rsquo;s annual or quarterly reports. If an amendment to the Trust
Agreement or Sponsor Agreement imposes new fees and charges or increases existing fees or charges, including the Sponsor Fee (except for
taxes and other governmental charges, registration fees or other such expenses), or prejudices a substantial right of Shareholders, it
will become effective for outstanding Shares 30 days after notice of such amendment is given to registered owners. Shareholders that are
not registered owners (which most Shareholders will not be) may not receive specific notice of a fee increase other than through an amendment
to the Prospectus. Moreover, at the time an amendment becomes effective, by continuing to hold Shares, Shareholders are deemed to agree
to the amendment and to be bound by the Trust Agreement and Sponsor Agreement as amended without specific agreement to such increase.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is subject
to risks due to its concentration of investments in a single asset class.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unlike other funds that may
invest in diversified assets, the Trust&rsquo;s investment strategy is concentrated in two asset classes: bitcoin and ether. This concentration
maximizes the degree of the Trust&rsquo;s exposure to a variety of market risks associated with bitcoin and ether. By concentrating its
investment strategy solely on bitcoin and ether, any losses suffered as a result of a decrease in the value of bitcoin and ether can be
expected 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 underlying
assets that were diversified.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A possible &ldquo;short
squeeze&rdquo; due to a sudden increase in demand for the Shares that largely exceeds supply may lead to price volatility in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors may purchase Shares
to 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 exceeds
the number of Shares available for purchase (for example, in the event that large redemption requests by Authorized Participants dramatically
affect Share liquidity), investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders. Those
repurchases 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 &ldquo;short squeeze.&rdquo; A short squeeze could lead to volatile price movements in the Shares that
are not directly correlated to the prices of bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As the Sponsor
and its management have a limited history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable
to manage the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor has no history
of 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 Advisers
Act of 1940 (the &ldquo;Advisers Act&rdquo;) or a commodity pool operator or commodity trading adviser under the Commodity Exchange Act.
The past performances of the Sponsor&rsquo;s management in other positions, including their experiences in exchange-traded products that
hold bitcoin and ether individually, private funds that hold bitcoin and ether individually and traditional exchange-traded funds investing
in securities, are an imperfect indication of their ability to manage an investment vehicle such as the Trust. If the experience of the
Sponsor and its management is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust
may be adversely affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Security threats
and 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 Ethereum
blockchains, thefts can be difficult to trace, which may make bitcoin and ether particularly attractive targets for theft. Cyber security
failures or breaches of one or more of the Trust&rsquo;s service providers (including, but not limited to, the Transfer Agent, the Marketing
Agent, the Administrator, the Cash Custodian or the Bitcoin and Ether Custodian) have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, violations of applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, and/or additional compliance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust and its service
providers&rsquo; 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 believes
that the Trust&rsquo;s bitcoin and ether held in the Trust Bitcoin Account and/or Trust Ether Account at the Bitcoin and Ether Custodian
or 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&rsquo;s bitcoin and ether and will only become more appealing as the Trust&rsquo;s assets grow. To the extent
that the Trust, Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent is unable to identify and mitigate or stop new security
threats or otherwise adapt to technological changes in the digital asset industry, the Trust&rsquo;s bitcoin and ether may be subject
to theft, loss, destruction or other attack.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor believes that
the security procedures in place for the Trust, including, but not limited to, offline storage, or cold storage, multiple encrypted private
key &ldquo;shards,&rdquo; and other measures, are reasonably designed to safeguard the Trust&rsquo;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 be
borne by the Trust and the security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust&rsquo;s
technical infrastructure, which could result in theft, loss or damage of its assets. The Sponsor does not control the Bitcoin and Ether
Custodian&rsquo;s or Prime Execution Agent&rsquo;s operations or implementation of such security procedures and there can be no assurance
that such security procedures will actually work as designed or prove to be successful in safeguarding the Trust&rsquo;s assets against
all possible sources of theft, loss or damage. Assets not held in cold storage, such as assets held in a trading account, may be more
vulnerable to security breach, hacking or loss than assets held in cold storage. Furthermore, assets held in a trading account, including
the Trust&rsquo;s Trading Balance at the Prime Execution Agent, are held on an omnibus, rather than segregated basis, which creates greater
risk of loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The security procedures and
operational 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 Trust
Bitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust&rsquo;s Trading Balance with the Prime Execution Agent, the
private keys (and therefore bitcoin and ether) or other data of the Trust. Additionally, outside parties may attempt to fraudulently induce
employees of the Sponsor, Bitcoin and Ether Custodian, Prime Execution Agent or the Trust&rsquo;s other service providers to disclose
sensitive information in order to gain access to the Trust&rsquo;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 and
often are not recognized until launched against a target, the Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent may be unable
to anticipate these techniques or implement adequate preventative measures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An actual or perceived breach
of the Trust Bitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust&rsquo;s Trading Balance with the Prime Execution
Agent could harm the Trust&rsquo;s operations, result in partial or total loss of the Trust&rsquo;s assets, damage the Trust&rsquo;s reputation
and 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 result
in a reduction in the price of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While the Sponsor and the
Trust&rsquo;s service providers have established business continuity plans and systems that they respectively believe are reasonably designed
to prevent cyber attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not
been, or cannot be, identified. Service providers may have limited indemnification obligations to the Trust, which could be negatively
impacted as a result.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Trust&rsquo;s holdings
of bitcoin and ether are lost, stolen or destroyed under circumstances rendering a party liable to the Trust, the responsible party may
not have the financial resources sufficient to satisfy the Trust&rsquo;s claim. For example, as to a particular event of loss, the only
source 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 satisfy
a valid claim of the Trust. Similarly, as noted below, the Bitcoin and Ether Custodian and Prime Execution Agent have limited liability
to the Trust, which could adversely affect the Trust&rsquo;s ability to seek recovery from them, even when the Bitcoin and Ether Custodian&rsquo;s
or Prime Execution Agent&rsquo;s actions or failure to act are the cause of the Trust&rsquo;s loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It may not be possible, either
because of a lack of available policies or because of prohibitive cost, for the Trust to obtain insurance that would cover losses of the
Trust&rsquo;s bitcoin and ether. If an uninsured loss occurs or a loss exceeds policy limits, the Trust could lose all of its assets.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s
risk management processes and policies may prove to not be adequate to prevent any loss of the Trust&rsquo;s bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor is continuing
to monitor and evaluate the Trust&rsquo;s risk management processes and policies and believes that the current risk management processes
and procedures are reasonably designed and effective. The Sponsor believes that the security procedures that the Sponsor, Bitcoin and
Ether Custodian and Prime Execution Agent utilize, such as hardware redundancy, segregation and offline data storage (i.e., the maintenance
of data on computers and/or storage media that is not directly connected to or accessible from the internet and/or networked with other
computers, also known as &ldquo;cold storage&rdquo;) protocols are reasonably designed to safeguard the Trust&rsquo;s bitcoin and ether
from theft, loss, destruction or other issues relating to hackers and technological attack. Despite the number of security procedures
that the Sponsor, Bitcoin and Ether Custodian and Prime Execution Agent employ, it is impossible to guarantee the prevention of any loss
due to a security breach, software defect, act of God, pandemic or riot that may be borne by the Trust. Notwithstanding the above, the
Sponsor, Bitcoin and Ether Custodian and Prime Execution Agent are responsible for their own gross negligence, willful misconduct or bad
faith. In the event that the Trust&rsquo;s risk management processes and policies prove to not be adequate to prevent any loss of the
Trust&rsquo;s bitcoin and ether and such loss is not covered by insurance or is otherwise recoverable, the value of the Shares will decrease
as a result and investors would experience a decrease in the value of their investment.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The development
and commercialization of the Trust is subject to competitive pressures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust and the Sponsor
face competition with respect to the creation of competing products. The Sponsor&rsquo;s competitors may have greater financial, technical
and 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 large
and established companies. If the SEC were to approve many or all of the currently pending applications for such exchange-traded bitcoin
and ether products, many or all of such products, including the Trust, could fail to acquire substantial assets, initially or at all.
The Trust&rsquo;s competitors may also charge a substantially lower fee than the Sponsor Fee in order to achieve initial market acceptance
and scale. Accordingly, the Sponsor&rsquo;s competitors may commercialize a competing product more rapidly or effectively than the Sponsor
is able to, which could adversely affect the Sponsor&rsquo;s competitive position and the likelihood that the Trust will achieve initial
market acceptance, and could have a detrimental effect on the scale and sustainability of the Trust. For exchange-traded products similar
to the Trust, there have been significant &ldquo;first-mover&rdquo; 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 the
SEC were to approve other exchange-traded bitcoin and ether products prior to approving the Trust, the Trust could be significantly negatively
affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Trust fails to achieve
sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue to cover the costs associated with launching
and maintaining the Trust, and such shortfalls could impact the Sponsor&rsquo;s ability to properly invest in robust ongoing operations
and 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 number
of Authorized Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in
the Shares for extended periods and the Trust&rsquo;s failure to reflect the performance of the prices of bitcoin and ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the Trust will
compete with direct investments in bitcoin and ether, bitcoin and ether futures-based products, other digital assets and other potential
financial vehicles, possibly including securities backed by or linked to digital assets and other investment vehicles that focus on other
digital assets. Market and financial conditions, and other conditions beyond the Trust&rsquo;s control, may make it more attractive to
invest directly or in other vehicles, which could adversely affect the performance of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that the Trust
incurs transaction expenses in connection with the creation and redemption process, litigation expenses, indemnification obligations under
the Trust&rsquo;s service provider agreements and other extraordinary expenses that are not borne by the Sponsor, such expenses will be
borne by the Trust. To the extent that the Trust fails to attract a sufficiently large amount of investors, the effect of such expenses
on the value of the Shares may be significantly greater than would be the case if the Trust had attracted more assets.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The lack of active
trading markets for the Shares may result in losses on investors&rsquo; investments at the time of disposition of Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although Shares are expected
to be publicly listed and traded on the Exchange, there can be no guarantee that an active trading market for the Trust will develop or
be maintained. If investors need to sell their Shares at a time when no active market for them exists, the price investors receive for
their Shares, assuming that investors are able to sell them, likely will be lower than the price that investors would receive if an active
market did exist and, accordingly, a Shareholder may suffer losses.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Possible illiquid
markets may exacerbate losses or increase the variability between the Trust&rsquo;s NAV and its market price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether is a novel asset with
a very limited trading history. Therefore, the markets for bitcoin and ether may be less liquid and more volatile than other markets for
more established products, such as futures contracts for traditional physical commodities. It may be difficult to execute bitcoin and
ether trades at a specific price when there is a relatively small volume of buy and sell orders in the bitcoin and ether market. A market
disruption can also make it more difficult to liquidate a position or find a suitable counterparty at a reasonable cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Market illiquidity may cause
losses for the Trust. The large size of the positions that the Trust may acquire will increase the risk of illiquidity by both making
the positions more difficult to liquidate and increasing the losses incurred while trying to do so should the Trust need to liquidate
its bitcoin and ether. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Trust will typically
invest in bitcoin and ether, which is highly concentrated.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s
bitcoin and ether may be subject to loss, damage, theft or restriction on access.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is a risk that part
or all of the Trust&rsquo;s bitcoin and ether could be lost, stolen or destroyed, potentially by the loss or theft of the private keys
held by the Bitcoin and Ether Custodian or Prime Execution Agent associated with Trust&rsquo;s bitcoin and ether. The Sponsor believes
that the Bitcoin and Ether Custodian&rsquo;s and Prime Execution Agent&rsquo;s operations are an appealing target to hackers or malware
distributors seeking to destroy, damage or steal bitcoin and ether or private keys. Although the Bitcoin and Ether Custodian and Prime
Execution Agent use multiple means and layers of security to minimize the risk of loss, damage and theft, neither the Bitcoin and Ether
Custodian, the Prime Execution Agent nor the Sponsor can guarantee that such security will prevent such loss, damage or theft, whether
caused intentionally, accidentally or by act of God. Access to the Trust&rsquo;s bitcoin and ether could also be restricted by natural
events (such as an earthquake or flood), human actions (such as a terrorist attack) or security or compliance measures (such as in response
to a hard fork). Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Several factors
may affect the Trust&rsquo;s ability to achieve its investment objective on a consistent basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no guarantee that
the Trust will meet its investment objectives. Factors that may affect the Trust&rsquo;s ability to meet its investment objective include:
(1) the Trust&rsquo;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&rsquo;s portfolio
holdings to comply with investment restrictions or policies or regulatory or tax law requirements; (6) early or unanticipated closings
of the markets on which bitcoin and ether trade, resulting in the inability of the Authorized Participants to execute intended portfolio
transactions; (7) operational or methodological issues with the Pricing Benchmarks that result in the benchmark used by the Trust not
accurately representing the true value of the Trust&rsquo;s bitcoin and ether holdings; and (8) accounting standards.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of
bitcoin and ether represented by a Share will decline over time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of bitcoin and
ether represented by a Share will continue to be reduced during the life of the Trust due to the transfer of the Trust&rsquo;s bitcoin
and ether to pay the Sponsor Fee and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. This dynamic will occur
irrespective 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 assumed
by the Sponsor, any interest payable on the Trade Credits will be the responsibility of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each outstanding Share represents
a unit of undivided beneficial ownership of the Trust. The Trust does not generate any income and transfers bitcoin and ether to pay the
Sponsor Fee, and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. Therefore, the amount of bitcoin and ether
represented by each Share will gradually decline over time. This is also true with respect to Shares that are issued in exchange for additional
deposits of bitcoin and ether or cash used to acquire bitcoin and ether over time, as the amount of bitcoin and ether required to create
Shares proportionally reflects the amount of bitcoin and ether represented by the Shares outstanding at the time of such Basket being
created. Assuming a constant bitcoin and ether prices, the trading price of the Shares is expected to gradually decline relative to the
prices of bitcoin and ether as the amount of bitcoin and ether represented by the Shares gradually declines.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors should be aware
that the gradual decline in the amount of bitcoin and ether represented by the Shares will occur regardless of whether the trading price
of the Shares rises or falls in response to changes in the price of bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Extraordinary
expenses resulting from unanticipated events may become payable by the Trust, adversely affecting an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In consideration for the Sponsor
Fee, the Sponsor has contractually assumed certain operational and periodic expenses of the Trust. See &ldquo;ADDITIONAL INFORMATION ABOUT
THE TRUST&mdash;The Trust&rsquo;s Fees and Expenses.&rdquo; Extraordinary, non-recurring expenses that are not assumed by the Sponsor
are borne by the Trust and paid through the sale of the Trust&rsquo;s bitcoin and ether. Any incurring of extraordinary expenses by the
Trust could adversely affect an investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of the
Shares will be adversely affected if the Trust is required to indemnify the Trustee, the Administrator, the Transfer Agent, the Bitcoin
and Ether Custodian, the Prime Execution Agent or the Cash Custodian.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Trust Agreement
and the Trust&rsquo;s service provider agreements, each of the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, Prime
Execution Agent, Cash Custodian and Sponsor has a right to be indemnified by the Trust for any liability or expense it incurs, subject
to certain exceptions. Therefore, the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, Prime Execution Agent, Cash
Custodian or Sponsor may require that the assets of the Trust be sold in order to cover losses or liability suffered by it. Any sale of
that kind would reduce the net assets of the Trust and the NAV.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 25pt; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><B><I>Unforeseeable risks</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin and ether have gained
commercial 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 bitcoin
and ether may expose investors in the Trust to additional risks that are impossible to predict.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Regulatory Risk</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Future and current
regulations by a U.S. or foreign government or quasi-governmental agency could have an adverse effect on an investment in the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The regulation of bitcoin
and ether and related products and services continues to evolve, may take many different forms and will, therefore, impact the Bitcoin
and Ethereum networks and bitcoin and ether and their usage in a variety of manners. The inconsistent and sometimes conflicting regulatory
landscape may make it more difficult for bitcoin and ether businesses to provide services, which may impede the growth of the bitcoin
and ether economies and have an adverse effect on consumer adoption of bitcoin and ether. There is a possibility of future regulatory
change altering, perhaps to a material extent, the nature of an investment in the Shares or the ability of the Trust to continue to operate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes to current regulatory
determinations of bitcoin or ether&rsquo;s status under federal or state securities laws, changes to regulations surrounding bitcoin and
ether futures or related products, or actions by a U.S. or foreign government or quasi-governmental agency exerting regulatory authority
over bitcoin and ether, the Bitcoin and Ethereum networks, bitcoin and ether trading, or related activities impacting other parts of the
digital asset market, may adversely impact bitcoin and ether and therefore may have an adverse effect on the value of an investment in
the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is not
a registered investment company and is not subject to the Commodity Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is not a registered
investment company subject to the Investment Company Act of 1940 (&ldquo;Investment Company Act&rdquo;). Consequently, Shareholders of
the Trust do not have the regulatory protections provided to Shareholders in registered and regulated investment companies, which, for
example, require investment companies to have a certain percentage of disinterested directors and regulate the relationship between the
investment company and certain of its affiliates. Further, the Trust will not hold or trade in commodity futures contracts regulated by
the Commodity Exchange Act, as administered by the CFTC. The Trust will not engage in &ldquo;retail commodity transactions&rdquo;&mdash;
any bitcoin and ether transactions entered into on a leveraged, margined or financed basis (as described above). Such transactions are
deemed to be commodity futures under the Commodity Exchange Act and subject to CFTC jurisdiction. Furthermore, the Sponsor believes that
the Trust is not a commodity pool for purposes of the Commodity Exchange Act. Consequently, Shareholders will not have the regulatory
protections provided to Shareholders in Commodity Exchange Act-regulated instruments or commodity pools.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Trading on digital
asset trading platforms outside the United States is not subject to U.S. regulation and may be less reliable than U.S. trading platforms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent any of the Trust&rsquo;s
trading is conducted on digital asset trading platforms outside the United States, trading on such trading platforms is not regulated
by any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. trading platforms. Certain foreign markets
may be more susceptible to disruption than U.S. trading platforms. These factors could adversely affect the performance of the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As the Bitcoin
and Ethereum networks and the broader digital assets ecosystem have grown, they have begun to attract more regulatory attention around
the globe. The future regulatory environment is uncertain and may vary by country or even within countries. Failure to appropriately regulate
the digital assets ecosystem could stifle innovation, which could adversely impact the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Current and future legislation,
CFTC and SEC rulemaking, and other regulatory developments may impact the manner in which bitcoin and ether are treated for classification
and clearing purposes. In particular, bitcoin and ether may be classified by the CFTC as a &ldquo;commodity interest&rdquo; under the
Commodity Exchange Act and certain transactions in bitcoin and ether may be deemed to be commodity futures or bitcoin and ether may be
classified by the SEC as a &ldquo;security&rdquo; under U.S. federal securities laws. As of the date of this Prospectus, the Sponsor is
not 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 commodity
interest), these rulings are not definitive and the Sponsor and the Trust cannot be certain as to how future regulatory developments will
impact the treatment of bitcoin and ether under U.S. law. In the face of such developments, the required registrations and compliance
steps may result in extraordinary, non-recurring expenses to the Trust. If the Sponsor decides to terminate the Trust in response to the
changed regulatory circumstances, the Trust may be dissolved or liquidated at a time that is disadvantageous to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC has not asserted regulatory
authority over bitcoin or ether or trading or ownership of bitcoin or ether and has not expressed the view that bitcoin or ether should
be classified or treated as a security for purposes of U.S. federal securities laws. In fact, senior members of the staff of the SEC have
expressed 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 recent
letter regarding the SEC&rsquo;s review of proposed rule changes to list and trade shares of certain bitcoin- and ether-related investment
vehicles on public markets, the SEC staff stated that it has significant investor protection concerns regarding the markets for digital
assets, including the potential for market manipulation and fraud. In March 2018, it was reported that the SEC was examining as many as
100 investment funds with strategies focused on digital assets. The reported focus of the examinations is on the accuracy of risk disclosures
to 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 been
reported that some of these funds have received subpoenas from the SEC&rsquo;s Enforcement Division. The SEC also has determined that
certain digital assets are securities under U.S. securities laws. In these determinations, the SEC reasoned that the unregistered offer
and sale of digital assets can, in certain circumstances, including ICOs, be considered illegal public offering of securities. A significant
amount of funding for digital asset startups has come from ICOs, and if ICOs are halted or face obstacles, or companies that rely on them
face legal action or investigation, it could have a negative impact on the value of digital assets, including bitcoin and ether. Finally,
the SEC&rsquo;s Division of Examinations (&ldquo;Examinations&rdquo;) 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The SEC has stated that certain
digital assets may be considered &ldquo;securities&rdquo; under federal securities laws. The test for determining whether a particular
digital asset is a &ldquo;security&rdquo; is complex and the outcome is difficult to predict. In April 2019, the SEC&rsquo;s Strategic
Hub for Innovation and Financial Technology published a framework for the analysis of digital assets; however, this framework is not a
rule, regulation or statement of the Commission and is not binding on the Commission. If Ethereum is determined to be a &ldquo;security&rdquo;
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 have
material adverse consequences for bitcoin and ether as digital assets. For example, it may become more difficult for bitcoin and ether
to be traded, cleared and custodied as compared to other digital assets that are not considered to be securities, which could in turn
negatively 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 &ldquo;security&rdquo; 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 have material adverse consequences for bitcoin
and ether as digital assets due to negative publicity or a decline in the general acceptance of digital assets. In addition, trading platforms
that feature digital assets that are determined to be securities may face penalties or be required to shut down if they do not have the
licenses required to facilitate electronic markets in securities, which could result in a reduction of the liquidity of bitcoin and ether
markets. As such, any determination that bitcoin, ether or any other digital asset is a security under federal or state securities laws
may adversely affect the value of bitcoin and ether and, as a result, the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that bitcoin
and ether are deemed to fall within the definition of a security under U.S. federal securities laws, the Trust and the Sponsor may be
subject to additional requirements under the Investment Company Act and the Advisers Act. The Sponsor or the Trust may be required to
register as an investment adviser under the Advisers Act. Such additional registration may 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 may terminate the Trust. Any such termination could result
in the liquidation of the Trust&rsquo;s bitcoin and ether at a time that is disadvantageous to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CFTC has regulatory jurisdiction
over the bitcoin and ether futures markets. In addition, because the CFTC has determined that bitcoin and ether are &ldquo;commodities&rdquo;
under the CEA and the rules thereunder, it has jurisdiction to prosecute fraud and manipulation in the cash, or spot, markets for bitcoin
and ether. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions
involving bitcoin and ether that do not utilize collateral, leverage, or financing. The National Futures Association (the &ldquo;NFA&rdquo;)
is the self-regulatory agency for the U.S. futures industry, and, as such, has jurisdiction over bitcoin and ether futures. However, the
NFA does not have regulatory oversight authority for the cash or spot markets for bitcoin and ether trading or transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the extent that bitcoin
and ether are deemed to fall within the definition of a &ldquo;commodity interest&rdquo; under the Commodity Exchange Act, the Trust and
the Sponsor may be subject to additional regulation under the Commodity Exchange Act and CFTC regulations. These additional requirements
may 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 may
terminate the Trust. Any such termination could result in the liquidation of the Trust&rsquo;s bitcoin and ether at a time that is disadvantageous
to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, if any other digital
asset with widespread markets is determined to be a &ldquo;commodity interest&rdquo; under the Commodity Exchange Act, it may have material
adverse consequences for bitcoin and ether as a digital asset due to negative publicity or a decline in the general acceptance of digital
assets. In addition, trading platforms that feature digital assets that are determined to be commodity interests may face penalties or
be 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin and Ethereum and other
digital assets currently face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China, the United
Kingdom, Australia, Russia, Israel, Poland, India and Canada. Cybersecurity attacks by state actors, particularly for the purpose of evading
international economic sanctions, are likely to attract additional regulatory scrutiny to the acquisition, ownership, sale and use of
digital assets, including bitcoin and ether. The effect of any existing regulation or future regulatory change on the Trust or bitcoin
and ether is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Shares. Various
foreign jurisdictions have adopted, and may continue to adopt in the near future, laws, regulations or directives that affect digital
assets, particularly with respect to digital asset exchanges, trading venues and service providers that fall within such jurisdictions&rsquo;
regulatory scope. For example, on May 21, 2021, Chinese Vice Premier Liu He and the State Council issued a statement aiming to crack down
on bitcoin mining in China. Over the subsequent weeks, multiple regions began to shut down mining operations, including what was estimated
to be the three largest Chinese mining regions in Xinjiang, Sichuan, and Inner Mongolia. This resulted in a material decrease in the global
bitcoin hash rate. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance
of digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability
of the digital assets economy in these jurisdictions as well as in the United States and elsewhere, or otherwise negatively affect the
value of digital assets, including bitcoin and ether, and, in turn, the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to financial regulation
of bitcoin and ether, because of the high energy usage required for bitcoin mining, bitcoin may be subject to regulation stemming from
energy usage and/or climate concerns. For example, as of December 31, 2022, approximately 245 million tera hashes are performed every
second in connection with mining on the Bitcoin network. Although measuring the electricity consumed by this process is difficult because
these 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 addition
to the direct energy costs of performing calculations on any given digital asset network, there are indirect costs that impact a network&rsquo;s
total energy consumption, including the costs of cooling the machines that perform these calculations. A number of states and countries
have adopted, or are considering the adoption of, regulatory frameworks to impede bitcoin mining and/or bitcoin use more broadly. For
example, on May&nbsp;26, 2021, Iran placed a temporary ban on bitcoin mining in an attempt to decrease energy usage and help alleviate
blackouts. New York State recently failed to pass a bill that would place a moratorium on mining operations for proof-of-work blockchains
such as bitcoin. Depending on how futures regulations are formulated and applied, such policies could have the potential to negatively
affect the price of bitcoin, and, in turn, the value of the Shares. Increased regulation and the corresponding compliance cost of these
regulations could additionally result in higher barriers to entry for bitcoin miners, which could increase the concentration of the hash
rate, potentially having a negative impact on the price of bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Notwithstanding Ethereum&rsquo;s
move 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 consequently
adversely impact the value of the Shares. This could adversely affect the price of ether, or the operation of the Bitcoin and Ethereum
networks, and accordingly decrease the value of the Shares, by creating negative sentiment around digital assets generally.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It may be illegal
now, or in the future, to acquire, own, hold, sell or use bitcoin and ether in one or more countries, and ownership of, holding or trading
in the Shares may also be considered illegal and subject to sanction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although currently bitcoin
and 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 bitcoin
and ether or to exchange bitcoin and ether for fiat currency. Such an action may also result in the restriction of ownership, holding
or trading in the Shares. Such a restriction could result in the termination and liquidation of the Trust at a time that is disadvantageous
to Shareholders, or may adversely affect an investment in the Shares.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Tax Risk</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The IRS may disagree
with or seek to challenge the Trust&rsquo;s treatment as a grantor trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor intends to take
the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a
grantor trust, the Trust will not be subject to U.S. federal income tax. Rather, if the Trust is a grantor trust, each beneficial owner
of Shares will be treated as directly owning its pro rata share of the Trust&rsquo;s assets and a pro rata portion of the Trust&rsquo;s
income, gain, losses and deductions will &ldquo;flow through&rdquo; to each beneficial owner of Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders could
incur a tax liability without an associated distribution of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 bitcoin
and ether as a result of the Trust using bitcoin and ether to pay its expenses, including the Sponsor Fee) that is otherwise not associated
with a distribution to Shareholders, or in connection with the receipt cash from the Sponsor in connection with the Sponsor&rsquo;s sale
of Incidental Right(s) and/or IR Asset(s). Shareholders may be subject to tax due to the grantor trust status of the Trust even though
there is not a corresponding distribution from the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax treatment
of bitcoin and ether and transactions involving bitcoin and ether for U.S. federal income tax purposes may change.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax treatment of digital
assets is still evolving and subject to change. Current IRS guidance indicates that bitcoin and ether should be treated as property for
federal income tax purposes and that transactions involving the exchange of bitcoin and ether in return for goods and services should
be 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 bitcoin
and ether or in transactions relating to investments in bitcoin and ether, including without limitation the tax treatment of a fork or
airdrop, may evolve and change from those described in this Prospectus, possibly with retroactive effect. For example, current guidance
indicates 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 or
a currency, the tax rate incurred by investors would be higher. Additional disclosure requirements may also apply to an investment in
digital assets. Investors should consult their individual tax advisers to determine if such disclosure requirements apply to them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any change in the U.S. federal
income tax treatment of bitcoin and ether may have a negative effect on the prices of bitcoin and ether and may adversely affect the value
of the Shares. Whether any additional guidance will adversely affect the U.S. federal income tax treatment of an investment in bitcoin
and ether or in transactions relating to investments in bitcoin and ether is unknown. There can be no assurance that the IRS will not
alter its position with respect to digital assets in the future or that a court would uphold the treatment set forth in the Notice and
the Rulings &amp; FAQs.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The tax treatment
of bitcoin and ether and transactions involving bitcoin and ether for state and local tax purposes is not settled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because bitcoin and ether
are new technological innovations, the tax treatment of bitcoin and ether for state and local tax purposes, including without limitation
state and local income and sales and use taxes, is not settled. It is uncertain what guidance, if any, on the treatment of bitcoin and
ether for state and local tax purposes may be issued in the future. A state or local government authority&rsquo;s treatment of bitcoin
and ether may have negative consequences, including the imposition of a greater tax burden on investors in bitcoin and ether or the imposition
of a greater cost on the acquisition and disposition of bitcoin and ether generally. Any such treatment may have a negative effect on
the prices of bitcoin and ether and may adversely affect the value of the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A &ldquo;fork&rdquo;
of the Bitcoin and Ethereum blockchains or an airdrop could result in Shareholders incurring a tax liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a fork occurs in the Bitcoin
or Ethereum blockchains, the Trust Agreement requires that the Sponsor analyze the transaction according to several criteria and promptly
determine which digital asset network is generally accepted as the Bitcoin or Ethereum networks and should therefore be considered the
appropriate network for the Trust&rsquo;s purposes. The Sponsor will base its determination on a variety of then-relevant factors, including,
but not limited to, the Sponsor&rsquo;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 engagement
with, the Bitcoin or Ethereum networks. The outcome of such determination shall determine which asset is &ldquo;bitcoin&rdquo; or &ldquo;ether&rdquo;
and which is the Forked Asset, an IR Asset. Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rights
and IR Assets, including Forked Assets. Such assets are not considered assets of the Trust at any point in time. Once it has been determined
by 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 desirable
in connection with its acquisition of such asset. In the event that the Sponsor decides to sell the Forked Asset, it will seek to do so
for cash. This may be a sale of the Forked Asset directly in exchange for cash, or in exchange for another digital asset which may subsequently
be exchanged for cash. The Sponsor would then contribute that cash back to the Trust, which in turn would distribute the cash to DTC to
be distributed to Shareholders in proportion to the number of Shares owned. The receipt of cash in connection with this distribution may
cause Shareholders to incur a U.S. federal, state, local, or foreign tax liability. In addition, the IRS may not accept the Trust&rsquo;s
position that disclaimed Incidental Rights or IR Assets do not represent a taxable incident. Any tax liability could adversely impact
an investment in the Shares and may require Shareholders to prepare and file tax returns. Any tax liability could adversely impact an
investment in the Shares and may require Shareholders to prepare and file tax returns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the IRS guidance on
digital assets, hard forks, airdrops and similar occurrences with respect to digital assets will under certain circumstances be treated
as taxable events giving rise to ordinary income. In the absence of guidance to the contrary, it is possible that any such income recognized
by a U.S. tax-exempt Shareholder would constitute &ldquo;unrelated business taxable income&rdquo; (&ldquo;UBTI&rdquo;). A tax-exempt Shareholder
should consult its tax adviser regarding whether such Shareholder may recognize UBTI as a consequence of an investment in Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-U.S. Holders
may be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">IRS guidance on digital assets
does not address whether income recognized by a non-U.S. person as a result of a fork, airdrop or similar occurrence could be subject
to the 30% withholding tax imposed on U.S.-source &ldquo;fixed or determinable annual or periodical&rdquo; income. Non-U.S. Shareholders
should assume that, in the absence of guidance, a withholding agent (including the Sponsor) is likely to withhold 30% of any such income
recognized 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&rsquo;s sale
of an IR Right and/or IR Asset and contributing such cash back to the Trust.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other Risks</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 develops
and 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 the
option of the Sponsor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a new fund, there can be
no assurance that the Trust will grow to or maintain an economically viable size, in which case the Sponsor may elect to terminate the
Trust, which could result in the liquidation of the Trust&rsquo;s bitcoin and ether at a time that is disadvantageous to an investor in
the Shares. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue
to cover the costs associated with launching and maintaining the Trust, and such shortfalls could impact the Sponsor&rsquo;s ability to
properly invest in robust ongoing operations and controls of the Trust to minimize the risk of operating events, errors, or other forms
of losses to the Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the Trust may
also fail to attract adequate liquidity in the secondary market due to such competition, resulting in a sub-standard number of Authorized
Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in the Shares for
extended periods and the Trust&rsquo;s failure to reflect the performance of the prices of bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust may
be required to terminate and liquidate at a time that is disadvantageous to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Trust is required to
terminate and liquidate, such termination and liquidation could occur at a time that is disadvantageous to Shareholders, such as when
the prices of bitcoin and ether are lower than they was at the time when Shareholders purchased their Shares. In such a case, when the
Trust&rsquo;s bitcoin and ether is sold as part of the Trust&rsquo;s liquidation, the resulting proceeds distributed to Shareholders will
be less than if the prices of bitcoin and ether were higher at the time of sale. See &ldquo;ADDITIONAL INFORMATION ABOUT THE TRUST&mdash;Termination
of the Trust&rdquo; for more information about the termination of the Trust, including when the termination of the Trust may be triggered
by events outside the direct control of the Sponsor, the Trustee or Shareholders.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Exchange on
which the Shares are listed may halt trading in the Shares, which would adversely impact an investor&rsquo;s ability to sell Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Shares are listed for
trading on the Exchange under the market symbol &ldquo;[___].&rdquo; Trading in Shares may be halted due to market conditions or, in light
of 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 &ldquo;circuit breaker&rdquo; rules that require
trading to be halted for a specified period based on a specified market decline. Additionally, there can be no assurance that the requirements
necessary to maintain the listing of the Shares will continue to be met or will remain unchanged.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The liquidity
of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market
price of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the event that one or more
Authorized Participants or market makers that have substantial interests in the Shares withdraw or &ldquo;step away&rdquo; from participation
in the purchase (creation) or sale (redemption) of the Shares, the liquidity of the Shares will likely decrease, which could adversely
affect the market price of the Shares and result in investors incurring a loss on their investment.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The market infrastructure
of the bitcoin and ether spot markets could result in the absence of active Authorized Participants able to support the trading activity
of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 guarantee
that the Sponsor will be able to find an Authorized Participant to actively and continuously support the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Digital asset
trading platforms are not subject to the same regulatory oversight as traditional equity exchanges, which could negatively impact the
ability of Authorized Participants to implement arbitrage mechanisms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading for bitcoin and
ether occurs on multiple digital asset trading platforms that have various levels and types of regulation, but are not regulated in the
same 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Authorized
Participants serve in such capacity for several competing exchange-traded bitcoin and ether products, which could adversely affect the
market for the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Only an Authorized Participant
may engage in creation or redemption transactions directly with the Trust. Some or all of the Trust&rsquo;s Authorized Participants are
expected to serve as authorized participants or market makers for one or more exchange-traded bitcoin and ether products that compete
with the Trust. This may make it more difficult to engage or retain Authorized Participants for the Trust. Furthermore, because there
is no obligation on the part of the Authorized Participants to engage in creation and redemption or market making activities with respect
to the Trust&rsquo;s Shares, decisions by the Authorized Participants to not engage with the Trust or its Shares may result in a decline
in the liquidity of the Shares and the price of the Shares may fluctuate independently of the prices of Trust&rsquo;s bitcoin and ether
(i.e., at a greater premium or discount to the Trust&rsquo;s NAV).</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders that
are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with
trading in secondary markets may adversely affect investors&rsquo; investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Only Authorized Participants
may purchase or redeem Baskets. All other investors that desire to purchase or sell Shares must do so through the Exchange or in other
markets, if any, in which the Shares may be traded. Shares may trade at a premium or discount to the NAV per Share.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor is
leanly staffed and relies heavily on key personnel to manage its activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor is leanly staffed
and relies heavily on key personnel to manage its activities. These key personnel intend to allocate their time managing the Trust in
a manner that they deem appropriate. If such key personnel were to leave or be unable to carry out their present responsibilities, it
may have an adverse effect on the management of the Sponsor.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Conducting creations
and redemptions for cash has drawbacks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the near term, the Trust
will effect all of its creations and redemptions for cash, rather than in kind. The use of cash creations and redemptions may cause Shares
to trade in the market at greater bid-ask spreads or greater premiums or discounts to their NAV per Share. The use of cash for redemptions
will also limit the tax efficiency of the Trust. Additionally, the Trust&rsquo;s need to purchase bitcoin and ether in connection with
creation orders introduces the possibility that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoin
and ether by the Pricing Benchmarks, the rate used to calculate the Trust&rsquo;s NAV. This is known as &ldquo;slippage.&rdquo; While
transactions 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 consummate
a creation order for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and ether
ascribed by the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippage
from time to time. The Trust will also incur transaction costs it would not otherwise have incurred if it received and distributed bitcoin
and ether in kind and was not required to purchase and sell bitcoin and ether in connection with creation and redemption orders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 and
ether, the Trust would first need to seek certain regulatory approvals, including an amendment to Exchange&rsquo;s listing rules and an
amendment to the Trust&rsquo;s registration statement of which this prospectus forms a part. There can be no guarantee that the Trust
will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful
in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in
a prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Potential conflicts
of interest may arise among the Sponsor or its affiliates and the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust operations will
be managed by the Sponsor. It is possible that conflicts may arise between the Sponsor, affiliates, the Trust and its Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In resolving conflicts of
interest, the Sponsor is allowed to take into account the interests of other parties. Conflicts of interest may arise as a result of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">Sponsor and its affiliates will be indemnified pursuant to
the Trust Agreement;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Sponsor&rsquo;s allocation of resources (including the
time and attention of management and business development) among different clients and potential future business ventures, to each of
which they may owe fiduciary duties, the determination of which is the responsibility of the Sponsor and its affiliates;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The staff of the Sponsor may also directly or indirectly serve
affiliates and clients of the Sponsor;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Trust Agreement does not prohibit the Sponsor, its respective
affiliates and their respective officers and employees from engaging in other businesses or activities that might be in direct competition
with the Trust;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Sponsor and its staff may take direct positions in bitcoin
and ether or in other investments, or may advise other clients to take such positions, that may be in conflict with the investment objective
of the Shares or that may be of a size that could impact the prices of bitcoin and ether;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">There has been no independent due diligence conducted with
respect to this offering, where applicable, and there is an absence of arm&rsquo;s-length negotiation with respect to certain terms of
the Trust;</TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify">The Sponsor decides whether to obtain third-party services
for the Trust.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">By investing in the Shares,
investors agree and consent to the provisions set forth in the Trust Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For a further discussion of
the conflicts of interest among the Sponsor, Bitcoin and Ether Custodian, Cash Custodian, Trust and others, see <I>&ldquo;Conflicts of
Interest.&rdquo;</I></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is new,
and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is new. If the Trust
does 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&rsquo;s assets
are sold as part of the Trust&rsquo;s liquidation, the resulting proceeds distributed to Shareholders may be less than those that may
be realized in a sale outside of a liquidation context. Investors may be adversely affected by redemption or creation orders that are
subject to postponement, suspension or rejection under certain circumstances.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor may
discontinue its services, which may be detrimental to the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sponsor may be unwilling or
unable to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities and is unable to
be replaced, the Trust may have to terminate and liquidate the bitcoin and ether held by the Trust. A substitute sponsor&rsquo;s appointment
will not guarantee the Trust&rsquo;s continued operation even if a substitute sponsor is found, the appointment of a substitute sponsor
may not necessarily be beneficial to the Trust or an investment in the Shares and the Trust may terminate.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of the service
providers could resign or be removed by the Trust, which could trigger early termination of the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any service provider may resign
or be removed under its respective governing agreement. The Trust may dissolve in accordance with the terms of the Trust Agreement if
any service provider resigns or is removed and is unable to be replaced.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The lack of independent
advisers representing investors in the Trust may cause Shareholders to be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Counsel, accountants and other
advisers have been consulted by the Sponsor regarding the formation and operation of the Trust. Potential investors should consult their
own legal, tax and financial advisers regarding the desirability of an investment in the Shares. No counsel has been appointed to represent
an investor in connection with the offering of the Shares. Failure to consult with their own legal, tax and financial advisers may lead
to Shareholders making an undesirable investment decision with respect to investment in the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No separate counsel;
no responsibility or independent verification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Chapman and Cutler LLP represents
the Sponsor. The Trust does not have counsel separate and independent from counsel to the Sponsor. Chapman and Cutler LLP does not represent
Shareholders, and no independent counsel has been retained to represent Shareholders. Chapman and Cutler LLP is not responsible for any
acts or omissions of the Sponsor, the Administrator, the Trustee, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime Execution
Agent, 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 by
the Sponsor, the Administrator, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime Execution Agent, the Transfer Agent, and
the 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders do
not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by
limited voting and distribution rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Shares have limited voting
and distribution rights under the Trust Agreement. For example, except as required under applicable federal law or under the rules or
regulations 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&rsquo;s operations or business. The Trust may enact splits or reverse splits without Shareholder approval, and the Trust is
not required to pay regular distributions. The Trust will not have regular Shareholder meetings. The right to authorize actions, appoint
service providers or take other actions will not be held by Shareholders, unlike shareholders of other trusts.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An investment
in the Trust may be adversely affected by competition from other investment vehicles focused on bitcoin and ether or other digital assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust will compete with
direct investments in bitcoin and ether, other digital assets and other potential financial vehicles, possibly including securities backed
by or linked to digital assets and other investment vehicles that focus on other digital assets. Market and financial conditions, and
other conditions beyond the Trust&rsquo;s control, may make it more attractive to invest in other vehicles, which could adversely affect
the performance of the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors cannot
be assured of the Sponsor&rsquo;s continued services, the discontinuance of which may be detrimental to the Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investors cannot be assured
that the Sponsor will be able to continue to service the Trust for any length of time. If the Sponsor discontinues its activities on behalf
of 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 could
result in termination of the Trust.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The liability
of the Sponsor and the Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required to indemnify
the Trustee or the Sponsor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 negligence
or 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. As
a 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 of
that kind would reduce the NAV of the Trust and the value of its Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders&rsquo;
limited rights of legal recourse against the Trust, Sponsor, Administrator, Transfer Agent, Cash Custodian, Prime Execution Agent and
Bitcoin and Ether Custodian and the Trust&rsquo;s lack of direct insurance protection expose the Trust and its Shareholders to the risk
of loss of the Trust&rsquo;s bitcoin and ether for which no person is liable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is not a banking
institution and is not a member of the FDIC or Securities Investor Protection Corporation (&ldquo;SIPC&rdquo;) and, therefore, investments
in the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. Likewise, the Bitcoin and
Ether Custodian is not a depository institution and is not a member of the FDIC or SIPC and, therefore, the Trust&rsquo;s assets held
with the Bitcoin and Ether Custodian are not subject to FDIC or SIPC insurance coverage. In addition, neither the Trust nor the Sponsor
insures the Trust&rsquo;s bitcoin and ether. The Bitcoin and Ether Custodian&rsquo;s parent, Coinbase Global, Inc. (&ldquo;Coinbase Global&rdquo;),
maintains a commercial crime insurance policy of up to $320 million, which is intended to cover the loss of client assets held by Coinbase
Global and all of its subsidiaries, including the Bitcoin and Ether Custodian and the Prime Execution Agent (collectively, Coinbase Global
and its subsidiaries are referred to as the &ldquo;Coinbase Insureds&rdquo;), including from employee collusion or fraud, physical loss
including theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by Coinbase Global
is shared among all of Coinbase&rsquo;s customers, is not specific to the Trust or to customers holding bitcoin and ether with the Bitcoin
and Ether Custodian or Prime Execution Agent, and may not be available or sufficient to protect the Trust from all possible losses or
sources of losses. Coinbase Global&rsquo;s insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trust
may be forced to share such insurance proceeds with other clients or customers of the Coinbase Insureds, which could reduce the amount
of such proceeds that are available to the Trust. In addition, the bitcoin and ether insurance market is limited, and the level of insurance
maintained by Coinbase Global may be substantially lower than the assets of the Trust. While the Bitcoin and Ether Custodian maintains
certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to
cover client asset losses, the Trust cannot be assured that the Bitcoin and Ether Custodian will maintain capital reserves sufficient
to cover actual or potential losses with respect to the Trust&rsquo;s digital assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, under the Bitcoin
and Ether Custody Agreement, the Bitcoin and Ether Custodian&rsquo;s liability is limited as follows, among others: (i) other than with
respect 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&rsquo;s aggregate liability under the Bitcoin and Ether Custody Agreement shall not exceed
the 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 the
12 months prior to the event giving rise to the Bitcoin and Ether Custodian&rsquo;s liability, and (B) the value of the affected bitcoin
and ether or cash giving rise to the Bitcoin and Ether Custodian&rsquo;s liability; (ii) in respect of the Bitcoin and Ether Custodian&rsquo;s
obligations 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&rsquo;s gross negligence, violation of its confidentiality, data protection and/or information
security obligations, or violation of any law, rule or regulation with respect to the provision of its services (the &ldquo;Mutually Capped
Liabilities&rdquo;), the Bitcoin and Ether Custodian&rsquo;s liability shall not exceed the greater of (A) $5 million and (B) the aggregate
fees 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&rsquo;s
liability; and (iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin and Ether
Custodian 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, suspension
of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the
reasonable control of the Bitcoin and Ether Custodian. In the event of potential losses incurred by the Trust as a result of the Bitcoin
and Ether Custodian losing control of the Trust&rsquo;s bitcoin and ether or failing to properly execute instructions on behalf of the
Trust, the Bitcoin and Ether Custodian&rsquo;s liability with respect to the Trust will be subject to certain limitations which may allow
it to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Bitcoin and
Ether Custodian directly caused such losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Similarly, under the Prime
Execution Agreement, the Prime Execution Agent&rsquo;s liability is limited as follows, among others: (i) other than with respect to claims
and losses arising from spot trading of bitcoin and ether, or fraud or willful misconduct, or the PB Mutually Capped Liabilities (defined
below), the Prime Execution Agent&rsquo;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 Execution
Agent&rsquo;s liability, and (B) the value of the cash or affected bitcoin and ether giving rise to the Prime Execution Agent&rsquo;s
liability; (ii) in respect of the Prime Execution Agent&rsquo;s obligations 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 Prime Execution Agent&rsquo;s gross negligence, violation
of its confidentiality, data protection and/or information security obligations, violation of any law, rule or regulation with respect
to the provision of its services, or the full amount of the Trust&rsquo;s assets lost due to the insolvency of or security event at a
Connected Trading Venue (as defined below) (the &ldquo;PB Mutually Capped Liabilities&rdquo;), the Prime Execution Agent&rsquo;s liability
shall 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 months
prior to the event giving rise to the Prime Execution Agent&rsquo;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 advised
of 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, material
violation of applicable law or willful misconduct. The Prime Execution Agent is not liable for delays, suspension of operations, failure
in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the
Prime Execution Agent. These and the other limitations on the Prime Execution Agent&rsquo;s liability may allow it to avoid liability
for potential losses or may be insufficient to cover the value of such potential losses, even if the Prime Execution Agent directly caused
such losses. Both the Trust and the Prime Execution Agent and its affiliates (including the Bitcoin and Ether Custodian) are required
to indemnify each other under certain circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, in the event of
an insolvency or bankruptcy of the Prime Execution Agent (in the case of the Trading Balance) or the Bitcoin and Ether Custodian (in the
case of the Trust Bitcoin and Ether Account) in the future, given that the contractual protections and legal rights of customers with
respect to digital assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Bitcoin
and Ether Custodian or Prime Execution Agent in the virtual currency industry, there is a risk that customers&rsquo; assets&mdash;including
the Trust&rsquo;s assets&mdash;may be considered the property of the bankruptcy estate of the Prime Execution Agent (in the case of the
Trading Balance) or the Bitcoin and Ether Custodian (in the case of the Trust Bitcoin and Ether Account), and customers&mdash;including
the Trust&mdash;may be at risk of being treated as general unsecured creditors of such entities and subject to the risk of total loss
or markdowns on value of such assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin and Ether Custody
Agreement contains an agreement by the parties to treat the bitcoin and ether credited to the Trust Bitcoin and Ether Account as financial
assets under Article 8 of the New York Uniform Commercial Code (&ldquo;Article 8&rdquo;), in addition to stating that the Bitcoin and
Ether Custodian will serve as fiduciary and custodian on the Trust&rsquo;s behalf. The Bitcoin and Ether Custodian&rsquo;s parent, Coinbase
Global Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisions
relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event the
Bitcoin and Ether Custodian were to experience insolvency. However, due to the novelty of digital asset custodial arrangements courts
have not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how they
would rule in such a scenario. If the Bitcoin and Ether Custodian became subject to insolvency proceedings and a court were to rule that
the custodied bitcoin and ether were part of the Bitcoin and Ether Custodian&rsquo;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&rsquo;s insolvency proceedings and
the Trust could be subject to the loss of all or a significant portion of its assets. Moreover, in the event of the bankruptcy of the
Bitcoin and Ether Custodian, an automatic stay could go into effect and protracted litigation could be required in order to recover the
assets held with the Bitcoin and Ether Custodian, all of which could significantly and negatively impact the Trust&rsquo;s operations
and the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With respect to the Prime
Execution Agreement, there is a risk that the Trading Balance, in which the Trust&rsquo;s bitcoin and ether and cash is held in omnibus
accounts by the Prime Execution Agent (in the latter case, as described below in &ldquo;RISK FACTORS&mdash;Loss of a critical banking
relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust&rsquo;s ability to create
or redeem Baskets, or could cause losses to the Trust&rdquo;), could be considered part of the Prime Execution Agent&rsquo;s bankruptcy
estate in the event of the Prime Execution Agent&rsquo;s bankruptcy. The Prime Execution Agreement contains an Article 8 opt-in clause
with respect to the Trust&rsquo;s assets held in the Trading Balance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution Agent
is not required to hold any of the bitcoin and ether or cash in the Trust&rsquo;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&rsquo;s Trading Balance represents an entitlement to a pro rata share of the bitcoin and ether (and cash) the Prime
Execution Agent has allocated to the omnibus wallets the Prime Execution Agent holds, as well as the accounts in the Prime Execution Agent&rsquo;s
name that the Prime Execution Agent maintains at Connected Trading Venues (the &ldquo;Connected Trading Venue&rdquo;) (which are typically
held on an omnibus, rather than segregated, basis). If the Prime Execution Agent suffers an insolvency event, there is a risk that the
Trust&rsquo;s assets held in the Trading Balance could be considered part of the Prime Execution Agent&rsquo;s bankruptcy estate and the
Trust 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 litigation
could be required in order to recover the assets held with the Prime Execution Agent, all of which could significantly and negatively
impact the Trust&rsquo;s operations and the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 bitcoin
and ether by the Bitcoin and Ether Custodian or Prime Execution Agent, absent gross negligence, bad faith or willful misconduct on the
part 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 bitcoin
and ether by the Bitcoin and Ether Custodian or Prime Execution Agent, is limited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Shareholders&rsquo; recourse
against the Sponsor and the Trust&rsquo;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, is
limited. For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates nor any other party has guaranteed
the assets or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities of any service provider
to the Trust, including, without limitation, the Bitcoin and Ether Custodian and Prime Execution Agent. The Prime Execution Agreement
and Bitcoin and Ether Custody Agreement provide that neither the Sponsor nor its affiliates shall have any obligation of any kind or nature
whatsoever, by guaranty, enforcement or otherwise, with respect to the performance of any of the Trust&rsquo;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&rsquo;s bitcoin and ether that is not covered by Coinbase Global&rsquo;s
insurance 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.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the rare
and limited circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. If the Trade Credits are not
available 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the rare and limited
circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits (defined below). To avoid having to pre-fund
purchases or sales of bitcoin and ether, the Trust may borrow bitcoin, ether or cash as trade credit (&ldquo;Trade Credit&rdquo;) from
Coinbase Credit, Inc. (the &ldquo;Trade Credit Lender&rdquo;) on a short-term basis pursuant to the Coinbase Credit Committed Trade Financing
Agreement (the &ldquo;Trade Financing Agreement&rdquo;). The Trade Credit Lender is only required to extend Trade Credits to the Trust
to the extent such bitcoin, ether or cash is actually available to the Trade Credit Lender. To the extent that Trade Credits are not available
or become exhausted, (1) there may be delays in the buying and selling of bitcoin and ether related to cash creations and redemptions
or the selling of bitcoin and ether related to paying Trust expenses not assumed by the Sponsor, to the extent applicable, (2) Trust assets
may be in held the Trading Balance for a longer duration than if Trade Credits were available, and (3) the execution price associated
with such trades may deviate significantly from the Pricing Benchmarks price used to determine the NAV of the Trust. To the extent that
the execution price for purchases and sales of bitcoin and ether deviate significantly from the Pricing Benchmarks price used to determine
the Trust&rsquo;s NAV, Shareholders may be negatively impacted because the added costs of such price deviations would be incurred by the
Authorized Participants and may be passed onto the Shareholders in the secondary market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>To the extent the Trust
utilizes Trade Credits when using the Agent Execution Model, such Trade Credits are secured by the Trust&rsquo;s assets, including any
cash and bitcoin and ether held in the Trading Balance with the Prime Execution Agent and the Trust Bitcoin and Ether Account held with
the Bitcoin and Ether Custodian, and such assets may be liquidated by the Trade Credit Lender to repay Trade Credit debt owed by the Trust
in the event the Trust fails to repay the Trade Credit debt.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the rare and limited
circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. The Trust generally must repay Trade Credits
by 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 a
security interest, lien on, and right of set off against all of the Trust&rsquo;s right, title and interest, in the Trust&rsquo;s Trading
Balance 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 for
Cause, as defined in the Prime Execution Agreement, which includes a failure by the Trust to pay and settle in full its obligations to
the Trade Credit Lender in respect of the financing it provides to the Trust in the form of Trade Credits, the Bitcoin and Ether Custodian
and the Prime Execution Agent have agreed to comply with instructions from the Trade Credit Lender with respect to the disposition of
the assets in the Trust Bitcoin and Ether Account and Trading Balance respectively without further consent by the Trust. If the Trust
fails 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&rsquo;s
assets and liquidate them to repay the Trade Credit debt owed by the Trust to the Trade Credit Lender.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Loss of a critical
banking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust&rsquo;s ability
to create or redeem Baskets, or could cause losses to the Trust, in the limited circumstances when the Trust utilizes the Agent Execution
Model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution Agent
relies on bank accounts to provide its trading platform services and including temporarily holding any cash related to a customer&rsquo;s
purchase or sale of bitcoin and ether. In particular, the Prime Execution Agent has disclosed that customer cash held by the Prime Execution
Agent, including the cash associated with the Trust&rsquo;s Trading Balance, is held in one or more banks&rsquo; accounts for the benefit
of the Prime Execution Agent&rsquo;s customers, or in money market funds in compliance with Rule 2a-7 under the Investment Company Act
and rated &ldquo;AAA&rdquo; by S&amp;P (or the equivalent from any eligible rating service), provided that such investments are held in
accounts in Coinbase&rsquo;s name for the benefit of customers and are permitted and held in accordance with state money transmitter laws
(&ldquo;Money Market Funds&rdquo;). The Prime Execution Agent has represented to the Sponsor that it has implemented the following policy
with respect to the cash associated with the Trust&rsquo;s Trading Balance. First, any cash related to the Trust&rsquo;s purchase or sale
of bitcoin and ether will be held in an omnibus account in the Prime Execution Agent&rsquo;s name for the benefit of (&ldquo;FBO&rdquo;)
its customers at each of multiple FDIC-insured banks (an &ldquo;FBO Account&rdquo;), or in a Money Market Fund. The amount of Trust cash
held 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 in
a Money Market Fund. The Prime Execution Agent has agreed to title the accounts in a manner designed to enable receipt of FDIC deposit
insurance where applicable on a pass-through basis, but does not guarantee that pass-through insurance will apply since such insurance
is dependent on the compliance of the bank. Second, to the extent the Trust&rsquo;s cash in the Trading Balance in aggregate exceeds the
amounts that can be maintained at the banks on the foregoing basis, the Prime Execution Agent has represented that it currently conducts
an overnight sweep of the excess into U.S. government money market funds. The Sponsor has not independently verified the Prime Execution
Agent&rsquo;s representations. To the extent that the Prime Execution Agent faces difficulty establishing or maintaining banking relationships,
the loss of the Prime Execution Agent&rsquo;s banking partners or the imposition of operational restrictions by these banking partners
and the inability of the Prime Execution Agent to utilize other financial institutions may result in a disruption of creation and redemption
activity of the Trust, or cause other operational disruptions or adverse effects for the Trust. In the future, it is possible that the
Prime Execution Agent could be unable to establish accounts at new banking partners or establish new banking relationships, or that the
banks with which the Prime Execution Agent is able to establish relationships may not be as large or well-capitalized or subject to the
same degree of prudential supervision as the existing providers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust could also suffer
losses in the event that a bank in which the Prime Execution Agent holds customer cash, including the cash associated with the Trust&rsquo;s
Trading Balance (which is used by the Prime Execution Agent to move cash flows associated with the Trust&rsquo;s orders to sell bitcoin
and ether in connection with payment of Trust expenses not assumed by the Sponsor), fails, becomes insolvent, enters receivership, is
taken 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 Protection
and Innovation (&ldquo;DFPI&rdquo;) announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023, Silicon Valley
Bank (&ldquo;SVB&rdquo;) was closed by the DFPI, which appointed the FDIC as receiver. Similarly, on March 12, 2023, the New York Department
of Financial Services took possession of Signature Bank and appointed the FDIC as receiver. A joint statement by the Department of the
Treasury, the Federal Reserve and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will have access to all of their
funds, including funds held in deposit accounts, in excess of the insured amount. On May 1, 2023, First Republic Bank was closed by the
California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Following a bidding process, the FDIC
entered into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, to acquire the substantial majority of
the assets and assume certain liabilities of First Republic Bank from the FDIC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution Agent
has historically maintained banking relationships with Silvergate Bank and Signature Bank. While the Sponsor does not believe there is
a direct risk to the Trust&rsquo;s assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances
and market conditions, some of which may be beyond the Trust&rsquo;s or the Sponsor&rsquo;s control, could impair the Trust&rsquo;s ability
to access the Trust&rsquo;s cash held with the Prime Execution Agent in the Trust&rsquo;s Trading Balance or associated with the Trust&rsquo;s
orders to sell bitcoin and ether in connection with payment of Trust expenses not assumed by the Sponsor. If the Prime Execution Agent
were to experience financial distress or its financial condition is otherwise affected by the failure of its banking partners, the Prime
Execution Agent&rsquo;s ability to provide services to the Trust could be affected. Moreover, the future failure of a bank at which the
Prime Execution Agent maintains customer cash, in the Trust&rsquo;s Trading Balance associated with the Trust&rsquo;s orders to sell bitcoin
and ether in connection with payment of Trust expenses not assumed by the Sponsor, could result in losses to the Trust, to the extent
the balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Execution Agent is subject
or other potential protections. Although the Prime Execution Agent has made certain representations to the Sponsor regarding the Prime
Execution Agent&rsquo;s maintenance of records in a manner reasonably designed to qualify for FDIC insurance on a pass-through basis in
connection with the accounts in which the Prime Execution Agent maintains cash on behalf of its customers (including the Trust), there
can be no assurance that such pass-through insurance will ultimately be made available. In addition, the Trust may maintain cash balances
with the Prime Execution Agent that are not insured or are in excess of the FDIC&rsquo;s insurance limits, or which are maintained by
the Prime Execution Agent at Money Market Funds and subject to the attendant risks (e.g., &ldquo;breaking the buck&rdquo;). As a result,
the Trust could suffer losses.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Prime Execution
Agent routes orders through Connected Trading Venues in connection with trading services under the Prime Execution Agreement. The loss
or failure of any such Connected Trading Venues may adversely affect the Prime Execution Agent&rsquo;s business and cause losses for the
Trust.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with trading
services 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 connection
with these activities, the Prime Execution Agent may hold bitcoin and ether with such Connected Trading Venues in order to effect customer
orders, including the Trust&rsquo;s orders. However, the Prime Execution Agent has represented to the Sponsor that no customer cash is
held at Connected Trading Venues. If the Prime Execution Agent were to experience a disruption in the Prime Execution Agent&rsquo;s access
to these Connected Trading Venues, the Prime Execution Agent&rsquo;s trading services under the Prime Execution Agreement could be adversely
affected to the extent that the Prime Execution Agent is limited in its ability to execute order flow for its customers, including the
Trust. In addition, while the Prime Execution Agent has policies and procedures to help mitigate the Prime Execution Agent&rsquo;s risks
related 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, or
loss of customer assets, the Prime Execution Agent might not be able to fully recover the customer&rsquo;s bitcoin and ether that the
Prime Execution Agent has deposited with these third parties. As a result, the Prime Execution Agent&rsquo;s business, operating results
and financial condition could be adversely affected, potentially resulting in its failure to provide services to the Trust or perform
its obligations under the Prime Execution Agreement, and the Trust could suffer resulting losses or disruptions to its operations. The
failure of a Connected Trading Venue at which the Prime Execution Agent maintains customer bitcoin and ether, including bitcoin and ether
associated with the Trust, could result in losses to the Trust, notwithstanding the regulatory requirements to which the Prime Execution
Agent is subject or other potential protections.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A loss of confidence
or breach of the Bitcoin and Ether Custodian may adversely affect the Trust and the value of an investment in the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Custody and security services
for the Trust&rsquo;s bitcoin and ether are provided by Coinbase Custody, although the Trust may retain one or more additional custodians
at 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&rsquo;s
bitcoin and ether holdings may be custodied by Coinbase Custody and another portion by another third-party custodian). Over time, the
Trust may change the custody or security arrangement for all or a portion of its holdings. The Sponsor will decide the appropriate custody
and arrangements based on, among other factors, the availability of experienced custodians and the Trust&rsquo;s ability to securely safeguard
the bitcoin and ether.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Bitcoin
and Ether Custody Agreement or Prime Execution Agreement is terminated or the Bitcoin and Ether Custodian or Prime Execution Agent fails
to provide services as required, the Sponsor may need to find and appoint a replacement custodian or prime broker, which could pose a
challenge to the safekeeping of the Trust&rsquo;s bitcoin and ether, and the Trust&rsquo;s ability to continue to operate may be adversely
affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is dependent on
the 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&rsquo;s bitcoin and ether in the Trust Bitcoin and Ether
Account, and its affiliate, Coinbase Inc., in its capacity as Prime Execution Agent under the Agent Execution Model. If Coinbase Custody
or 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 22, 2023, the Prime
Execution Agent and its parent (such parent, &ldquo;Coinbase Global&rdquo; and together with Coinbase Inc., the &ldquo;Relevant Coinbase
Entities&rdquo;) received a &ldquo;Wells Notice&rdquo; from the SEC staff stating that the SEC staff made a &ldquo;preliminary determination&rdquo;
to recommend that the SEC file an enforcement action against the Relevant Coinbase Entities alleging violations of federal securities
laws, including the Exchange Act and the 1933 Act. According to Coinbase Global&rsquo;s public reporting company disclosure, based on
discussions with the SEC staff, the Relevant Coinbase Entities believe these potential enforcement actions would relate to aspects of
the Relevant Coinbase Entities&rsquo; Coinbase Prime service, spot market, staking service Coinbase Earn, and Coinbase Wallet, and the
potential civil action may seek injunctive relief, disgorgement, and civil penalties. On June 6, 2023, the SEC filed a complaint against
the Relevant Coinbase Entities in federal district court in the Southern District of New York, alleging, inter alia: (i) that Coinbase
Inc. has violated the Exchange Act by failing to register with the SEC as a national securities exchange, broker-dealer, and clearing
agency, in connection with activities involving certain identified digital assets that the SEC&rsquo;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.&rsquo;s violations of
the Exchange Act to the same extent as Coinbase Inc. The SEC&rsquo;s complaint against the Relevant Coinbase Entities does not allege
that bitcoin and ether is a security nor does it allege that Coinbase Inc&rsquo;s activities involving bitcoin and ether caused the alleged
registration violations, and the Bitcoin and Ether Custodian was not named as a defendant. The SEC&rsquo;s complaint seeks a permanent
injunction against the Relevant Coinbase Entities to prevent them from violations of the Exchange Act or 1933 Act, disgorgement, civil
monetary penalties, and such other relief as the court deems appropriate or necessary. Coinbase Inc., as Prime Execution Agent, could
be required, as a result of a judicial determination, or could choose, to restrict or curtail the services it offers, or its financial
condition 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 services
it offers, it could negatively affect the Trust&rsquo;s ability to operate or process creations or redemptions of Baskets, which could
force 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 could
negatively affect the Trust&rsquo;s ability to operate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Alternatively, the Sponsor
could decide to replace Coinbase Custody as the Bitcoin and Ether Custodian with custody of the Trust&rsquo;s bitcoin and ether, pursuant
to the Bitcoin and Ether Custody Agreement. Similarly, Coinbase Custody or Coinbase Inc. could terminate services under the Bitcoin and
Ether Custody Agreement or the Coinbase Prime Broker Agreement (the &ldquo;Prime Execution Agreement&rdquo;), respectively upon providing
the applicable notice to the Trust for any reason, or immediately for Cause (a &ldquo;Termination for Cause&rdquo; is defined in the Bitcoin
and Ether Custody Agreement as (i) the Trust materially breaching any provision of the Bitcoin and Ether Custody Agreement; (ii) the Trust
becomes bankrupt or insolvent; or (iii) the Trust fails to pay and settle in full its obligations to Coinbase Custody&rsquo;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 custodian
will likely be complex and could subject the Trust&rsquo;s bitcoin and ether to the risk of loss during the transfer, which could have
a negative impact on the performance of the Shares or result in loss of the Trust&rsquo;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. Under
certain circumstances, Coinbase Inc. is permitted to halt or suspend trading on its trading platform, or impose limits on the amount or
size of, or reject, the Trust&rsquo;s orders, including in the event of, among others, (a) delays, suspension of operations, failure in
performance, 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&rsquo;s order would cause the amount
of Trade Credits extended to exceed the maximum amount of Trade Credit (as defined below) that the Trust&rsquo;s agreement with the Trade
Credit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is continuing that results
in Coinbase Inc. being unable to provide trading services or accept the Trust&rsquo;s order, in each case, subject to certain protections
for the Trust. Also, if Coinbase Custody or Coinbase Inc. becomes insolvent, suffers business failure, ceases business operations, defaults
on or fails to perform its obligations under its contractual agreements with the Trust, or abruptly discontinues the services it provides
provide to the Trust for any reason, the Trust&rsquo;s operations would be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor may not be able
to find a party willing to serve as the custodian of the Trust&rsquo;s bitcoin and ether or as the Trust&rsquo;s prime execution agent
under the same terms as the current Bitcoin and Ether Custody Agreement or Prime Execution Agreement or at all. To the extent that Sponsor
is not able to find a suitable party willing to serve as the custodian or prime execution agent, the Sponsor may be required to terminate
the Trust and liquidate the Trust&rsquo;s bitcoin and ether. In addition, to the extent that the Sponsor finds a suitable party but must
enter into a modified Bitcoin and Ether Custody Agreement or Prime Execution Agreement that is less favorable for the Trust, the value
of the Shares could be adversely affected. If the Trust is unable to find a replacement prime execution agent, its operations could be
adversely affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Coinbase Custody
serves as the bitcoin and ether custodian and Coinbase Inc. serves as the prime broker for several competing exchange-traded bitcoin and
ether products, which could adversely affect the Trust&rsquo;s operations and ultimately the value of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin and Ether Custodian
and Prime Execution Agent are both affiliates of Coinbase Global. As of the date hereof, Coinbase Global is the largest publicly traded
crypto asset company in the world by market capitalization and is also the largest crypto asset custodian in the world by assets under
custody. By virtue of its leading market position and capabilities, and the relatively limited number of institutionally capable providers
of crypto asset brokerage and custody services, Coinbase Custody serves as the bitcoin and ether custodian and Coinbase Inc. serves as
the prime broker for several competing exchange-traded bitcoin and ether products. Therefore, Coinbase Global has a critical role in supporting
the U.S. spot bitcoin and ether exchange-traded product ecosystem, and its size and market share create the risk that Coinbase Global
may 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 ether
because no Ether Trading Counterparties were willing or able to effectuate the Trust&rsquo;s transactions, and the Prime Execution Agent
were to favor the interests of certain products over others, it could result in inadequate attention or comparatively unfavorable commercial
terms to less favored products, which could adversely affect the Trust&rsquo;s operations and ultimately the value of the Shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor may
need to find and appoint a replacement Bitcoin and Ether Custodian or Cash Custodian quickly, which could pose a challenge to the safekeeping
of the Trust&rsquo;s bitcoin, ether and cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Sponsor may need to replace
Coinbase Custody as the bitcoin and ether custodian of the Trust&rsquo;s bitcoin and ether or BNY Mellon as the cash custodian of the
Trust&rsquo;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&rsquo;s accounts with the Bitcoin and Ether
Custodian and/or Cash Custodian to another party will likely be complex and could subject the Trust&rsquo;s bitcoin and ether to the risk
of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the Trust&rsquo;s
assets. The Sponsor may not be able to find a party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian under the same
terms as the current Bitcoin and Ether Custody Agreement or Cash Custody Agreement, respectively. To the extent that Sponsor is not able
to find a suitable party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian, as applicable, the Sponsor may be required
to terminate the Trust and liquidate the Trust&rsquo;s bitcoin and ether. In addition, to the extent that the Sponsor finds a suitable
party but must enter into modified custodial services agreements that cost more, the value of the Shares could be adversely affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin and
Ether Custodian could become insolvent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust&rsquo;s assets will
be held in one or more accounts maintained for the Trust by the Bitcoin and Ether Custodian and Cash Custodian. The Bitcoin and Ether
Custodian is not a depository institution as it is not insured by the FDIC. The insolvency of the Bitcoin and Ether Custodian or of any
broker, custodian bank or clearing corporation used by the Bitcoin and Ether Custodian, may result in the loss of all or a substantial
portion of the Trust&rsquo;s assets or in a significant delay in the Trust having access to those assets. Additionally, custody of digital
assets presents inherent and unique risks relating to access, loss, theft and means of recourse in such scenarios. These risks are applicable
to the Trust&rsquo;s use of Coinbase Custody.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin and Ether
held by the Trust is not subject to FDIC or SIPC protections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust is not a banking
institution or otherwise a member of the FDIC or SIPC and, therefore, deposits held with or assets held by the Trust are not subject to
the protections enjoyed by depositors with FDIC or SIPC member institutions. The undivided interests in the Trust&rsquo;s bitcoin and
ether represented by the Shares in the Trust are not insured.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Third parties
may infringe upon or otherwise violate intellectual property rights or assert that the Sponsor has infringed or otherwise violated their
intellectual property rights, which may result in significant costs and diverted attention.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is possible that third
parties might utilize the Trust&rsquo;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 their
trademarks, proprietary software and other technology. Also, third parties may independently develop business methods, trademarks or proprietary
software and other technology similar to that of the Trust or claim that the Trust has violated their intellectual property rights, including
their copyrights, trademark rights, trade names, trade secrets and patent rights. As a result, the Trust may have to litigate in the future
to protect its trade secrets, determine the validity and scope of other parties&rsquo; proprietary rights, defend itself against claims
that it has infringed or otherwise violated other parties&rsquo; 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 its
resources from the Trust, or require it to change its proprietary software and other technology or enter into royalty or licensing agreements.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the increased
use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With the increased use of
technologies such as the internet and the dependence on computer systems to perform necessary business functions, the Trust is susceptible
to 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 assets
or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does
not require gaining unauthorized access, such as causing denial-of-service attacks on websites. Cyber security failures or breaches of
one or more of the Trust&rsquo;s third-party service providers (including, but not limited to, the Administrator, Transfer Agent, the
Sponsor, 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 and
other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance
costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, substantial costs
may be incurred in order to prevent any cyber incidents in the future. The Trust and its Shareholders could be negatively impacted as
a result. While the Trust has established business continuity plans, there are inherent limitations in such plans.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Trust faces
risks related to the novel coronavirus (COVID-19) outbreak, which could negatively impact the value of the Trust&rsquo;s holdings and
significantly disrupt its operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Health crises caused by the
outbreak of infectious diseases or other public health issues, may exacerbate other pre-existing political, social, economic, market and
financial risks. The impact of any such events, could negatively affect the global economy, as well as the economies of individual countries
or regions, the financial performance of individual companies, sectors and industries, and the markets in general in significant and unforeseen
ways. Any such impact could adversely affect the prices and liquidity of the Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For example, an outbreak of
a respiratory disease designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The
transmission of COVID-19 and efforts to contain its spread resulted in international, national and local border closings and other significant
travel restrictions and disruptions, significant disruptions to business operations, supply chains and customer activity, event cancellations
and 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 caused
significant volatility and declines in global financial markets, including increased volatility and uncertainty in crypto markets, which
have caused losses for investors. The emergence of new COVID variants or other infectious diseases could result in a substantial economic
downturn or recession.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the operations
of the Trust, the Sponsor and other service providers may be significantly impacted, or even temporarily or permanently halted, as a result
of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public
health emergency, including its potential adverse impact on the health of any such entity&rsquo;s personnel. Any disruption of operations
could adversely impact the price and liquidity of the Shares, including, without limitation, the Trust&rsquo;s ability to process orders
for Baskets.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_003"></A>Bitcoin AND THE
Bitcoin MARKET</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This section of the Prospectus
provides a more detailed description of bitcoin, including information about the historical development of bitcoin, how a person holds
bitcoin, how to use bitcoin in transactions, how to trade bitcoin, the &ldquo;spot&rdquo; trading platform market where bitcoin can be
bought, held and sold, the bitcoin over-the-counter (&ldquo;OTC&rdquo;) trading market and bitcoin mining.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin is the digital asset
that is native to, and created and transmitted through the operations of, the peer-to-peer Bitcoin network, a decentralized network of
computers that operates on cryptographic protocols. No single entity owns or operates the Bitcoin network, the infrastructure of which
is 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 individual
end-user-to-end-user transactions under a barter system. Although nascent in use, bitcoin may be used as a medium of exchange, unit of
account or store of value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network is decentralized
and 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 as
decentralized and censorship resistant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The value of bitcoin is determined
by the supply of and demand for bitcoin. New bitcoin are created and rewarded to the parties providing the Bitcoin network&rsquo;s infrastructure
(&ldquo;miners&rdquo;) 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 updated
to 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 settled
and validated through such recording, the Bitcoin blockchain represents a complete, transparent and unbroken history of all transactions
of the Bitcoin network.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin was first described
in a white paper released in 2008 and published under the name &ldquo;Satoshi Nakamoto.&rdquo; The protocol underlying Bitcoin was subsequently
released in 2009 as open-source software and currently operates on a worldwide network of computers. The Bitcoin network and its software
has been under active development since that time by a group of computer engineers known as core developers, each of whom operates under
a volunteer basis and without strict hierarchical administration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin network utilizes
a digital asset known as &ldquo;bitcoin,&rdquo; which can be transferred among parties via the Internet. Unlike other means of electronic
payments such as credit card transactions, one of the advantages of bitcoin is that it can be transferred without the use of a central
administrator 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 transacting
in bitcoin is generally not afforded some of the protections that may be offered by intermediaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first step in directly
using the Bitcoin network for transactions is to download specialized software referred to as a &ldquo;bitcoin wallet.&rdquo; A user&rsquo;s
bitcoin wallet can run on a computer or smartphone, and can be used both to send and to receive bitcoin. Within a bitcoin wallet, a user
can generate one or more unique &ldquo;bitcoin addresses,&rdquo; which are conceptually similar to bank account numbers. After establishing
a bitcoin address, a user can send or receive bitcoin from his or her bitcoin address to another user&rsquo;s bitcoin address. Sending
bitcoin from one bitcoin address to another is similar in concept to sending a bank wire from one person&rsquo;s bank account to another
person&rsquo;s bank account; however, such transactions are not managed by an intermediary and erroneous transactions generally may not
be reversed or remedied once sent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of bitcoin associated
with each bitcoin address, as well as each bitcoin transaction to or from such bitcoin address, is transparently reflected in the Bitcoin
blockchain and can be viewed by websites that operate as &ldquo;Bitcoin blockchain explorers.&rdquo; Copies of the Bitcoin blockchain
exist on thousands of computers on the Bitcoin network throughout the Internet. A user&rsquo;s bitcoin wallet will either contain a copy
of the Bitcoin blockchain or be able to connect with another computer that holds a copy of the Bitcoin blockchain. The innovative design
of the Bitcoin network protocol allows each Bitcoin user to trust that their copy of the Bitcoin blockchain will generally be updated
consistent with each other user&rsquo;s copy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When a Bitcoin user wishes
to transfer bitcoin to another user, the sender must first request a Bitcoin address from the recipient. The sender then uses his or her
Bitcoin wallet software to create a proposed transaction that is confirmed and settles when included in the Bitcoin blockchain. The transaction
would reduce the amount of bitcoin allocated to the sender&rsquo;s address and increase the amount allocated to the recipient&rsquo;s
address, in each case by the amount of bitcoin desired to be transferred. The transaction is completely digital in nature, similar to
a file on a computer, and it can be sent to other computers participating in the Bitcoin network; however, the use of cryptographic verification
is believed to prevent the ability to duplicate or counterfeit bitcoin.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Protocol</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Bitcoin protocol is built
using open source software allowing for any developer to review the underlying code and suggest changes. There is no official company
or group that is responsible for making modifications to Bitcoin. There are, however, a number of individual developers that regularly
contribute to the reference software known as &ldquo;Bitcoin Core,&rdquo; a specific distribution of Bitcoin software that provides the
de-facto standard for the Bitcoin protocol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Significant changes to the
Bitcoin protocol are typically accomplished through a so-called &ldquo;Bitcoin Improvement Proposal&rdquo; or BIP. Such proposals are
generally posted on websites, and the proposals explain technical requirements for the protocol change as well as reasons why the change
should be accepted by users. Because Bitcoin has no central authority, updating the reference software&rsquo;s Bitcoin protocol will not
immediately change the Bitcoin network&rsquo;s operations. Instead, the implementation of a change is achieved by users (including transaction
validators known as &ldquo;miners&rdquo;) downloading and running the updated versions of Bitcoin Core or other Bitcoin software that
abides by the new Bitcoin protocol. Users and miners must accept any changes made to the Bitcoin source code by downloading a version
of their Bitcoin software that incorporates the proposed modification of the Bitcoin network&rsquo;s source code. A modification of the
Bitcoin network&rsquo;s source code or protocol is only effective with respect to those Bitcoin users and miners who download it. If an
incompatible modification is accepted by a less than overwhelming percentage of users and miners, a division in the Bitcoin network will
occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such a
division is known as a &ldquo;fork&rdquo; in the Bitcoin network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Recent development on the
Bitcoin network has enabled some functionality other than the transfer of value on the Bitcoin blockchain. Following the recent activation
of Segregated Witness on the Bitcoin network, an alpha version of the Lightning Network was released. The Lightning Network is an open-source
decentralized 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 as
multi-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 data
written 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 which
led to the launch of the &ldquo;ordinal protocol.&rdquo; The ordinal protocol takes advantage of Taproot&rsquo;s relaxed data requirements
to allow users to add graphic images and other data files to Bitcoin transactions. By the end of 2023, nearly 53 million Ordinals had
been inscribed to the Bitcoin blockchain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other efforts include increased
use of smart contracts and distributed registers built into, built atop or pegged alongside the Bitcoin blockchain. The Trust&rsquo;s
activities will not directly relate to such projects, though such projects may utilize bitcoin as tokens for the facilitation of their
non-financial uses, thereby potentially increasing the utility of the Bitcoin network as a whole. Conversely, projects that operate and
are built within the Bitcoin blockchain may increase the data flow on the Bitcoin network and could either &ldquo;bloat&rdquo; the size
of the Bitcoin blockchain or slow confirmation times. At this time, such projects remain in early stages.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Transactions</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A bitcoin transaction is similar
in concept to an irreversible digital check. The transaction contains the sender&rsquo;s bitcoin address, the recipient&rsquo;s bitcoin
address, the amount of bitcoin to be sent, a transaction fee and the sender&rsquo;s digital signature. Bitcoin transactions are secured
by cryptography known as &ldquo;public-private key cryptography,&rdquo; represented by the bitcoin addresses and digital signature in
a transaction&rsquo;s data file. Each Bitcoin network address, or wallet, is associated with a unique &ldquo;public key&rdquo; and &ldquo;private
key&rdquo; pair, both of which are lengthy alphanumeric codes, derived together and possessing a unique relationship.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The use of key pairs is a
cornerstone of the Bitcoin network technology. This is because the use of a private key is the only mechanism by which a bitcoin transaction
can be signed. If a private key is lost, the corresponding bitcoin is thereafter permanently non-transferable. Moreover, the theft of
a private key provides the thief immediate and unfettered access to the corresponding bitcoin. Bitcoin users must therefore understand
that in this regard, bitcoin is similar to cash: that is, the person or entity in control of the private key corresponding to a particular
quantity of bitcoin has de facto control of the bitcoin. For large quantities of bitcoin, holders often embrace sophisticated security
measures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The public key is visible
to the public and analogous to the Bitcoin network address. The private key is a secret and is used to digitally sign a transaction in
a way that proves the transaction has been signed by the holder of the public-private key pair, and without having to reveal the private
key. A user&rsquo;s private key must be kept safe in accordance with appropriate controls and procedures to ensure it is used only for
legitimate and intended transactions. If an unauthorized third person learns of a user&rsquo;s private key, that third person could apply
the user&rsquo;s digital signature without authorization and send the user&rsquo;s bitcoin to their or another bitcoin address, thereby
stealing the user&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To prevent the possibility
of double-spending of bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a &ldquo;block&rdquo; in
the Bitcoin blockchain, which is publicly available. Thus, the Bitcoin network provides confirmation against double-spending by memorializing
every transaction in the Bitcoin blockchain, which is publicly accessible and downloaded in part or in whole by all users of the Bitcoin
network software program. Any user may validate, through their Bitcoin wallet or a blockchain explorer, that each transaction in the Bitcoin
network was authorized by the holder of the applicable private key, and Bitcoin network mining software consistent with reference software
requirements validates each such transaction before including it in the Bitcoin blockchain. This cryptographic security ensures that bitcoin
transactions may not generally be counterfeited, although it does not protect against the &ldquo;real world&rdquo; theft or coercion of
use of a Bitcoin user&rsquo;s private key, including the hacking of a Bitcoin user&rsquo;s computer or a service provider&rsquo;s systems.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A Bitcoin transaction between
two parties is recorded if included in a valid block added to the Bitcoin blockchain, when that block is accepted as valid through consensus
formation among Bitcoin network participants. Validation of a block is achieved by confirming the cryptographic hash value included in
the block&rsquo;s data and by the block&rsquo;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 &ldquo;confirmation&rdquo; of validity. As each block contains a reference
to the immediately preceding block, additional blocks appended to and incorporated into the Bitcoin blockchain constitute additional confirmations
of 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 further
back one goes in the Bitcoin blockchain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To undo past transactions
in a block recorded on the Bitcoin blockchain, a malicious actor would have to exert tremendous hashrate in re-solving each block in the
Bitcoin blockchain starting with and after the target block and broadcasting all such blocks to the Bitcoin network. The Bitcoin network
is generally programmed to consider the longest Bitcoin blockchain containing solved and valid blocks to be the most accurate Bitcoin
blockchain. In order to undo multiple layers of confirmation and alter the Bitcoin blockchain, a malicious actor must re-solve all of
the old blocks sought to be regenerated and be able to continuously add new blocks to the Bitcoin blockchain at a speed that would have
to outpace that of all of the other miners on the Bitcoin network, who would be continuously solving for and adding new blocks to the
Bitcoin blockchain. Given the size and speed of the Bitcoin network, it is generally agreed that the cost of amassing such computational
power exceeds the profit to be obtained by double-spending or attempting to fabricate prior blocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a malicious actor is able
to amass ten (10) percent of the Bitcoin network&rsquo;s aggregate hashrate, there is estimated to be a 0.1 percent chance that it would
be able to overcome six (6) confirmations. Therefore, given the difficulty in amassing such hashrate, six (6) confirmations is an often-cited
standard for the validity of transactions. The Trust has adopted a policy whereby a transaction will be deemed confirmed upon this industry
standard of six (6) confirmations (the &ldquo;Confirmation Protocol&rdquo;). As one (1) block is added to the Bitcoin blockchain approximately
every six (6) to twelve (12) minutes, a Bitcoin transaction will be, on average, confirmed using the Confirmation Protocol beyond a reasonable
doubt in approximately one (1) hour. Merchants selling high-value goods and services, as well as bitcoin trading platforms and many experienced
users, are believed to generally use the six (6) confirmations standard. This confirmation system, however, does not mean that merchants
must always wait for multiple confirmations for transactions involving low-value goods and services. As discussed below, the value of
a successful double-spending attack involving a low-value transaction may, and perhaps likely will, be significantly less than the cost
involved in arranging and executing such double-spending attacks. Furthermore, merchants engaging in low-value transactions may then view
the reward of quicker transaction settlements with limited or no Bitcoin blockchain confirmation as greater than the related risk of not
waiting for six (6) confirmations with respect to low-value transactions at points of sale. Conversely, for high-value transactions that
are not time sensitive, additional settlement security can be provided by waiting for more than six (6) confirmations.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Mining</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The process by which bitcoin
are created and bitcoin transactions are verified is called &ldquo;mining.&rdquo; To begin mining, a user, or &ldquo;miner,&rdquo; can
download and run a mining &ldquo;client,&rdquo; which, like regular Bitcoin network software programs, turns the user&rsquo;s computer
into a &ldquo;node&rdquo; on the Bitcoin network, and in this case has the ability to validate transactions and add new blocks of transactions
to the Bitcoin blockchain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Miners, through the use of
the bitcoin software program, engage in a set of prescribed complex mathematical calculations in order to verify transactions and compete
for the right to add a block of verified transactions to the Bitcoin blockchain and thereby confirm bitcoin transactions included in that
block&rsquo;s data. The miner who successfully &ldquo;solves&rdquo; the complex mathematical calculations has the right to add a block
of transactions to the Bitcoin blockchain and is then rewarded by a grant of bitcoin, known as a &ldquo;coinbase,&rdquo; plus any transaction
fees paid for the transactions included in such block.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Confirmed and validated bitcoin
transactions are recorded in blocks added to the Bitcoin blockchain. Each block contains the details of some or all of the most recent
transactions 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 pools
on the Bitcoin network must engage in a competitive process of constantly increasing their computing power to improve their likelihood
of solving for new blocks. As more miners join the Bitcoin network and its processing power increases, the Bitcoin network adjusts the
complexity of a block-solving equation to maintain a predetermined pace of adding a new block to the Bitcoin blockchain approximately
every ten minutes.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mathematically Controlled Supply</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The method for creating new
bitcoin 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 for
solving 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 estimated
to halve again in 2028. This deliberately controlled rate of bitcoin creation means that the number of bitcoin in existence will never
exceed twenty-one (21) million and that bitcoin cannot be devalued through excessive production unless the Bitcoin network&rsquo;s source
code (and the underlying protocol for bitcoin issuance) is altered. As of July&nbsp;2024, it was estimated that over 19.7 million bitcoins
were outstanding and the date when the 21 million Bitcoin limitation will be reached is estimated to be the year 2140.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Market and Digital Asset Trading
Platforms</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to using bitcoin
to engage in transactions, investors may purchase and sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or as
a long-term investment to diversify their portfolio. The value of bitcoin within the market is determined, in part, by (i) the supply
of and demand for bitcoin in the bitcoin market, (ii) market expectations for the expansion of investor interest in bitcoin and the adoption
of 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-user
transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although the value of bitcoin
is determined by the value that two transacting market participants place on bitcoin through their transaction, the most common means
of determining a reference value is by surveying one or more trading platforms where secondary markets for bitcoin exist. The most prominent
digital asset trading platforms are often referred to as &ldquo;exchanges&rdquo;, although they neither report trade information nor are
they regulated in the same way as a national securities exchange. As such, there is some difference in the form, transparency and reliability
of trading data from digital asset trading platforms. Generally speaking, bitcoin data is available from these trading platforms with
publicly disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S. dollar or Euro (such as
the USD-BTC Pair) or another digital asset such as ether. OTC dealers or market makers do not typically disclose their trade data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currently, there are many
digital asset trading platforms operating worldwide and trading platforms represent a substantial percentage of bitcoin buying and selling
activity, and, therefore, provide large data sets for market valuation of bitcoin. A digital asset trading platform provides investors
with a way to purchase and sell bitcoin, similar to stock exchanges like the New York Stock Exchange or NASDAQ, which provide ways for
investors to buy stocks and bonds in the so-called &ldquo;secondary market.&rdquo; Unlike stock exchanges, which are regulated to monitor
securities trading activity, digital asset trading platforms are largely regulated as money services businesses (or a foreign regulatory
equivalent) and are required to monitor for and detect money-laundering and other illicit financing activities that may take place on
the platform. Digital asset trading platforms operate websites designed to permit investors to open accounts with the trading platform
and then purchase and sell bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As with conventional stock
exchanges, an investor opening a trading account and wishing to transact at a digital asset trading platform must deposit an accepted
government-issued currency into their account, or a previously acquired digital asset. The process of establishing an account with a digital
asset trading platform and trading bitcoin is different from, and should not be confused with, the process of users sending bitcoin from
one bitcoin address to another bitcoin address, such as to pay for goods and services. This latter process is an activity that occurs
wholly within the confines of the Bitcoin network, while the former is an activity that occurs largely on private websites and databases
owned by the trading platform.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although bitcoin was the first
cryptocurrency, since 2009, the number of digital assets, market participants and companies in the space has increased dramatically. In
addition to bitcoin, other well-known digital assets include ether, bitcoin cash, and litecoin. The digital asset marketplace is still
being defined and evolving, including the practices of exchanges, behavior of investors, and the protocols and prominence of particular
digital assets. Prior to 2017, bitcoin accounted for approximately 85% or more of the total market capitalization of all digital assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Authorized Participants and
the Trust have the option of purchasing and selling bitcoin used in Basket transactions either on digital asset trading platforms, in
the OTC markets or in direct bilateral transactions. OTC trading of bitcoin is generally accomplished via bilateral agreements on a principal-to-principal
basis. All risks and issues related to creditworthiness are between the parties directly involved in the transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The bitcoin OTC market demonstrates
flexibility 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 a
price &ndash; often via phone, email, or chat &ndash; and then one of the two parties will initiate the transaction. For example, a seller
of bitcoin could initiate the transaction by sending the bitcoin to the buyer&rsquo;s bitcoin address. The buyer would then wire US Dollars
to the seller&rsquo;s bank account. OTC trading tends to occur in large blocks of bitcoin. All risks and issues related to creditworthiness
are 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 offer
two-sided liquidity for bitcoin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Bitcoin futures contracts
are traded on CME, the Intercontinental Exchange and smaller regulated platforms such as ErisX and LedgerX. Authorized Participants may
utilize bitcoin futures contracts to hedge bitcoin exposure relating to the purchase and redemption of Baskets. Since their launch in
2017, bitcoin futures contracts on the CME have seen significant growth in average daily volume traded, open interest, and the number
of large participants. Bitcoin futures contracts on the CME are cash-settled based on the BRR, which shares the same methodology as the
Bitcoin Pricing Benchmark.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bitcoin Market Participants</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Miners</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Miners range from Bitcoin
enthusiasts to professional mining operations that design and build dedicated machines and data centers, but the vast majority of mining
is 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.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Investment and Speculative Sector</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This sector includes the investment
and 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Historically, larger financial
services institutions are publicly reported to have limited involvement in investment and trading in bitcoin; however, this trend appears
to be eroding and more platforms seek to offer exposure to digital assets and more institutional investors seek to deploy capital in the
space. Major financial institutions have cited advisory client demand in adding direct, equity or synthetic means of obtaining digital
asset exposure.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Retail Sector</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The retail sector includes
users transacting in direct peer-to-peer Bitcoin transactions through the direct sending of bitcoin over the Bitcoin network. The retail
sector also includes transactions between consumers paying for goods or services from commercial or service businesses through direct
transactions or third-party service providers such as BitPay, which provides a merchant platform for instantaneous transactions whereby
the consumer sends bitcoin to BitPay, which then provides either the bitcoin or the cash value thereof to the commercial or service business
utilizing the platform. PayPal, Square and Shopify are examples of traditional merchant payment processors or merchant platforms that
have also added Bitcoin payment options for their merchant customers. Payment processing through the Bitcoin network may reduce the transaction
cost for merchants, relative to the costs paid for credit card transaction processing, and eliminates the potential for consumer chargebacks.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Service Sector</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This sector includes companies
that provide a variety of services including the buying, selling, payment processing and storing of bitcoin. Coinbase and Fidelity are
examples of multi-service financial institutions that provide wallets that store bitcoin for users and also serve as a retail or exchange
gateway whereby users can purchase bitcoin for fiat currency. BitPay is an example of Bitcoin payment processors that allow merchants
to accept bitcoin as payment. As the Bitcoin network continues to grow in acceptance, it is anticipated that service providers will expand
the currently available range of services and that additional parties will enter the service sector for the Bitcoin network.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_004"></A>Ether AND THE Ether
MARKET</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This section of the Prospectus
provides 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 &ldquo;spot&rdquo; trading platform market where ether can be bought, held and
sold, the ether over-the-counter (&ldquo;OTC&rdquo;) trading market and the proof-of-stake concept.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ether and the Ethereum network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether is a digital asset that
is created and transmitted through the operations of the peer-to-peer Ethereum network, a network of computers, known as nodes, that operates
on cryptographic computer-code based logic, called a protocol. No single entity owns or operates the Ethereum network, the infrastructure
of 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 recorded
on a public transaction ledger known as the Ethereum blockchain. Ether can be used to pay for goods and services, including computational
power on the Ethereum network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset
exchanges or in individual end-user-to-end-user transactions under a barter system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network allows
users to write and implement computer programs called smart contracts&mdash;that is, general-purpose code that executes on every computer
in the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smart
contracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance
with conditional instructions and create digital assets other than ether on the Ethereum network. Smart contract operations are executed
on the Ethereum blockchain in exchange for payment of ether. The Ethereum network is one of a number of projects intended to expand blockchain
use beyond just a peer-to-peer money system.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network is commonly
understood to be decentralized and does not require governmental authorities or financial institution intermediaries to create, transmit
or determine the value of ether. Rather, following the initial distribution of ether, ether is created, burned and allocated by the Ethereum
network protocol through a process that is currently subject to an issuance and burn rate as further described under &ldquo;Limits on
ether supply&rdquo; below. The value of ether is determined by the supply of and demand for ether on the digital asset exchanges or in
private end-user-to-end-user transactions. There is no hard cap which would limit the number of outstanding ether at any one time to a
predetermined maximum.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">New ether is created and rewarded
to the validators of a block in the Ethereum blockchain for verifying transactions. The Ethereum blockchain is effectively a decentralized
database that includes all blocks that have been validated and it is updated to include new blocks as they are validated. Each ether transaction
is broadcast to the Ethereum network and, when included in a block, recorded in the Ethereum blockchain. As each new block records outstanding
ether transactions, and outstanding transactions are settled and validated through such recording, the Ethereum blockchain represents
a complete, transparent and unbroken history of all transactions of the Ethereum network. For further details, see &ldquo;Creation of
New Ether.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Among other things, ether
is used to pay for transaction fees and computational services (i.e., smart contracts) on the Ethereum network; users of the Ethereum
network pay for the computational power of the machines executing the requested operations with ether. Requiring payment in ether on the
Ethereum network incentivizes developers to write quality applications and increases the efficiency of the Ethereum network because wasteful
code costs more. It also ensures that the Ethereum network remains economically viable by compensating people for their contributed computational
resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Assets in the Ethereum network
are held in accounts. Each account, or &ldquo;wallet,&rdquo; is made up of at least two components: a public address and a private key.
An Ethereum private key controls the transfer or &ldquo;spending&rdquo; of ether from its associated public ether address. An ether &ldquo;wallet&rdquo;
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 anywhere
in the world.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 transaction
fee process. Instead of performing complex calculations to estimate the fee that is charged (&ldquo;gas&rdquo;), users instead pay an
algorithmically determined transaction fee set by the protocol itself. Gas price is often a small fraction of ether, which is denoted
in the unit of Gwei (10^9 Gwei = 1 ether). Gas is essential in sustaining the Ethereum network. It motivates validators to process and
verify transactions for a monetary reward. Gas price fluctuates with supply. Gas has another important function in preventing unintentional
waste 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 facilitate
transactions. When gas runs out, the program will be terminated, and no additional energy would be used.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network recently
implemented software upgrades and other changes to its protocol, including the adoption of network upgrades collectively referred to as
Serenity, or Ethereum 2.0. Ethereum 2.0 aimed to improve the network&rsquo;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 Ethereum
2.0, in mid-September 2022, a shift from the proof-of-work to the proof-of-stake model occurred. Ethereum 2.0 also encompassed the addition
of other new features, such as &ldquo;sharding.&rdquo; Sharding is a multi-phase upgrade to improve Ethereum&rsquo;s scalability and capacity.
Shard chains spread the network&rsquo;s load across numerous new chains splitting the data processing responsibility among many nodes
and allowing for parallel processing and validation of transactions. Sharding makes it easier to run a node by keeping hardware requirements
low. A digital asset network&rsquo;s consensus mechanism is an aspect of its source code, and any failure to properly implement such a
change could have a material adverse effect on the value of ether and the value of the Shares. The move to proof-of-stake may subject
Ethereum and ether to new and unexpected vulnerabilities not applicable to proof-of-work consensus models.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">History of Ethereum</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum network was originally
described in a 2013 white paper by Vitalik Buterin, a programmer involved with bitcoin, with the goal of creating a peer-to-peer, open-source
network enabling users to create so-called decentralized applications powered by smart contracts, which are general-purpose code that
executes on the Ethereum network. By combining the Ethereum blockchain with a flexible scripting language that is designed to be capable
of implementing sophisticated logic and execute a wide variety of instructions, the Ethereum network was designed to act as a programmable
infrastructure layer that would enable users to create their own rules for ownership, transaction formats and state transition functions
that they could build into custom software programs of their own creation. The formal development of the Ethereum network began through
a Swiss firm called Ethereum Switzerland GmbH (&ldquo;EthSuisse&rdquo;) in conjunction with several other entities. Subsequently, the
Ethereum Foundation, a Swiss non-profit organization, was set up to oversee the protocol&rsquo;s development. The Ethereum network went
live on July 30, 2015. Decentralized applications may be controlled by a single user or small group. See &ldquo;RISK FACTORS&mdash;Risks
Related to Digital Assets.&rdquo; 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 adverse impact on the value of ether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether is the digital asset
that powers the Ethereum network and serves as the network&rsquo;s native unit of account used to pay transaction fees to the protocol
itself 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 &ldquo;Creation of New Ether.&rdquo; Coinciding with the network launch, it was decided that EthSuisse would be dissolved, designating
the Ethereum Foundation as the sole organization dedicated to protocol development.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Smart Contracts and Development on the Ethereum
Network</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Smart contracts are programs
that run on a blockchain that can execute automatically when certain conditions are met. Smart contracts facilitate the exchange of anything
representative of value, such as money, information, property, or voting rights. Using smart contracts, users can send or receive digital
assets, create markets, store registries of debts or promises, represent ownership of property or a company, move funds in accordance
with conditional instructions and create new digital assets, among other actions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Development on the Ethereum
network involves building more complex tools on top of smart contracts, such as DApps; organizations that are autonomous, known as decentralized
autonomous organizations (&ldquo;DAOs&rdquo;); and entirely new decentralized networks. For example, a company that distributes charitable
donations on behalf of users could hold donated funds in smart contracts that are paid to charities only if the charities satisfy certain
pre-defined conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, the Ethereum network
has 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 Ethereum
network, with such assets representing a significant amount of the total market value of all digital assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">More recently, the Ethereum
network 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 on
their digital assets, exchange one digital asset for another and create derivative digital assets such as stablecoins, which are digital
assets pegged to a reserve asset such as fiat currency. Over the course of 2023, between $32.1 billion and $67.1 billion worth of digital
assets were locked up as collateral on DeFi platforms on the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the Ethereum
network and other smart contract platforms have been used for creating NFTs. Unlike digital assets native to smart contract platforms
which are fungible and enable the payment of fees for smart contract execution. Instead, NFTs allow for digital ownership of assets that
convey 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 exists
in an online game or a DApp, and users can trade their NFTs in the DApp or game, and carry them to other digital experiences, creating
an entirely new free-market internet-native economy that can be monetized in the physical world.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The DAO and Ethereum Classic</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2016, the Ethereum
network experienced what is referred to as a permanent hard fork that resulted in two different versions of its blockchain: Ethereum and
Ethereum Classic.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In April 2016, a blockchain
solutions company known as Slock.it announced the launch of a decentralized autonomous organization, known as &ldquo;The DAO&rdquo; on
the Ethereum network. The DAO was designed as a decentralized crowdfunding model, in which anyone could contribute ether tokens to The
DAO in order to become a voting member and equity stakeholder in the organization. Members of The DAO could then make proposals about
different projects to pursue and put them to a vote. By committing to profitable projects, members would be rewarded based on the terms
of 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 17, 2016, an anonymous
hacker exploited The DAO&rsquo;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 Ethereum
community worked to determine a solution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 direct
interference with the protocol (i.e., a hard fork) would be necessary. The argument for the hard fork was that it would create an entirely
new version of the Ethereum blockchain, erasing any record of the theft, and restoring the stolen funds to their original owners. The
counterargument was that it would be antithetical to the core principle of immutability of the Ethereum blockchain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The decision over whether
or not to hard fork the Ethereum blockchain was put to a vote of Ethereum community members. A majority of votes were cast in favor of
a hard fork. On July 15, 2016, a hard fork specification was implemented by the Ethereum Foundation. On July 20, 2016, the Ethereum network
completed the hard fork, and a new version of the blockchain, without recognition of the theft, was born.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many believed that after the
hard fork the original version of the Ethereum blockchain would dissipate entirely. However, a group of validators continued to mine the
original Ethereum blockchain for philosophical and economic reasons. On July 20, 2016, the original Ethereum protocol was rebranded as
Ethereum 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.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Overview of the Ethereum Network&rsquo;s
Operations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to own, transfer
or use ether directly on the Ethereum network on a peer-to-peer basis (as opposed to through an intermediary, such as a custodian or centralized
exchange), a person generally must have internet access to connect to the Ethereum network. Ether transactions may be made directly between
end-users without the need for a third-party intermediary. To prevent the possibility of double-spending ether, a user must notify the
Ethereum network of the transaction by broadcasting the transaction data to its network peers. The Ethereum network provides confirmation
against 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 network
validation process, which adds &ldquo;blocks&rdquo; of data, including recent transaction information, to the Ethereum blockchain.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Summary of an Ether Transaction</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A &ldquo;transaction request&rdquo;
refers to a request to the Ethereum network made by a user, in which the requesting user (the &ldquo;sender&rdquo;) asks the Ethereum
network to send some ether or execute some code. A &ldquo;transaction&rdquo; refers to a fulfilled transaction request and the associated
change in the Ethereum network&rsquo;s state. An Ethereum Client is a software application that implements the Ethereum network specification
and communicates with the Ethereum network. A node is a computer or other device, such as a mobile phone, running an individual Ethereum
Client that is connected to other computers also running their own Ethereum Clients, which collectively form the Ethereum network. Nodes
can be full nodes (meaning they host a local copy of the entire Ethereum blockchain) or light nodes, which only host a local copy of a
sub-portion of the full Ethereum blockchain with reduced data. Nodes may (but do not have to) be validators, which requires them to download
an additional piece of software in the node&rsquo;s Ethereum Client and stake a certain amount of ether, which is discussed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any user can broadcast a transaction
request 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 operated
by 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 &ldquo;committed to the network&rdquo; by another node (specifically, a validator node). Execution of the transaction request
by the validator results in a change to the state of the Ethereum network once the transaction is broadcast to all other nodes across
the Ethereum network. Transactions can include, for example, sending ether from one account to another, as discussed below; publishing
a new smart contract onto the Ethereum network; or activating and executing the code of an existing smart contract, in accordance with
the terms and conditions specified in the sender&rsquo;s transaction request.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Ethereum blockchain can
be thought of as a ledger recording a history of transactions and the balances associated with individual accounts, each of which has
an address on the Ethereum network. An Ethereum network account can be used to store ether. There are two types of Ethereum accounts:
&ldquo;externally owned accounts,&rdquo; which are controlled by a private key, and &ldquo;smart contract accounts,&rdquo; which are controlled
by their own code. Externally owned accounts are controlled by users, do not contain executable code, and are associated with a unique
&ldquo;public key&rdquo; and &ldquo;private key&rdquo; pair, commonly referred to as a &ldquo;wallet,&rdquo; with the private key being
used to execute transactions. Smart contract accounts contain, and are controlled by, their own executable code: every time the smart
contract account receives a transaction from, or is &ldquo;called&rdquo; by, another user, the smart contract account&rsquo;s code activates,
allowing it to read and write to internal storage, send ether, or perform other operations. Both externally owned accounts and smart contract
accounts can be used to send, hold, or receive ether, and both can interact with other smart contracts. However, only externally owned
accounts have the power to initiate transactions; smart contract accounts can only send transactions of their own after they are first
activated or called by another transaction. An externally owned account is associated with both a public address on the Ethereum network
and a private key, while a smart contract account is only associated with a public address. While a smart contract account does not use
a private key to authorize transactions, including transfers of ether, the developer of a smart contract may hold an &ldquo;admin key&rdquo;
to the smart contract account, or have special access privileges, allowing the developer to make changes to the smart contract, enable
or disable features on the smart contract, or change how the smart contract receives external inputs and data, among others.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Accounts depend on nodes to
access the peer-to-peer Ethereum network. Through the node&rsquo;s Ethereum Client, a user&rsquo;s Ethereum wallet and its associated
Ethereum 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 its
own Ethereum Client) and connect that node to its Ethereum wallet, allowing it to make transactions from its Ethereum wallet on the Ethereum
network, or a user&rsquo;s wallet can connect to third-party nodes operated as a service (e.g., Infura) and access the Ethereum network
that way. Multiple accounts can access the Ethereum network through one node.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each user&rsquo;s Ethereum
wallet is associated with a unique &ldquo;public key&rdquo; and &ldquo;private key&rdquo; 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. dollars
providing a routing address in wire instructions to the payor so that cash may be wired to the recipient&rsquo;s account. The sender approves
the transfer to the address provided by the recipient by &ldquo;signing&rdquo; a transaction that consists of the recipient&rsquo;s public
key with the private key of the address from which the sender is transferring the ether. The recipient, however, does not make public
or provide to the sender the recipient&rsquo;s related private key, only its public key.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Neither the recipient nor
the sender reveals its private keys in a peer-to-peer transaction, because the private key authorizes transfer of the funds in that address
to other users. Therefore, if a user loses its private key, the user may permanently lose access to the ether contained in the associated
address. Likewise, ether is irretrievably lost if the private key associated with it is deleted and no backup has been made. When sending
ether, a user&rsquo;s Ethereum wallet must sign the transaction with the sender&rsquo;s associated private key. In addition, since every
computation on the Ethereum network requires processing power, there is a mandatory transaction fee involved with the transfer that is
paid by the sender to the Ethereum network itself (&ldquo;base fee&rdquo;), plus additional transaction fees the sender can elect (or
not) to pay at their discretion to the validators who validate their transaction (&ldquo;tip&rdquo;). The resulting digitally signed transaction
is sent by the user&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ethereum network validators
record and confirm transactions when they validate and add blocks of information to the Ethereum blockchain. Validators operate through
nodes whose Ethereum Clients have an extra piece of software that permits the node to perform validation transactions. In a proof-of-stake
consensus protocol like that used by the Ethereum network, validators compete to be randomly selected to validate transactions. A validator
must stake 32 ether to become a validator, which allows it to activate a unique validator key pair (consisting of a public and private
validator key). Each stake of 32 ether results in issuance of a validator key pair, meaning that multiple validators can operate through
a single validator node (including a validator node operated by a third party as a service). There are two types of validators, those
who propose blocks (&ldquo;proposers&rdquo;) and those who participate in a committee that approves the block (&ldquo;attesters&rdquo;).
Staking more ether (in chunks of 32 ether) can increase the numerical chances that a given validator will be randomly selected. When a
validator is randomly selected by the protocol&rsquo;s algorithm to propose a block, it creates that block, which includes data relating
to (i) the verification of newly submitted transaction requests submitted by senders and (ii) a reference to the prior block in the Ethereum
blockchain to which the new block is being added. The proposing validator becomes aware of outstanding transaction requests through peer-to-peer
data packet transmission and distribution enforced by the Ethereum protocol rules, which connects the proposer to users who want transactions
recorded. If&mdash;once created&mdash;the proposing validator&rsquo;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 the
transaction request is also executed (provided the base fee is paid for the Ethereum network&rsquo;s computational power associated with
executing the code, and up to the amount of the base fee). Upon the addition of a block included in the Ethereum blockchain, an adjustment
to the ether balance in both the sender and recipient&rsquo;s Ethereum network public key will occur, completing the ether transaction.
Once a transaction is confirmed on the Ethereum blockchain, it is irreversible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a reward for their services
in adding the block to the Blockchain, both the proposing validator and the attesting validators receive newly minted ether from the Ethereum
network. If the proposing validator&rsquo;s block is determined by the approving validator committee to be faulty or to break protocol
rules, the proposer is penalized by having its staked ether reduced. Validators can also be penalized for attesting to transactions that
break protocol rules or are inconsistent with the majority of other validators, or for inactivity or missing attestations that the Ethereum
network protocol assigned to them. In extreme cases, a proposing or attesting validator can be &ldquo;slashed,&rdquo; meaning forcibly
ejected 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some ether transactions are
conducted &ldquo;off-blockchain&rdquo; and are therefore not recorded in the Ethereum blockchain. Some &ldquo;off-blockchain transactions&rdquo;
involve the transfer of control over, or ownership of, a specific digital wallet holding ether or the reallocation of ownership of certain
ether in a pooled-ownership digital wallet, such as a digital wallet owned by a digital asset exchange. If a transaction can also take
place through a centralized digital asset exchange or a custodian&rsquo;s internal books and records, it is not broadcast to the Ethereum
network or recorded on the Ethereum blockchain. In contrast to on-blockchain transactions, which are publicly recorded on the Ethereum
blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain
transactions are not peer-to-peer ether transactions in that they do not involve a transaction on the Ethereum network and do not reflect
a movement of ether between addresses recorded in the Ethereum blockchain. For these reasons, off-blockchain transactions are not immutable
or irreversible as any such transfer of ether ownership is not cryptographically protected by the protocol behind the Ethereum network
or recorded in, and validated through, the blockchain mechanism.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether has generally exhibited
high price volatility relative to more traditional asset classes. One volatility measure, standard deviation, is based on the variability
of historical price returns. A higher standard deviation indicates a wider dispersion of past price returns and thus greater historical
volatility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ethereum Markets and Exchanges</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether can be transferred in
direct peer-to-peer transactions through the direct sending of ether over the Ethereum blockchain from one ether address to another. Among
end-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 the
Ethereum blockchain or through third-party service providers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to using ether
to 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-term
investment to diversify their portfolio. The value of ether within the market is determined, in part, by the supply of and demand for
ether in the global ether market, market expectations for the adoption of ether as a store of value, the number of merchants that accept
ether as a form of payment, and the volume of peer-to-peer transactions, among other factors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ether spot markets typically
permit investors to open accounts with the market and then purchase and sell ether via websites or through mobile applications. Prices
for trades on ether spot markets are typically reported publicly. An investor opening a trading account must deposit an accepted government-issued
currency into its account with the spot market, or a previously acquired digital asset, before they can purchase or sell assets on the
spot market. The process of establishing an account with an ether market and trading ether is different from, and should not be confused
with, the process of users sending ether from one ether address to another ether address on the Ethereum blockchain. This latter process
is an activity that occurs on the Ethereum network, while the former is an activity that occurs entirely within the order book operated
by the spot market. The spot market typically records the investor&rsquo;s ownership of ether in its internal books and records, rather
than on the Ethereum blockchain. The spot market ordinarily does not transfer ether to the investor on the Ethereum blockchain unless
the investor makes a request to the exchange to withdraw the ether in its exchange account to an off-exchange ether wallet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 institutional
entities, such as firms that offer two-sided liquidity for ether, investment managers, proprietary trading firms, high-net-worth individuals
that trade ether on a proprietary basis, entities with sizeable ether holdings, and family offices. The OTC market provides a relatively
flexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of ether. The OTC market
has no formal structure and no open-outcry meeting place. Parties engaging in OTC transactions will agree upon a price&mdash;often via
phone or email&mdash;and then one of the two parties will then initiate the transaction. For example, a seller of ether could initiate
the transaction by sending the ether to the buyer&rsquo;s ether address. The buyer would then wire U.S. dollars to the seller&rsquo;s
bank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on ether spot markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, ether futures
and options trading occurs on exchanges in the United States regulated by the CFTC. The market for CFTC-regulated trading of ether derivatives
has developed substantially. As of March 28, 2024, regulated ether futures represented approximately $837 million in notional trading
volume on Chicago Mercantile Exchange (&ldquo;CME&rdquo;). Ether futures on the CME traded around $562 million per day in the one year
ending March 28, 2024 and represented around $546 million in open interest per day. Through the common membership of the Exchange and
the CME Ethereum Futures market in the Intermarket Surveillance Group (the &ldquo;ISG&rdquo;), the Exchange may obtain information regarding
trading in the Shares and listed ether derivatives from the CME Ethereum Futures market via the ISG and from other exchanges who are members
or affiliates of the ISG. Such an arrangement with the ISG and the CME Ethereum Futures market allows for the surveillance of ether futures
market conditions and price movements on a real-time and ongoing basis in order to detect and prevent price distortions, including price
distortions caused by manipulative efforts. The sharing of surveillance information between the Exchange and the CME Ethereum Futures
market regarding market trading activity, clearing activity and customer identity assists in detecting, investigating and deterring fraudulent
and manipulative misconduct, as well as violations of the Exchange&rsquo;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 sessions
and to deter and detect violations of Exchange rules and the applicable federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As discussed in more detail
below, barring the liquidation of the Trust or extraordinary circumstances, the Trust will not directly purchase or sell ether, although
the Sponsor may direct the Ether Custodian to sell ether to pay certain expenses. Instead, Authorized Participants will deliver ether
to the Trust&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Creation of New Ether</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Initial Creation of Ether</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. The initial 72.0 million ether were distributed as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><U>Initial Distribution</U>:
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 raised
approximately $18 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><U>Ethereum Foundation</U>:
6.0 million ether, or 8.33% of the supply, was distributed to the Ethereum Foundation for operational costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><U>Ethereum Developers</U>:
3.0 million ether, or 4.17% of the supply, was distributed to developers who contributed to the Ethereum network.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><U>Developer Purchase Program</U>:
3.0 million ether, or 4.17% of the supply, was distributed to members of the Ethereum Foundation to purchase at the initial crowd sale
price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Following
the launch of the Ethereum network, ether supply initially increased through a progressive validation process. Following the introduction
of EIP-1559, described below, ether supply and issuance rates vary based on factors such as recent use of the network.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Proof-of-Work Validation Process</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to September 2022, Ethereum
operated using a proof-of-work consensus mechanism. Under proof-of-work, in order to incentivize those who incurred the computational
costs of securing the network by validating transactions, there was a reward given to the computer (under proof-of-work, validators were
known as &ldquo;miners&rdquo;) that was able to create the latest block on the chain. Every 12 seconds, on average, a new block was added
to the Ethereum blockchain with the latest transactions processed by the network, and the miner that generated this block was awarded
a variable amount of ether, depending on use of the network at the time. In certain validation scenarios, ether was sometimes sent from
one miner to another if it was also able to find a solution but its block was not included. This is referred to as an &ldquo;uncle/aunt
reward.&rdquo; Due to the nature of the algorithm for block generation, this process (generating a &ldquo;proof-of-work&rdquo;) was guaranteed
to be random. Prior to the Merge upgrade, described below, miners on the Ethereum network engaged in a set of prescribed complex mathematical
calculations in order to add a block to the Ethereum blockchain and thereby confirm ether transactions included in that block&rsquo;s
data.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Proof-of-Stake Process</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">In
the second half of 2020, the Ethereum network began the first of several stages of an upgrade that was initially known as &ldquo;Ethereum
2.0&rdquo; and eventually became known as the &ldquo;Merge&rdquo; to transition the Ethereum network from a proof-of-work consensus mechanism
to a proof-of-stake consensus mechanism. The Merge was completed on September 15, 2022, and the Ethereum network has operated on a proof-of-stake
model since such time.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Unlike
proof-of-work, in which validators expend computational resources to compete to validate transactions and are rewarded coins in proportion
to the amount of computational resources expended, in proof-of-stake, validators risk or &ldquo;stake&rdquo; coins to compete to be randomly
selected to validate transactions and are rewarded coins in proportion to the amount of coins staked. Any malicious activity, such as
validating multiple blocks, disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or
&ldquo;slashing&rdquo; of a portion of the staked coins. Proof-of-stake is believed by some to be more energy efficient and scalable than
proof-of-work. Approximately every 12 seconds, a new block is added to the Ethereum blockchain with the latest transactions processed
by the network, and the validator that generated this block is awarded ether.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Limits
on Ether Supply</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">The
rate at which new ether are issued and put into circulation is expected to vary. In September 2022 the Ethereum network converted from
proof-of-work to a new proof-of-stake consensus mechanism. Following the Merge, approximately 1,700 ether are issued per day, though
the issuance rate varies based on the number of validators on the network. In addition, the issuance of new ether could be partially
or completely offset by the burn mechanism introduced by the EIP-1559 modification, under which ether are removed from supply at a rate
that varies with network usage. See &ldquo;Modifications to the Ethereum Protocol.&rdquo; On many occasions, the ether supply has been
deflationary 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 deflationary
over the long term.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">As
of September 1, 2024, approximately 120.3 million ether were outstanding.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Modifications
to the Ethereum Protocol</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">The
Ethereum network is an open-source project with no official developer or group of developers that controls it. However, historically
the Ethereum network&rsquo;s development has been overseen by the Ethereum Foundation and other core developers. The Ethereum Foundation
and core developers are able to access and alter the Ethereum network source code and, as a result, they are responsible for quasi-official
releases of updates and other changes to the Ethereum network&rsquo;s source code. However, the release of proposed updates to the Ethereum
network&rsquo;s source code by core developers does not guarantee that the updates will be automatically adopted. Nodes must accept any
changes made to the Ethereum source code by choosing to download the proposed modification of the Ethereum network&rsquo;s source code
in their individual Ethereum Client, and ultimately a critical mass (in practice, a substantial majority) of validators and users&mdash;such
as DApp and smart contract developers, as well as users of DApps and smart contracts, and anyone else who transacts on the Ethereum blockchain
or Ethereum network&mdash;must support the shift, or the upgrades will lack adoption. A modification of the Ethereum network&rsquo;s
source code is only effective with respect to the Ethereum nodes that download it and modify their Ethereum Clients accordingly, and
in practice such decisions are heavily influenced by the preferences of validators and users. If a modification is accepted only by a
percentage of nodes, a division in the Ethereum network will occur such that one network will run the pre-modification source code and
the other network will run the modified source code. Such a division is known as a &ldquo;fork.&rdquo; See &ldquo;RISK FACTORS&mdash;Risks
Related to Digital Assets.&rdquo; A temporary or permanent &ldquo;fork&rdquo; of the Ethereum blockchain could adversely affect the value
of the Shares. Consequently, as a practical matter, a modification to the source code becomes part of the Ethereum network only if accepted
by a sufficiently broad cross-section of the Ethereum network&rsquo;s participants.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">For
example, in 2019 the Ethereum network completed a network upgrade called Metropolis that was designed to enhance the usability of the
Ethereum network and was introduced in two stages. The first stage, called Byzantium, was implemented in October 2017. The purposes of
Byzantium were to increase the network&rsquo;s privacy, security, and scalability and to reduce the block reward for validators (at that
time, validators on the proof-of-work consensus version of Ethereum were known as &ldquo;miners&rdquo;) who created new blocks in proof-of-work
consensus from 5.0 ether to 3.0 ether. The second stage, called Constantinople, was implemented in February 2019, along with another
upgrade, called St. Petersburg. Another network upgrade, called Istanbul, was implemented in December 2019. The purpose of Istanbul was
to make the network more resistant to denial-of-service attacks, to enable greater ether and Zcash interoperability as well as other
Equihash-based proof-of-work digital assets, and to increase the scalability and performance for solutions on zero-knowledge privacy
technology like SNARKs and STARKs. The purposes of these upgrades were to prepare the Ethereum network for the introduction of a proof-of-stake
algorithm and reduce the block reward from 3.0 ether to 2.0 ether.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">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&rsquo;s consensus mechanism to include proof-of-stake and was intended to address the perceived shortcomings of
the proof-of-work consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known
under proof-of-work as &ldquo;miners&rdquo;) who did not win the race, under proof of work, to be the first in time to solve the cryptographic
puzzle that would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was
only given to the first validator to successfully solve the puzzle and hash a given block, and not to others).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">Following
the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase
speed, throughput and scalability and also improve existing or next-generation uses. Future upgrades to the Ethereum protocol and Ethereum
blockchain to address scaling issues&mdash;such as network congestion, slow throughput and periods of high transaction fees owing to
spikes in network demand&mdash;have been discussed by network participants, such as sharding. The purpose of sharding, which has been
discussed 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 validators
being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. However, there appears
to be uncertainty and a lack of existing widespread consensus among network participants about how to solve the scaling challenges faced
by the Ethereum network.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">The
rapid development of other competing scalability solutions, such as those which would rely on handling the bulk of computational work
relating to transactions or smart contracts and DApps outside of the main Ethereum network and Ethereum blockchain, has caused alternatives
to sharding to emerge. &ldquo;Layer 2&rdquo; is a collective term for solutions that are designed to help increase throughput and reduce
transaction fees by handling or validating transactions off the main Ethereum network (known as &ldquo;Layer 1&rdquo;) and then attempting
to take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by uploading the transactions validated
on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer
2 technologies and implementations. For example, &ldquo;rollups&rdquo; perform transaction execution outside the Layer 1 blockchain and
then post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. &ldquo;Zero knowledge rollups&rdquo;
are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proof
of validity of a batch of transactions (not the entire transactions themselves). By contrast, &ldquo;optimistic rollups&rdquo; assume
transactions are valid by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling
solutions include, among others, &ldquo;state channels,&rdquo; which are designed to allow participants to run a large number of transactions
on the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening
the state channel, and the transaction closing the channel); and &ldquo;side chains,&rdquo; in which an entire Layer 2 blockchain network
with similar capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum
blockchain 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">Apart
from solutions designed to address scalability challenges, there have been other upgrades as well. In&nbsp;2021, the Ethereum network
implemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate the fees paid to validators. EIP-1559 resulted in
the 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 from
circulation, or &ldquo;burnt,&rdquo; and the tip is paid to validators. EIP-1559 has reduced the total net issuance of ether fees to
validators. Future updates may impact the supply of or demand for ether or its price.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">The
Trust&rsquo;s activities will not directly relate to scalability or upgrade projects, though such projects may potentially increase demand
for ether and the utility of the Ethereum network as a whole. Conversely, if they are unsuccessful or they cause users or application
or smart contract developers to migrate away from the Ethereum blockchain, demand for ether could potentially be reduced. Also, projects
that operate and are built within the Layer 1 Ethereum blockchain and network may increase the data flow on the Ethereum network and
could either &ldquo;bloat&rdquo; the size of the Ethereum blockchain or slow confirmation times.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Forms
of Attack Against the Ethereum Network</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">All
networked 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 &ldquo;51% attack&rdquo; whereby, if a validator or group of validators
acting in concert were to gain control of more than 50% of the staked ether, a malicious actor would be able to gain full control of
the network and the ability to manipulate the Ethereum blockchain. As of the date of this Prospectus, the top three largest staking pools
controlled nearly 50% of the ether staked on the Ethereum network.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">Many
digital asset networks have been subjected to a number of denial-of-service attacks, which has led to temporary delays in block creation
and in the transfer of Ethereum. Any similar attacks on the Ethereum network that impact the ability to transfer ether could have a material
adverse effect on the price of ether and the value of the Shares. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font: normal 10pt Times New Roman, Times, Serif">This
is not intended as an exhaustive list of all forms of attack against the Ethereum network. For additional information, see the &ldquo;RISK
FACTORS&rdquo; section of this Prospectus.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Market
Participants</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Validators</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
proof-of-stake, validators risk or stake coins to compete to be randomly selected to validate transactions and are rewarded for performing
their responsibilities and behaving in accordance with protocol rules. Any malicious activity, such as validating multiple blocks, disagreeing
with the eventual consensus or otherwise violating protocol rules, results in the penalization or, in extreme cases, slashing of a portion
of the staked coins.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Validators
range from Ethereum enthusiasts to professional operations that design and build dedicated machines and data centers. On the Ethereum
network, 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 validating
blocks, validators may be able to prioritize certain transactions in return for increased transaction fees, particularly tips, an incentive
system known as &ldquo;Maximal Extractable Value,&rdquo; or MEV. For example, in blockchain networks that facilitate DeFi protocols in
particular, such as the Ethereum network, users may attempt to gain an advantage over other users by increasing offered transaction fees
to incentivize validators to give their submitted transaction requests priority. Certain software services, such as Flashbots, have been
developed to facilitate validators in capturing MEV produced by these increased fees.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
and Speculative Sector</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
sector includes the investment and trading activities of both private and professional investors and speculators. Historically, larger
financial services institutions are publicly reported to have limited involvement in investment and trading in digital assets, although
the participation landscape is beginning to change. Currently, there is relatively limited use of digital assets in the retail and commercial
marketplace in comparison to relatively extensive use by speculators, and a significant portion of demand for digital assets is generated
by speculators and investors seeking to profit from the short- or long-term holding of digital assets.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Retail
Sector</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
retail sector includes users transacting in direct peer-to-peer ether activity through the direct sending of ether over the Ethereum
network. The retail sector also includes transactions in which consumers pay for goods or services from commercial or service businesses
through direct transactions or third-party service providers, although the use of ether as a means of payment is still developing and
has not been accepted in the same manner as bitcoin due to ether&rsquo;s relative nascency and because ether has a generally different
purpose than bitcoin.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Service
Sector</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
sector 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. Coinbase
Custody Trust Company, LLC, the Custodian of the Trust, is a digital asset custodian that provides custodial accounts that store ether
for users. As the Ethereum network continues to grow in acceptance, it is anticipated that service providers will expand the currently
available range of services and that additional parties will enter the service sector for the Ethereum network.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Competition</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2023, more than 8,000 other digital assets, as tracked by CoinMarketCap.com, have been developed since the inception
of bitcoin, which is currently the most developed digital asset because of the length of time it has been in existence, the investment
in the infrastructure that supports it, and the network of individuals and entities that are using bitcoin in transactions. While ether
has enjoyed some success in its limited history, the aggregate value of outstanding ether is smaller than that of bitcoin and may be
eclipsed by the more rapid development of other digital assets. In addition, while ether was the first digital asset with a network that
served 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.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_005"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">REGULATION
OF BITCOIN AND ETHER</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">As
digital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including
</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial Crimes Enforcement Network (&ldquo;FinCEN&rdquo;)<FONT STYLE="background-color: white">,
SEC, CFTC, the Financial Industry Regulatory Authority (&ldquo;FINRA&rdquo;), the Consumer Financial Protection Bureau (&ldquo;CFPB&rdquo;),
the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial institution
and 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 criminal
or terrorist enterprises, and the safety and soundness of exchanges or other service providers that hold or have custody of digital assets
for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed to investors by digital
assets. President Biden&rsquo;s March 9, 2022 Executive Order, asserting that technological advances and the rapid growth of the digital
asset markets &ldquo;necessitate an evaluation and alignment of the United States Government approach to digital assets,&rdquo; signals
an ongoing focus on digital asset policy and regulation in the United States. A number of reports issued pursuant to the Executive Order
have 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 treatment
of digital asset transactions or requirements for businesses engaged in digital asset activity.</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">Many
of 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, perhaps
to a materially adverse extent, the nature of an investment in the Shares and/or the ability of the Trust to continue to operate. For
example, the events of 2022, including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius
Network, Voyager Digital, Genesis, BlockFi and others, and other developments in the digital asset markets, have resulted in calls for
heightened 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 to
regulate 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-asset
risks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud
and scams, legal uncertainties, significant volatility, and contagion risk. Although banking organizations are not prohibited from crypto-asset
related activities, the agencies have expressed significant safety and soundness concerns with business models that are concentrated
in crypto-asset related activities or have concentrated exposures to the crypto-asset sector. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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, Financial
Technology and Inclusion Subcommittee and the Commodity Markets, Digital Assets, and Rural Development Subcommittee, each of which were
formed in part to analyze issues concerning crypto assets and demonstrate a legislative intent to develop and consider the adoption of
federal 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 ascertainable
in the near future. A divided Congress makes any prediction difficult.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">FinCEN
requires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply with
the anti-money laundering regulations applicable to money transmitters. In 2015, FinCEN assessed a $700,000 fine against a sponsor of
a digital asset for violating several requirements of the Bank Secrecy Act by acting as a money services business and selling the digital
asset without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering program. In 2017, FinCEN
assessed a $110 million fine against BTC-e, a now defunct digital asset exchange, for similar violations. The requirement that exchangers
that do business in the U.S. register with FinCEN and comply with anti-money laundering regulations may increase the cost of buying and
selling bitcoin and therefore may adversely affect the price of bitcoin and an investment in the Shares. In a March 2018 letter from
FinCEN&rsquo;s assistant secretary for legislative affairs to U.S. Senator Ron Wyden, the assistant secretary indicated that under current
law both the developers and the exchanges involved in the sale of tokens in an initial coin offering (&ldquo;ICO&rdquo;) may be required
to register with FinCEN as money transmitters and comply with the anti-money laundering regulations applicable to money transmitters.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Office of Foreign Assets Control (&ldquo;OFAC&rdquo;) of the U.S. Department of the Treasury (the &ldquo;U.S. Treasury Department&rdquo;)
has added digital currency addresses, including addresses on the Bitcoin Network to the list of Specially Designated Nationals whose
assets are blocked, and with whom U.S. persons are generally prohibited from dealing. Such actions by OFAC, or by similar organizations
in other jurisdictions, may introduce uncertainty in the market as to whether bitcoin that has been associated with such addresses in
the past can be easily sold. This &ldquo;tainted&rdquo; bitcoin may trade at a substantial discount to untainted bitcoin. Reduced fungibility
in the Bitcoin markets may reduce the liquidity of bitcoin and therefore adversely affect their price.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
regulations from the New York State Department of Financial Services (&ldquo;NYDFS&rdquo;), businesses involved in digital asset business
activity for third parties in or involving New York, excluding merchants and consumers, must apply for a license, commonly known as a
BitLicense, from the NYDFS and must comply with anti-money laundering, cyber security, consumer protection, and financial and reporting
requirements, among others. As an alternative to a BitLicense, a firm can apply for a charter to become a limited purpose trust company
under New York law qualified to engage in digital asset business activity. Other states have considered or approved digital asset business
activity statutes or rules, passing, for example, regulations or guidance indicating that certain digital asset business activities constitute
money transmission requiring licensure.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
inconsistency in applying money transmitting licensure requirements to certain businesses may make it more difficult for these businesses
to provide services, which may affect consumer adoption of bitcoin and its price. In an attempt to address these issues, the Uniform
Law Commission passed a model law in July 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similarities
to the BitLicense and features a multistate reciprocity licensure feature, wherein a business licensed in one state could apply for accelerated
licensure procedures in other states. It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">In
addition, the chair of the SEC has stated that the SEC has authority under existing laws to regulate the digital asset sector and the
SEC, U.S. state securities regulators and several foreign governments have issued warnings and instituted legal proceedings in which
they argue that certain digital assets may be classified as securities and that both those digital assets and any related initial coin
offerings 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 continue
to operate. Additionally, U.S. state and federal, and foreign, regulators and legislatures have taken action against virtual currency
businesses or enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming
from virtual currency activity.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
June 2023, the SEC filed lawsuits against Coinbase and Binance, two large U.S. digital asset trading platforms, alleging that Coinbase
and Binance had been operating as unregistered securities exchanges, brokers and clearing agencies in violation of U.S. federal securities
laws. While the SEC has not alleged that bitcoin is a security, the outcome of these enforcement actions and others may result in the
substantial restructuring of the digital asset market in the United States. However, the SEC has recently faced setbacks in U.S. courts
in its attempt to regulate the digital asset markets. In July 2023, the U.S. District Court for the Southern District of New York ruled
on the SEC&rsquo;s action against Ripple Labs, Inc. The court found that offers and sales of XRP, a digital token, to institutions and
sophisticated individuals constituted securities transactions, but that offers and sales of XRP on crypto exchanges, distributions to
employees, and other third-party developers were not securities transactions. More recently, the D.C. Circuit Court found that the SEC&rsquo;s
denial of the Grayscale Bitcoin Trust&rsquo;s listing was &ldquo;arbitrary and capricious&rdquo; under the Administrative Procedures
Act in light of the SEC&rsquo;s approval of two similar bitcoin futures-based ETPs. Nonetheless, until the SEC&rsquo;s numerous actions
against digital asset market participants are resolved, the structure of the digital asset market in the United States will remain subject
to substantial regulatory risk, which may impact the demand for digital assets and the continued availability of existing exchanges and
offerings.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">The
SEC has also recently proposed amendments to the custody rules under Rule 406(4)-2 of the Investment Advisers Act. The proposed rule
changes would amend the definition of a &ldquo;qualified custodian&rdquo; under Rule&nbsp;206(4)-2(d)(6) and expand the current custody
rule under Rule 406(4)-2 to cover digital assets and related advisory activities. If enacted as proposed, these rules would likely impose
additional regulatory requirements with respect to the custody and storage of digital assets and could lead to additional regulatory
oversight of the digital asset ecosystem more broadly. In addition, it is possible the market turbulence in late 2022, which led to the
failure of FTX Trading Ltd. (&ldquo;FTX&rdquo;) 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">The
CFTC has regulatory jurisdiction over the bitcoin and ether futures markets. In addition, because the CFTC has determined that bitcoin
and ether are each a &ldquo;commodity&rdquo; under the CEA and the rules thereunder, it has jurisdiction to prosecute fraud and manipulation
in the cash, or spot, market for bitcoin and ether. The CFTC has pursued enforcement actions relating to fraud and manipulation involving
bitcoin, ether and bitcoin and ether markets. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or
spot market exchanges or transactions involving bitcoin or ether that do not use collateral, leverage, or financing.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">Various
foreign jurisdictions have adopted and may continue in the near future to adopt laws, regulations or directives that affect a digital
asset network, the digital asset markets, and their users, particularly digital asset exchanges and service providers that fall within
such jurisdictions&rsquo; regulatory scope. For example:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">China
has made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow. China
has banned initial coin offerings and there have been reports that Chinese regulators have taken action to shut down a number of China-based
digital asset exchanges.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.6in; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">South
Korea determined to amend its Financial Information Act in March 2020 to require virtual asset service providers to register and comply
with its AML and counter-terrorism funding framework. These measures also provide the government with the authority to close digital
asset exchanges that do not comply with specified processes. South Korea has also banned initial coin offerings.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Reserve Bank of India in April 2018 banned the entities it regulates from providing services to any individuals or business entities
dealing with or selling digital assets. In March 2020, this ban was overturned in the Indian Supreme Court, although the Reserve Bank
of India is currently challenging this ruling.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
United Kingdom&rsquo;s Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and exchange-traded
notes that reference certain types of digital assets, contending that they are &ldquo;ill-suited&rdquo; to retail investors citing extreme
volatility, valuation challenges and association with financial crime. A new bill, the Financial Services and Markets Bill (the &ldquo;FSMB&rdquo;),
has made its way through the House of Commons and is expected to work through the House of Lords and become law in 2023. The FSMB would
bring digital asset activities within the scope of existing laws governing financial institutions, markets and assets.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
European Council of the European Union approved the text of the Markets in Crypto-Assets Regulation (&ldquo;MiCA&rdquo;) in October 2022,
establishing a regulatory framework for digital asset services across the European Union. MiCA is intended to serve as a comprehensive
regulation of digital asset markets and imposes various obligations on digital asset issuers and service providers. The main aims of
MiCA are industry regulation, consumer protection, prevention of market abuse and upholding the integrity of digital asset markets. MiCA
was ratified by the European Parliament on April 20, 2023, and will take begin to take effect in June 2024.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
remains significant uncertainty regarding foreign governments&rsquo; future actions with respect to the regulation of digital assets
and digital asset exchanges. Such laws, regulations or directives may conflict with those of the United States and may negatively impact
the acceptance of ether by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability
of the Ethereum ecosystem in the United States and globally, or otherwise negatively affect the value of ether held by the Trust.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
transparency of blockchains has in the past facilitated investigations by law enforcement agencies. However, certain privacy-enhancing
features have been or are expected to be introduced to a number of digital asset networks, and these features may provide law enforcement
agencies with less visibility into transaction histories. Although no regulatory action has been taken to treat privacy-enhancing digital
assets differently, this may change in the future.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
effect of any future regulatory change on the Trust or the bitcoin or ether held by the Trust is impossible to predict, but such change
could be substantial and adverse to the Trust and the value of the Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_006"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">THE
TRUST AND BITCOIN and ETHER PRICES</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overview
of the Trust</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses
of the Trust&rsquo;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 daily
based on the Pricing Benchmarks. Bitcoin and ether will be the only digital assets held by the Trust. The Trust&rsquo;s allocation of
its assets to bitcoin and ether will approximate the relative market capitalization of bitcoin and ether to one another.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor believes that the Trust will provide a cost-efficient way for investors to implement strategic and tactical asset allocation
strategies 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 opening
an account or arranging a private transaction, and initiating a fiat transaction to initiate or settle such acquisition. An investor
would then also be required to custody such bitcoin or ether by selecting a retail or institutional custodial platform or establishing
a personal computer or hardware security module-based system capable of transacting directly on the blockchain, and incurring the risk
associated with cybersecurity and maintaining a private key that is irrecoverable if lost, among other difficulties.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Purchase
and Sale of Bitcoin and Ether</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
the Trust will conduct creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin and ether
in 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 pay
for such expenses, the Sponsor, on behalf of the Trust, will sell bitcoin and ether on a pro rata basis based upon the relative amount
of bitcoin and ether held by the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing
Benchmark as practical. When choosing between potential counterparties, the Sponsor may consider factors other than simply the most favorable
price. However, the most favorable price will be the predominant factor in determining the counterparty with which the Sponsor effectuates
the contemplated transaction. Other factors that the Sponsor may consider include the size of the proposed order, as well as a counterparty&rsquo;s
execution capabilities, reliability and responsiveness.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s purchase and sale of bitcoin and ether may be conducted pursuant to either of two models: (i) the &ldquo;Trust-Directed
Trade Model&rdquo;; or the (ii) the &ldquo;Agent Execution Model.&rdquo; The Trust intends to utilize the Trust-Directed Trade Model
for all purchases and sales of bitcoin and ether and will only utilize the Agent Execution Model in the event that no Digital Asset Trading
Counterparty is able or willing to effectuate the Trust&rsquo;s purchase or sale of bitcoin or ether.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Whether
utilizing either the Trust-Directed Trade Model or the Agent Execution Model, the Authorized Participants will deliver only cash to create
Shares 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 with
respect 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 from
a third party that is not the Authorized Participant, and the Sponsor, on behalf of the Trust&mdash;not the Authorized Participant&mdash;is
responsible for selecting the third party to deliver the bitcoin or ether. Moreover, the third party will not be acting as an agent of
the Authorized Participant with respect to the delivery of the bitcoin or ether to the Trust or acting at the direction of the Authorized
Participant with respect to the delivery of the bitcoin or ether to the Trust. Additionally, the Trust will redeem Shares by delivering
bitcoin or ether to a third party that is not the Authorized Participant and the Sponsor, on behalf of the Trust&mdash;not the Authorized
Participant&mdash;is responsible for selecting the third party to receive the bitcoin or ether. The third party will also not be acting
as an agent of the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust or acting at the direction
of the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trust-Directed
Trade Model</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Trust-Directed Trade Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin from a bitcoin trading counterparty
that has been approved by the Sponsor (a Bitcoin Trading Counterparty) and ether from an ether trading counterparty that has been approved
by 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 the
general parameters under which a transaction in bitcoin and/or ether will be effectuated, should any transaction with a Digital Asset
Trading 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 for
creations or redemptions. All transactions between the Sponsor, on behalf of the Trust, and a Digital Asset Trading Counterparty will
be done on an arm&rsquo;s-length basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
it is expected and intended that the Digital Asset Trading Counterparties are unaffiliated third-parties, it is possible that a Digital
Asset Trading Counterparty may on any given day be or become considered an affiliate of the Trust if it acquires Shares in an amount
that would cause it to become considered an affiliate of the Trust, as the Shares are publicly traded. Digital Asset Trading Counterparties
are not required to have a custody account with the Bitcoin and Ether Custodian. When seeking to purchase or sell bitcoin or ether on
behalf of the Trust, the Sponsor will typically seek to buy and sell bitcoin or ether at a price as close to the applicable Pricing Benchmark
as practical from any of the approved Digital Asset Trading Counterparties. Upon notification that the Trust needs to purchase or sell
bitcoin or ether, the Sponsor will obtain indicative prices from multiple Digital Asset Trading Counterparties at which they would be
willing to execute the contemplated transaction. The Sponsor then determines the Digital Asset Trading Counterparty with which it wishes
to transact and records the rationale for that determination. Once agreed upon, the transaction will generally occur on an &ldquo;over-the-counter&rdquo;
basis. Transfers of bitcoin or ether to and from the Trust Digital Asset Accounts to the Digital Asset Trading Counterparty are &ldquo;on-chain&rdquo;
transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Transfer fees with respect to this on-chain
transfer of bitcoin or ether will be paid by the Bitcoin and Ether Custodian.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor maintains a process for approving and monitoring Digital Asset Trading Counterparties, which is overseen by the Bitwise Portfolio
Oversight Committee, which is responsible for investment activities and related risk, as well as counterparty risk. All Digital Asset
Trading Counterparties must be approved by the Bitwise Portfolio Oversight Committee before the Sponsor, on behalf of the Trust, will
engage in transactions with the entity. The Bitwise Portfolio Oversight Committee continuously reviews all approved Digital Asset Trading
Counterparties at its quarterly meetings and will reject the approval of any previously approved Digital Asset Trading Counterparty if
new information arises regarding the entity that puts the appropriateness of that entity as an approved ether trading counterparty in
doubt. In considering which Digital Asset Trading Counterparties to approve, the Bitwise Portfolio Oversight Committee has instituted
rigorous policies and procedures that include, but are not limited to, (i) a review of all sanctioned entities, including, but not limited
to, the various categories of sanctioned persons and entities identified by the Office of Foreign Assets Control; (ii) a review of all
publicly available information regarding the entity, including a review of all information that has been filed pursuant to the requirements
of U.S. or non-U.S. regulators, with a particular emphasis on the identity of the entity&rsquo;s owners, disclosure events and reports
of disciplinary action; and (iii) a review of the entity&rsquo;s policies and procedures regarding various topics, including, but not
limited to, anti-money laundering and &ldquo;know-your-customer&rdquo; requirements, trade surveillance, auditing and testing and cybersecurity
capabilities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of __________, 2025, _________________, _________________, _________________ and _________________ have been approved as Digital Asset
Trading Counterparties.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Agent
Execution Model</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event that every Digital Asset Trading Counterparty is either unable or unwilling to effectuate the Trust&rsquo;s purchase or sale
of bitcoin or ether, the Sponsor, on behalf of the Trust, may execute the trade using the Agent Execution Model.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the 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 pursuant
to the Prime Execution Agreement. To avoid having to pre-fund purchases or sales of bitcoin and ether, the Trust may borrow bitcoin or
ether or cash as Trade Credit from the Trade Credit Lender on a short-term basis pursuant to the Trade Financing Agreement. As the Trust
intends 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the case of a purchase of bitcoin or ether, the extension of Trade Credits allows the Trust to purchase bitcoin or ether through the
Prime Execution Agent on the date the Trust wishes to effectuate the transaction (for instance, on the evening of the day when an order
to create Shares is received), with such bitcoin or ether being deposited in the Trust&rsquo;s Trading Balance. On the day following
a trade when Trade Credits have been utilized, the Trust uses cash (for instance, from the Authorized Participant who submitted the creation
order) to repay the Trade Credits borrowed from the Trade Credit Lender. The bitcoin or ether purchased by the Trust is then swept from
the Trust&rsquo;s Trading Balance with the Prime Execution Agent to the applicable Trust Digital Asset Account with the Bitcoin and Ether
Custodian pursuant to a regular end-of-day sweep process. Transfers of bitcoin and ether into the Trust&rsquo;s Trading Balance are off-chain
transactions and transfers from the Trust&rsquo;s Trading Balance to the Trust Digital Asset Accounts are &ldquo;on-chain&rdquo; transactions
represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit Lender is deemed
part of trade execution costs and embedded in the trade price for each transaction.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the 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&rsquo;s Trading Balance with the Prime Execution Agent may not be funded with bitcoin or ether on the date the Trust wishes
to effectuate the transaction (for instance, on the evening a day when an order to redeem Shares is received) because the bitcoin or
ether remains in the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian. In those circumstances the Trust may borrow Trade
Credits in the form of bitcoin or ether from the Trade Credit Lender, which allows the Trust to sell bitcoin or ether through the Prime
Execution Agent at the desired time, and the cash proceeds are deposited in the Trust&rsquo;s Trading Balance with the Prime Execution
Agent. On the business day following the trade, the Trust will use the bitcoin or ether that is moved from the Trust Digital Asset Account
with the Bitcoin and Ether Custodian to the Trading Balance with the Prime Execution Agent to repay the Trade Credits borrowed from the
Trade Credit Lender. Transfers of bitcoin or ether from the Trust Digital Asset Account to the Trust&rsquo;s Trading Balance are &ldquo;on-chain&rdquo;
transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit
Lender is deemed part of trade execution costs and embedded in the trade price for each transaction.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Pricing Benchmarks</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
a daily basis, to calculate the aggregate U.S. dollar value of the bitcoin held by the Trust (the Trust Bitcoin Value), the Trust references
the value of one bitcoin in U.S. dollars provided by the CME CF Bitcoin Reference Rate&ndash; 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), the
Trust references the value of one ether in U.S. dollars provided by the CME CF Ether &ndash; Dollar Reference Rate &ndash; New York Variant,
the Ether Pricing Benchmark.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator uses the Trust Bitcoin Value and the Trust Ether Value to calculate the Trust&rsquo;s NAV, which is the aggregate of the
Trust Bitcoin Value and Trust Ether Value, based on the Bitcoin Pricing Benchmark and Ether Pricing Benchmark respectively, less the
Trust&rsquo;s liabilities and expenses.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;NAV
per Share&rdquo; is calculated by dividing NAV by the number of Shares currently outstanding. NAV and NAV per Share are not measures
calculated in accordance with GAAP. NAV is not intended to be a substitute for the Trust&rsquo;s Principal Market NAV calculated in accordance
with GAAP, and NAV per Share is not intended to be a substitute for the Trust&rsquo;s Principal Market NAV per Share calculated in accordance
with GAAP.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additional
information regarding the Pricing Benchmarks is set forth below.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CME CF Bitcoin Reference Rate &ndash; New York Variant</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s bitcoin holdings are valued on a daily basis with reference to the CME CF Bitcoin Reference Rate&ndash; New York Variant,
the Bitcoin Pricing Benchmark, a standardized reference rate published by CF Benchmarks Ltd., the Benchmark Provider, that is designed
to reflect the performance of bitcoin in U.S. dollars. The Bitcoin Pricing Benchmark was created to facilitate financial products based
on 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 between
3:00 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 substantially
the same methodology as the CME CF Bitcoin Reference Rate, the BRR, including utilizing the same constituent bitcoin exchanges, which
is the underlying rate to determine settlement of CME bitcoin futures contracts, except that the Bitcoin Pricing Benchmark is calculated
as 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 February
28, 2022, is based on materially the same methodology (except calculation time) as the BRR, which was first introduced on November&nbsp;14,&nbsp;2016.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor, in its sole discretion, may cause the Trust to price its portfolio of bitcoin based upon an index, benchmark or standard other
than the Bitcoin Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor
believes that another index, benchmark or standard better aligns with the Trust&rsquo;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 Bitcoin Pricing Benchmark price
of bitcoin differs materially from the global market price of bitcoin and/or that third parties are able to purchase and sell bitcoin
on public or private markets not included among the Constituent Platforms, and such transactions may take place at prices materially
higher or lower than the Bitcoin Pricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changes
in any circumstance. In the event that the Sponsor intends to establish the Trust Bitcoin Value by reference to an index, benchmark or
standard other than the Bitcoin Pricing Benchmark, it will provide Shareholders with notice in a prospectus supplement and/or through
a current report on Form 8-K or in the Trust&rsquo;s annual or quarterly reports.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitcoin
Pricing Benchmark Methodology</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin Pricing Benchmark is calculated based on the &ldquo;Relevant Transactions&rdquo; (as defined below) of all of its constituent
bitcoin trading venues (the Constituent Platforms) as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
Relevant Transactions are added to a joint list, recording the time of execution, trade price and size for each transaction.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            list is partitioned by timestamp into twelve (12) equally sized time intervals of five (5)
                                            minutes in length.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
                                            each partition separately, the volume-weighted median trade price is calculated from the
                                            trade prices and sizes of all Relevant Transactions, i.e., across all Constituent Platforms.
                                            A volume-weighted median differs from a standard median in that a weighting factor, in this
                                            case trade size, is factored into the calculation.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Bitcoin Pricing Benchmark is then determined by the equally weighted average of the volume
                                            medians of all partitions.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of September 3, 2024, the Constituent Platforms included in the Bitcoin Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,
and LMAX Digital.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Bitstamp</I>:
                                            A U.K.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency
                                            business under the NYDFS BitLicense as well as a money transmitter in various U.S. states.
                                            It is also regulated as a Payments Institution within the European Union and is registered
                                            as a Crypto Asset business with the U.K. FCA.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Coinbase</I>:
                                            A U.S.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency
                                            business under the NYDFS BitLicense as well as a money transmitter in various U.S. states.
                                            Subsidiaries operating internationally are further regulated as e-money providers (Republic
                                            of Ireland, Central Bank of Ireland) and Major Payment Institutions (Singapore, Monetary
                                            Authority of Singapore).</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Gemini</I>:
                                            A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.
                                            It is also registered with FinCEN as an MSB and is licensed as a money transmitter in various
                                            U.S. states. It is also registered with the FCA as a Crypto Asset Business.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>itBit</I>:
                                            A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.
                                            It is also registered FinCEN as an MSB and is licensed as a money transmitter in various
                                            U.S. states.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Kraken</I>:
                                            A U.S.-based exchange that is registered as an MSB with FinCEN in various U.S. states, Kraken
                                            is registered with the FCA as a Crypto Asset Business and is authorized by the Central Bank
                                            of Ireland as a Virtual Asset Service Provider. Kraken also holds a variety of other licenses
                                            and regulatory approvals, including from the Canadian Securities Administrators.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>LMAX
                                            Digital</I>: A Gibraltar-based exchange regulated by the Gibraltar Financial Services Commission
                                            as a DLT provider for execution and custody services. LMAX Digital does not hold a BitLicense
                                            and is part of LMAX Group, a U.K.-based operator of an FCA-regulated Multilateral Trading
                                            Facility and Broker-Dealer.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
oversight function is implemented by the Benchmark Provider in seeking to ensure that the Bitcoin Pricing Benchmark is administered through
the Benchmark Provider&rsquo;s codified policies for index integrity. The Bitcoin Pricing Benchmark is administered through the Benchmark
Provider&rsquo;s codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountability
framework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subject
to a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprised
of at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the Benchmark
Provider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. The
CME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee&rsquo;s Founding Charter and quarterly
meeting minutes are publicly available.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the 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 &ldquo;Contingency Calculation Rules&rdquo; as they relate to the
Bitcoin Pricing Benchmark that are set forth on the Benchmark Provider&rsquo;s website. Such rules dictate how the Benchmark Provider
will calculate the Bitcoin Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no Relevant
Transaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platform
but cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Bitcoin Pricing
Benchmark for that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions
that have been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the
calculation of the Bitcoin Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate
and publish the Bitcoin Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informing
Bitcoin Pricing Benchmark users, including the Trust, the calculation and publication have been delayed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
the creation of the Bitcoin Pricing Benchmark, there have been several changes to Constituent Platforms comprising the Bitcoin Pricing
Benchmark, most recently in May 2022. Once it has actual knowledge of changes to the Constituent Platforms used to calculate the Bitcoin
Pricing Benchmark, or other material changes to the Bitcoin Pricing Benchmark calculation methodology, the Trust will notify Shareholders
in a prospectus supplement and a current report on Form 8-K or in its annual or quarterly reports.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
trading venue is eligible as a &ldquo;Constituent Platform&rdquo; in any of the CME CF Cryptocurrency Pricing Products if it offers a
market that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including markets
where the quote asset is made fungible with Accepted Assets (the &ldquo;Relevant Pair&rdquo;) and makes trade data and order data available
through an Automatic Programming Interface (&ldquo;API&rdquo;) with sufficient reliability, detail and timeliness. The CME CF Oversight
Committee 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 &ldquo;Constituent Platform&rdquo; does not fall or become unavailable to a degree that impacts the integrity of
the Bitcoin Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmark
can be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrieval
at the required frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue&rsquo;s Relevant Pair spot trading volume for an index must meet the minimum thresholds
                                            as detailed below for it to be admitted as a Constituent Platform: the average daily volume
                                            the venue would have contributed during the observation window for the Reference Rate of
                                            the Relevant Pair exceeds 3% for two consecutive calendar quarters.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue has policies to ensure fair and transparent market conditions at all times and has
                                            processes in place to identify and impede illegal, unfair or manipulative trading practices.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue does not impose undue barriers to entry or restrictions on market participants, and
                                            utilizing the venue does not expose market participants to undue credit risk, operational
                                            risk, legal risk or other risks.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue complies with applicable laws and regulations, including, but not limited to, capital
                                            markets regulations, money-transmission regulations, client money custody regulations, and
                                            KYC and AML regulations.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue cooperates with inquiries and investigations of regulators and the Administrator upon
                                            request and must execute data-sharing agreements with CME Group. Once admitted, a Constituent
                                            Platform must demonstrate that it continues to fulfill criteria 2 to 5 inclusive. Should
                                            the average daily contribution of a Constituent Platform fall below 3% for any Reference
                                            Rate, then the continued inclusion of the venue as a Constituent Platform to the Relevant
                                            Pair shall be assessed by the CME CF Oversight Committee.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or the
Oversight Committee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitcoin
Pricing Benchmark data and the description of the Bitcoin Pricing Benchmark are based on information made publicly available by the Benchmark
Provider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider&rsquo;s website is incorporated
by reference into this Prospectus.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
six Constituent Platforms that contribute transaction data to the Bitcoin Pricing Benchmark with the aggregate volumes traded on their
respective BTC-USD markets over the preceding four calendar quarters are listed in the table below:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="22" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Aggregate Trading Volume of BTC-USD
    Markets of Bitcoin Pricing Benchmark<BR>
 Constituent&nbsp;Platforms</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Period</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Bitstamp</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Coinbase</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Gemini</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Kraken</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">LMAX&nbsp;Digital</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">itBit</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 28%; text-align: left; padding-bottom: 1.5pt">2023 Q4</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q1</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q2</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q3</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market share for BTC-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="22" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Bitcoin Constituent Platform Market Share of BTC-USD Trading</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left; font-weight: bold">Period</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Bitstamp</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Coinbase</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Gemini</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Kraken</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">LMAX&nbsp;Digital</TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">itBit</TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; width: 28%; padding-bottom: 1.5pt">2023 Q4</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q1</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q2</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt">2024 Q3</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">%</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>CF
BENCHMARKS LTD. DATA IS USED UNDER LICENSE AS A SOURCE OF INFORMATION FOR THE TRUST&rsquo;S PRODUCTS. CF BENCHMARKS LTD., ITS AGENTS
AND LICENSORS HAVE NO OTHER CONNECTION TO THE TRUST&rsquo;S PRODUCTS AND SERVICES AND DOES NOT SPONSOR, ENDORSE, RECOMMEND OR PROMOTE
ANY OF THE TRUST&rsquo;S PRODUCTS OR SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS HAVE NO OBLIGATION OR LIABILITY IN CONNECTION
WITH THE TRUST&rsquo;S PRODUCTS AND SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF ANY INDEX LICENSED TO THE TRUST AND SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.</B></FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CME CF Ether &ndash; Dollar Reference Rate &ndash; New York Variant</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s ether holdings are valued on a daily basis with reference to the CME CF Ether &ndash; Dollar Reference Rate &ndash; New
York Variant, the Ether Pricing Benchmark, a standardized reference rate published by CF Benchmarks Ltd., the Benchmark Provider, that
is designed to reflect the performance of ether in U.S. dollars. The Ether Pricing Benchmark was created to facilitate financial products
based 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 3:00
p.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 substantially
the same methodology as the CME CF Ether Reference Rate, the ERR, including utilizing the same constituent ether exchanges, which is
the underlying rate to determine settlement of CME ether futures contracts, except that the Ether Pricing Benchmark is calculated as
of 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 February
28, 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor, in its sole discretion, may cause the Trust to price its portfolio based upon an index, benchmark or standard other than the
Ether Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor believes that
another index, benchmark or standard better aligns with the Trust&rsquo;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 Ether Pricing Benchmark price of ether differs
materially from the global market price of ether and/or that third parties are able to purchase and sell ether on public or private markets
not included among the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the Ether
Pricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the event
that the Sponsor intends to establish the Trust&rsquo;s NAV by reference to an index, benchmark or standard other than the Ether Pricing
Benchmark, it will provide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in the
Trust&rsquo;s annual or quarterly reports.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ether
Pricing Benchmark Methodology</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Ether Pricing Benchmark is calculated based on the &ldquo;Relevant Transactions&rdquo; (as defined below) of all of its constituent ether
trading venues (the Constituent Platforms) as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
Relevant Transactions are added to a joint list, recording the time of execution, trade price and size for each transaction.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
list is partitioned by timestamp into twelve (12) equally sized time intervals of five (5) minutes in length.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
each partition separately, the volume-weighted median trade price is calculated from the trade prices and sizes of all Relevant Transactions,
i.e., across all Constituent Platforms. A volume-weighted median differs from a standard median in that a weighting factor, in this case
trade size, is factored into the calculation.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Ether Pricing Benchmark is then determined by the equally weighted average of the volume medians of all partitions.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of September 3, 2024, the Constituent Platforms included in the Ether Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,
and LMAX Digital.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Bitstamp</I>:
A U.K.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency business under the NYDFS BitLicense as well
as a money transmitter in various U.S. states. It is also regulated as a Payments Institution within the European Union and is registered
as a Crypto Asset business with the U.K. FCA.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Coinbase</I>:
A U.S.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency business under the NYDFS BitLicense as well
as a money transmitter in various U.S. states. Subsidiaries operating internationally are further regulated as e-money providers (Republic
of Ireland, Central Bank of Ireland) and Major Payment Institutions (Singapore, Monetary Authority of Singapore).</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Gemini</I>:
A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense. It is also registered with FinCEN as
an MSB and is licensed as a money transmitter in various U.S. states. It is also registered with the FCA as a Crypto Asset Business.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>itBit</I>:
A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense. It is also registered FinCEN as an
MSB and is licensed as a money transmitter in various U.S. states.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Kraken</I>:
A U.S.-based exchange that is registered as an MSB with FinCEN in various U.S. states, Kraken is registered with the FCA as a Crypto
Asset Business and is authorized by the Central Bank of Ireland as a Virtual Asset Service Provider. Kraken also holds a variety of other
licenses and regulatory approvals, including from the Canadian Securities Administrators.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>LMAX
Digital</I>: A Gibraltar-based exchange regulated by the Gibraltar Financial Services Commission as a DLT provider for execution and
custody services. LMAX Digital does not hold a BitLicense and is part of LMAX Group, a U.K.-based operator of an FCA-regulated Multilateral
Trading Facility and Broker-Dealer.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
oversight function is implemented by the Benchmark Provider in seeking to ensure that the Ether Pricing Benchmark is administered through
the Benchmark Provider&rsquo;s codified policies for index integrity. The Ether Pricing Benchmark is administered through the Benchmark
Provider&rsquo;s codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountability
framework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subject
to a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Ether Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprised
of at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the Benchmark
Provider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. The
CME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee&rsquo;s Founding Charter and quarterly
meeting minutes are publicly available.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the 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 &ldquo;Contingency Calculation Rules&rdquo; as they relate to the
Ether Pricing Benchmark that are set forth on the Benchmark Provider&rsquo;s website. Such rules dictate how the Benchmark Provider will
calculate the Ether Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no Relevant
Transaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platform
but cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Ether Pricing Benchmark
for that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions that
have been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the calculation
of the Ether Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate and publish the
Ether Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informing Ether Pricing
Benchmark users, including the Trust, the calculation and publication have been delayed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
the 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 prospectus
supplement and a current report on Form 8-K or in its annual or quarterly reports.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
trading venue is eligible as a &ldquo;Constituent Platform&rdquo; in any of the CME CF Cryptocurrency Pricing Products if it offers a
market that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including markets
where the quote asset is made fungible with Accepted Assets (the &ldquo;Relevant Pair&rdquo;) and makes trade data and order data available
through an Automatic Programming Interface (&ldquo;API&rdquo;) with sufficient reliability, detail and timeliness. The CME CF Oversight
Committee 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 &ldquo;Constituent Platform&rdquo; does not fall or become unavailable to a degree that impacts the integrity of
the Ether Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmark
can be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrieval
at the required frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue&rsquo;s Relevant Pair spot trading volume for an index must meet the minimum thresholds
                                            as detailed below for it to be admitted as a Constituent Platform: the average daily volume
                                            the venue would have contributed during the observation window for the Reference Rate of
                                            the Relevant Pair exceeds 3% for two consecutive calendar quarters.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue has policies to ensure fair and transparent market conditions at all times and has
                                            processes in place to identify and impede illegal, unfair or manipulative trading practices.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue does not impose undue barriers to entry or restrictions on market participants, and
                                            utilizing the venue does not expose market participants to undue credit risk, operational
                                            risk, legal risk or other risks.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue complies with applicable laws and regulations, including, but not limited to, capital
                                            markets regulations, money-transmission regulations, client money custody regulations, and
                                            KYC and AML regulations.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            venue cooperates with inquiries and investigations of regulators and the Administrator upon
                                            request and must execute data-sharing agreements with CME Group. Once admitted, a Constituent
                                            Platform must demonstrate that it continues to fulfill criteria 2 to 5 inclusive. Should
                                            the average daily contribution of a Constituent Platform fall below 3% for any Reference
                                            Rate, then the continued inclusion of the venue as a Constituent Platform to the Relevant
                                            Pair shall be assessed by the CME CF Oversight Committee.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or the
Oversight Committee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ether
Pricing Benchmark data and the description of the Ether Pricing Benchmark are based on information made publicly available by the Benchmark
Provider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider&rsquo;s website is incorporated
by reference into this Prospectus.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
six Constituent Platforms that contribute transaction data to the Ether Pricing Benchmark with the aggregate volumes traded on their
respective ETH-USD markets over the preceding four calendar quarters are listed in the table below:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="22" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Aggregate
    Trading Volume of ETH-USD Markets of Ether Pricing Benchmark Constituent Platforms</B></FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Period</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitstamp</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coinbase</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gemini</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kraken</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">LMAX
    Digital</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">itBit</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 28%; text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2023
    Q4</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q1</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q2</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q3</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market share for ETH-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="22" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Ether
    Constituent Platform Market Share of ETH-USD Trading</B></FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Period</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitstamp</FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coinbase</FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gemini</FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kraken</FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">LMAX
    Digital</FONT></TD><TD STYLE="text-align: center; padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="text-align: center; font-weight: bold; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">itBit</FONT></TD><TD STYLE="padding-bottom: 1.5pt; font-weight: bold"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; width: 28%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2023
    Q4</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q1</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q2</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2024
    Q3</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD><TD STYLE="padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">%</FONT></TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>CF
BENCHMARKS LTD. DATA IS USED UNDER LICENSE AS A SOURCE OF INFORMATION FOR THE TRUST&rsquo;S PRODUCTS. CF BENCHMARKS LTD., ITS AGENTS
AND LICENSORS HAVE NO OTHER CONNECTION TO THE TRUST&rsquo;S PRODUCTS AND SERVICES AND DOES NOT SPONSOR, ENDORSE, RECOMMEND OR PROMOTE
ANY OF THE TRUST&rsquo;S PRODUCTS OR SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS HAVE NO OBLIGATION OR LIABILITY IN CONNECTION
WITH THE TRUST&rsquo;S PRODUCTS AND SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF ANY INDEX LICENSED TO THE TRUST AND SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.</B></FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trust
Structure</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is a statutory trust formed under the Delaware Statutory Trust Act, and the Trust Agreement constitutes the &ldquo;governing instrument&rdquo;
of the Trust under the laws of the State of Delaware relating to statutory trusts. The Trust holds ether and is expected from time to
time to issue Baskets in exchange for deposits of cash and to distribute cash in connection with redemptions of Baskets. The Trust&rsquo;s
investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust&rsquo;s
operations and other liabilities. In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and establish
its NAV by reference to the Pricing Benchmarks.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor believes the Trust&rsquo;s is a straight-forward solution to seek its investment objective. Besides cash received in connection
with purchase orders of Baskets, the Trust&rsquo;s sole assets are expected to be bitcoin and ether held with the Bitcoin and Ether Custodian.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor believes that the Bitcoin Pricing Benchmark is a representative value for the price of bitcoin in U.S. dollars and that the Ether
Pricing Benchmark is a representative value for the price of ether in U.S. dollars, based on the methodology administered by the Benchmark
Provider.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust processes and pays its only ordinary expense (the Sponsor Fee) in bitcoin and ether. The Trust will only sell bitcoin and ether
(1) in connection with the redemption of Baskets for cash, (2) on an as-needed basis to pay Trust expenses not assumed by the Sponsor,
(3) in the event the Trust terminates and liquidates its assets, or (4) as otherwise required by law or regulation. This restriction
provides protection against potential attempts by bad actors to manipulate the operation of the Trust based on how the Trust calculates
its NAV.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Market
prices for the Shares are available from a variety of sources including brokerage firms, information websites and other information service
providers. The NAV of the Trust is published by the Sponsor at the Trust&rsquo;s website (_________.com) on each day that the Exchange
is open for regular trading and is posted on the Trust&rsquo;s website.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_007"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Calculation
of NAV</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
normal circumstances, the Trust&rsquo;s only assets will be bitcoin and ether and, under limited circumstances, cash. The Trust&rsquo;s
bitcoin and ether are carried, for financial statement purposes, at fair value, as required by the U.S. generally accepted accounting
principles (&ldquo;GAAP&rdquo;). The Trust&rsquo;s NAV will be determined by the Administrator once each Exchange trading day at 4:00
p.m. ET, or as soon thereafter as practicable. The NAV for a normal trading day will be released after 4:00 p.m. ET. Trading during the
core trading session on the Exchange typically closes at 4:00 p.m. ET. However, the NAV is not officially struck until later in the day
(often by 5:30 p.m. and almost always by 8:00 p.m.). The pause between 4:00 p.m. and 5:30 p.m. (or later) provides an opportunity for
the Sponsor to algorithmically detect, flag, investigate, and correct unusual pricing should it occur.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator will calculate the NAV of the Trust by (i) multiplying the number of bitcoin held by the Trust by the U.S. dollar price
of one bitcoin provided by the Bitcoin Pricing Benchmark on such day (the Trust Bitcoin Value); (ii)&nbsp;multiplying the number of ether
held by the Trust by the U.S. dollar price of one ether provided by the Ether Pricing Benchmark (the Trust Ether Value) on such day;
(iii) adding the Trust Bitcoin Value to the Trust Ether Value; (iv) adding any receivables; and (v) subtracting the accrued but unpaid
expenses and liabilities of the Trust. The Trust&rsquo;s NAV per Share is calculated by dividing the Trust&rsquo;s NAV by the number
of Shares then outstanding.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator will determine the price of the Trust&rsquo;s bitcoin by reference to the Bitcoin Pricing Benchmark and the price of the
Trust&rsquo;s ether by reference to the Ether Pricing Benchmark, both of which are published between 4:00 p.m. and 4:30 p.m. ET on every
calendar day.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
methodology used to calculate the Bitcoin Pricing Benchmark price to value bitcoin and the Ether Pricing Benchmark price to value ether
in determining the NAV of the Trust may not be deemed consistent with GAAP. To the extent the methodology used to calculate the Pricing
Benchmarks is deemed inconsistent with GAAP, the Trust will utilize an alternative GAAP-consistent pricing source for purposes of the
Trust&rsquo;s periodic financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor has the exclusive authority to determine the NAV of the Trust. The Sponsor has delegated to the Administrator the responsibility
to calculate the NAV of the Trust and the NAV per Share, based on a pricing source selected by the Sponsor (the Pricing Benchmarks).
The Administrator will determine the NAV of the Trust each business day. In determining the NAV of the Trust, the Administrator values
the bitcoin held by the Trust based on the Bitcoin Pricing Benchmark and the ether held by the Trust based on the Ether Pricing Benchmark,
unless otherwise determined by the Sponsor in its sole discretion. If either Pricing Benchmark is not available or the Sponsor in its
sole discretion determines that a Pricing Benchmark should not be used, the Trust&rsquo;s holdings may be fair valued in accordance with
the policy approved by the Sponsor. The Sponsor does not anticipate that the need to &ldquo;fair value&rdquo; bitcoin or ether will be
a common occurrence.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
ITV will be calculated by using the prior day&rsquo;s closing NAV per Share of the Trust as a base and updating that value throughout
the trading day to reflect changes in the most recently reported price level of the CME Bitcoin Real Time Price and CME Ether Real Time
Price (the &ldquo;Real Time Prices&rdquo;). The ITV disseminated during the Exchange core trading session hours should not be viewed
as an actual real-time update of the NAV, because NAV per Share is calculated only once at the end of each trading day based upon the
relevant end-of-day values of the Trust&rsquo;s investments. The ITV will be disseminated on a per-Share basis every 15 seconds during
regular Exchange core trading session hours of 9:30 a.m. ET to 4:00 p.m. ET. The Exchange will disseminate the ITV value through the
facilities of CTA/CQ High Speed Lines that allow for high-speed data transmission. In addition, the ITV will be published on the Exchange&rsquo;s
website and will be available through online information services such as Bloomberg and Reuters. The ITV (which is based upon the Real
Time Prices) may differ from the NAV (which is based upon the Pricing Benchmarks) due to differences in how the Real Time Prices and
Pricing Benchmarks are calculated. While the Pricing Benchmarks are calculated as described in the section above entitled &ldquo;THE
TRUST AND BITCOIN AND ETHER PRICES,&rdquo; the Real Time Prices are calculated once per second, in real time by utilizing the order books
of USD/BTC and USD/ETH trading pairs operated by all Constituent Platforms. An &ldquo;order book&rdquo; is a list of buy and sell orders
with associated limit prices and sizes that have not yet been matched, that is reported and disseminated by CF Benchmarks Ltd., as the
calculation agent for the Real Time Prices. The order books are aggregated into one consolidated order book for each Real Time Price
by the calculation agent and the bid-price volume curve, ask-price volume curve, mid-price volume curve and mid-spread volume curve are
calculated. The mid-price volume curve is the average of the bid-price volume curve (which maps transaction volume to the marginal price
per cryptocurrency unit a seller is required to accept in order to sell this volume to the consolidated order book) and the ask-price
volume curve (which maps a transaction volume to the marginal price per cryptocurrency unit a buyer is required to pay in order to purchase
this volume from the consolidated order book). The mid-price volume curve is weighted by the normalized probability density of the exponential
distribution up to the utilized depth (utilized depth being calculated as the maximum cumulative volume for which the mid-spread volume
curve does not exceed a certain percentage deviation from the mid price). Each Real Time Price is then given by the sum of the weighted
mid-price volume curve obtained in the previous step.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dissemination
of the ITV provides additional information that is not otherwise available to the public and may be useful to investors and market professionals
in connection with the trading of the Shares on the Exchange. Investors and market professionals will be able throughout the trading
day to compare the market price of the Trust and the ITV. If the market price of the Shares diverges significantly from the ITV, market
professionals will have an incentive to execute arbitrage trades. For example, if the Trust appears to be trading at a discount compared
to the ITV, a market professional could buy the Shares on the Exchange and sell short futures contracts. Such arbitrage trades can tighten
the tracking between the market price of the Trust and the ITV and thus can be beneficial to all market participants.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor reserves the right to adjust the Share price of the Trust in the future to maintain convenient trading ranges for investors.
Any adjustments would be accomplished through stock splits or reverse stock splits. Such splits would decrease (in the case of a split)
or increase (in the case of a reverse split) the proportionate NAV per Share, but would have no effect on the net assets of the Trust
or the proportionate voting rights of Shareholders or the value of any Shareholder&rsquo;s investment.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s periodic financial statements may not utilize the NAV of the Trust determined by reference to the Pricing Benchmarks to
the extent the methodology used to calculate the Pricing Benchmarks is deemed not to be consistent with GAAP. The Trust&rsquo;s periodic
financial statements will be prepared in accordance with the Financial Accounting Standards Board (&ldquo;FASB&rdquo;) Accounting Standards
Codification Topic 820, &ldquo;Fair Value Measurements and Disclosures&rdquo; (&ldquo;ASC Topic 820&rdquo;) and utilize an exchange-traded
price from the Trust&rsquo;s principal market for ether on the Trust&rsquo;s financial statement measurement date. The Sponsor will determine
in its sole discretion the valuation sources and policies used to prepare the Trust&rsquo;s financial statements in accordance with GAAP.
The Trust intends to engage a third-party vendor to obtain a price from a principal market for bitcoin or ether, which will be determined
and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight,
and the volume and frequency of trades. Under GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC
Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
determine which market is the Trust&rsquo;s principal market (or in the absence of a principal market, the most advantageous market)
for purposes of calculating the Trust&rsquo;s financial statements, the Trust follows ASC 820-10, which outlines the application of fair
value accounting. ASC 820-10 determines fair value to be the price that would be received for bitcoin or ether in a current sale, which
assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume that bitcoin
or ether is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market.
Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable,
and willing and able to transact. The Trust may transact through Digital Asset Trading Counterparties, in multiple markets, and its application
of ASC 820-10 reflects this fact. The Trust anticipates that, while multiple venues and types of markets will be available to the Digital
Asset Trading Counterparties from whom the Sponsor acquires or disposes of the Trust&rsquo;s bitcoin or ether, the principal market in
each scenario is determined by looking at the market-based level of volume and bitcoin/ether trading activity. Digital Asset Trading
Counterparties may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined
in the FASB ASC Master Glossary. Based on information reasonably available to the Trust, Exchange Markets have the greatest volume and
level of activity for the asset. The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market
and Principal-to-Principal Markets to determine its principal market. As a result of the aforementioned analysis, an Exchange Market
has been selected as the Trust&rsquo;s principal market. The Trust determines its principal market (or in the absence of a principal
market the most advantageous market) on a quarterly basis to determine which market is its Principal Market for the purpose of calculating
fair value for the creation of quarterly and annual financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
process that the Sponsor has developed for identifying a principal market, as prescribed in ASC 820-10, which outlines the application
of fair value accounting. The process begins by identifying publicly available, well established and reputable bitcoin and ether trading
venues (Exchange Markets, as defined in the FASB ASC Master Glossary), which are selected by the Sponsor and its affiliates in their
sole discretion. Those markets include Binance, Bitfinex, Bitflyer, Bitstamp, Coinbase Pro, Crypto.com, Gemini, HitBTC, Huobi, Kraken,
KuCoin, OKEx, Poloniex. The Sponsor then, through a service provider, calculates on each valuation period, the highest volume venue during
the 60-minute period prior to 4:00 ET for bitcoin and ether. The Sponsor then identifies that market as the principal market for bitcoin
and ether during that period, and uses the price for bitcoin and ether from that venue at 4:00 ET as the principal market price.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_008"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additional
Information About The trust</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is a Delaware statutory trust, formed pursuant to the Delaware Statutory Trust Act. The Trust continuously issues common shares
representing units of undivided beneficial ownership of the Trust that may be purchased and sold on the Exchange. The Trust operates
pursuant to the First Amended and Restated Trust Agreement dated as of __________, 2025. Delaware Trust Company, a Delaware trust company,
is the Delaware trustee of the Trust. The Trust is managed and controlled by the Sponsor. The Sponsor is a limited liability company
formed in the State of Delaware on June 4, 2018.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is passively managed and does not pursue active management investment strategies, and the Sponsor does not actively manage the
bitcoin or ether held by the Trust. The Trust&rsquo;s tax structure provides the Sponsor with very limited means to affirmatively alter
the Trust&rsquo;s allocation to bitcoin and ether. Nonetheless, the Sponsor believes that the Trust&rsquo;s allocation to bitcoin and
ether will generally approximate the relative market capitalization of bitcoin and ether to one another, although this cannot be guaranteed.
Additionally, the Sponsor does not sell bitcoin or ether at times when the price of bitcoin or ether is high, nor does it acquire bitcoin
or ether at low prices in the expectation of future price increases. The Sponsor does not make use of any of the hedging techniques available
to professional bitcoin and ether investors to attempt to reduce the risks of losses resulting from price decreases. The Trust will not
utilize leverage or any similar arrangements in seeking to meet its investment objective. Bitcoin and ether will be the only digital
assets held by the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust will only sell bitcoin and ether (1) in connection with the redemption of Baskets for cash, (2) on an as-needed basis to pay Trust
expenses not assumed by the Sponsor, (3)&nbsp;in the event the Trust terminates and liquidates its assets, or (4) as otherwise required
by law or regulation. The delivery or sale of bitcoin or ether to pay fees and expenses by the Trust is a taxable event to Shareholders.
See &ldquo;<FONT STYLE="text-transform: uppercase">United States Federal Income Tax Consequences</FONT>.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is not registered as an investment company under the Investment Company Act and the Sponsor believes the Trust is not required
to register under such act. The Trust does not hold or trade in commodity futures contracts, &ldquo;commodity interests&rdquo; or any
other instruments regulated by the Commodity Exchange Act, as administered by the CFTC or National Futures Association (&ldquo;NFA&rdquo;).
The Sponsor believes that the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and that neither the Sponsor
nor the Trustee is subject to regulation as a commodity pool operator or a commodity trading adviser in connection with the operation
of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
number of outstanding Shares is expected to increase and decrease from time to time as a result of the purchase and redemption of Baskets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust has no fixed termination date.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s Fees and Expenses</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust will pay the unitary Sponsor Fee of 0.__% per annum of the Trust&rsquo;s bitcoin and ether holdings. The Sponsor Fee is paid by
the Trust to the Sponsor as compensation for services performed under the Trust Agreement and Sponsor Agreement. Except during periods
in which all or a portion of the Sponsor Fee is being waived, the Sponsor Fee will accrue daily and will be payable in bitcoin and ether
monthly in arrears.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator will calculate the Sponsor Fee on a daily basis by applying a 0.__% annualized rate to the Trust Bitcoin Value (by reference
to the Bitcoin Pricing Benchmark) and to the Trust Ether Value (by reference to the Ether Pricing Benchmark). The amount of bitcoin and
ether payable in respect of each such daily accrual shall also be determined by reference to the Bitcoin Pricing Benchmark and Ether
Pricing Benchmark, respectively. The NAV of the Trust is reduced each day by the amount of the Sponsor Fee calculated each day. On or
about the last day of each month, an amount of bitcoin and ether will be transferred from the Trust Bitcoin Account or Trust Ether Account,
as applicable, to the Sponsor Accounts equal to the sum of all daily Sponsor Fees accrued in bitcoin for the month in U.S. dollars divided
by the Bitcoin Pricing Benchmark on the last day of the month and the sum of all daily Sponsor Fees accrued in ether for the month in
U.S. dollars divided by the Ether Pricing Benchmark on the last day of the month. The Trust is not responsible for paying any fees or
costs associated with the transfer of bitcoin or ether to the Sponsor.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the
Trustee&rsquo;s monthly fee and out-of-pocket expenses, the fees of the Trust&rsquo;s regular service providers (Cash Custodian, Bitcoin
and Ether Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting
fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses.
The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The
Sponsor will also pay the costs of the Trust&rsquo;s organization.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust may incur certain extraordinary, non-recurring expenses that are not assumed by the Sponsor, including, but not limited to, taxes
and governmental charges, any applicable brokerage commissions, financing fees, Bitcoin network fees or Ethereum network fees and similar
transaction fees, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf
of the Trust to protect the Trust or the Shareholders (including, for example, in connection with any fork of the Bitcoin blockchain
or Ethereum blockchain, any Incidental Rights (as defined below) and any IR Asset (as defined below)), any indemnification of the Cash
Custodian, Bitcoin and Ether Custodian, Prime Execution Agent, Transfer Agent, Administrator or other agents, service providers or counterparties
of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation,
regulatory enforcement or investigation matters.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor, from time to time, may temporarily waive all or a portion of the Sponsor Fee in its sole discretion. To the extent not already
disclosed in the Prospectus, the Sponsor may notify Shareholders of its intent to commence, or cease, waiving the Sponsor Fee on the
Trust&rsquo;s website, in a prospectus supplement, through a current report on Form 8-K and/or in the Trust&rsquo;s annual or quarterly
reports.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator and/or the Sponsor will direct the Bitcoin and Ether Custodian to transfer bitcoin from the Trust Bitcoin Account and ether
from the Trust Ether Account to the Sponsor Account to pay the Sponsor Fee and any other Trust expenses not assumed by the Sponsor. To
pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust&rsquo;s
bitcoin or ether as necessary to pay such expenses. The Sponsor will sell bitcoin and ether to pay such expenses on a pro rata basis
based upon the relative amount of bitcoin and ether held by the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing
Benchmark as practical. Such sales will be undertaken pursuant to the Trust-Directed Trade Model unless no Digital Asset Trading Counterparty
is willing or able to effectuate the trade. Transfers of bitcoin and ether from the Trust Digital Asset Accounts to the Sponsor Accounts,
and from the Sponsor Accounts to the Digital Asset Trading Counterparty are &ldquo;on-chain&rdquo; transactions represented on the Bitcoin
blockchain or Ethereum blockchain as applicable. Transfer fees with respect to this on-chain transfer of bitcoin or ether will be paid
by the Bitcoin and Ether Custodian. The cash proceeds of the sale will be sent to the Sponsor, which will use such proceeds to pay the
expenses. Any remaining cash will be distributed back to the Cash Custodian. To the extent that the Trust must utilize the Agent Execution
Model to undertake bitcoin or ether sales to pay for expenses not assumed by the Sponsor, the Prime Execution Agent, acting in an agency
capacity, would conduct the sale on behalf of the Trust with third parties through its Coinbase Prime service pursuant to the Prime Execution
Agreement. Transfers of bitcoin or ether from the Trust Digital Asset Accounts to the Trust&rsquo;s Trading Balance in connection with
such sales are &ldquo;on-chain&rdquo; transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Each
delivery or sale of bitcoin and ether by the Trust to pay the Sponsor Fee or other Trust expenses will be a taxable event to Shareholders.
See <FONT STYLE="text-transform: uppercase">&ldquo;United States Federal Income Tax Consequences.&rdquo;</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust does not engage in any activity designed to derive a profit from changes in the price of bitcoin or ether. Bitcoin and ether not
needed to redeem Baskets, or to cover the Sponsor Fee and Trust expenses not assumed by the Sponsor, is held by the Bitcoin and Ether
Custodian or Prime Execution Agent. As a result of the recurring deliveries of bitcoin and ether necessary to pay the Sponsor Fee and
potential sales of bitcoin or ether to pay in cash the Trust expenses not assumed by the Sponsor, the NAV of the Trust and, correspondingly,
the amount of bitcoin and ether represented by each Share will decrease proportionately over the life of the Trust. New deposits of bitcoin
and ether, purchased with the cash received in connection with purchases of Baskets, will not reverse this trend.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Distributions</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the terms of the Trust Agreement, the Trust may make distributions on the Shares in cash or potentially in kind.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Trust is required to terminate and liquidate, or the Sponsor determines in accordance with the terms of the Trust Agreement that
it is appropriate to terminate and liquidate the Trust, the Sponsor will sell the Trust&rsquo;s bitcoin and ether and will distribute
to the Shareholders any amounts of the cash proceeds of the liquidation remaining after the satisfaction of all outstanding liabilities
of the Trust and the establishment of reserves for applicable taxes, other governmental charges and contingent or future liabilities
as the Sponsor will determine. Under no circumstances will the Trust distribute ether to Shareholders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">See
&ldquo;ADDITIONAL INFORMATION ABOUT THE TRUST&mdash;Termination of the Trust.&rdquo; Shareholders of record on the record date fixed
by the Transfer Agent for a distribution will be entitled to receive their pro rata portions of any distribution.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incidental
Rights and IR Assets</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, the Trust may come into possession of rights incident to its ownership of bitcoin or ether, which permit the Trust to acquire,
or otherwise establish dominion and control over, other digital assets. These rights are generally expected to be Forked Assets that
arise in connection with hard forks in the Ethereum blockchain, airdrops offered to holders of ether and digital assets arising from
other similar events without any action of the Trust or of the Sponsor or Trustee on behalf of the Trust. These rights are referred to
as &ldquo;Incidental Rights&rdquo; and any digital assets acquired through Incidental Rights are referred to as &ldquo;IR Assets.&rdquo;
Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rights and IR Assets. Such assets are not considered
assets of the Trust at any point in time and will not be taken into account for purposes of determining the Trust&rsquo;s NAV and the
NAV per Share.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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. At such time, the Incidental Right(s) and/or IR Asset(s) will be
the property of the Sponsor. Once acquired, the Sponsor, subject to a reasonable, good faith determination, may take any lawful action
necessary or desirable in connection with its acquisition of such assets. 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 in exchange for another digital asset which may subsequently be exchanged for cash. The Sponsor would then contribute
that cash back to the Trust, which in turn would distribute the cash to the Depository Trust Company (&ldquo;DTC&rdquo;) to be distributed
to Shareholders in proportion to the number of Shares owned.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 contribute such 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&rsquo;s ability
to realize a benefit from any such Incidental Right(s) and/or IR Asset(s). The Sponsor may choose to evaluate any such fork, airdrop
or similar occurrence on a case-by-case basis in consultation with its legal advisers, tax consultants and custodian. In determining
whether to attempt to acquire and/or retain any 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:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
availability of a safe and practical way to custody the Incidental Right or IR Asset;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
cost or operational burden of taking possession and/or maintaining ownership of the Incidental Right or IR Asset and whether such cost
or burden exceed the benefits of owning such Incidental Rights or IR Asset or the proceeds that would be realized from a sale thereof;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">whether
there are any legal or regulatory restrictions on or risks or consequences arising from, or tax implications with respect to, the acceptance,
retention, ownership, sale, transfer, abandonment, distribution or disposal or disposition of the Incidental Right or IR Asset, regardless
of whether there is a safe and practical way to custody and secure such Incidental Right or IR Asset;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
existence of a suitable market into which the Incidental Right or IR Asset may be sold; and</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">whether
claiming, owning, selling, or otherwise taking any action in respect of Incidental Rights or IR Asset may create legal or regulatory
risks, liability, or burdens of any kind for the Sponsor (including, without limitation, if such Incidental Right or IR Asset is, or
may be, a security under federal securities laws or a commodity interest under the CEA).</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor is under no obligation to 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 Trust claims any Incidental Right(s) and/or IR Asset(s) resulting from a fork or airdrop in the Bitcoin
blockchain or Ethereum blockchain (other than bitcoin or ether), the Trust would need to seek and obtain certain regulatory approvals,
including an amendment to the Trust&rsquo;s registration statement of which this Prospectus is a part and approval of an application
by the Exchange to amend its listing rules.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Termination
of the Trust</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor will notify Shareholders at least 30 days before the date for termination of the Trust Agreement and the Trust if any of the
following occurs:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares
are delisted from the Exchange and are not approved for listing on another national securities exchange within five (5) business days
of their delisting;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">One
hundred eighty days have elapsed since the Trustee notified the Sponsor of the Trustee&rsquo;s election to resign or since the Sponsor
removed the Trustee, and a successor trustee has not been appointed or accepted its appointment;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SEC determines that the Trust is an investment company under the Investment Company Act, and the Sponsor has made the determination that
termination of the Trust is advisable;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CFTC determines that the Trust is a commodity pool under the CEA, and the Sponsor has made the determination that termination of the
Trust is advisable;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust is determined to be a &ldquo;money services business&rdquo; under the regulations promulgated by FinCEN under the authority of
the Bank Secrecy Act of 1970 and is required to comply with certain FinCEN regulations thereunder or is determined to be a &ldquo;money
transmitter&rdquo; (or equivalent designation) under the laws of any state in which the Trust operates and is required to seek licensing
or otherwise comply with state licensing requirements, and the Sponsor has made the determination that termination of the Trust is advisable;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
U.S. regulator requires the Trust to shut down or forces the Trust to liquidate its ether;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
ongoing event exists that prevents the Trust from making or makes impractical the Trust&rsquo;s reasonable efforts to make a fair determination
of the price of ether for purposes of determining the NAV of the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor determines that the aggregate net assets of the Trust in relation to the operating expenses of the Trust make it unreasonable
or imprudent to continue the business of the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust fails to qualify for treatment, or ceases to be treated, as a &ldquo;grantor trust&rdquo; under the Code or any comparable provision
of the laws of any state or other jurisdiction where that treatment is sought, and the Sponsor determines that, because of that tax treatment
or change in tax treatment, termination of the Trust is advisable;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sixty
days have elapsed since DTC or another depository has ceased to act as depository with respect to the Shares, and the Sponsor has not
identified another depository that is willing to act in such capacity;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee elects to terminate the Trust after the Sponsor is conclusively deemed to have resigned effective immediately as a result of
the Sponsor being adjudged bankrupt or insolvent, or a receiver of the Sponsor or of its property being appointed, or a trustee or liquidator
or any public officer taking charge or control of the Sponsor or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation and a successor sponsor has not been appointed; or</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor elects to terminate the Trust after the Trustee, Administrator or Bitcoin and Ether Custodian (or any successor trustee, administrator
or custodian) resigns or otherwise ceases to be the trustee, administrator or custodian of the Trust, as applicable, and no replacement
trustee, administrator and/or custodian acceptable to the Sponsor is engaged.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the Trust may be dissolved at any time for any reason by the Sponsor in its sole discretion. In respect of termination events
that rely on Sponsor determinations to terminate the Trust (e.g., if the SEC determines that the Trust is an investment company under
the Investment Company Act; the CFTC determines that the Trust is a commodity pool under the Commodity Exchange Act; the Trust is determined
to be a money transmitter under the regulations promulgated by FinCEN; the Trust fails to qualify for treatment, or ceases to be treated,
as a grantor trust for U.S. federal income tax purposes; or, following resignation by a trustee or custodian, the Sponsor determines
that no replacement is acceptable to it), the Sponsor may consider, without limitation, the profitability to the Sponsor and other service
providers of the operation of the Trust, any obstacles or costs relating to the operation or regulatory compliance of the Trust relating
to the determination&rsquo;s triggering event, and the ability to market the Trust to investors. To the extent that the Sponsor determines
to continue operation of the Trust following a determination&rsquo;s triggering event, the Trust will be required to alter its operations
to comply with the triggering event. In the instance of a determination that the Trust is an investment company, the Trust and Sponsor
would have to comply with the regulations and disclosure and reporting requirements applicable to investment companies and investment
advisers. In the instance of a determination that the Trust is a commodity pool, the Trust and the Sponsor would have to comply with
regulations and disclosure and reporting requirements applicable to commodity pools and commodity pool operators or commodity trading
advisers. In the event that the Trust is determined to be a money transmitter, the Trust and the Sponsor will have to comply with applicable
federal and state registration and regulatory requirements for money transmitters and/or money service businesses. In the event that
the Trust ceases to qualify for treatment as a grantor trust for U.S. federal tax purposes, the Trust will be required to alter its disclosure
and tax reporting procedures and may no longer be able to operate or to rely on pass-through tax treatment. In each such case and in
the case of the Sponsor&rsquo;s determination as to whether a potential successor trustee or custodian is acceptable to it, the Sponsor
will not be liable to anyone for its determination of whether to continue or to terminate the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the dissolution of the Trust, the Sponsor (or in the event there is no Sponsor, such person (the &ldquo;Liquidating Trustee&rdquo;) as
the majority of the Shareholders may propose and approve and who agrees to serve hereunder) shall take full charge of the Trust Property.
Any Liquidating Trustee so appointed shall have and may exercise, without further authorization or approval of any of the parties hereto,
all of the powers conferred upon the Sponsor under the terms of this Trust Agreement, subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, and provided that the Liquidating Trustee shall not have general liability for the acts,
omissions, obligations and expenses of the Trust. Thereafter, in accordance with Section 3808(e) of the DSTA, the affairs of the Trust
shall be wound up and all bitcoin and ether owned by the Trust shall be liquidated as promptly as is consistent with obtaining the fair
value thereof and in such a manner so as to effectuate orderly sales and a minimal market impact. The Liquidating Trustee may thereafter
hold the net proceeds of any such sale, together with any other cash then held by it under this Trust Agreement, uninvested and without
liability for interest, for the pro rata benefit of Shareholders that had not theretofore been redeemed. The Liquidating Trustee shall
not be liable for or responsible in any way for depreciation or loss incurred by reason of any sale or sales made in accordance with
the provisions of this Section 8.01. The Liquidating Trustee may suspend its sales of bitcoin or ether upon the occurrence of unusual
or unforeseen circumstances, including, but not limited to, a suspension in trading of bitcoin or ether or similar market event. Upon
receipt of proceeds from the sale of the last bitcoin and ether held hereunder, all proceeds shall be applied and distributed in the
following order of priority:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">pay
                                            to Sponsor from the Trust an amount equal to the sum of (1)&nbsp;any compensation due it
                                            for extraordinary or other services, (2)&nbsp;any advances made but not yet repaid and (3)&nbsp;reimbursement
                                            of any other disbursements as provided herein;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">deduct
                                            from the Trust any amounts that the Liquidating Trustee, in its sole discretion, shall deem
                                            necessary or appropriate to pay on behalf of the Trust any applicable taxes or other governmental
                                            charges that may be payable by the Trust and any other contingent or future liabilities of
                                            the Trust; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">distribute
                                            each Shareholder&rsquo;s interest in the remaining assets of the Trust. Such distribution
                                            shall consist of cash. Under no circumstances will the Trust distribute bitcoin or ether
                                            to Shareholders.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Following
the dissolution and windup of the Trust, including distribution of the assets of the Trust, the Trust shall terminate and the Sponsor
or the Liquidating Trustee, as the case may be, shall instruct the Trustee to execute and cause such certificate of cancellation of the
Certificate of Trust to be filed in accordance with the DSTA at the expense of the Sponsor or the Liquidating Trustee, as the case may
be. Notwithstanding anything to the contrary contained in this Trust Agreement, the existence of the Trust as a separate legal entity
shall continue until the filing of such certificate of cancellation. Upon the termination of the Trust, the Sponsor will be discharged
from all obligations under the Trust Agreement except for certain of its obligations that survive termination of the Trust Agreement.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendments</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust Agreement can be amended by the Sponsor in its sole discretion and without the Shareholders&rsquo; consent by making an amendment,
a Trust Agreement supplemental thereto, or an amended and restated trust agreement. Any such restatement, amendment and/or supplement
to the Trust Agreement will be effective on such date as designated by the Sponsor in its sole discretion. However, any amendment to
the Trust Agreement that affects the duties, liabilities, rights or protections of the Trustee will require the Trustee&rsquo;s prior
written consent, which it may grant or withhold in its sole discretion. Every Shareholder, at the time any amendment so becomes effective,
will be deemed, by continuing to hold any Shares or an interest therein, to consent and agree to such amendment and to be bound by the
Trust Agreement as amended thereby. In no event will any amendment impair the right of Authorized Participants to surrender Baskets and
receive therefor the ether Baskets represented thereby (less fees in connection with the surrender of Shares and any applicable taxes
or other governmental charges), except in order to comply with mandatory provisions of applicable law.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_009"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust&rsquo;s Service Providers</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitwise
Investment Advisers, LLC, as Sponsor, arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares
for their public offering in the United States and the listing of Shares on the Exchange. The Sponsor will not exercise day-to-day oversight
over the Trustee, the Custodian, the Administrator, the Transfer Agent or the Benchmark Provider. The Sponsor will develop a marketing
plan for the Trust, will prepare marketing materials regarding the Shares, and will exercise the marketing plan of the Trust on an ongoing
basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal office of the Sponsor is 250 Montgomery Street, Suite 200, San Francisco, CA 94104.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Officers
of the Sponsor</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a biographical summary of the business experience of each of the officers, directors and other key employees of the Sponsor:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Hunter
Horsley</I> is the Chief Executive Officer of Bitwise Asset Management, Inc., the parent of the Sponsor, and has served in such role
since October 2016. He serves as President and Treasurer of the Sponsor. Prior to Bitwise, Mr. Horsley was a product manager at Facebook
and Instagram leading efforts in monetization from 2015 to 2016. He graduated from the Wharton School at the University of Pennsylvania
with a Bachelor of Science in Economics in 2015. Mr. Horsley took two years off from school from 2011 to 2013 to be on the founding team
of a technology company called Lore (formerly known as CourseKit) to assist in the development of an online learning tool incorporating
social networking features. Lore raised over $6 million in equity, grew to 20 employees and was sold to Noodle Education, Inc., in 2013.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Paul
&ldquo;Teddy&rdquo; Fusaro</I> is the President of Bitwise Asset Management, Inc., and has served in such capacity since January 2021.
Prior to joining Bitwise in April 2018, Mr. Fusaro was Senior Vice President and Head of Portfolio Management and Capital Markets at
IndexIQ, the exchange-traded fund unit of New York Life Investment Management, a firm with over $550 billion in AUM. In this capacity
he oversaw portfolio management, trading, and operations for a suite of alternative strategy exchange-traded funds, mutual funds, and
separately managed accounts. Prior to that, from 2009 to 2013, Mr. Fusaro was Vice President of Portfolio Management and co-head of Trading
and Operations at Direxion Investments, a $13 billion alternative exchange-traded fund manager. Earlier in his career, Mr.&nbsp;Fusaro
spent time in both equity derivatives and credit derivatives at Goldman Sachs &amp; Co. Mr. Fusaro is a graduate of Providence College.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Katherine
Dowling</I> is the General Counsel and Chief Compliance Officer of Bitwise Asset Management and has served in such capacity since March
2021. She serves as the General Counsel, CCO and Vice President of the Sponsor. Prior to Bitwise, Ms. Dowling was the General Counsel
and Chief Compliance Officer for True Capital Management from 2019 to 2021. Before that, Ms. Dowling was a General Partner, as well as
Chief Operating Officer and Chief Compliance Officer of Luminate Capital Partners, from 2015 to 2018. Prior to 2015, Ms. Dowling spent
over ten years as an Assistant U.S. Attorney, most recently in the Economic Crimes Unit of the U.S. Attorney&rsquo;s Office for the Northern
District of California. Ms. Dowling is an Echols Scholar graduate of the University of Virginia and a graduate of Harvard Law School.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a biographical summary of the business experience of certain key officers of Bitwise Asset Management, the parent of the
Sponsor:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Matthew
&ldquo;Matt&rdquo; Hougan</I> is the Chief Investment Officer of Bitwise Asset Management and has served in such capacity since October
2020 after joining Bitwise in February 2018. Prior to Bitwise, Mr. Hougan was the Chief Executive Officer of Inside ETFs and Managing
Director of Global Finance at Informa PLC, an FTSE 100 company. Before that, he was Chief Executive Officer of ETF.com, a venture-backed
start-up that was sold in three separate transactions, with the data business sold to FactSet in 2015, the Events business sold to Informa
in 2015, and the Media business sold to BATS Global Markets in early 2016. Mr. Hougan was also the editor for nine years of the Journal
of Indexes. Mr. Hougan is a three-time member of Barron&rsquo;s ETF Roundtable and co-author of the CFA (Chartered Financial Analyst)
Institute&rsquo;s monograph on exchange-traded funds. Mr. Hougan is a graduate of Bowdoin College.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Hong
Kim</I> is the Chief Technology Officer of Bitwise Asset Management and has served in such capacity since Bitwise&rsquo;s inception.
Prior to Bitwise, Mr. Kim worked in cybersecurity for the South Korean Military. He later worked on Google&rsquo;s backend infrastructure
for Drive. Mr. Kim attended the University of Pennsylvania where he graduated with a Bachelor of Science in Computer Science.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Delaware
Trust Company, a Delaware trust company, acts as the trustee of the Trust for the purpose of creating a Delaware statutory trust in accordance
with the Delaware Statutory Trust Act (the &ldquo;DSTA&rdquo;). The Trustee is appointed to serve as the trustee of the Trust in the
State of Delaware for the sole purpose of satisfying the requirement of Section 3807(a) of the DSTA that the Trust have at least one
trustee with a principal place of business in the State of Delaware.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal address of Delaware Trust Company, as Trustee is 251 Little Falls Drive, Wilmington, DE 19808.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
Duty of Care of Trustee</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee is a fiduciary under the Trust Agreement; provided, however, that the fiduciary duties and responsibilities and liabilities of
the Trustee are limited by, and are only those specifically set forth in, the Trust Agreement.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Resignation,
Discharge or Removal of Trustee; Successor Trustees</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee may resign at any time by giving at least 30 days&rsquo; advance written notice to the Sponsor. The Sponsor may remove the Trustee
at any time by giving at least 30 days&rsquo; advance written notice to the Trustee. Upon effective resignation or removal, the Trustee
will be discharged of its duties and obligations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Trustee resigns or is removed, the Sponsor, acting on behalf of the Shareholders, is required to use reasonable efforts to appoint
a successor trustee. Any successor Trustee must satisfy the requirements of Section 3807 of the DSTA. Any resignation or removal of the
Trustee and appointment of a successor Trustee cannot become effective until a written acceptance of appointment is delivered by the
successor Trustee to the outgoing Trustee and the Sponsor and any fees and expenses due to the outgoing Trustee are paid or waived by
the outgoing Trustee. Following compliance with the preceding sentence, the successor will become fully vested with the rights, powers,
duties and obligations of the outgoing Trustee under the Trust Agreement, with like effect as if originally named as Trustee, and the
outgoing Trustee shall be discharged of its duties and obligations herein. If no successor Trustee shall have been appointed and shall
have accepted such appointment within forty-five (45) days after the giving of such notice of resignation or removal, the Trustee may
petition any court of competent jurisdiction for the appointment of a successor Trustee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Trustee resigns and no successor trustee is appointed within 180 days after the date the Trustee issues its notice of resignation,
the Sponsor will terminate and liquidate the Trust and distribute its remaining assets.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Trust Administration and Accounting Agreement, the Administrator provides necessary administrative, tax and accounting services and
financial reporting for the maintenance and operations of the Trust. In addition, the Administrator makes available the office space,
equipment, personnel and facilities to provide such services.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
principal address of BNY Mellon, as Administrator, Transfer Agent and Cash Custodian, is 240 Greenwich Street, New York, NY 10286.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Transfer Agent</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Transfer Agent (1) issues and redeems Shares of the Trust; (2) responds to correspondence by Shareholders and others relating to its
duties; (3) maintains Shareholder accounts; and (4) makes periodic reports to the Trust.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian is responsible for safekeeping the bitcoin and ether owned by the Trust. The Bitcoin and Ether Custodian
was selected by the Sponsor. The Bitcoin and Ether Custodian has responsibility for opening the Trust Digital Asset Accounts and facilitating
the transfer of bitcoin and ether required for the operation of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor may, in its sole discretion, add or terminate bitcoin or ether custodians at any time. The Sponsor may, in its sole discretion,
change the custodian of the Trust&rsquo;s bitcoin and/or ether holdings, but it will have no obligation whatsoever to do so or to seek
any particular terms for the Trust from other such custodians. However, the Sponsor will only enter into ether custody arrangements with
custodians that meet the Sponsor&rsquo;s criteria, including an agreement to maintain Trust assets in segregated accounts, to maintain
insurance and to store the Trust&rsquo;s private keys in cold storage or in such other manner as the Sponsor determines provides reasonable
protection for the Trust&rsquo;s assets from loss or theft.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Cash Custodian</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Cash Custodian is the custodian of the Trust&rsquo;s cash holdings.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Marketing Agent</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Marketing Agent is responsible for: (1) working with the Transfer Agent to review and approve, or reject, purchase and redemption orders
of Baskets placed by Authorized Participants with the Transfer Agent; and (2)&nbsp;reviewing and approving the marketing materials prepared
by the Trust for compliance with applicable SEC and FINRA advertising laws, rules, and regulations.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_010"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Custody
of the Trust&rsquo;s Assets</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust has entered into an agreement with the Bitcoin and Ether Custodian, the Bitcoin and Ether Custody Agreement, pursuant to which
the Bitcoin and Ether Custodian will custody all of the Trust&rsquo;s bitcoin and ether in segregated accounts from time to time (the
Trust Digital Asset Accounts), other than the Trust&rsquo;s bitcoin and ether which is temporarily maintained in the Trading Balance
with the Prime Execution Agent as described below in <I>&ldquo;</I>THE PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER&mdash;The Prime
Execution Agent.&rdquo; The Bitcoin and Ether Custodian will keep a substantial portion of the private keys associated with the Trust&rsquo;s
bitcoin and ether in &ldquo;cold storage&rdquo; or similarly secure technology (the &ldquo;Cold Digital Asset Accounts&rdquo;), with
any remainder of the Trust Digital Asset Accounts held as a &ldquo;Hot Digital Asset Account.&rdquo; The Sponsor expects that all of
the Trust&rsquo;s assets and private keys will be held in cold storage of the Bitcoin and Ether Custodian on an ongoing basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Custody
of bitcoin and ether typically involves the generation, storage and utilization of private keys. These private keys are used to effect
transfer transactions (i.e., transfers of bitcoin and ether from an address associated with the private key to another address). Cold
storage of private keys may involve keeping such keys on a non-networked computer or electronic device or storing the private keys on
a storage device or printed medium and deleting the keys from all computers. Cold storage is a safeguarding method with multiple layers
of protections and protocols, by which the private key(s) corresponding to the Trust&rsquo;s bitcoin and ether is (are) generated and
stored in an offline manner. Private keys are generated in offline computers that are not connected to the internet so that they are
resistant to being hacked. By contrast, in hot storage, the private keys are held online, where they are more accessible, leading to
more efficient transfers, though they are potentially more vulnerable to being hacked. While the Bitcoin and Ether Custodian will generally
keep all of the Trust&rsquo;s bitcoin and ether in cold storage on an ongoing basis, it is possible that, from time to time, portions
of the Trust&rsquo;s bitcoin and ether will be held outside of cold storage temporarily as part of trade facilitation in connection with
creations and redemptions of Baskets and to sell bitcoin and ether to pay Trust expenses not assumed by the Sponsor, as necessary. The
Trust&rsquo;s bitcoin and ether held in the Cold Digital Asset Accounts by the Bitcoin and Ether Custodian are held in segregated wallets
and therefore are not commingled with the Bitcoin and Ether Custodian&rsquo;s or other customer assets. The private key materials are
stored within secure storage facilities within the United States and Europe. For security reasons exact locations are never disclosed.
A limited number of employees at the Bitcoin and Ether Custodian are involved in private key management operations, and the Bitcoin and
Ether Custodian has represented that no single individual has access to full private keys. The Bitcoin and Ether Custodian carefully
considers the design of the physical, operational and cryptographic systems for secure storage of the Trust&rsquo;s private keys in an
effort to lower the risk of loss or theft. No such system is perfectly secure and loss or theft due to operational or other failure is
always possible.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian&rsquo;s internal audit team performs periodic internal audits over custody operations, and the Bitcoin and
Ether Custodian has represented that Systems and Organizational Control attestations covering private key management controls are also
performed on the Bitcoin and Ether Custodian by an external provider.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the terms of the Bitcoin and Ether Custody Agreement, the Sponsor maintains sole discretion in allocating bitcoin and ether between the
Hot Digital Asset Accounts and the Cold Digital Asset Accounts. Bitcoin and ether custodied by the Bitcoin and Ether Custodian are not
commingled with the assets of the Bitcoin and Ether Custodian or its affiliates or with the assets of other customers of the Bitcoin
and Ether Custodian. Neither the Trust, the Sponsor, nor any other entity is permitted to lend, pledge, hypothecate or rehypothecate
any of the Trust&rsquo;s bitcoin and ether. The Bitcoin and Ether Custodian has also agreed in the Bitcoin and Ether Custody Agreement
that it will not, directly or indirectly, lend, pledge, hypothecate or rehypothecate any of the Trust&rsquo;s bitcoin or ether, and that
the Trust&rsquo;s bitcoin or ether assets are not treated as general assets of the Bitcoin and Ether Custodian, but are instead considered
custodial assets that remain the Trust&rsquo;s property. Additionally, the Bitcoin and Ether Custodian has agreed to provide the Trust
or its authorized independent public accountant with confirmation of or access to information sufficient to confirm the bitcoin and ether
held by the Bitcoin and Ether Custodian for the Trust and that the Trust&rsquo;s bitcoin and ether is held in separate, segregated accounts
under the Trust&rsquo;s name. The Bitcoin and Ether Custody Agreement does not require that private key information with respect to the
Trust&rsquo;s bitcoin or ether be kept in a particular physical location.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian may receive deposits of bitcoin or ether but may not send bitcoin or ether without use of the corresponding
private keys. In order to send ether when the private keys are kept in cold storage, unsigned transactions must be physically transferred
to the offline cold storage facility and signed using a software/hardware utility with the corresponding offline keys. At that point,
the Bitcoin and Ether Custodian can upload the fully signed transaction to an online network and transfer the ether. Because the Bitcoin
and Ether Custodian may need to retrieve private keys from offline storage prior to initiating transactions, the initiation or crediting
of withdrawals or other transactions may be delayed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian&rsquo;s liability is limited as follows, among others: (i)&nbsp;other
than with respect to claims and losses arising from spot trading of bitcoin or ether, or fraud or willful misconduct, among others, the
Bitcoin and Ether Custodian&rsquo;s aggregate liability under the Bitcoin and Ether Custody Agreement shall not exceed the greater of
(A)&nbsp;the greater of (x) $5 million and (y) the aggregate fees 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&rsquo;s liability, and (B) the value of the affected bitcoin, ether
or cash giving rise to the Bitcoin and Ether Custodian&rsquo;s liability; (ii) in respect of the Bitcoin and Ether Custodian&rsquo;s
obligations 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&rsquo;s violation of any law, rule or regulation with respect to the provision of its
services, the Bitcoin and Ether Custodian&rsquo;s liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees
paid by the Trust to the Ether Custodian in the 12 months prior to the event giving rise to the Ether Custodian&rsquo;s liability; and
(iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin and Ether Custodian is
not liable, even if the Bitcoin and Ether Custodian has been advised of or knew or should have known of the possibility thereof. The
Bitcoin and Ether Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service to
the extent it is directly due to a cause or condition beyond the reasonable control of the Bitcoin and Ether Custodian. Under the Bitcoin
and Ether Custody Agreement, except in the case of its negligence, fraud, material violation of applicable law or willful misconduct,
the Bitcoin and Ether Custodian shall not have any liability, obligation, or responsibility for any damage or interruptions caused by
any computer viruses, spyware, scareware, Trojan horses, worms or other malware that may affect the Trust&rsquo;s computer or other equipment,
or any phishing, spoofing or other attack, unless the Bitcoin and Ether Custodian fails to have commercially reasonable policies, procedures
and technical controls in place to prevent such damages or interruptions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coinbase
Global maintains a commercial crime insurance policy, which is intended to cover the loss of client assets held by the Coinbase Insureds,
including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent
transfer. The insurance maintained by the Coinbase Insureds is shared among all of Coinbase&rsquo;s customers, is not specific to the
Trust or to customers holding bitcoin or ether with the Bitcoin and Ether Custodian or Prime Execution Agent and may not be available
or sufficient to protect the Trust from all possible losses or sources of losses.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing the applicable notice
to the Trust, or immediately for Cause (as defined in the Bitcoin and Ether Custody Agreement), including, among others, if the Trust
materially breaches the Prime Execution Agreement and such breach remains uncured, undergoes a bankruptcy event, or fails to repay Trade
Credits. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing 180 days&rsquo;
notice to the Trust, or immediately for Cause (as defined below). The Bitcoin and Ether Custody Agreement forms a part of the Prime Execution
Agreement, and is subject to the termination provisions in the Prime Execution Agreement. These termination provisions are described
in more detail in <I>&ldquo;</I>THE PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER&mdash;The Prime Execution Agent&rdquo; below.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Transfer Agent will facilitate the settlement of Shares in response to the placement of creation orders and redemption orders from Authorized
Participants. The Trust has entered into the Cash Custody Agreement with BNY Mellon under which BNY Mellon acts as custodian of the Trust&rsquo;s
cash and cash equivalents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust may engage third-party custodians or vendors besides the Bitcoin and Ether Custodian and the Cash Custodian to provide custody
and security services for all or a portion of its bitcoin, ether and/or cash, and the Sponsor will pay the custody fees and any other
expenses associated with any such third-party custodian or vendor. The Sponsor is responsible for overseeing the Bitcoin and Ether Custodian
and the Trust&rsquo;s other service providers. The Sponsor may, in its sole discretion, add or terminate bitcoin and/or ether custodians
at any time. The Sponsor may, in its sole discretion, change the custodian of the Trust&rsquo;s bitcoin or ether holdings, but it will
have no obligation whatsoever to do so or to seek any particular terms for the Trust from other such custodians. However, the Sponsor
will only enter into ether custody arrangements with custodians that meet the Sponsor&rsquo;s criteria, including an agreement to maintain
Trust assets in a segregated account, to maintain insurance and to store the Trust&rsquo;s private keys in cold storage or in such other
manner as the Sponsor determines provides reasonable protection for the Trust&rsquo;s assets from loss or theft.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_011"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">THE
PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following section describe the role of the Prime Execution Agent and Trade Credit Lender. These parties will only be utilized during
the rare and limited circumstances when the Trust buys and sells ether using the Agent Execution Model. The Trust intends to utilize
the Trust-Directed Trade Model for all purchases and sales of ether and will only utilize the Agent Execution Model in the event that
no Ether Trading Counterparty is able or willing to effectuate the Trust&rsquo;s purchase or sale of ether.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Prime Execution Agreement, the Trust&rsquo;s bitcoin, ether and/or cash holdings, from time to time, may be temporarily held with
the Prime Execution Agent, an affiliate of the Bitcoin and Ether Custodian, in the Trading Balance, for certain limited purposes, including
in connection with creations and redemptions of Baskets and the sale of bitcoin and ether to pay other Trust expenses not assumed by
the Sponsor. The Sponsor may, in its sole discretion, add or terminate prime execution agents at any time. The Sponsor may, in its sole
discretion, change the prime execution agent for the Trust, but it will have no obligation whatsoever to do so or to seek any particular
terms for the Trust from other such prime execution agents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
the Trust&rsquo;s Trading Balance, the Prime Execution Agreement provides that the Trust does not have an identifiable claim to any particular
bitcoin or ether (or cash). Instead, the Trust&rsquo;s Trading Balance represents an entitlement to a pro rata share of the bitcoin and
ether (and cash) the Prime Execution Agent holds on behalf of customers who hold similar entitlements against the Prime Execution Agent.
In this way, the Trust&rsquo;s Trading Balance represents an omnibus claim on the Prime Execution Agent&rsquo;s bitcoin and ether (and
cash) held on behalf of the Prime Execution Agent&rsquo;s customers. The Prime Execution Agent holds the bitcoin and ether associated
with customer entitlements across a combination of omnibus cold wallets, omnibus &ldquo;hot&rdquo; wallets (meaning wallets whose private
keys are generated and stored online, in internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent&rsquo;s
name on a trading venue (including third-party venues and the Prime Execution Agent&rsquo;s own execution venue) where the Prime Execution
Agent executes orders to buy and sell ether on behalf of its clients.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor that it keeps the majority of
assets in cold wallets to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals. However,
the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the Sponsor, the percentage
of ether that the Prime Execution Agent holds for customers holding similar entitlements as the Trust, which are kept in omnibus cold
wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent&rsquo;s name on a trading venue. The Prime
Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing
risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated liquidity needs for its customers
as a class against the anticipated greater security of cold storage.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent is not required by the Prime Execution Agreement to hold any of the bitcoin or ether in the Trust&rsquo;s Trading
Balance in cold storage or to hold any such ether in segregation, and neither the Trust nor the Sponsor can control the method by which
the Prime Execution Agent holds the bitcoin and ether credited to the Trust&rsquo;s Trading Balance.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent relies on bank accounts to provide its trading platform services and including temporarily holding any cash related
to a customer&rsquo;s purchase or sale of bitcoin or ether. In particular, the Prime Execution Agent has disclosed that customer cash
held by the Prime Execution Agent, including the cash associated with the Trust&rsquo;s Trading Balance, is held in one or more banks&rsquo;
accounts for the benefit of the Prime Execution Agent&rsquo;s customers, or in Money Market Funds in compliance with Rule 2a-7 under
the Investment Company Act and rated &ldquo;AAA&rdquo; by S&amp;P (or the equivalent from any eligible rating service), provided that
such investments are held in accounts in Coinbase&rsquo;s name for the benefit of customers and are permitted and held in accordance
with state money-transmitter laws. The Prime Execution Agent has represented to the Sponsor that it has implemented the following policy
with respect to the cash associated with the Trust&rsquo;s Trading Balance. First any cash related to the Trust&rsquo;s purchase or sale
of bitcoin or ether will be held in an FBO Account or in a Money Market Fund. The amount of Trust cash held at each FBO Account shall,
unless otherwise agreed by the Sponsor in writing, 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 in a Money Market Fund. The Prime Execution Agent has agreed to title the accounts in a manner designed to enable
receipt of FDIC deposit insurance where applicable on a pass-through basis. Second, to the extent the Trust&rsquo;s cash in the Trading
Balance in aggregate exceeds the amounts that can be maintained at the banks on the foregoing basis, the Prime Execution Agent has represented
that it currently conducts an overnight sweep of the excess into U.S. government Money Market Funds. The Sponsor has not independently
verified the Prime Execution Agent&rsquo;s representations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the extent the Trust sells bitcoin ether through the Prime Execution Agent, the Trust&rsquo;s orders will be executed at the Connected
Trading Venues that have been approved in accordance with the Prime Execution Agent&rsquo;s due diligence and risk assessment process.
The Prime Execution Agent has represented that its due diligence on Connected Trading Venues includes reviews conducted by the legal,
compliance, security, privacy and finance and credit-risk teams, The Connected Trading Venues, which are subject to change from time
to time, currently include Bitstamp, LMAX, Kraken, the exchange operated by the Prime Execution Agent, as well as four additional non-bank
market makers (&ldquo;NBMMs&rdquo;). The Prime Execution Agent has represented to the Trust that it is unable to name the NBMMs due to
confidentiality restrictions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Prime Execution Agreement, the Trust may engage in sales of bitcoin or ether by placing orders with the Prime Execution Agent.
The Prime Execution Agent will route orders placed by the Sponsor through the prime execution agent execution platform (the &ldquo;Trading
Platform&rdquo;) to a Connected Trading Venue where the order will be executed. Each order placed by the Sponsor will be sent, processed
and settled at each Connected Trading Venue to which it is routed. The Prime Execution Agreement provides that the Prime Execution Agent
is subject to certain conflicts of interest, including: (i) the Trust&rsquo;s orders may be routed to the Prime Execution Agent&rsquo;s
own execution venue where the Trust&rsquo;s orders may be executed against other customers of the Prime Execution Agent or with the Coinbase
acting as principal, (ii) the beneficial identity of the counterparty purchaser or seller with respect to the Trust&rsquo;s orders may
be unknown and therefore may inadvertently be another client of the Prime Execution Agent, (iii) the Prime Execution Agent does not engage
in front-running, but is aware of the Trust&rsquo;s orders or imminent orders and may execute a trade for its own inventory (or the account
of an affiliate) while in possession of that knowledge and (iv) the Prime Execution Agent may act in a principal capacity with respect
to certain orders. As a result of these and other conflicts, when acting as principal, the Prime Execution Agent may have an incentive
to favor its own interests and the interests of its affiliates over the Trust&rsquo;s interests.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subject
to the foregoing, and to certain policies and procedures that the Prime Execution Agreement requires the Prime Execution Agent to have
in place to mitigate conflicts of interest when executing the Trust&rsquo;s orders, the Prime Execution Agreement provides that the Prime
Execution Agent shall have no liability, obligation, or responsibility whatsoever for the selection or performance of any Connected Trading
Venue, and that other Connected Trading Venues and/or trading venues not used by Coinbase may offer better prices and/or lower costs
than the Connected Trading Venue used to execute the Trust&rsquo;s orders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Coinbase
Global maintains a commercial crime insurance policy, which is intended to cover the loss of client assets held by Coinbase Global and
all of its subsidiaries, including the Prime Execution Agent, including from employee collusion or fraud, physical loss including theft,
damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by the Coinbase Insureds is shared
among all of Coinbase&rsquo;s customers, is not specific to the Trust or to customers holding bitcoin or ether with the Bitcoin and Ether
Custodian or Prime Execution Agent and may not be available or sufficient to protect the Trust from all possible losses or sources of
losses.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Once
the Sponsor places an order to purchase or sell bitcoin or ether on the Trading Platform, the associated bitcoin, ether or cash used
to fund or fill the order, if any, will be placed on hold and will generally not be eligible for other use or withdrawal from the Trust&rsquo;s
Trading Balance. The Trust Digital Asset Accounts may be used directly to fund orders. With each Connected Trading Venue, the Prime Execution
Agent shall establish an account in the Prime Execution Agent&rsquo;s name, or in its name for the benefit of clients, to trade on behalf
of its clients, including the Trust, and the Trust will not, by virtue of the Trading Balance the Trust maintains with the Prime Execution
Agent, have a direct legal relationship, or account with, any Connected Trading Venue.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent is permitted to suspend or terminate the Prime Execution Agreement under certain circumstances. The Prime Execution
Agent, for itself or as agent for the Bitcoin and Ether Custodian and Trade Credit Lender, may not terminate the Prime Execution Agreement
(including the Bitcoin and Ether Custody Agreement) or suspend, restrict terminate or modify the Prime Execution Agent Services (as defined
below) on less than 180 days&rsquo; notice, except in the event of (i) a Change in Law or (ii) a Cause event (as defined below).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agreement defines a &ldquo;Change in Law&rdquo; as any change in or adoption of any applicable law, rule, or regulation
which, in the reasonable opinion of counsel to the Prime Execution Agent would prohibit or materially impede some or all of the arrangement
contemplated by the Prime Execution Agreement. Upon the occurrence of a Change in Law, the parties will negotiate to agree on modifications
to the Prime Execution Agreement or the Prime Execution Agent Services that would enable compliance with such Change in Law or, in the
case of a material impediment, reduce the impact to the parties of such Change in Law and the Coinbase Entities shall continue to provide
the Prime Execution Agent Services unless prohibited from doing so by the Change in Law. If the parties cannot agree on modifications
within thirty (30) days following notice from the Prime Execution Agent or if the Change in Law requires that Coinbase immediately ceases
providing any Prime Execution Agent Services, the Prime Execution Agent may, upon written notice, suspend, restrict or terminate the
Prime Execution Agent Services solely to the extent necessary to account for the Change in Law, provided that any such suspension, restriction,
termination or modification is narrowly tailored and, to the extent not prohibited by the Change in Law, the Coinbase Entities will continue
to provide, at a minimum, the Transition Services (as defined below) following any Change in Law.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the occurrence and continuation of a Cause event, and after giving effect to any notice requirement and cure period that may apply, the
Prime Execution Agent may in its reasonable discretion, terminate the Prime Execution Agreement and accelerate the Trust&rsquo;s obligations,
and/or take certain other actions. The Prime Execution Agreement defines &ldquo;Cause&rdquo; to mean (i) a material breach of the Prime
Execution Agreement (other than the Bitcoin and Ether Custody Agreement) which is uncured for ten (10) days; (ii) a material breach of
the Ether Custody Agreement which is uncured for 30 days; (iii) a Bankruptcy Event (as defined below); and (iv) the failure by the Trust
to repay Trade Credits by the applicable deadline specified in the Trade Financing Agreement which, in the event the failure results
solely from an error or omission of an administrative or operational nature, remains uncured for a period of one (1) business day.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notwithstanding
any termination of the Prime Execution Agreement by the Prime Execution Agent for Cause, during any Transition Period (as defined below)
the Coinbase Entities (defined in the Prime Execution Agreement as the Prime Execution Agent, Ether Custodian, and Trade Credit Lender)
or their affiliates shall continue to provide the Transition Services (as defined below) and render such assistance as the Trust may
reasonably request to enable the continuation and orderly assumption of the Transition Services to be effected by the Trust, its affiliate
or any alternative service provider and shall continue to provide the Transition Services pursuant to the Prime Execution Agreement,
except to the extent any Transition Service is prohibited under applicable law (including, but not limited to, applicable sanctions programs)
or by a facially valid subpoena, court order, or binding order of a government authority; provided that (i) the Coinbase Entities will
continue to have the right to exercise their right of set-off under the Prime Execution Agreement with respect to any sale proceeds during
the Transition Period for any fees or other amounts owed by the Trust and (ii), notwithstanding any provision in the Prime Execution
Agreement to the contrary, in no event shall any Coinbase Entity, its affiliates, or their respective officers, directors, agents, employees
and representatives have any liability to the Trust or Sponsor for any claims or losses arising out of or relating to the Prime Execution
Agreement during (A) with respect to any Transition Services described in clause (i) of the definition of Transition Services, the 91st
day through the end of the Transition Period (as defined below) and (B) with respect to any Transition Services described in clause (ii)
of the definition of Transition Services, the 16th&nbsp;day through the end of the Transition Period, which do not result from its gross
negligence, fraud, material violation of applicable law or willful misconduct; provided that throughout the Transition Period the Coinbase
Entities shall act in good faith and in a commercially reasonable manner to provide the same level of service with respect to the Transition
Services as was provided prior to the start of the Transition Period. For the avoidance of doubt, during the Transition Period, the fees
set forth in the Prime Execution Agreement will continue to apply to the Transition Services.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;Transition
Period&rdquo; is defined in the Prime Execution Agreement to mean a 180-day period (or such extended period as agreed in writing by the
Coinbase Entities and the Trust) commencing on the date the Trust is notified of any termination of the Prime Execution Agreement pursuant
to a Cause event.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;Transition
Services&rdquo; means the Prime Execution Agent services consisting of (i) the custody of the Trust&rsquo;s ether on the Trust&rsquo;s
behalf, the processing of deposits and withdrawals and other custody transactions, and (ii) access to the Prime Execution Agent&rsquo;s
trading platform and the execution and settlement of all orders for the sale of ether submitted by the Trust. For the avoidance of doubt,
the Transition Services shall not include the extension of credit, and the obligation to execute and settle any Orders for the purchase
of Digital Assets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;Bankruptcy
Event&rdquo; is defined in the Prime Execution Agreement to mean the party is (i) dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors;
(iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors&rsquo; rights, or a petition is presented for its winding-up or
liquidation, and in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (I) results
in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation
or (II) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (v)
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation
or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially all its assets; (vii) has a secured party take possession of all
or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued
on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter; (viii) causes or is subject to any event with respect to it
which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (vii)
(inclusive); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust may terminate the Prime Execution Agreement, including the Bitcoin and Ether Custody Agreement, in whole or in part for any reason
upon thirty (30) days&rsquo; notice to the Prime Execution Agent, for itself or as agent on behalf of the Bitcoin and Ether Custodian
or Trade Credit Lender, or upon a Coinbase Termination Event. The Prime Execution Agreement defines a &ldquo;Coinbase Termination Event&rdquo;
to mean the occurrence and continuance of (i) a Bankruptcy Event with respect to any Coinbase Entity, (ii) the failure of any Coinbase
Entity to sell or withdraw or transfer the Trust&rsquo;s bitcoin or ether in accordance with the Trust&rsquo;s instructions within the
time periods set forth in the Prime Execution Agreement and such failure is not cured within two (2) business days following the Trust
providing written notice to the relevant Coinbase Entity (&ldquo;CB Return Cure&rdquo;); provided, however, that (A) if, prior to the
expiration of the CB Return Cure, the Prime Execution Agent transfers cash to the Trust in an amount equal to the value of the bitcoin
or ether based on the Benchmark Valuation (defined as the applicable Pricing Benchmark) as of the time that the request to sell, transfer
or withdraw was originally made by the Trust (the &ldquo;BTC/ETH Cash Value&rdquo;) or if the Prime Execution Agent delivers cash collateral
to an account designated by the Trust and in which the Trust has a perfected, first priority security interest and in an amount equal
to the BTC/ETH Cash Value until the relevant bitcoin and/or ether is sold, withdrawn or transferred or the Trust elects to receive such
amount in cash in lieu of the Prime Execution Agent&rsquo;s obligation to sell, withdraw or transfer the relevant bitcoin and/or ether,
in each cash, such failure will be deemed cured; provided, further that, the Trust shall have the right to choose whether to receive
the BTC/ETH Cash Value in lieu of the relevant bitcoin and/or ether or receive the BTC/ETH Cash Value as cash collateral, or (B) if such
failure is due to a technology or security issue where, in the commercially reasonable opinion of the Prime Execution Agent, returning
the relevant bitcoin and/or ether would result in material risk to the Trust or the Prime Execution Agent or may result in the relevant
bitcoin and/or ether being lost or otherwise not successfully returned and the Prime Execution Agent promptly notifies the Trust promptly
upon Client&rsquo;s notice of such failure, (1)&nbsp;the Trust may request that the Prime Execution Agent still sell, withdraw or transfer
the bitcoin and/or ether, but the Prime Execution Agent will have no liability with respect to any such sell, withdrawal or transfer
(unless the Prime Execution Agent or any of the Coinbase Entities act with negligence unrelated to such technology or security issue)
and any failure to withdraw or transfer shall not result in a Coinbase Termination Event if the Trust does not receive the withdrawn
or transferred bitcoin and/or ether or the proceeds of any such sale due to such technology or security issue, or (2) if the Trust does
not elect to have the Prime Execution Agent still make the sale, withdrawal or transfer, a Coinbase Termination Event shall not occur
while the relevant security or technology event is occurring and continuing, (iii) the failure of any Coinbase Entity to withdraw or
transfer cash to the Trust in accordance with the Trust&rsquo;s instructions within the time periods set forth in the Prime Execution
Agreement and such failure is not cured within one (1) business day following the Trust providing written notice to the relevant Coinbase
Entity, (iv) a Coinbase Entity intentionally or willfully, materially breaches any provision of the Prime Execution Agreement (other
than the provisions of the Bitcoin and Ether Custody Agreement) and such breach remains uncured for a period of ten (10) calendar days
after notice of such breach is provided by the Trust to the Prime Execution Agent; or (v) a Coinbase Entity intentionally or willfully,
materially breaches any provision of the Bitcoin and Ether Custody Agreement and such breach remains uncured for a period of 30 calendar
days after notice of such breach is provided by the Trust to the Prime Execution Agent.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent does not guarantee uninterrupted access to the Trading Platform or the services it provides to the Trust. Under
certain circumstances, the Prime Execution Agent is permitted to halt or suspend trading on the Trading Platform, or impose limits on
the amount or size of, or reject, the Trust&rsquo;s orders, including in the event of, among others, (a) delays, suspension of operations,
failure in performance, or interruption of service that are directly due to a cause or condition beyond the reasonable control of the
Prime Execution Agent, (b) the Trust has engaged in unlawful or abusive activities or fraud, or (c) a security or technology issue occurred
and is continuing that results in the Prime Execution Agent being unable to provide trading services or accept the Trust&rsquo;s order,
in each case, subject to certain protections for the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Neither
the Prime Execution Agent nor any other Coinbase entity is permitted to withdraw the Trust&rsquo;s bitcoin or ether from the Trust Digital
Asset Accounts, or loan, hypothecate, pledge or otherwise encumber the Trust&rsquo;s bitcoin or ether, without the consent of the Trust.
The Trading Balance is subject to the lien to secure outstanding Trade Credits in favor of the Trade Credit Lender discussed below.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Prime Execution Agreement, the Prime Execution Agent&rsquo;s liability is limited as follows, among others: (i) other than with respect
to claims and losses arising from spot trading of bitcoin or ether, or fraud or willful misconduct, among others, the Prime Execution
Agent&rsquo;s aggregate liability shall not exceed the greater of (A) the greater of (x) &nbsp;$5&nbsp;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 Execution Agent&rsquo;s
liability, and (B) the value of the cash or affected bitcoin or ether giving rise to the Prime Execution Agent&rsquo;s liability; (ii)
in respect of the Prime Execution Agent&rsquo;s obligations 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 Prime Execution Agent&rsquo;s violation of any law, rule or regulation
with respect to the provision of its services, or the full amount of the Trust&rsquo;s assets lost due to the insolvency of or security
event at a Connected Trading Venue, the Prime Execution Agent&rsquo;s liability shall 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 months prior to the event giving rise to the Prime Execution
Agent&rsquo;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 advised of or knew or should have known of the possibility
thereof. The Prime Execution Agent is not liable for delays, suspension of operations, failure in performance, or interruption of service
to the extent it is directly due to a cause or condition beyond the reasonable control of the Prime Execution Agent. Both the Trust and
the Prime Execution Agent and its affiliates (including the Bitcoin and Ether Custodian) are required to indemnify each other under certain
circumstances. The Prime Execution Agreement is governed by New York law and provides that disputes arising under it are subject to arbitration.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agreement provides that the Coinbase Entities may have actual or potential conflicts of interest in connection with providing
the Prime Execution Agent Services including that (i) orders to buy or sell bitcoin or ether may be routed to the Prime Execution Agent&rsquo;s
exchange platform (&ldquo;Coinbase Exchange&rdquo;) where such orders may be executed against other Coinbase customers or with Coinbase
acting as principal, (ii) the beneficial identity of the purchaser or seller with respect to an order is unknown and therefore may inadvertently
be another Coinbase customer, (iii) the Prime Execution Agent does not engage in front-running, but is aware of orders or imminent orders
and may execute a trade for its own inventory (or the account of an affiliate) while in possession of that knowledge, and (iv) Coinbase
may act in a principal capacity with respect to certain orders (e.g., to fill residual order size when a portion of an order may be below
the minimum size accepted by the Connected Trading Venues). As a result of these and other conflicts, when acting as principal, the Coinbase
Entities may have an incentive to favor their own interests and the interests of their affiliates over the Trust&rsquo;s interests and
have in place certain policies and procedures that are designed to mitigate such conflicts. The Prime Execution Agent will maintain appropriate
and effective arrangements to eliminate or manage conflicts of interest, including segregation of duties, information barriers and training.
The Prime Execution Agent will notify the Trust of changes to its business that have a material adverse effect on the Prime Execution
Agent&rsquo;s ability to manage its conflicts of interest. The Coinbase Entities shall execute trades pursuant to such policies and procedures;
provided that the Coinbase Entities (a) shall execute in a commercially reasonable amount of time (i) any marketable orders appropriately
entered by the Trust and (ii) any other pending orders by the Trust received by the Coinbase Entities that become marketable, (b) for
any order that the Prime Execution Agent receives from the Trust, the Prime Execution Agent will make commercially reasonable efforts
to route orders for execution to the Connected Trading Venue offering the highest price for the Trust&rsquo;s bitcoin or ether sale orders,
including consideration of any gas fees or similar fees related to a particular blockchain at the time that such orders are routed for
execution, and (c) shall not knowingly enter into a transaction for the benefit of (x) the Coinbase Entities, or (y)&nbsp;any other client
received after the Trust&rsquo;s order, ahead of any order received from the Trust. For purposes of the foregoing, a marketable order
is a sell order equivalent to or better than the best bid price on any Connected Trading Venue (or any venue that a Coinbase Entity may
use) at a given moment. The Prime Execution Agent agrees to direct the Trust&rsquo;s orders in a manner that does not systematically
favor the Coinbase Exchange or Connected Trading Venues that provide financial incentives to the Prime Execution Agent; provided, however,
that under certain circumstances the Prime Execution Agent may choose to intentionally route to the Coinbase Exchange due to temporary
conditions affecting Connected Trading Venues (e.g., connectivity problems of the Connected Trading Venue or funding constraints).</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trade Credit Lender</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
avoid having to pre-fund purchases or sales of bitcoin or ether when using the Agent Execution Model, the Trust may borrow bitcoin, ether
or cash as Trade Credit from the Trade Credit Lender on a short-term basis. The Sponsor does not intend to fund the Trading Balance at
the Prime Execution Agent with sufficient bitcoin, ether or cash to pay fees and expenses and instead intends to utilize the Trade Financing
Agreement for such fees and expenses. This allows the Trust to buy or sell bitcoin or ether through the Prime Execution Agent in an amount
that exceeds the bitcoin, ether or cash credited to the Trust&rsquo;s Trading Balance at the Prime Execution Agent at the time such order
is submitted to the Prime Execution Agent, which is expected to facilitate the Trust&rsquo;s ability purchase and sell bitcoin or ether
in a timely manner, rather than waiting for the cash to be transferred by the Cash Custodian to the Prime Execution Agent prior to purchasing
the bitcoin or ether or for the bitcoin or ether held in the Trust Digital Asset Accounts to be transferred to the Trust&rsquo;s Trading
Balance prior to selling bitcoin or ether. The Trust is required by the terms of the Trade Financing Agreement, which is part of the
Prime Execution Agreement, to repay any extension of Trade Credit by the Trade Credit Lender by 6:00 p.m. ET on the business day following
the day that the Trade Credit was extended to the Trust. The Trade Credit Lender is only required to extend Trade Credits to the Trust
to the extent such bitcoin, ether or cash is actually available to the Trade Credit Lender. For example, if the Trade Credit Lender is
unable to borrow bitcoin or ether to lend to the Trust as a Trade Credit, or there is a material market disruption (as determined by
the Trade Credit Lender in good faith and in its sole discretion), the Trade Credit Lender is not obligated to extend Trade Credits to
the Trust. To secure the repayment of Trade Credits, the Trust has granted a first-priority lien to the Trade Credit Lender over the
assets in its Trading Balance and the Trust Digital Asset Accounts. If the Trust fails to repay a Trade Credit within the required deadline,
the Trade Credit Lender is permitted to take control of the bitcoin, ether or cash credited to the Trust&rsquo;s Trading Balance and
Trust Digital Asset Accounts (though it is required to exhaust the Trading Balance prior to taking control of assets in the Trust Digital
Asset Accounts) and liquidate them to repay the outstanding Trade Credit. Trade Credits bear interest. Pursuant to the Trade Financing
Agreement, there is a maximum &ldquo;Authorized Amount&rdquo; of Trade Credits that the Trade Credit Lender allows to be outstanding
at any one time, which is determined and may be changed by the Trade Credit Lender in its sole discretion. To the extent the Trade Credit
Lender changes the Authorized Amount, it will give the Trust advance notice if it is feasible to do so.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
entirety of the Trust&rsquo;s bitcoin and ether holdings are expected to be maintained with the Bitcoin and Ether Custodian rather than
the Prime Execution Agent. Accordingly, when using the Agent Execution Model, the Trust does expect to utilize Trade Credits. When utilizing
Trade Credits in connection with Purchase Orders and Redemption Orders, any interest payable on Trade Credits will be the responsibility
of the Authorized Participants. In the very rare event that Trade Credits are utilized in connection with the payment of Trust expenses
not assumed by the Sponsor, any interest payable on the Trade Credits will be the responsibility of the Trust. Any such interest payments
borne by the Trust will have the effect of reducing the amount of bitcoin and/or ether represented by a Share and the NAV of the Trust.
In connection with a Redemption Order or to pay expenses not assumed by the Sponsor, the Trust will first borrow bitcoin or ether from
the Trade Credit Lender using the Trade Financing Agreement, and then sell this bitcoin or ether. In connection with a Purchase Order,
the Trust will first borrow cash from the Trade Credit Lender using the Trade Financing Agreement, and then purchase bitcoin or ether.
The purpose of borrowing the bitcoin, ether or cash from the Trade Credit Lender is to lock in the bitcoin or ether price on the trade
date or the payment date, as applicable, rather than waiting for the funds associated with the creation to be transferred by the Cash
Custodian to the Prime Execution Agent prior to purchasing the bitcoin or ether or for the bitcoin or ether held in the Trust Digital
Asset Accounts to be transferred to a Trading Balance prior to selling the bitcoin or ether (a process that may take up to twenty-four
hours, or longer if the Bitcoin blockchain or Ethereum blockchain is experiencing delays in transaction confirmation, or if there are
other delays). To the extent that the execution price of the bitcoin or ether acquired exceeds the amount of cash deposited by the Authorized
Participant, the Authorized Participant bears the responsibility for the difference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event Trade Credits are unavailable from the Trade Credit Lender or become exhausted, the Sponsor would require the Authorized Participant
to deliver cash on the trade date so that a purchase order can be settled in a timely manner. For a Redemption Order under the Agent
Execution Model, the Trust may use financing when the bitcoin or ether remains in the Trust Digital Asset Accounts at the point of intended
execution of a sale of bitcoin or ether. In the event Trade Credits are unavailable or become exhausted in this situation, the Sponsor
would instruct the Bitcoin and Ether Custodian to move bitcoin or ether out of the Trust Digital Asset Accounts into the Trading Balance
so that it could be sold directly in response to a redemption order or to pay fees and expenses. Under these circumstances, the Trust
may not be able to lock in the bitcoin or ether price on the trade date or the payment date, as applicable, and would instead have to
wait until the transfer from the Trust Digital Asset Accounts to the Trading Balance was completed before selling the bitcoin or ether.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_012"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form
of Shares</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Registered
Form</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares
are issued in registered form in accordance with the Trust Agreement. The Transfer Agent has been appointed registrar and transfer agent
for the purpose of transferring Shares in certificated form. The Transfer Agent keeps a record of all Shareholders and holders of the
Shares in certified form in the registry (&ldquo;Register&rdquo;). The Sponsor recognizes transfers of Shares in certificated form only
if done in accordance with the Trust Agreement. The beneficial interests in such Shares are held in book-entry form through participants
and/or accountholders in DTC.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Book-Entry</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Individual
certificates are not issued for the Shares. Instead, Shares are represented by one or more global certificates, which are deposited by
the Transfer Agent with DTC and registered in the name of Cede &amp; Co., as nominee for DTC. The global certificates evidence all of
the Shares outstanding at any time. Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers and trust companies
(&ldquo;DTC Participants&rdquo;), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant
(&ldquo;Indirect Participants&rdquo;), and (3) those who hold interests in the Shares through DTC Participants or Indirect Participants,
in each case who satisfy the requirements for transfers of Shares. DTC Participants acting on behalf of investors holding Shares through
such participants&rsquo; accounts in DTC will follow the delivery practice applicable to securities eligible for DTC&rsquo;s Same-Day
Funds Settlement System. Shares are credited to DTC Participants&rsquo; securities accounts following confirmation of receipt of payment.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">DTC</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">DTC
has advised the Sponsor as follows: It is a limited-purpose trust company organized under the laws of the State of New York and is a
member of the Federal Reserve System, a &ldquo;clearing corporation&rdquo; within the meaning of the New York Uniform Commercial Code
and a &ldquo;clearing agency&rdquo; registered pursuant to the provisions of Section&nbsp;17A of the Exchange Act. DTC holds securities
for DTC Participants and facilitates the clearance and settlement of transactions between DTC Participants through electronic book-entry
changes in accounts of DTC Participants.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_013"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transfer
of Shares</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their Shares
through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through
which their Shares are held) to transfer the Shares. Transfers are made in accordance with standard securities industry practice.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transfers
of interests in Shares with DTC are made in accordance with the usual rules and operating procedures of DTC and the nature of the transfer.
DTC has established procedures to facilitate transfers among the participants and/or accountholders of DTC. Because DTC can only act
on behalf of DTC Participants, who in turn act on behalf of Indirect Participants, the ability of a person or entity having an interest
in a global certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect
of such interest, may be affected by the lack of a certificate or other definitive document representing such interest.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">DTC
has advised the Sponsor that it will take any action permitted to be taken by a Shareholder (including, without limitation, the presentation
of a global certificate for exchange) only at the direction of one or more DTC Participants in whose account with DTC interests in global
certificates are credited and only in respect of such portion of the aggregate principal amount of the global certificate as to which
such DTC Participant or Participants has or have given such direction.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_014"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">SEED
CAPITAL INVESTOR</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitwise
Asset Management, Inc., the parent of the Sponsor, served as seed capital investor to the Trust (the &ldquo;Seed Capital Investor&rdquo;).
The Seed Capital Investor agreed to purchase $___ in Shares on _________________, and on _________________, took delivery of __ Shares
at a per-Share price of $__ (the &ldquo;Seed Shares&rdquo;). The $___ the Trust received in consideration for the sale of the Seed Shares
served as the basis of the audit described in the sections entitled &ldquo;REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM&rdquo;
and &ldquo;STATEMENT OF FINANCIAL CONDITION.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor will not receive from the Trust or any of its affiliates any fee or other compensation in connection with the Seed Capital Investor&rsquo;s
purchase of the Seed Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_015"></A>Plan
of Distribution</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Buying
and Selling Shares</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Most
investors buy and sell Shares in secondary market transactions through brokers. Shares trade on the Exchange under the ticker symbol
&ldquo;_____.&rdquo; Shares are bought and sold throughout the trading day like other publicly traded securities. When buying or selling
Shares through a broker, most investors incur customary brokerage commissions and charges. Shareholders are encouraged to review the
terms of their brokerage account for details on applicable charges.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitwise
Investment Manager, LLC, an affiliate of the Sponsor, is expected to purchase the initial Baskets of Shares for $__________, at per-Share
price of $__ for these ______ Shares (the Seed Baskets). Such proceeds are expected to be used by the Trust to purchase bitcoin and ether
at or prior to the listing of Shares on the Exchange. Bitwise Investment Manager, LLC will act as a statutory underwriter in connection
with the initial purchase of the Seed Baskets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><I>&nbsp;</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><I>Authorized
Participants</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
offering of the Shares is a best efforts offering. The Trust continuously offers Baskets consisting of 10,000 Shares to Authorized Participants.
Authorized Participants pay a transaction fee for each order they place to purchase or redeem one or more Baskets. The Sponsor believes
that the Basket size of 10,000 Shares will enable Authorized Participants to manage inventory and facilitate an effective arbitrage mechanism
for the Trust, however, the Sponsor may adjust the Baskets in order to improve the effectiveness of the activities of Authorized Participants
in the secondary market for the Shares if the Sponsor determines it to be necessary or advisable. Because new Shares can be created and
issued on an ongoing basis, at any point during the life of the Trust, a &ldquo;distribution,&rdquo; as such term is used in the 1933
Act, will be occurring.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
offering of Baskets is being made in compliance with Conduct Rule 2310 of FINRA. Accordingly, Authorized Participants will not make any
sales to any account over which they have discretionary authority without the prior written approval of a purchaser of Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By
executing an Authorized Participant Agreement, an Authorized Participant becomes part of the group of parties eligible to purchase Baskets
from, and put Baskets for redemption to, the Trust. An Authorized Participant is under no obligation to purchase or redeem Baskets or
to offer to the public Shares of any Basket it does create. As of ____________, 2025, _________________, _________________ and _________________
have executed Authorized Participant Agreements with the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
new Shares can be created and issued on an ongoing basis, at any point during the life of the Trust, a &ldquo;distribution,&rdquo; as
such term is used in the 1933 Act, will be occurring. Authorized Participants, other broker-dealers and other persons are cautioned that
some of their activities may result in their being deemed participants in a distribution in a manner that would render them statutory
underwriters and subject them to the prospectus-delivery and liability provisions of the 1933 Act. Any purchaser who purchases Shares
with a view toward distribution of such Shares may be deemed to be a statutory underwriter. In addition, an Authorized Participant, other
broker-dealer firm or its client will be deemed a statutory underwriter if it purchases a Basket from the Trust, breaks the Basket down
into the constituent Shares and sells the Shares to its customers; or if it chooses to couple the creation of a supply of new Shares
with an active selling effort involving solicitation of secondary market demand for the Shares. In contrast, Authorized Participants
may engage in secondary market or other transactions in Shares that would not be deemed &ldquo;underwriting.&rdquo; For example, an Authorized
Participant may act in the capacity of a broker or dealer with respect to Shares that were previously distributed by other Authorized
Participants. A determination of whether a particular market participant is an underwriter must take into account all the facts and circumstances
pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that would lead to designation as an underwriter and subject them to the prospectus-delivery
and liability provisions of the 1933 Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dealers
who are neither Authorized Participants nor &ldquo;underwriters&rdquo; but are nonetheless participating in a distribution (as contrasted
to ordinary secondary trading transactions), and thus dealing with Shares that are part of an &ldquo;unsold allotment&rdquo; within the
meaning of Section 4(3)(C) of the 1933 Act, would be unable to take advantage of the prospectus-delivery exemption provided by Section
4(3) of the 1933 Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
the Authorized Participants may be indemnified by the Sponsor, they will not be entitled to receive a discount or commission from the
Trust or the Sponsor for their purchases of Baskets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><I>&nbsp;</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><I>Selling
Shareholders</I></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor or its affiliates, or a fund or unit investment trust for which the Sponsor or an affiliate of the Sponsor serves as sponsor
or investment advisor, may purchase Shares of the Trust through a broker-dealer or other investors, including in secondary market transactions,
and because the Sponsor and its affiliates may be deemed affiliates of the Trust, the Shares are being registered to permit the resale
of these Shares by affiliates of the Trust from time to time after any such purchase. The Trust will not receive any of the proceeds
from the resale of such Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Selling
shareholders (each, a &ldquo;Selling Shareholder&rdquo;), including the Seed Capital Investor, may sell Shares owned by them directly
or through broker-dealers, in accordance with applicable law, on any national securities exchange on which the Shares may be listed or
quoted at the time of sale, through trading systems, in the OTC market or in transactions other than on these exchanges or systems at
fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated
prices. These sales may be effected through brokerage transactions, privately negotiated trades, block sales, entry into options or other
derivatives transactions or through any other means authorized by applicable law. Selling Shareholders may redeem Shares held in Basket
size through an Authorized Participant. See &ldquo;Conflicts of Interest.&rdquo;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_016"></A>Creation
and Redemption of Shares</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
the Trust creates or redeems its Shares, it will do so only in Baskets (blocks of 10,000 Shares) based on the quantity of bitcoin and
ether attributable to each Share of the Trust as of the end of the prior business day (net of accrued but unpaid expenses and liabilities)
multiplied by the number of Shares comprising a Basket (10,000). This is called the &ldquo;Basket Amount.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Authorized
Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered
broker-dealers or other securities market participants, such as banks and other financial institutions, that are not required to register
as broker-dealers to engage in securities transactions described below, and (2) DTC Participants. To become an Authorized Participant,
a person must enter into an Authorized Participant Agreement. The Authorized Participant Agreement provides the procedures for the creation
and redemption of Baskets and for the delivery of the cash or Shares required for such creation and redemptions. The Authorized Participant
Agreement and the related procedures attached thereto may be amended by the Trust, without the consent of any Shareholder or Authorized
Participant. Authorized Participants must pay the Transfer Agent a non-refundable fee for each order they place to create or redeem one
or more Baskets. The transaction fee may be waived, reduced, increased or otherwise changed by the Sponsor in its sole discretion. Authorized
Participants who make deposits with the Trust in exchange for Baskets receive no fees, commissions or other form of compensation or inducement
of any kind from either the Trust or the Sponsor, and no such person will have any obligation or responsibility to the Sponsor or the
Trust to effect any sale or resale of Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
Authorized Participant will be required to be registered as a broker-dealer under the Exchange Act and a member in good standing with
FINRA, or exempt from being or otherwise not required to be licensed as a broker-dealer or a member of FINRA, and will be qualified to
act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants
may also be regulated under federal and state banking laws and regulations. Each Authorized Participant has its own set of rules and
procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Authorized Participant Agreement, the Sponsor, and the Trust under limited circumstances, have agreed to indemnify the Authorized
Participants against certain liabilities, including liabilities under the 1933 Act, and to contribute to the payments the Authorized
Participants may be required to make in respect of those liabilities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following description of the procedures for the creation and redemption of Baskets is only a summary and an investor should refer to
the relevant provisions of the Trust Agreement and the form of Authorized Participant Agreement for more detail. The Trust Agreement
and form of Authorized Participant Agreement are filed as exhibits to the registration statement of which this Prospectus is a part.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Determination
of Basket Amount</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Basket Amount required to create each Basket changes from day to day. On each day that the Exchange is open for regular trading, the
Administrator adjusts the quantity of bitcoin and ether constituting the Basket Amount as appropriate to reflect accrued expenses and
any loss of bitcoin and ether that may occur. The computation is made by the Administrator each business day prior to the commencement
of trading on the Exchange. The Administrator determines the bitcoin included in the Basket Amount for a given day by dividing the number
of bitcoin held by the Trust as of the close of business on the prior business day, adjusted for the amount of bitcoin constituting estimated
accrued but unpaid fees and expenses of the Trust as of the close of business on the prior business day, by the quotient of the number
of Shares outstanding at the opening of business, multiplied by 10,000. The same procedure (except substituting ether for bitcoin) would
be followed to determine the number of ether to include in the Basket Amount. Fractions of a bitcoin smaller than a satoshi (0.00000001
bitcoin) and fractions of ether smaller than 0.00000000001 are disregarded for purposes of the computation of the Basket Amount. The
Basket Amount so determined is communicated via electronic mail message to all Authorized Participants and made available on the Sponsor&rsquo;s
website for the Shares. The Exchange also publishes the Basket Amount determined by the Administrator as indicated above.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Creation
Procedures</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
any business day, an Authorized Participant may create Shares by placing an order to purchase one or more Baskets with the Transfer Agent
through the Marketing Agent in exchange for cash (a &ldquo;Purchase Order&rdquo;). Such orders are subject to approval by the Marketing
Agent and Transfer Agent. Such orders are subject to approval by the Marketing Agent and Transfer Agent. For purposes of processing creation
and redemption orders, a &ldquo;business day&rdquo; means any day other than a day when the Exchange is closed for regular trading. Purchase
Orders must be placed by 2:00 p.m., ET, or the close of regular trading on the Exchange, whichever is earlier (the &ldquo;Order Cut-Off
Time&rdquo;). The Order Cut-Off time may be modified by the Sponsor in its sole discretion. The day on which a Purchase Order is accepted
by the Transfer Agent is considered the &ldquo;Purchase Order Date.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor may in its sole discretion limit the number of Shares created pursuant to Purchase Orders on any specified day without notice
to the Authorized Participants and may direct the Marketing Agent to reject any Purchase Orders in excess of such capped amount. The
Sponsor may choose to limit the number of Shares created pursuant to Purchase Orders when it deems so doing to be in the best interest
of Shareholders. It may choose to do so when it believes the market is too volatile to execute a bitcoin or ether transaction, when it
believes the price of bitcoin or ether is being inconsistently, irregularly, or discontinuously published from bitcoin/ether trading
venues and other data sources, or when it believes other similar circumstances may create a scenario in which accepting Purchase Orders
would not be in the best interests of the Shareholders. The Sponsor does not believe that the Trust&rsquo;s ability to arrive at such
a determination will have a significant impact on the Shares in the secondary market because it believes that the ability to create Shares
would be reinstated shortly after such determination is made, and any entity desiring to create Shares would be able to do so once the
ability to create Shares is reinstated. However, it is possible that such a determination would cause the Shares to trade at premiums
or discounts relative to the Trust&rsquo;s NAV on the secondary market if arbitrageurs believe that there is risk that the creation and
redemption process is not available, as this process is a component of keeping the price of the Shares on the secondary market closely
aligned to the Trust&rsquo;s NAV.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
manner by which creations are made is dictated by the terms of the Authorized Participant Agreement. By placing a Purchase Order, an
Authorized Participant agrees to deposit, or cause the deposit of, cash with the Trust in an equivalent amount of cash equal to the required
amount of bitcoin and ether as described in the &ldquo;Determination of Required Deposits&rdquo; sub-section above, multiplied by the
applicable Pricing Benchmark price, plus any additional cash required to account for the price at which the Trust agrees to purchase
the requisite amount of bitcoin and ether to the extent it is greater than the applicable Pricing Benchmark price on each Purchase Order
Date. On each Purchase Order Date, the Administrator will communicate to the Authorized Participant the full cash amount required to
settle the transaction. Authorized Participants may not withdraw a Purchase Order once placed. If an Authorized Participant fails to
consummate the foregoing, the Purchase Order will be cancelled. The Sponsor causes to be published each night the amount of bitcoin and
ether that will be acquired in exchange for each Purchase Order, from which can be computed the estimated amount of cash required to
create each Basket, prior to accounting for any additional cash required to acquire the requisite amount of bitcoin and ether if the
price paid by the Trust is in excess of the applicable Pricing Benchmark on each Purchase Order Date.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
Authorized Participant who places a Purchase Order is responsible for facilitating the delivery of the required amount of cash to the
Cash Custodian by 3:00 p.m. ET, on the business day following the Purchase Order Date. Pursuant to the cash creation and redemption process,
the Trust is responsible for acquiring and selling ether, which it may do pursuant to two different models: (i) the &ldquo;Trust-Directed
Trade Model,&rdquo; and the (ii) the &ldquo;Agent Execution Model.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Trust-Directed Trade Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin or ether from an approved Digital
Asset Trading Counterparty in an amount equal to the Basket Amount. When seeking to purchase bitcoin or ether on behalf of the Trust,
the Sponsor will seek to purchase bitcoin or ether at a price as close to the applicable Pricing Benchmark as practical. Once the trade
has been agreed upon with a Digital Asset Trading Counterparty, the transaction will generally occur on an &ldquo;over-the-counter&rdquo;
basis. Transfers of bitcoin and ether from the Digital Asset Trading Counterparty to the Trust Digital Asset Accounts are &ldquo;on-chain&rdquo;
transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Upon receipt of the deposit amount of bitcoin
and ether in the Trust Digital Asset Accounts at the Bitcoin and Ether Custodian from the Digital Asset Trading Counterparty, the Bitcoin
and Ether Custodian will notify the Sponsor that the bitcoin and ether has been received. The Sponsor will then notify the Transfer Agent
that the bitcoin and ether has been received, and the Transfer Agent will direct DTC to credit the number of Shares ordered to the Authorized
Participant&rsquo;s DTC account and will wire the cash previously sent by the Authorized Participant to the Digital Asset Trading Counterparty
to complete settlement of the Purchase Order and the acquisition of the bitcoin and ether by the Trust. If the Digital Asset Trading
Counterparty fails to deliver the bitcoin and ether to the Bitcoin and Ether Custodian, no cash is sent from the Cash Custodian to the
Digital Asset Trading Counterparty, no Shares are transferred to the Authorized Participant&rsquo;s DTC account, the cash is returned
to the Authorized Participant, and the Purchase Order is cancelled.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Agent Execution Model, the Prime Execution Agent, acting in an agency capacity, conducts bitcoin and ether purchases on behalf of
the Trust with third parties through its Coinbase Prime service pursuant to the Prime Execution Agreement. On the evening of the Purchase
Order Date, the Trust enters into a transaction to buy bitcoin and ether through the Prime Execution Agent for cash. Because the Trust&rsquo;s
Trading Balance may not be funded with cash on the Purchase Order Date for the purchase of bitcoin or ether in connection with the Purchase
Order under the Agent Execution Model, the Trust may borrow Trade Credits in the form of cash from the Trade Credit Lender pursuant to
the Trade Financing Agreement or may require the Authorized Participant to deliver the required cash for the Purchase Order on the Purchase
Order Date. The extension of Trade Credits on the Purchase Order Date allows the Trust to purchase bitcoin or ether through the Prime
Execution Agent on the Purchase Order Date, with such bitcoin or ether being deposited in the Trust&rsquo;s Trading Balance. On the day
following the Purchase Order Date, the Purchase Order Settlement Date, the Trust delivers Shares to the Authorized Participant&rsquo;s
DTC account in exchange for cash received from the Authorized Participant. Where applicable, the Trust uses the cash to repay the Trade
Credits borrowed from the Trade Credit Lender. On the Purchase Order Settlement Date for a Purchase Order utilizing the Agent Execution
Model, the bitcoin or ether associated with the Purchase Order and purchased on the Purchase Order Date is swept from the Trust&rsquo;s
Trading Balance with the Prime Execution Agent to the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian pursuant to a
regular end-of-day sweep process. Transfers of bitcoin and ether into the Trust&rsquo;s Trading Balance are off-chain transactions and
transfers from the Trust&rsquo;s Trading Balance to the Trust Digital Asset Accounts are &ldquo;on-chain&rdquo; transactions represented
on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit Lender is deemed part of
trade execution costs and embedded in the trade price for each transaction.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
between the Trust and the Authorized Participant, the expense and risk of the difference between the value of bitcoin or ether calculated
by the Administrator for daily valuation using the applicable Pricing Benchmark and the price at which the Trust acquires the bitcoin
or ether will be borne solely by the Authorized Participant to the extent that the Trust pays more for bitcoin or ether than the price
used by the Trust for daily valuation. Any such additional cash amount will be included in the amount of cash calculated by the Administrator
on the Purchase Order Date, communicated to the Authorized Participant on the Purchase Order Date, and wired by the Authorized Participant
to the Cash Custodian on the Settlement Date.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Rejection
of Purchase Orders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor or its designee has the absolute right, but does not have any obligation, to reject any purchase order if the Sponsor determines
that:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
Purchase Order is not in proper form;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">it
would not be in the best interest of the Shareholders;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
acceptance of the Purchase Order would have adverse tax consequences to the Trust or its Shareholders;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
acceptance or receipt of which would, in the opinion of counsel to the Sponsor, be unlawful; or</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">circumstances
outside the control of the Trust, the Sponsor, the Marketing Agent, the Transfer Agent, the Cash Custodian or the Bitcoin and Ether Custodian
make it, for all practical purposes, not feasible to process Baskets (including if the Sponsor determines that the investments available
to the Trust at that time will not enable it to meet its investment objective).</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">None
of the Sponsor, the Marketing Agent, the Cash Custodian or the Bitcoin and Ether Custodian will be liable for the rejection of any Purchase
Order.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Redemption
Procedures</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
any business day, an Authorized Participant may place an order with the Transfer Agent through the Marketing Agent to redeem one or more
Baskets (a &ldquo;Redemption Order&rdquo;). Redemption Orders must be placed by 2:00 p.m. ET (the &ldquo;Redemption Order Cut-Off Time&rdquo;),
which may be modified by the Sponsor in its sole discretion. A Redemption Order will be effective on the date it is accepted by the Transfer
Agent (&ldquo;Redemption Order Date&rdquo;). The redemption distribution from the Trust in exchange for a redemption of Shares consists
of a movement of cash representing the Basket Amount of bitcoin and ether, less any trading expenses incurred by the Trust in liquidating
the bitcoin and ether, to the redeeming Authorized Participant or its designee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Trust-Directed Trade Model, the procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures
for the creation of Baskets under the Trust-Directed Trade Model with an additional safeguard on bitcoin and ether being removed from
the Trust Digital Asset Accounts, which will not occur until cash has been received by the Cash Custodian in an amount equal to the Basket
Amount of bitcoin and ether multiplied by the price at which the Trust agrees with the Digital Asset Trading Counterparty to sell the
bitcoin and ether on the Redemption Order Date. When seeking to sell bitcoin and ether on behalf of the Trust, the Sponsor will seek
to sell bitcoin and ether at a price as close to the applicable Pricing Benchmark as practical. Once the trade has been agreed upon with
a Digital Asset Trading Counterparty, the transaction will generally occur on an &ldquo;over-the-counter&rdquo; basis. Transfers of bitcoin
and ether from the Trust Digital Asset Accounts to the Digital Asset Trading Counterparty are &ldquo;on-chain&rdquo; transactions represented
on the Bitcoin blockchain or Ethereum blockchain, as applicable. The Authorized Participant must deliver the Shares represented by the
Basket to be redeemed to the Trust&rsquo;s DTC account by end of day ET on the business day following the Redemption Order Date (the
&ldquo;Redemption Order Settlement Date&rdquo;). The Bitcoin and Ether Custodian will not send the Basket Amount of bitcoin and ether
from the Trust Digital Asset Accounts to the Digital Asset Trading Counterparty until the Cash Custodian has received the cash from the
Digital Asset Trading Counterparty and is instructed by the Sponsor to make such transfer. Once the Digital Asset Trading Counterparty
has sent the cash to the Cash Custodian in an agreed-upon amount to settle the agreed upon sale of the Basket Amount of bitcoin and ether,
the Transfer Agent will notify the Sponsor. The Sponsor will then notify the Bitcoin and Ether Custodian to transfer the bitcoin and
ether to the Digital Asset Trading Counterparty, and the Transfer Agent will facilitate the redemption of Shares in exchange for cash.
Once the Authorized Participant has delivered the Shares represented by the Basket to be redeemed to the Trust&rsquo;s DTC account, the
Cash Custodian will wire the requisite amount of cash to the Authorized Participant. Transfers of bitcoin and ether from the Trust Digital
Asset Accounts to the Digital Asset Trading Counterparty are &ldquo;on-chain&rdquo; transactions represented on the Bitcoin blockchain
or Ethereum blockchain, as applicable. In the event that by the end of the day on the Redemption Order Settlement Date, the Trust&rsquo;s
account at DTC shall not have been credited with the total number of Shares corresponding to the total number of Baskets to be redeemed
pursuant to such Redemption Order the Transfer Agent shall send to the Authorized Participant, the Sponsor and the Bitcoin and Ether
Custodian via fax or electronic mail message notice of such fact and the Authorized Participant shall have two (2) business days following
receipt of such notice to correct such failure. If such failure is not cured within such two (2) business day period, the Transfer Agent
(in consultation with the Sponsor) will cancel such Redemption Order and will send via fax or electronic mail message notice of such
cancellation to the Authorized Participant and the Bitcoin and Ether Custodian, and the Authorized Participant will be solely responsible
for all costs incurred by the Trust, the Transfer Agent, the Sponsor or the Bitcoin and Ether Custodian related to the cancelled Redemption
Order.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
a redemption of Baskets utilizing the Agent Execution Model, the Authorized Participant may be required to submit a Redemption Order
by an earlier than normal order cutoff time (the &ldquo;Redemption Early Order Cutoff Time&rdquo;). The Redemption Early Order Cutoff
Time may be as early as 5:00 p.m. ET on the business day prior to Redemption Order Date. Once a Redemption Order is received, the Sponsor
instructs the Bitcoin and Ether Custodian to prepare to transfer the bitcoin and ether associated with the Redemption Order from the
Trust Digital Asset Accounts with the Bitcoin and Ether Custodian to the Trust&rsquo;s Trading Balance with the Prime Execution Agent.
For a Redemption Order utilizing the Agent Execution Model, on the evening of the Redemption Order Date, the Prime Execution Agent, acting
in an agency capacity, conducts bitcoin and ether sales on behalf of the Trust with third parties through its Coinbase Prime service
in exchange for cash. The Trust&rsquo;s Trading Balance with the Prime Execution Agent may not be funded with bitcoin or ether on the
evening of the Redemption Order Date at the time of the intended execution of the sale of bitcoin or ether in connection with the Redemption
Order because such bitcoin or ether is still in the Trust Digital Asset Accounts at the Bitcoin and Ether Custodian. In those circumstances
the Trust may borrow Trade Credits in the form of bitcoin or ether from the Trade Credit Lender, which allows the Trust to sell bitcoin
or ether through the Prime Execution Agent on the evening Redemption Order Date, and the cash proceeds are deposited in the Trust&rsquo;s
Trading Balance with the Prime Execution Agent. Such cash is then transferred to the Cash Custodian. The Trust will subsequently transfer
the Basket Amount of bitcoin or ether from the Trust Digital Asset Accounts to the Trust&rsquo;s Trading Balance with the Prime Execution
Agent. Once the Authorized Participant has delivered the Shares represented by the Basket to be redeemed to the Trust&rsquo;s DTC account,
the Cash Custodian will then wire the requisite amount of cash to the Authorized Participant. In the event Trade Credits were used, the
Trust will use the bitcoin or ether that is moved from the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian to the Trading
Balance with the Prime Execution Agent to repay the Trade Credits borrowed from the Trade Credit Lender. Transfers of bitcoin or ether
from the Trust Digital Asset Accounts to the Trust&rsquo;s Trading Balance are &ldquo;on-chain&rdquo; transactions represented on the
Bitcoin blockchain or Ethereum blockchain, as applicable.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Suspension
or Rejection of Redemption Orders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor may, in its discretion, suspend the right of purchase or redemption or may postpone the Redemption Order Settlement Date, for
(1) for any period during which the Exchange is closed other than customary weekend or holiday closings, or trading on the Exchange is
suspended or restricted, (2)&nbsp;any period during which an emergency exists as a result of which the fulfillment of a purchase order
or the redemption distribution is not reasonably practicable (for example, as a result of an interruption in services or availability
of the Prime Execution Agent, Bitcoin and 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, internet services, or network provider services, unavailability of Fedwire, SWIFT or banks&rsquo; payment processes,
significant technical failure, bug, error, disruption or fork of the Bitcoin network or Ethereum network, hacking, cybersecurity breach,
or power, internet, or Bitcoin network or Ethereum network outage, or similar event), or (3) such other period as the Sponsor determines
to be necessary for the protection of the Shareholders of the Trust (for example, where acceptance of the U.S. dollars needed to create
each Basket would have certain adverse tax consequences to the Trust or its Shareholders). For example, the Sponsor may determine that
it is necessary to suspend redemptions to allow for the orderly liquidation of the Trust&rsquo;s assets. If the Sponsor has difficulty
liquidating the Trust&rsquo;s positions (e.g., because of a market disruption event), it may be appropriate to suspend redemptions until
such time as such circumstances are rectified. None of the Sponsor, the person authorized to take Redemption Orders in the manner provided
in the Authorized Participant Agreement, the Bitcoin and Ether Custodian or the Cash Custodian will be liable to any person or in any
way for any loss or damages that may result from any such suspension or postponement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Redemption
Orders must be made in whole Baskets. The Sponsor acting by itself or through the person authorized to take Redemption Orders in the
manner provided in the Authorized Participant Agreement may, in its sole discretion, reject any Redemption Order (1) the Sponsor determines
not to be in proper form, (2) the fulfillment of which its counsel advises may be illegal under applicable laws and regulations, or (3)
if circumstances outside the control of the Sponsor, the person authorized to take redemption orders in the manner provided in the Authorized
Participant Agreement or the Bitcoin and Ether Custodian make it for all practical purposes not feasible for the Shares to be delivered
under the Redemption Order. The Sponsor may also reject a Redemption Order if the number of Shares being redeemed would reduce the remaining
outstanding Shares to 100,000 Shares (<I>i.e.</I>, ten Baskets) or fewer.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Creation
and Redemption Transaction Fee</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
compensate the Transfer Agent for expenses incurred in connection with the creation and redemption of Baskets, an Authorized Participant
is required to pay a transaction fee to the Transfer Agent to create or redeem Baskets, which does not vary in accordance with the number
of Baskets in such order. The transaction fee may be reduced, increased or otherwise changed by the Sponsor.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tax
Responsibility</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Authorized
Participants are responsible for any transfer tax, sales or use tax, stamp tax, recording tax, value added tax or similar tax or governmental
charge applicable to the creation or redemption of Baskets, regardless of whether or not such tax or charge is imposed directly on the
Authorized Participant, and agree to indemnify the Sponsor and the Trust if they are required by law to pay any such tax, together with
any applicable penalties, additions to tax and interest thereon.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Secondary
Market Transactions</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
discussed above, Authorized Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants
must be registered broker-dealers or other securities market participants, such as banks and other financial institutions that are not
required to register as broker-dealers to engage in securities transactions. An Authorized Participant is under no obligation to create
or redeem Baskets, and an Authorized Participant is under no obligation to offer to the public Shares of any Basket it does create.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Authorized
Participants that do offer to the public Shares from the Basket they create will do so at per-Share offering prices that are expected
to reflect, among other factors, the trading price of the Shares on the Exchange, the NAV of the Trust at the time the Authorized Participant
purchased the Baskets, the NAV of the Shares at the time of the offer of the Shares to the public, the supply of and demand for Shares
at the time of sale, and the liquidity of bitcoin or ether or other portfolio investments. Baskets are generally expected to be redeemed
when the price per Share is at a discount to the NAV per Share. Shares initially comprising the same Basket but offered by Authorized
Participants to the public at different times may have different offering prices. An order for one or more Baskets may be placed by an
Authorized Participant on behalf of multiple clients. Authorized Participants who make deposits of cash with the Trust in exchange for
Baskets receive no fees, commissions or other forms of compensation or inducement of any kind from either the Trust or the Sponsor, and
no such person has any obligation or responsibility to the Sponsor or the Trust to effect any sale or resale of Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares
are expected to trade in the secondary market on the Exchange. Shares may trade in the secondary market at prices that are lower or higher
relative to their NAV per Share. The amount of the discount or premium in the trading price relative to the NAV per Share may be influenced
by various factors, including the number of investors who seek to purchase or sell Shares in the secondary market and the liquidity of
ether.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT><P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_017"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Use
of Proceeds</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proceeds
received by the Trust from Purchase Orders of Baskets will be used to acquire bitcoin and ether. Such deposits of cash are held by the
Cash Custodian on behalf of the Trust until (i) used to acquire bitcoin or ether, (ii) accrued and distributed to pay fees due to the
Sponsor and Trust expenses and liabilities not assumed by the Sponsor, (iii) distributed to Authorized Participant in connection with
redemptions of Baskets, or (iv) disposed of in a liquidation of the Trust.</FONT></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event that the Trust is terminated and its assets are to be liquidated, all of the Trust&rsquo;s bitcoin and ether will be sold and
the cash proceeds will be distributed to Shareholders. Under no circumstances will the Trust distribute bitcoin or ether to Shareholders.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_018"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ownership
oF Beneficial Interest in the Trust</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
beneficial interest in the Trust is divided into Shares. Each Share of the Trust represents an equal beneficial interest in the net assets
of the Trust, and each holder of Shares is entitled to receive such holder&rsquo;s pro rata share of distributions of income and capital
gains, if any.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
Shares are fully paid and non-assessable. No Share will have any priority or preference over any other Share of the Trust. All distributions,
if any, will be made ratably among all Shareholders from the assets of the Trust according to the number of Shares held of record by
such Shareholders on the record date for any distribution or on the date of termination of the Trust, as the case may be. Except as otherwise
provided by the Sponsor, Shareholders will have no preemptive or other right to subscribe to any additional shares or other securities
issued by the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor will have full power and authority, in its sole discretion, without seeking the approval of the Trustee or the Shareholders (a)
to establish and designate and to change in any manner and to fix such preferences, voting powers, rights, duties and privileges of the
Trust as the Sponsor may from time to time determine, (b) to divide the beneficial interest in the Trust into an unlimited amount of
Shares, with or without par value, as the Sponsor will determine, (c) to issue Shares without limitation as to number (including fractional
Shares), to such persons and for such amount of consideration, subject to any restriction set forth in the By-Laws, if any, at such time
or times and on such terms as the Sponsor may deem appropriate, (d) to divide or combine the Shares into a greater or lesser number without
thereby materially changing the proportionate beneficial interest of the Shares in the assets held, and (e) to take such other action
with respect to the Shares as the Sponsor may deem desirable. The ownership of Shares will be recorded on the books of the Trust or a
transfer or similar agent for the Trust. No certificates certifying the ownership of Shares will be issued except as the Sponsor may
otherwise determine from time to time. The Sponsor may make such rules as it considers appropriate for the issuance of share certificates,
transfer of Shares and similar matters. The record books of the Trust as kept by the Trust, or any transfer or similar agent, as the
case may be, will be conclusive as to the identity of the Shareholders and as to the number of Shares held from time to time by each.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_019"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Conflicts
of Interest</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are present and potential future conflicts of interest in the Trust&rsquo;s structure and operation you should consider before you purchase
Shares. The Sponsor will use this notice of conflicts as a defense against any claim or other proceeding made. If the Sponsor is not
able to resolve these conflicts of interest adequately, it may impact the Trust&rsquo;s ability to achieve its investment objectives.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
officers, directors and employees of the Sponsor do not devote their time exclusively to the Trust. These persons are directors, officers
or employees of other entities, or otherwise work in respect of other clients, which may compete with the Trust for their services. They
could have a conflict between their responsibilities to the Trust and to those other entities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor has adopted policies and procedures that identify the conflicts of interest associated with these companies and their principals,
officers, directors and employees when and if trading ether, ether futures and related contracts or other ether-linked derivatives. These
policies are intended to prevent conflicts of interest occurring where the Sponsor or their principals, officers, directors or employees
could give preferential treatment to their own accounts or trade their own accounts ahead of or against the Trust. Pursuant to these
policies, all principals, officers, directors and employees of the Sponsor, and their family members, must receive prior written clearance
from the Sponsor&rsquo;s chief compliance officer before entering into a transaction in bitcoin, ether, bitcoin futures contract, ether
futures contract or any other bitcoin-linked or ether-linked derivative equal if such transaction exceeds $4,999 in current market value.
To the extent any such transaction constitutes a purchase of bitcoin, ether, bitcoin futures contract, ether futures contract or any
other bitcoin-linked or ether-linked derivative exceeds $4,999 in current market value, the policies require that such bitcoin, ether,
bitcoin futures contract, ether futures contract or any other bitcoin-linked or ether-linked derivative must be held for 60 days before
it can be traded or sold.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor has sole current authority to manage the investments and operations of the Trust, and this may allow it to act in a way that
furthers its own interests, which may create a conflict with a Shareholder&rsquo;s best interests. Except as required under applicable
federal law or under the rules or regulations of the Exchange, Shareholders have no voting rights, which will limit their ability to
influence matters such as amendment of the Trust Agreement, a change in the Trust&rsquo;s basic investment policy, dissolution of the
Trust, or the sale or distribution of the Trust&rsquo;s assets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor serves as the sponsor for the Trust. The Sponsor may have a conflict to the extent that its trading decisions for the Trust may
be influenced by the effect they would have on the other funds it manages, including, but not limited to, the Bitwise 10 Crypto Index
Fund, LLC; the Bitwise 10 Index Offshore Fund Ltd.; the Digital Asset Index Fund; the Bitwise Bitcoin Fund, LLC; the Bitwise Ethereum
Fund, LLC; the Bitwise DeFi Crypto Index Fund; the Bitwise Bitcoin ETF; and the Bitwise Ethereum ETF. In addition, the Sponsor may be
required to indemnify its officers, directors and key employees with respect to their activities on behalf of the other funds, if the
need for indemnification arises. This potential indemnification could cause the Sponsor&rsquo;s assets to decrease. If the Sponsor&rsquo;s
other sources of income are not sufficient to compensate for the indemnification, it could cease operations, which could in turn result
in Trust losses and/or termination of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Sponsor acquires knowledge of a potential transaction or arrangement that may be an opportunity for the Trust, it will have no duty
to offer such opportunity to the Trust. The Sponsor will not be liable to the Trust or the Shareholders for breach of any fiduciary or
other duty if the Sponsor pursues such opportunity or directs it to another person or does not communicate such opportunity to the Trust.
Neither the Trust nor any Shareholder has any rights or obligations by virtue of the Trust Agreement, the trust relationship created
thereby, or this Prospectus in such business ventures or the income or profits derived from such business ventures. The pursuit of such
business ventures, even if competitive with the activities of the Trust, will not be deemed wrongful or improper.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Resolution
of Conflicts Procedures</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust Agreement provides that whenever a conflict of interest exists between the Sponsor or any of its affiliates, on the one hand, and
the Trust or any Shareholders or any other person, on the other hand, the Sponsor will resolve such conflict of interest considering
the relative interest of each party (including its own interest) and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable accepted accounting practices or principles.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_020"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fiduciary
and Regulatory Duties AND OBLIGATIONS of the Sponsor</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
general fiduciary duties that would otherwise be imposed on the Sponsor (which would make its operation of the Trust as described herein
impracticable due to the strict prohibition imposed by such duties on, for example, conflicts of interest on behalf of a fiduciary in
its dealings with its beneficiaries) are defined and limited in scope by the terms of the Trust Agreement (to which terms all Shareholders,
by subscribing to the Shares, are deemed to consent).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
under the Trust Agreement, the Sponsor has the following obligations as a sponsor of the Trust:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
execute, file, record and/or publish all certificates, statements and other documents and do any and all other things as may be appropriate
for the formation, qualification and operation of the Trust and for the conduct of its business in all appropriate jurisdictions;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
retain independent public accountants to audit the accounts of the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
employ attorneys to represent the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
select the Trust&rsquo;s Trustee, administrator, transfer agent, custodian(s), digital asset trading platform counterparties and OTC
market participant counterparties, Pricing Benchmark Provider, marketing agent(s), insurer(s) and any other service provider(s) and cause
the Trust to enter into contracts with such service provider(s);</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
negotiate and enter into insurance agreements to secure and maintain the insurance coverage to the extent described in this Prospectus;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
develop a marketing plan for the Trust on an ongoing basis and prepare marketing materials regarding the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->138<!-- Field: /Sequence --></P></DIV>
    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
maintain the Trust&rsquo;s website;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
acquire and sell bitcoin and ether, subject in each instance to the limitations imposed by the Trust Agreement, with a view to providing
Shareholders with exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust&rsquo;s operations, valuing
the Trust&rsquo;s net assets and the Shares daily with reference to the Pricing Benchmarks, or any other pricing methodology adopted
by the Sponsor in its discretion (for the avoidance of doubt, the Sponsor may select such subsequent pricing methodology without Shareholder
approval);</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with a hard fork of the Bitcoin network to which the Sponsor has actual knowledge, to determine, in good faith, whether the
digital asset network running the modified or the extant Bitcoin network software is generally accepted to be the Bitcoin network and
should therefore be considered to be the Bitcoin network for the purposes of the Trust&rsquo;s ongoing operations;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with a hard fork of the Ethereum network to which the Sponsor has actual knowledge, to determine, in good faith, whether the
digital asset network running the modified or the extant Ethereum network software is generally accepted to be the Ethereum network and
should therefore be considered to be Ethereum network for the purposes of the Trust&rsquo;s ongoing operations;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
enter into an Authorized Participant Agreement with each Authorized Participant and discharge the duties and responsibilities of the
Trust and the Sponsor thereunder;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
receive directly or through its delegates from Authorized Participants and process or cause its delegates to process properly submitted
Purchase Orders, as described in the Trust Agreement and in the Authorized Participant Agreement;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with Purchase Orders, to receive from Authorized Participants directly or through its delegates the required amount of cash;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with Purchase Orders, after accepting a Purchase Order and receiving the required amount of cash, either directly or through
its delegates to direct the Transfer Agent to credit the Baskets to fill the Purchase Order within one (1) business day immediately following
the Purchase Order Date;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
receive directly or through its delegates from Authorized Participants and process or cause its delegates to process properly submitted
Redemption Orders, as described in the Trust Agreement and in the Authorized Participant Agreement;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
assist in the preparation and filing of reports and proxy statements (if any) to the Shareholders, the periodic updating of the Registration
Statement and this Prospectus and other reports and documents for the Trust required to be filed by the Trust with the SEC and other
governmental bodies;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
use its best efforts to maintain the status of the Trust as a grantor trust for U.S. federal income tax purposes, including by making
such elections, filing such tax returns, and preparing, disseminating and filing such tax reports as it is advised by its counsel or
accountants are from time to time required by any statute, rule or regulation of the United States, any state or political subdivision
thereof, or other jurisdiction having taxing authority in respect of the Trust or its administration; the expense of accountants employed
to prepare such tax returns and tax reports will be an expense of the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
monitor all fees charged to the Trust, and the services rendered by the service providers to the Trust, to determine whether the fees
paid by, and the services rendered to, the Trust are at competitive rates and are the best price and services available under the circumstances
and, if necessary, to renegotiate the fee structure to obtain such rates and services for the Trust;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
perform such other services as the Sponsor believes the Trust may from time to time require; and</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
general, to carry out any other business in connection with or incidental to any of the foregoing powers; to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power herein set forth,
either alone or in association with others; and to do every other act or thing incidental or appurtenant or growing out of or connected
with the aforesaid business or purposes, objects or powers.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
the extent that a law (common or statutory) or in equity, the Sponsor has duties (including fiduciary duties) and liabilities relating
thereto to the Trust, the Shareholders or any other person, the Sponsor will not be liable to the Trust, the Shareholders or to any other
person for its good faith reliance on the provisions of the Trust Agreement or this Prospectus unless such reliance constitutes gross
negligence, bad faith, or willful misconduct on the part of the Sponsor.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_021"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Liability
and Indemnification</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trustee</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee will not be liable for the acts or omissions of the Sponsor, nor will the Trustee be liable for supervising or monitoring the
performance and the duties and obligations of the Sponsor or the Trust under the Trust Agreement. The Trustee will not be personally
liable under any circumstances, except for its own willful misconduct, bad faith or gross negligence. In particular, but not by way of
limitation:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)&nbsp;the
Trustee will not be personally liable for any error of judgment made in good faith except to the extent such error of judgment constitutes
gross negligence on its part;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)&nbsp;no
provision of the Trust Agreement will require the Trustee to expend or risk its personal funds or otherwise incur any financial liability
in the performance of its rights or powers hereunder, if the Trustee shall have reasonable grounds for believing that the payment of
such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)&nbsp;under
no circumstances will the Trustee be personally liable for any representation, warranty, covenant, agreement, or indebtedness of the
Trust;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)&nbsp;the
Trustee will not be personally responsible for or in respect of the validity or sufficiency of the Trust Agreement or for the due execution
hereof by the Sponsor;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(e)&nbsp;the
Trustee will incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it to be genuine and reasonably believed by it to be signed by
the proper party or parties. The Trustee may accept a certified copy of a resolution of any governing body of any corporate party as
conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any
fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustee may for all purposes hereof rely
on a certificate, signed by an authorized officer of the Sponsor or any other corresponding directing party, as to such fact or matter,
and such certificate will constitute full protection to the Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(f)&nbsp;in
the exercise or administration of the trust hereunder, the Trustee (i) may act directly or through agents or attorneys pursuant to agreements
entered into with any of them, and the Trustee will not be liable for the default or misconduct of such agents or attorneys if such agents
or attorneys will have been selected by the Trustee in good faith and with due care and (ii) may consult with counsel, accountants and
other skilled persons to be selected by it in good faith and with due care and employed by it, and it will not be liable for anything
done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled
persons;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(g)&nbsp;except
as expressly provided in Article III of the Trust Agreement, the Trustee acts solely as a trustee under the Trust Agreement and not in
its individual capacity, and all persons having any claim against the Trustee by reason of the transactions contemplated by the Trust
Agreement will look only to the Trust&rsquo;s property for payment or satisfaction thereof; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(h)&nbsp;the
Trustee will not be liable for punitive, exemplary, consequential, special or other similar damages under any circumstances.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee or any officer, affiliate, director, employee, or agent of the Trustee (each, an &ldquo;Indemnified Person&rdquo;) will be entitled
to indemnification from the Sponsor or the Trust, to the fullest extent permitted by law, from and against any and all losses, claims,
taxes, damages, reasonable expenses, and liabilities (including liabilities under state or federal securities laws) of any kind and nature
whatsoever (collectively, &ldquo;Losses&rdquo;), to the extent that such Losses arise out of or are imposed upon or asserted against
such Indemnified Persons with respect to the creation, operation or termination of the Trust, the execution, delivery or performance
of the Trust Agreement or the transactions contemplated in the Trust Agreement; provided, however, that the Sponsor and the Trust will
not be required to indemnify any Indemnified Person for any Losses that are a result of the willful misconduct, bad faith or gross negligence
of such Indemnified Person. The obligations of the Sponsor and the Trust to indemnify the Indemnified Persons will survive the termination
of the Trust Agreement.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sponsor</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor will not be under any liability to the Trust, the Trustee or any Shareholder for any action taken or for refraining from the
taking of any action in good faith pursuant to the Trust Agreement, or for errors in judgment or for depreciation or loss incurred by
reason of the sale of any ether or other assets held in trust hereunder; provided, however, that this provision will not protect the
Sponsor against any liability to which it would otherwise be subject by reason of its own gross negligence, bad faith, or willful misconduct.
The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment,
draft or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee&rsquo;s counsel
or any other Indemnified Person for any matters arising hereunder. The Sponsor will in no event be deemed to have assumed or incurred
any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for herein. The Trust will not
incur the cost of that portion of any insurance which insures any party against any liability, the indemnification of which is herein
prohibited.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, as described in the Trust Agreement, (i) whenever a conflict of interest exists or arises between the Sponsor or any of its
Affiliates, on the one hand, and the Trust, on the other hand; or (ii) whenever the Trust Agreement or any other agreement contemplated
herein or therein provides that the Sponsor will act in a manner that is, or provides terms that are, fair and reasonable to the Trust,
the Sponsor will resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating
to such interests, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Sponsor,
the resolution, action or terms so made, taken or provided by the Sponsor will not constitute a breach of the Trust Agreement or any
other agreement contemplated herein or of any duty or obligation of the Sponsor at law or in equity or otherwise.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor and its shareholders, members, directors, officers, employees, Affiliates and subsidiaries (each a &ldquo;Sponsor Indemnified
Party&rdquo;) will be indemnified by the Trust and held harmless against any loss, liability or expense incurred hereunder without gross
negligence, bad faith, or willful misconduct on the part of such Sponsor Indemnified Party arising out of or in connection with the performance
of its obligations under the Trust Agreement or any actions taken in accordance with the provisions of the Trust Agreement. Any amounts
payable to a Sponsor Indemnified Party under Section 4.06 of the Trust Agreement may be payable in advance or will be secured by a lien
on the Trust. The Sponsor will not be under any obligation to appear in, prosecute or defend any legal action that in its opinion may
involve it in any expense or liability; provided, however, that the Sponsor may, in its discretion, undertake any action that it may
deem necessary or desirable in respect of the Trust Agreement and the rights and duties of the parties hereto and the interests of the
Shareholders and, in such event, the legal expenses and costs of any such action will be expenses and costs of the Trust and the Sponsor
will be entitled to be reimbursed therefor by the Trust. The obligations of the Trust to indemnify the Sponsor Indemnified Parties will
survive the termination of the Trust Agreement.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_022"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provisions
of Law</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to applicable law, indemnification of the Sponsor is payable only if the Sponsor determined, in good faith, that the act, omission or
conduct that gave rise to the claim for indemnification was in the best interest of the Trust and the act, omission or activity that
was the basis for such loss, liability, damage, cost or expense was not the result of negligence or misconduct and such liability or
loss was not the result of negligence or misconduct by the Sponsor, and such indemnification or agreement to hold harmless is recoverable
only out of the assets of the Trust.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"></P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provisions
of Federal and State Securities Laws</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
offering is made pursuant to federal and state securities laws. The SEC and state securities agencies take the position that indemnification
of the Sponsor that arises out of an alleged violation of such laws is prohibited unless certain conditions are met.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
conditions require that no indemnification of the Sponsor or any underwriter for the Trust may be made in respect of any losses, liabilities
or expenses arising from or out of an alleged violation of federal or state securities laws unless: (i) there has been a successful adjudication
on the merits of each count involving alleged securities law violations as to the party seeking indemnification and the court approves
the indemnification; (ii) such claim has been dismissed with prejudice on the merits by a court of competent jurisdiction as to the party
seeking indemnification; or (iii) a court of competent jurisdiction approves a settlement of the claims against the party seeking indemnification
and finds that indemnification of the settlement and related costs should be made, provided that, before seeking such approval, the Sponsor
or other indemnitee must apprise the court of the position held by regulatory agencies against such indemnification. These agencies are
the SEC and the securities administrator of the state or states in which the plaintiffs claim they were offered or sold interests.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provisions
of the 1933 Act and NASAA Guidelines</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insofar
as indemnification for liabilities arising under the 1933 Act may be permitted to the Sponsor or its directors, officers, or persons
controlling the Trust, the Trust has been informed that the SEC and the various state administrators believe that such indemnification
is against public policy as expressed in the 1933 Act and the North American Securities Administrators Association, Inc. (&ldquo;NASAA&rdquo;)
commodity pool guidelines and is therefore unenforceable.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_023"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Management;
Voting by Shareholders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as required under applicable federal law or under the rules or regulations of the Exchange, Shareholders shall have no voting rights
hereunder (including with respect to mergers, consolidations or conversions of the Trust or transfers to or domestication in any jurisdiction
by the Trust or any other matters that under the Delaware Act default voting rights are provided to holders of beneficial interests).
The Shareholders shall have the right to vote on other matters only as the Sponsor may consider desirable and so authorize in its sole
discretion. To the extent that federal or Delaware law is amended, modified or interpreted by rule, regulation, order, or no-action letter
to (on a mandatory basis) expand, eliminate or limit Shareholders&rsquo; right to vote on any specific matter, the Shareholders&rsquo;
right to vote shall be deemed to be amended, modified or interpreted in accordance therewith without further approval by the Sponsor
or the Shareholders.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_024"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Meetings</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Meetings
of the Trust&rsquo;s Shareholders may be called by the Sponsor for such purposes as may be prescribed by law or the Trust Agreement.
All notices of meetings will be sent or otherwise given to each Shareholder of record not less than seven nor more than one hundred twenty
days before the date of the meeting in the manner determined by the Sponsor. The notice will specify: (a) the place, date and hour of
the meeting; and (b) the general nature of the business to be transacted. Shareholders may vote in person, by proxy, or in any manner
determined by the Sponsor at any such meeting. Except when a larger quorum is required by applicable law or by the Trust Agreement, the
presence (in person or by ballot) of thirty-three and one-third percent (33 1/3%) of the Shares entitled to vote will constitute a quorum
at a Shareholders&rsquo; meeting. Any action taken by Shareholders may be taken without a meeting so long as Shareholders holding a majority
of Shares entitled to vote on the matter (or such larger proportion thereof as will be required by any express provision of this Trust
Agreement or federal law) or holding a majority (or such larger proportion as aforesaid) of the Shares entitled to vote separately on
the matter consent to the action in writing or by other electronic means. Such consent will be treated for all purposes as a vote taken
at a meeting of Shareholders.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_025"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Books
and Records</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust keeps its books of record and account at the office of the Sponsor located at 250 Montgomery Street, Suite 200, San Francisco,
CA 94104, or at the offices of the Administrator, or at such office, including of an administrative agent, as it may subsequently designate
upon notice. The books and records are open to inspection by any person who establishes to the Trust&rsquo;s satisfaction that such person
is a Shareholder upon reasonable advance notice at all reasonable times during usual business hours of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust keeps a copy of the Trust Agreement on file in the Sponsor&rsquo;s office which will be available for inspection by any Shareholder
at all times during the Trust&rsquo;s usual business hours upon reasonable advance notice.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_026"></A>Statements,
Filings, and Reports to Shareholders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
the end of each fiscal year, the Sponsor will cause to be prepared an annual report for the Trust containing audited financial statements.
The annual report will be in such form and contain such information as will be required by applicable laws, rules and regulations and
may contain such additional information that the Sponsor determines shall be included. The annual report will be filed with the SEC and
the Exchange and will be distributed to such persons and in such manner as is required by applicable laws, rules and regulations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor is responsible for the registration and qualification of the Shares under federal securities laws. The Sponsor will also prepare,
or cause to be prepared, and file any periodic reports or updates required under the Exchange Act. The Administrator will assist and
support the Sponsor in the preparation of such reports.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrator will make such elections, file such tax returns, and prepare, disseminate and file such tax reports as it is advised to
by its counsel or accountants or as required from time to time by any applicable statute, rule or regulation.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_027"></A>Fiscal
Year</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
fiscal year of the Trust is the calendar year. The Sponsor may select an alternate fiscal year.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_028"></A>Governing
Law; Consent to Delaware Jurisdiction</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
rights of the Sponsor, the Trust, DTC (as registered owner of the Trust&rsquo;s global certificate for Shares) and the Shareholders are
governed by the laws of the State of Delaware. The Sponsor, the Trust and DTC and, by accepting Shares, each DTC Participant and each
Shareholder consent to the exclusive jurisdiction of the courts of the State of Delaware and any federal courts located in Delaware.
Such consent is not required for any person to assert a claim of Delaware jurisdiction over the Sponsor or the Trust. However, pursuant
to the Trust Agreement, this shall not apply to causes of action for violations of U.S. federal or state securities laws. Section 22
of the 1933 Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the 1933 Act or the rules and regulations thereunder. Investors cannot waive compliance with federal securities laws and the
rules and regulations thereunder.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_029"></A>Legal
Matters</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Litigation
and Claims</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
the past five years of the date of this Prospectus, there have been no material administrative, civil or criminal actions against the
Sponsor, the Trust or any principal or affiliate of any of them. This includes any actions pending, on appeal, concluded, threatened,
or otherwise known to them.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Legal
Opinion</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chapman
and Cutler LLP has advised the Sponsor in connection with the Shares being offered. Chapman and Cutler LLP also advises the Sponsor with
respect to its responsibilities as sponsor of, and with respect to matters relating to, the Trust. Certain opinions of counsel have been
filed with the SEC as exhibits to the Registration Statement of which this Prospectus is a part.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_030"></A>Experts</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">_______________,
_______________, _______________, _______________, an independent registered public accounting firm, is hereby named as an expert in
auditing and accounting.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_031"></A>Material
Contracts</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fund
Administration and Accounting Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Fund Administration and Accounting Agreement, the Administrator is generally responsible for the day-to-day administration of
the Trust. The responsibilities of the Administrator include (i) establishing appropriate expense accruals and computing expense ratios,
maintaining expense files and coordinating the payment of Trust-approved invoices; (ii) calculating Trust-approved income and per Share
amounts required for periodic distributions to be made by the Trust; (iii) calculating total return information; (iv) coordinating the
Trust&rsquo;s annual audit; (v) supplying various normal and customary portfolio and Trust statistical data as requested on an ongoing
basis; and (vi) preparing financial statements for the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
responsibilities of the Administrator also include providing various valuation and computation accounting services for the Trust, including
(i) maintaining certain financial books and records for the Trust, including creation and redemptions books and records, and Trust accounting
records; (ii) computing the Trust&rsquo;s NAV; (iii)&nbsp;obtaining quotes from pricing services as directed and approved by the Sponsor
or, if such quotes are unavailable, then obtaining such prices from the Sponsor and, in either case, calculating the market value of
the Trust&rsquo;s assets in accordance with the Trust&rsquo;s valuation policies or guidelines; and (iv) transmitting or making available
a copy of the daily portfolio valuation to the Sponsor.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust will indemnify the Administrator and any affiliate of the Administrator (&ldquo;Indemnitees&rdquo;), and the Indemnitees will incur
no liability for their reliance upon (i) any law, act, regulation or interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed, (ii) the Trust&rsquo;s offering materials or documents (excluding information provided by
the Administrator), (iii) any instructions, or (iv) any written opinion of legal counsel for the Trust or the Administrator, or arising
out of transactions or other activities of the Trust that occurred prior to the commencement of the Fund Administration and Accounting
Agreement; provided, however, that the Trust shall not indemnify any Indemnitee for any losses arising out of such Indemnitees&rsquo;
own bad faith, gross negligence or willful misconduct in the performance of the Fund Administration and Accounting Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Fund Administration and Accounting Agreement shall be effective commencing upon regulatory approval by the SEC permitting shares of the
Trust to be offered for sale and, unless terminated pursuant to its terms, shall continue until 11:59 p.m. on the date which is the third
anniversary of such date (the &ldquo;Initial Term&rdquo;), at which time such Agreement shall terminate, unless renewed in accordance
with the terms hereof. The Fund Administration and Accounting Agreement shall automatically renew for successive terms of one (1) year
each (each, a &ldquo;Renewal Term&rdquo;), unless the Trust or the Administrator gives written notice to the other party of its intent
not to renew and such notice is received by the other party not less than ninety (90) days prior to the expiration of the Initial Term
or the then-current Renewal Term (a &ldquo;Non-Renewal Notice&rdquo;). In the event a party provides a Non-Renewal Notice, the Fund Administration
and Accounting Agreement shall terminate at 11:59 p.m. on the last day of the Initial Term or Renewal Term, as applicable.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transfer
Agency and Service Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Transfer Agency and Service Agreement, the Transfer Agent is generally responsible for the day-to-day administration of the Trust.
The responsibilities of the Transfer Agent include: (i) performing and facilitating the performance of purchases and redemption of Baskets;
(ii) preparing and transmitting by means of DTC&rsquo;s book-entry system payments for dividends and distributions on or with respect
to the Shares, if any, declared by the Trust; (iii) maintaining the record of the name and address of the Shareholder and the number
of Shares issued by the Trust and held by the Shareholder; and (iv) recording the issuance of Shares of the Trust and maintain a record
of the total number of Shares of the Trust which are outstanding and authorized, based upon data provided to it by the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Transfer Agency and Service Agreement will have a one-year initial term and will automatically be renewed for successive one-year periods,
unless terminated by either party pursuant to the terms of the agreement.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitcoin
and Ether Custody Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian is responsible for providing the Trust with segregated cold
wallet digital asset custody. The Trust&rsquo;s assets with the Bitcoin and Ether Custodian are held in segregated wallets and are therefore
not commingled with corporate or other customer assets. The Bitcoin and Ether Custodian also segregates each of the accounts (comprising
multiple wallets in some cases) that a client (such as the Trust) may hold with the Bitcoin and Ether Custodian, and each such account&rsquo;s
balance represents the account&rsquo;s on-chain balance, which can be independently verified by the client or third-party auditors as
needed. This approach applies to each asset supported by the Bitcoin and Ether Custodian.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Private
key materials are generated and subsequently stored in a form whereby no private key is stored in a decrypted format. The private key
materials are stored within the Bitcoin and Ether Custodian&rsquo;s secure storage facilities within the United States and Europe. For
security reasons, these exact locations are never disclosed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Personnel
supporting key operations are very limited and the Bitcoin and Ether Custodian requires a background check prior to onboarding, and where
required, annually thereafter. No single individual associated with the Bitcoin and Ether Custodian has access to full private keys.
Private key decryption and subsequent transaction signing instead require access to multiple systems and human operators in order to
reconstitute a key and perform an on-chain transaction. For security purposes, the Bitcoin and Ether Custodian does not disclose specifics
about the roles and numbers of individuals involved in these processes.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian&rsquo;s parent, Coinbase Global, maintains a commercial crime insurance policy of up to $320&nbsp;million,
which is intended to cover the loss of client assets held by Coinbase Global and all of its subsidiaries, including the Coinbase Insureds,
including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent
transfer.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian maintains an Internal Audit team that performs periodic internal audits of custody operations. SOC attestations
are also performed on the Ether Custodian&rsquo;s services. The SOC 1 Type 2 and SOC 2 Type 2 reports produced cover private key management
controls. A SOC 1 Type 2 report addresses the controls at a service organization that are likely to be relevant to user entities&rsquo;
internal control over financial reporting. A SOC 2 Type 2 report addresses controls at a service organization relevant to security, availability,
processing integrity, confidentiality, or privacy in order to support users&rsquo; evaluations of their own systems of internal control.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custodian will not be liable for any amount greater than the value of the supported digital assets on deposit in the
Trust&rsquo;s custodial account(s) at the time of the event giving rise to the liability.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Bitcoin and Ether Custody Agreement, which is a part of the Prime Execution Agreement, was effective as of the Prime Execution Agreement&rsquo;s
execution on ____________, and will remain in effect until terminated by either the Trust, the Bitcoin and Ether Custodian or the Prime
Execution Agent. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing
the applicable notice to the Trust, or immediately for &ldquo;Cause&rdquo; (as defined in the Bitcoin and Ether Custody Agreement), including,
among others, if the Trust materially breaches the Prime Execution Agreement and such breach remains uncured, undergoes a bankruptcy
event, or fails to repay Trade Credits. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any
reason upon providing 180 days&rsquo; notice to the Trust, or immediately for &ldquo;Cause.&rdquo; The Bitcoin and Ether Custody Agreement
forms a part of the Prime Execution Agreement, and is subject to the termination provisions in the Prime Execution Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Neither
the Sponsor nor the Trust has given any instructions to the Bitcoin and Ether Custodian as it relates to Incidental Rights and/or IR
Assets.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prime
Execution Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Prime Execution Agreement, the Trust&rsquo;s bitcoin, ether and cash holdings from time to time may be temporarily held with the
Prime Execution Agent, an affiliate of the Bitcoin and Ether Custodian, in the Trading Balance, for certain limited purposes, including
in connection with creations and redemptions of Baskets and the sale of bitcoin and ether to pay Trust expenses not assumed by the Sponsor.
The Sponsor may, in its sole discretion, add or terminate prime execution agents at any time. The Sponsor may, in its sole discretion,
change the prime execution agent for the Trust, but it will have no obligation whatsoever to do so or to seek any particular terms for
the Trust from other such prime execution agents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
the Trust&rsquo;s Trading Balance, the Prime Execution Agreement provides that the Trust does not have an identifiable claim to any particular
bitcoin or ether (or cash). Instead, the Trust&rsquo;s Trading Balance represents an entitlement to a pro rata share of the bitcoin and
ether (and cash) the Prime Execution Agent holds on behalf of customers who hold similar entitlements against the Prime Execution Agent.
In this way, the Trust&rsquo;s Trading Balance represents an omnibus claim on the Prime Execution Agent&rsquo;s bitcoin and ether (and
cash) held on behalf of the Prime Execution Agent&rsquo;s customers. The Prime Execution Agent holds the bitcoin and ether associated
with customer entitlements across a combination of omnibus cold wallets, omnibus &ldquo;hot&rdquo; wallets (meaning wallets whose private
keys are generated and stored online, in Internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent&rsquo;s
name on a trading venue (including third-party venues and the Prime Execution Agent&rsquo;s own execution venue) where the Prime Execution
Agent executes orders to buy and sell bitcoin and ether on behalf of its clients.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Prime Execution Agreement, the Trust may engage in sales of bitcoin and ether by placing orders with the Prime Execution Agent.
The Prime Execution Agent will route orders placed by the Sponsor through the prime execution agent execution platform (the &ldquo;Trading
Platform&rdquo;) to a Connected Trading Venue where the order will be executed. Each order placed by the Sponsor will be sent, processed
and settled at each Connected Trading Venue to which it is routed. The Prime Execution Agreement provides that the Prime Execution Agent
is subject to certain conflicts of interest, including: (i) the Trust&rsquo;s orders may be routed to the Prime Execution Agent&rsquo;s
own execution venue where the Trust&rsquo;s orders may be executed against other customers of the Prime Execution Agent or with the Coinbase
acting as principal, (ii) the beneficial identity of the counterparty purchaser or seller with respect to the Trust&rsquo;s orders may
be unknown and therefore may inadvertently be another client of the Prime Execution Agent, (iii)&nbsp;the Prime Execution Agent does
not engage in front-running, but is aware of the Trust&rsquo;s orders or imminent orders and may execute a trade for its own inventory
(or the account of an affiliate) while in possession of that knowledge and (iv) the Prime Execution Agent may act in a principal capacity
with respect to certain orders. As a result of these and other conflicts, when acting as principal, the Prime Execution Agent may have
an incentive to favor its own interests and the interests of its affiliates over the Trust&rsquo;s interests.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agent is permitted to suspend or terminate the Prime Execution Agreement under certain circumstances. The Prime Execution
Agent, for itself or as agent for the Ether Custodian and Trade Credit Lender, may not terminate the Prime Execution Agreement (including
the Bitcoin and Ether Custody Agreement) or suspend, restrict terminate or modify the Prime Execution Agent Services (as such term is
defined in the Agreement) on less than 180 days&rsquo; notice, except in the event of (i) a Change in Law or (ii) a &ldquo;Cause&rdquo;
event (as such term is defined in the Agreement). The Prime Execution Agreement defines &ldquo;Prime Execution Agent Services&rdquo;
as (i) the custody of the Trust&rsquo;s bitcoin and ether in the Trust Digital Asset Accounts, the processing of deposits and withdrawals
and other custody transactions, (ii) access to the Prime Execution Agent&rsquo;s trading platform and the execution and settlement of
all orders for the sale of bitcoin and ether submitted by the Trust, and (iii) the extension of credit to the Trust by the Trade Credit
Lender pursuant to the Trade Financing Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Prime Execution Agreement, including the Ether Custody Agreement, was effective as of its execution on ___________, and will remain in
effect until terminated by either the Trust or the Prime Execution Agent. The Prime Execution Agreement defines a &ldquo;Coinbase Termination
Event&rdquo; to mean the occurrence and continuance of (i) a Bankruptcy Event with respect to any Coinbase Entity, (ii) the failure of
any Coinbase Entity to sell or withdraw or transfer the Trust&rsquo;s bitcoin or ether in accordance with the Trust&rsquo;s instructions
within the time periods set forth in the Prime Execution Agreement and such failure is not cured within two (2) business days following
the Trust providing written notice to the relevant Coinbase Entity (&ldquo;CB Return Cure&rdquo;); provided, however, that (A) if, prior
to the expiration of the CB Return Cure, the Prime Execution Agent transfers cash to the Trust in an amount equal to the value of the
bitcoin or ether based on the Benchmark Valuation (defined as the applicable Pricing Benchmark) as of the time that the request to sell,
transfer or withdraw was originally made by the Trust (the &ldquo;BTC/ETH Cash Value&rdquo;) or if the Prime Execution Agent delivers
cash collateral to an account designated by the Trust and in which the Trust has a perfected, first priority security interest and in
an amount equal to the BTC/ETH Cash Value until the relevant bitcoin and/or ether is sold, withdrawn or transferred or the Trust elects
to receive such amount in cash in lieu of the Prime Execution Agent&rsquo;s obligation to sell, withdraw or transfer the relevant bitcoin
and/or ether, in each cash, such failure will be deemed cured; provided, further that, the Trust shall have the right to choose whether
to receive the BTC/ETH Cash Value in lieu of the relevant bitcoin and/or ether or receive the BTC/ETH Cash Value as cash collateral,
or (B) if such failure is due to a technology or security issue where, in the commercially reasonable opinion of the Prime Execution
Agent, returning the relevant bitcoin and/or ether would result in material risk to the Trust or the Prime Execution Agent or may result
in the relevant bitcoin and/or ether being lost or otherwise not successfully returned and the Prime Execution Agent promptly notifies
the Trust promptly upon Client&rsquo;s notice of such failure, (1)&nbsp;the Trust may request that the Prime Execution Agent still sell,
withdraw or transfer the bitcoin and/or ether, but the Prime Execution Agent will have no liability with respect to any such sell, withdrawal
or transfer (unless the Prime Execution Agent or any of the Coinbase Entities act with negligence unrelated to such technology or security
issue) and any failure to withdraw or transfer shall not result in a Coinbase Termination Event if the Trust does not receive the withdrawn
or transferred bitcoin and/or ether or the proceeds of any such sale due to such technology or security issue, or (2) if the Trust does
not elect to have the Prime Execution Agent still make the sale, withdrawal or transfer, a Coinbase Termination Event shall not occur
while the relevant security or technology event is occurring and continuing, (iii) the failure of any Coinbase Entity to withdraw or
transfer cash to the Trust in accordance with the Trust&rsquo;s instructions within the time periods set forth in the Prime Execution
Agreement and such failure is not cured within one (1) business day following the Trust providing written notice to the relevant Coinbase
Entity, (iv) a Coinbase Entity intentionally or willfully, materially breaches any provision of the Prime Execution Agreement (other
than the provisions of the Bitcoin and Ether Custody Agreement) and such breach remains uncured for a period of ten (10) calendar days
after notice of such breach is provided by the Trust to the Prime Execution Agent; or (v) a Coinbase Entity intentionally or willfully,
materially breaches any provision of the Bitcoin and Ether Custody Agreement and such breach remains uncured for a period of 30 calendar
days after notice of such breach is provided by the Trust to the Prime Execution Agent.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trade
Financing Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trade Financing Agreement was entered into between the Trust (as the &ldquo;Borrower&rdquo;), Coinbase Credit (the &ldquo;Lender&rdquo;),
Coinbase, Inc. (the &ldquo;Agent&rdquo; or &ldquo;Coinbase&rdquo;), and Coinbase Custody as agent with respect to the Trust&rsquo;s balance
of bitcoin and ether held in the Trust Digital Asset Accounts pursuant to the Bitcoin and Ether Custody Agreement to govern the extension
of credit from Coinbase Credit to the Trust for use in connection with trading bitcoin and ether on Coinbase Inc.&rsquo;s Trading Platform.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the terms of the Trade Financing Agreement, the Lender agrees to lend to the Trust a specific quantity of bitcoin, ether and cash
(Trade Credits) in connection with the purchase or sale of bitcoin or ether via Coinbase Inc.&rsquo;s Trading Platform for use on the
Trading Platform up to the Authorized Amount. The &ldquo;Authorized Amount&rdquo; shall mean the aggregate U.S. dollar notional amount
of Trade Credits that the Lender has agreed to extend to the Trust during any Defined Interval. &ldquo;Defined Interval&rdquo; means
a twenty-four (24) hour period starting at 6:00 a.m. ET (or such other time as may be notified by the Lender to the Trust from time to
time) on any day that the Lender has extended Trade Credit to the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust and the Lender agree that the Trust may use the Trade Credits exclusively for the purpose of the execution of trades on the Trading
Platform. The Lender is under no obligation to continue to provide Trade Credits and may in its sole discretion impose black-out periods
during which Trade Credits for any or all fiat currencies and/or digital assets (including U.S. dollars, bitcoin and ether) may be unavailable;
provided, however, that the Lender will provide the Trust with advance notice of such black-out periods if feasible to do so.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Lender will establish in the name of the Trust a ledger entry for purposes of tracking Trade Credits extended by the Lender (&ldquo;Trade
Finance Debit Account&rdquo;). The Trade Finance Debit Account shall reflect the cumulative Trade Credits that the Lender has extended
during each Defined Interval, both in terms of the aggregate notional value of the Trade Credits and the Trade Credits denominated in
specific digital assets (such as bitcoin and ether). The Trade Finance Debit Account shall be conclusive, absent manifest error, of the
amount of Trade Credits extended by the Lender to the Trust. &ldquo;Defined Interval&rdquo; shall mean a twenty-four-hour period starting
at 6:00 a.m. ET (or such other time as may be notified by the Lender to the Trust from time to time) on any day that the Lender has extended
Trade Credit to the Trust. For the avoidance of doubt, in the event that the Lender extends Trade Credit to the Trust prior to 6:00 a.m.
ET on any given day, such notional amount of Trade Credit shall be included in the aggregation of the Authorized Amount for the immediately
prior day. The Lender or the Agent may revise the Defined Interval time period referenced above upon five (5) business days&rsquo; prior
notice to the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Trade Financing Agreement, the Lender and the Trust agreed that any digital assets (including bitcoin and ether) and any item of
property (whether investment property, financial asset, security, general intangible or instrument (each as defined in the UCC) or cash)
and all proceeds of the foregoing, credited to the Trust&rsquo;s Trading Balance and Trust Digital Asset Accounts, shall be treated as
a &ldquo;financial asset&rdquo; within the meaning of NY UCC &sect;8-102(a)(9). The Trust granted to the Lender and the Agent a continuing
first priority security interest in, lien on and right of set-off against all of the Trust&rsquo;s right, title and interest, whether
now owned or existing or hereafter acquired or arising, in the Trust&rsquo;s Trading Balance and Trust Digital Asset Accounts together
with proceeds thereof, in order to secure (i)&nbsp;repayment of Trade Credits to the Lender, (ii) payment of all fees and other amounts
owed by the Trust to the Lender or the Agent hereunder, and (iii) all other obligations of the Trust to the Lender and the Agent arising
hereunder from time to time. In addition, the Trust shall execute such documents and take such other actions as the Lender or the Agent
shall reasonably request in order to perfect and maintain the priority of the Lender&rsquo;s and the Agent&rsquo;s security interest
with respect to Trust&rsquo;s Trading Balance and the Trust Digital Asset Accounts. For purposes of perfecting the Lender&rsquo;s security
interest in the Trading Balance, the Agent holds the Trust&rsquo;s Trading Balance for itself and also as agent for the Lender, and has
control over the Trust&rsquo;s Trading Balance for its own benefit and for the benefit and on behalf of the Lender. The Agent agrees
to follow entitlement orders of the Lender as secured party with respect to the Trading Balance without further consent of the Trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust agrees to fully repay to the Lender the Trade Credits extended during a Defined Interval by the Settlement Deadline for that Defined
Interval. The &ldquo;Settlement Deadline&rdquo; shall mean 6:00 p.m. ET on the calendar day immediately following the start of a Defined
Interval. The Trust is permitted to repay the Trade Credits at any time during the Defined Interval. Failure of the Trust to fully repay
the Trade Credits by the Settlement Deadline may result in an Event of Default (as such term is defined in the agreement). The Trust
must repay the Lender with the same type of asset that the Lender provided in extending the applicable Trade Credit. The Trust&rsquo;s
repayment obligation shall be satisfied only when the Lender receives good funds for cash Trade Credits or bitcoin/ether for bitcoin/ether
Trade Credits. All cash repayments must be made to the Lender in good funds by the Settlement Deadline, regardless of whether the Federal
Reserve wire transfer system is open for business.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the occurrence of an Event of Default: (a) any outstanding extension of Trade Credit shall be immediately due and payable; (b) in addition
to all rights under the Coinbase Prime Broker Agreement, the Lender or the Agent may exercise any rights of a secured creditor with respect
to its interests in the Trust&rsquo;s assets, and may exercise all other rights under agreements between the Trust and the Lender, the
Agent or Coinbase Custody, including the Lender&rsquo;s, the Agent&rsquo;s or the Coinbase Custody&rsquo;s rights under the Coinbase
Prime Broker Agreement. The Lender and the Agent agree that they will exercise their secured creditor rights with respect to the Trading
Balance before exercising their secured creditor rights with respect to the Trust Ether Account; (c) the Trust authorizes the Agent,
as securities intermediary with respect to the Trading Balance, to comply with all instructions and entitlement orders from the Lender,
as secured party, with respect to the disposition of assets in the Trust&rsquo;s Trading Balance as contemplated herein without further
consent or direction from the Trust or any other party; the Trust also authorizes Coinbase Custody, as securities intermediary with respect
to the Trust Digital Asset Accounts, to comply with all instructions and entitlement orders from the Lender or the Agent, as secured
party, with respect to the disposition of assets in the Trust Digital Asset Accounts; Coinbase Custody agrees to follow such instructions
and entitlement orders; (d)&nbsp;without prior notice to the Trust, the Lender shall have the right to instruct the Agent (and the Agent
agrees to comply with such instruction) to: (i) transfer the Trust&rsquo;s Client Assets from the Trust&rsquo;s Trading Balance to the
Lender to repay the unpaid Trade Credits, and/or (ii) liquidate or cancel outstanding orders (including Orders that have been submitted
or are in the process of being fulfilled); and (e) without prior notice to the Trust, the Lender may suspend or terminate the Trust&rsquo;s
ability to receive extensions of Trade Credits, regardless of whether the Trust has cured the Event of Default.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the above actions are not sufficient to satisfy all obligations of the Trust to the Lender and the Agent, the Lender or the Agent shall
have the right to liquidate any and all of the Trust&rsquo;s assets and positions held with the Lender or the Agent, including the Trading
Balance and the Trust Digital Asset Accounts, to cover any losses incurred by the Trust&rsquo;s failure to repay the Trade Credits. In
connection with liquidating such assets, the Trust authorizes the Lender or the Agent, on the Lender&rsquo;s behalf, in the Lender&rsquo;s
sole discretion, to liquidate any of the Trust&rsquo;s bitcoin and ether in a commercially reasonable sale at the market price. The Trust
understands that the value of bitcoin or ether may rise or fall quickly, and neither the Lender nor the Agent has any obligation to liquidate
the Trust&rsquo;s bitcoin or ether at a time that provides the best price.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
parties to the Trade Financing Agreement may terminate the agreement immediately upon giving the other party written notice. Upon notice
of termination, all outstanding extensions of Trade Credits shall become due and payable immediately. All obligations of the Trust with
respect to outstanding Trade Credits and other amounts due hereunder, and rights of the Lender and the Agent in connection therewith
shall survive the termination of the Trade Financing Agreement, including the Lender&rsquo;s and the Agent&rsquo;s security interest
in the Trust Trading Balance and Trust Digital Asset Accounts and the Lender, the Agent&rsquo;s and Coinbase Custody&rsquo;s right of
set-off under the Prime Execution Agreement.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash
Custody Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust has entered into the Cash Custody Agreement with The Bank of New York Mellon under which The Bank of New York Mellon acts as custodian
of the Trust&rsquo;s cash and cash equivalents (in such capacity, the &ldquo;Cash Custodian&rdquo;). The Cash Custodian has agreed to
provide its services under the Cash Custody Agreement until terminated in accordance with the provisions of the Cash Custody Agreement.
Either the Cash Custodian or the Trust may terminate the Cash Custody Agreement by giving written notice to the counterparty as set forth
in the Cash Custody Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
fees of the Cash Custodian are paid by the Trust. In addition, the Trust shall reimburse the Cash Custodian for any out-of-pocket and
incidental expenses incurred by the Cash Custodian in connection with the Cash Custody Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Cash Custodian shall exercise the standard of care and diligence that a professional custodian would observe in these affairs taking
into account the prevailing rules, practices, procedures and circumstances in the relevant market (&ldquo;Standard of Care&rdquo;). Except
as otherwise expressly provided in the Cash Custody Agreement, the Cash Custodian&rsquo;s liability arising out of or relating to the
Cash Custody Agreement shall be limited solely to those direct damages that are caused by the Cash Custodian&rsquo;s failure to perform
its obligations under the Cash Custody Agreement in accordance with the Standard of Care. The Trust agrees to indemnify the Cash Custodian
and hold the Cash Custodian harmless from and against all losses, costs, expenses, damages and liabilities (including reasonable counsel
fees and expenses) incurred by the Cash Custodian arising out of or relating to the Cash Custodian&rsquo;s performance under the Cash
Custody Agreement, except to the extent resulting from the Cash Custodian&rsquo;s failure to perform its obligations under the Cash Custody
Agreement in accordance with the Standard of Care. The Cash Custody Agreement is governed by the substantive laws of the State of New
York.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Marketing
Agent Agreement</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Marketing Agent Agreement, the Marketing Agent is generally responsible for the day-to-day administration of the Trust. The responsibilities
of the Marketing Agent include (i) at the request of the Trust, assisting the Trust with facilitating Authorized Participant Agreements
between and among Authorized Participants, the Trust, and the applicable Transfer Agent, for the creation and redemption of Baskets of
the Trust; (ii)&nbsp;maintaining copies of confirmations of Basket creation and redemption order acceptances and producing such copies
upon reasonable request from the Trust or Sponsor; (iii) making available copies of this Prospectus to Authorized Participants who have
purchased Baskets in accordance with the Authorized Participant Agreements; (iv) maintaining telephonic, facsimile and/or access to direct
computer communications links with the Transfer Agent; (v) reviewing and approving, prior to use, certain Trust marketing materials submitted
by the Trust for review (&ldquo;Marketing Materials&rdquo;) for compliance with applicable SEC and FINRA advertising rules, and filing
all such Marketing Materials required to be filed with FINRA; (vi) ensuring that all direct requests by Authorized Participants for copies
of this Prospectus are fulfilled; and (vii) working with the Transfer Agent to review and approve orders placed by Authorized Participants
and transmitted to the Transfer Agent.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust shall indemnify, defend and hold the Marketing Agent, its affiliates and each of their respective members, managers, directors,
officers, employees, representatives and any person who controls or previously controlled the Marketing Agent within the meaning of Section
15 of the 1933 Act (collectively, the &ldquo;Marketing Agent Indemnitees&rdquo;), free and harmless from and against any and all losses,
claims, demands, liabilities, damages and expenses (including the costs of investigating or defending any alleged losses, claims, demands,
liabilities, damages or expenses and any reasonable counsel fees incurred in connection therewith) (collectively, &ldquo;Losses&rdquo;)
that any Marketing Agent Indemnitee may incur arising out of or relating to (i) the Trust&rsquo;s breach of any of its obligations, representations,
warranties or covenants contained in the Marketing Agent Agreement; (ii) the Trust&rsquo;s failure to comply in all material respects
with any applicable laws, rules or regulations; or (iii) any claim that this Prospectus, sales literature and advertising materials or
other information filed or made public by the Trust (as from time to time amended) includes or included an untrue statement of a material
fact or omits or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein
not misleading provided, however, that the Trust&rsquo;s obligation to indemnify any of the Marketing Agent Indemnitees shall not be
deemed to cover any Losses arising out of any untrue statement or alleged untrue statement or omission or alleged omission made in this
Prospectus or any such advertising materials or sales literature or other information filed or made public by the Trust in reliance upon
and in conformity with information provided by the Marketing Agent to the Trust, in writing, for use in this Prospectus or any such advertising
materials or sales literature.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Marketing Agreement shall continue in effect for two years. Thereafter, if not terminated, the Marketing Agreement shall continue automatically
in effect for successive one-year periods.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_032"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">United
States Federal Income Tax Consequences</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following discussion of the material U.S. federal income tax consequences that generally will apply to the purchase, ownership and disposition
of Shares by a U.S. Shareholder (as defined below), and certain U.S. federal income consequences that may apply to an investment in Shares
by a Non-U.S. Shareholder (as defined below), represents, insofar as it describes conclusions as to U.S. federal income tax law and subject
to the limitations and qualifications described therein, the opinion of Chapman and Cutler LLP, special U.S. federal income tax counsel
to the Sponsor. The discussion below is based on the Internal Revenue Code of 1986 (the &ldquo;Code&rdquo;), Treasury Regulations promulgated
thereunder and judicial and administrative interpretations of the Code, all as in effect on the date of this Prospectus and all of which
are subject to change either prospectively or retroactively. The tax treatment of Shareholders may vary depending upon their own particular
circumstances. Certain Shareholders (including, but not limited to, banks, financial institutions, insurance companies, regulated investment
companies, real estate investment trusts, tax-exempt organizations, tax-exempt or tax-advantaged retirement plans or accounts, brokers
or dealers, traders, partnerships for U.S. federal income tax purposes, persons holding Shares as a position in a &ldquo;hedging,&rdquo;
&ldquo;straddle,&rdquo; &ldquo;conversion,&rdquo; &ldquo;constructive sale&rdquo; or other integrated transaction for U.S. federal income
tax purposes, persons whose &ldquo;functional currency&rdquo; is not the U.S. dollar, persons with &ldquo;applicable financial statements&rdquo;
within the meaning of Section 451(b) of the Code, or other investors with special circumstances) may be subject to special rules not
discussed below. In addition, the following discussion applies only to investors who will hold Shares as &ldquo;capital assets&rdquo;
within the meaning of Section 1221 of the Code. Moreover, the discussion below does not address the effect of any state, local or foreign
tax law consequences that may apply to an investment in Shares. Purchasers of Shares are urged to consult their own tax advisers with
respect to all federal, state, local and foreign tax law considerations potentially applicable to their investment in Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
purposes of this discussion, a &ldquo;U.S. Shareholder&rdquo; is a Shareholder that is:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
individual who is treated as a citizen or resident of the United States for U.S. federal income tax purposes;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under applicable
Treasury Regulations to be treated as a domestic trust.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
Shareholder that is not a U.S. Shareholder as defined above is considered a &ldquo;Non-U.S. Shareholder&rdquo; for purposes of this discussion.
If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Shares, the tax treatment
of a partner generally depends upon the status of the partner and the activities of the partnership. If you are a partner of a partnership
holding Shares, the discussion below may not be applicable and we urge you to consult your own tax adviser for the U.S. federal income
tax implications of the purchase, ownership and disposition of such Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taxation
of the Trust</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor and the Trustee will treat the Trust as a &ldquo;grantor trust&rdquo; for U.S. federal income tax purposes. In the opinion of
Chapman and Cutler LLP, although not free from doubt due to the lack of directly governing authority, the Trust should be classified
as a &ldquo;grantor trust&rdquo; for U.S. federal income tax purposes (and the following discussion assumes such classification). As
a result, the Trust itself should not be subject to U.S. federal income tax. Instead, the Trust&rsquo;s income and expenses should &ldquo;flow
through&rdquo; to the Shareholders, and the Trustee will report the Trust&rsquo;s income, gains, losses and deductions to the Internal
Revenue Service (the &ldquo;IRS&rdquo;) on that basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
opinion of Chapman and Cutler LLP represents only its best legal judgment and is not binding on the IRS or any court. Accordingly, there
can be no assurance that the IRS will agree with the conclusions of counsel&rsquo;s opinion and it is possible that the IRS or another
tax authority could assert a position contrary to one or all of those conclusions and that a court could sustain that contrary position.
Neither the Sponsor nor the Trustee will request a ruling from the IRS with respect to the classification of the Trust for U.S. federal
income tax purposes or with respect to any other matter. Because of the evolving nature of digital assets, it is not possible to predict
potential future developments that may arise with respect to digital assets, including forks, airdrops and other similar occurrences.
Assuming that the Trust is currently a grantor trust for U.S. federal income tax purposes, certain future developments could render it
impossible, or impracticable, for the Trust to continue to be treated as a grantor trust for such purposes. If the IRS were to assert
successfully that the Trust is not classified as a &ldquo;grantor trust,&rdquo; the Trust would likely be classified as a partnership
for U.S. federal income tax purposes, which may affect the timing and other tax consequences to the Shareholders, and might be classified
as a publicly traded partnership that would be taxable as a corporation for U.S. federal income tax purposes, in which case the Trust
would be taxed in the same manner as a regular corporation on its taxable income and distributions to Shareholders out of the earnings
and profits of the Trust would be taxed to Shareholders as ordinary dividend income.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainty
Regarding the U.S. Federal Income Tax Treatment of Digital Assets</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
beneficial owner of Shares will be treated for U.S. federal income tax purposes as the owner of an undivided interest in the ether held
in the Trust. Due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital
assets, many significant aspects of the U.S. federal income tax treatment of digital assets are uncertain.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2014, the IRS released a notice (the &ldquo;Notice&rdquo;) discussing certain aspects of the treatment of &ldquo;convertible virtual
currency&rdquo; (including, without limitation, ether) for U.S. federal income tax purposes. In the Notice, the IRS stated that, for
U.S. federal income tax purposes, such digital assets (i) are property, (ii) are not &ldquo;currency&rdquo; for purposes of the provisions
of the Code relating to foreign currency gain or loss and (iii) may be held as a capital asset. Later, the IRS released a revenue ruling
and a set of &ldquo;Frequently Asked Questions&rdquo; (the &ldquo;2019 Ruling &amp; FAQs&rdquo;) that provide some additional guidance,
including guidance to the effect that, under certain circumstances, hard forks of digital assets are taxable events giving rise to ordinary
income and guidance with respect to the determination of the tax basis of digital assets. Recently, the IRS released additional guidance
confirming that staking income paid in digital assets is included in gross income (the &ldquo;2023 Ruling &amp; FAQs&rdquo;; the 2019
Ruling &amp; FAQs and the 2023 Ruling &amp; FAQs together, the &ldquo;Rulings &amp; FAQs&rdquo;). However, the Notice and the Rulings
&amp; FAQs do not address other significant aspects of the U.S. federal income tax treatment of digital assets. Moreover, although the
Rulings &amp; FAQs address the treatment of hard forks, there continues to be significant uncertainty with respect to the timing and
amount of the income inclusions. While the Rulings &amp; FAQs do not address most situations in which airdrops occur, it is clear from
the reasoning of the Rulings &amp; FAQs that the IRS generally would treat an airdrop as a taxable event giving rise to ordinary income.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
can be no assurance that the IRS will not alter its position with respect to digital assets in the future or that a court would uphold
the treatment set forth in the Notice and the Rulings &amp; FAQs. It is also unclear what additional guidance on the treatment of digital
assets for U.S. federal income tax purposes may be issued in the future. Any such alteration of the current IRS positions or additional
guidance could result in adverse tax consequences for Shareholders and could have an adverse effect on the prices of digital currencies,
including the price of ether, and therefore could have an adverse effect on the value of Shares. Future developments that may arise with
respect to digital assets may increase the uncertainty with respect to the treatment of digital assets for U.S. federal income tax purposes.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
example, El Salvador has recently announced that it is making bitcoin legal tender in El Salvador. If the IRS recognizes bitcoin as a
&ldquo;foreign currency,&rdquo; the tax consequences of an investment in the Trust will change. Gains or losses in respect of foreign
currencies are generally ordinary gains or losses. In general, entering or acquiring forward contracts, futures contracts, options or
similar financial instruments is treated as a foreign currency contract that produces ordinary gain or loss. However, ordinary gain or
loss treatment does not apply (unless elected) to contracts that require delivery of, or the settlement of which depends on the value
of, a foreign currency in respect of which positions are traded through regulated futures contracts. Instead, such contracts are treated
as having 60% long-term capital gain or loss and 40% short-term capital gain or loss. Such contracts are also required to be marked to
market at the end of each year.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
remainder of this discussion assumes that ether, and any Incidental Rights or IR Assets that the Trust may hold, is properly treated
for U.S. federal income tax purposes as property that may be held as a capital asset and that is not currency for purposes of the provisions
of the Code relating to foreign currency gain and loss.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders
are urged to consult their tax advisers regarding the tax consequences of an investment in the Trust and in digital currencies in general,
including, in the case of Shareholders that are generally exempt from U.S. federal income taxation, whether such Shareholders may recognize
&ldquo;unrelated business taxable income&rdquo; (&ldquo;UBTI&rdquo;) as a consequence of a fork, airdrop or similar occurrence.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incidental
Rights and IR Assets</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, the Trust may come into possession of rights incident to its ownership of ether, which permit the Trust to acquire, or
otherwise establish dominion and control over, other digital assets. These rights are generally expected to be Forked Assets that arise
in connection with hard forks in the Ethereum blockchain, airdrops offered to holders of ether and digital assets arising from other
similar events without any action of the Trust or of the Sponsor or Trustee on behalf of the Trust. These rights are referred to as &ldquo;Incidental
Rights&rdquo; and any digital assets acquired through Incidental Rights are referred to as &ldquo;IR Assets.&rdquo; Pursuant to the Trust
Agreement, the Trust has explicitly disclaimed all Incidental Rights and IR Assets. Such assets are not considered assets of the Trust
at any point in time and will not be taken into account for purposes of determining the Trust&rsquo;s NAV and the NAV per Share.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Trust Agreement, to the extent that the Trust receives such assets in a Trust wallet, it will, as soon as practicable, and, if
possible, immediately, distribute such assets to the Sponsor. At such time, the Incidental Right(s) and/or IR Asset(s) will be the property
of the Sponsor. Once acquired, the Sponsor, subject to a reasonable, good faith determination, may take any lawful action necessary or
desirable in connection with its acquisition of such assets. 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 in exchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash
back to the Trust, which in turn would distribute the cash to DTC to be distributed to Shareholders in proportion to the number of Shares
owned. Such distribution would generally be a taxable event giving rise to ordinary income for a U.S. Holder.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taxation
of U.S. Shareholders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders
will be treated for U.S. federal income tax purposes as if they directly owned a pro rata share of the underlying assets held in the
Trust. Shareholders also will be treated as if they directly received their respective pro rata shares of the Trust&rsquo;s income, if
any, and as if they directly incurred their respective pro rata shares of the Trust&rsquo;s expenses. In the case of a Shareholder that
acquires its Shares as part of the creation of a Basket, the delivery of bitcoin and ether to the Trust in exchange for a pro rata share
of the underlying bitcoin and ether represented by the Shares will not be a taxable event to the Shareholder, and the Shareholder&rsquo;s
tax basis and holding period for the Shareholder&rsquo;s pro rata share of the bitcoin and ether held in the Trust will be the same as
its tax basis and holding period for the bitcoin and ether delivered in exchange therefor. For purposes of this discussion, and unless
stated otherwise, it is assumed that all of a Shareholder&rsquo;s Shares are acquired on the same date and at the same price per Share.
Shareholders that hold multiple lots of Shares, or that are contemplating acquiring multiple lots of Shares, should consult their own
tax advisers as to the determination of the tax basis and holding period for the underlying ether related to such Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitcoin
and ether may be used to pay certain expenses of the Trust, which under current IRS guidance will be treated as a sale of such bitcoin
and ether. If the Trust sells bitcoin and ether (for example to generate cash to pay fees or expenses) or is treated as selling bitcoin
and ether (for example by using ether to pay fees or expenses), a Shareholder will recognize gain or loss in an amount equal to the difference
between (a) the Shareholder&rsquo;s pro rata share of the amount realized by the Trust upon the sale and (b) the Shareholder&rsquo;s
tax basis for its pro rata share of the bitcoin and ether that was sold. A Shareholder&rsquo;s tax basis for its share of any bitcoin
and ether sold by the Trust should generally be determined by multiplying the Shareholder&rsquo;s total basis for its share of all of
the bitcoin and ether held in the Trust immediately prior to the sale, by a fraction the numerator of which is the amount of bitcoin
and ether sold, and the denominator of which is the total amount of the bitcoin and ether held in the Trust immediately prior to the
sale. After any such sale, a Shareholder&rsquo;s tax basis for its pro rata share of the ether remaining in the Trust should be equal
to its tax basis for its share of the total amount of the bitcoin and ether held in the Trust immediately prior to the sale, less the
portion of such basis allocable to its share of the bitcoin and ether that was sold.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders&rsquo;
pro rata shares of the expenses incurred by the Trust will be treated as &ldquo;miscellaneous itemized deductions&rdquo; for U.S. federal
income tax purposes. As a result, for taxable years beginning after December 31, 2017 and before January 1, 2026, a non-corporate U.S.
Shareholder&rsquo;s share of these expenses will not be deductible for U.S. federal income tax purposes. For taxable years beginning
on or after January 1, 2026, a non-corporate U.S. Shareholder&rsquo;s share of these expenses will be deductible for regular U.S. federal
income tax purposes only to the extent that the U.S. Shareholder&rsquo;s share of the expenses, when combined with other &ldquo;miscellaneous
itemized deductions,&rdquo; exceeds 2% of the U.S. Shareholder&rsquo;s adjusted gross income for the particular year, will not be deductible
for U.S. federal alternative minimum tax purposes and will be subject to certain other limitations on deductibility.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
a Shareholder&rsquo;s sale of some or all of its Shares, the Shareholder will be treated as having sold the portion or all, respectively,
of its pro rata share of the ether held in the Trust at the time of the sale that is attributable to the Shares sold. Accordingly, the
Shareholder generally will recognize gain or loss on the sale in an amount equal to the difference between (a) the amount realized pursuant
to the sale of the Shares, and (b) the Shareholder&rsquo;s tax basis for the portion of its pro rata share of the bitcoin and ether held
in the Trust at the time of sale that is attributable to the Shares sold, as determined in the manner described in the preceding paragraph.
Based on current IRS guidance, such gain or loss (as well as any gain or loss realized by a Shareholder on account of the Trust selling
bitcoin and ether) will generally be long-term or short-term capital gain or loss, depending upon whether the Shareholder has a holding
period in its pro rata share of the bitcoin and ether that was sold of more than one (1) year.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
current maximum tax rate for individuals applicable to capital gains is 20% (subject to an additional tax of 3.8% on net investment income).
However, gain from collectibles is subject to a 28% maximum (also subject to the 3.8% additional tax), and currency gain is subject to
tax at ordinary income rates. Current guidance indicates that digital assets are treated neither as collectibles nor as currencies, but
the IRS has the authority to change its position on the treatment of digital assets.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
redemption of some or all of a Shareholder&rsquo;s Shares in exchange for the underlying bitcoin and ether represented by the Shares
redeemed generally will not be a taxable event to the Shareholder. The Shareholder&rsquo;s tax basis for the bitcoin and ether received
in the redemption generally will be the same as the Shareholder&rsquo;s tax basis for the portion of its pro rata share of the bitcoin
and ether held in the Trust immediately prior to the redemption that is attributable to the Shares redeemed. The Shareholder&rsquo;s
holding period with respect to the bitcoin and ether received should include the period during which the Shareholder held the Shares
redeemed. A subsequent sale of the bitcoin and ether received by the Shareholder will be a taxable event, unless a nonrecognition provision
of the Code applies to such sale.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
any sale or redemption of less than all of a Shareholder&rsquo;s Shares, the Shareholder&rsquo;s tax basis for its pro rata share of
the bitcoin and ether held in the Trust immediately after such sale or redemption generally will be equal to its tax basis for its share
of the total amount of the bitcoin and ether held in the Trust immediately prior to the sale or redemption, less the portion of such
basis that is taken into account in determining the amount of gain or loss recognized by the Shareholder upon such sale or, in the case
of a redemption, that is treated as the basis of the bitcoin and ether received by the Shareholder in the redemption.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
a fork were to occur in the Bitcoin blockchain or Ethereum blockchain, the Trust would hold both the original bitcoin or ether (as applicable)
and the alternative new asset. However, such Forked Asset would not constitute an asset of the Trust as, pursuant to the Trust Agreement,
the Trust has disclaimed all Incidental Rights and IR Assets, including Forked Assets. The Trust Agreement requires that, if such a transaction
occurs, the Trust will, as soon as possible, distribute the Forked Asset to the Sponsor. The Sponsor may then sell the Forked Asset,
at which point it would contribute the proceeds of that sale back to the Trust, which would distribute the cash to Shareholders. Such
distribution would cause Shareholders to incur a federal income tax liability.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
the Trust has explicitly disclaimed all Incidental Rights and IR Assets, it is possible that the IRS may not recognize such a disclaimer.
Under such circumstances, the receipt, distribution and/or sale of the Forked Asset may cause Shareholders to incur a federal income
tax liability. The IRS has taken the position in the Rulings &amp; FAQs that, under certain circumstances, a fork constitutes a taxable
event giving rise to ordinary income, and it is clear from the reasoning of the Rulings &amp; FAQs that the IRS generally would treat
an airdrop as a taxable event giving rise to ordinary income. Under the Rulings &amp; FAQs, a U.S. Shareholder will have a basis in any
IR Asset received in a fork or airdrop equal to the amount of income the U.S. Shareholder recognizes as a result of such fork or airdrop
and the U.S. Shareholder&rsquo;s holding period for such IR Asset will begin as of the time it recognizes such income. In the absence
of guidance to the contrary, it is possible that any income recognized by a U.S. tax-exempt Shareholder as a consequence of a hard fork,
airdrop or similar occurrence would constitute UBTI. A tax-exempt Shareholder should consult its tax adviser regarding whether such Shareholder
may recognize some UBTI as a consequence of an investment in Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.8%
Tax on Net Investment Income</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
U.S. Shareholders who are individuals are required to pay a 3.8% tax on the lesser of the excess of their modified adjusted gross income
over a threshold amount ($210,000 for married persons filing jointly and $200,000 for single taxpayers) or their &ldquo;net investment
income,&rdquo; which generally includes capital gains from the disposition of property. This tax is in addition to any capital gains
taxes due on such investment income. A similar tax applies to estates and trusts. U.S. Shareholders should consult their own tax advisers
regarding the effect, if any, this tax may have on their investment in the Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brokerage
Fees and Trust Expenses</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
brokerage or other transaction fee incurred by a Shareholder in purchasing Shares will be treated as part of the Shareholder&rsquo;s
tax basis in the underlying assets of the Trust. Similarly, any brokerage fee incurred by a Shareholder in selling Shares will reduce
the amount realized by the Shareholder with respect to the sale.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders
will be required to recognize the full amount of gain or loss upon a sale or deemed sale of bitcoin and ether by the Trust (as discussed
above), even though some or all of the proceeds of such sale are used by the Sponsor to pay Trust expenses. Shareholders may deduct their
respective pro rata shares of each expense incurred by the Trust to the same extent as if they directly incurred the expense. Shareholders
who are individuals, estates or trusts, however, may be required to treat some or all of the expenses of the Trust as miscellaneous itemized
deductions. An individual may not deduct miscellaneous itemized deductions for tax years beginning after December 31, 2017 and before
January 1, 2026. For tax years beginning after December 31, 2025, individuals may deduct certain miscellaneous itemized deductions only
to the extent they exceed in the aggregate 2% of the individual&rsquo;s adjusted gross income. Similar rules apply to certain miscellaneous
itemized deductions of estates and trusts. In addition, such deductions may be subject to phase-outs and other limitations under applicable
provisions of the Code.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investment
by Certain Retirement Plans</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Individual
retirement accounts (&ldquo;IRAs&rdquo;) and participant-directed accounts under tax-qualified retirement plans are limited in the types
of investments they may make under the Code. Potential purchasers of Shares that are IRAs or participant-directed accounts under a Code
section 401(a) plan should consult with their own tax advisers as to the tax consequences of a purchase of Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taxation
of Non-U.S. Shareholders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
Non-U.S. Shareholder generally should not be subject to U.S. federal income tax with respect to gain recognized upon the sale or other
disposition of Shares, or upon the sale or disposition of ether by the Trust, unless (1) the Non-U.S. Shareholder is an individual and
is present in the United States for 183 days or more during the taxable year of the sale or other disposition, and the gain is treated
as being from U.S. sources; or (2) the gain is effectively connected with the conduct by the Non-U.S. Shareholder of a trade or business
in the United States and certain other conditions are met. A Non-U.S. Shareholder also will generally not be subject to U.S. federal
income or withholding tax with respect to any distribution received from the Trust, whether in cash or in-kind.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provided
that it does not constitute income that is treated as &ldquo;effectively connected&rdquo; with the conduct of a trade or business in
the United States, U.S.-source &ldquo;fixed or determinable annual or periodical&rdquo; (&ldquo;FDAP&rdquo;) income received, or treated
as received, by a Non-U.S. Shareholder will generally be subject to U.S. withholding tax at the rate of 30% (subject to possible reduction
or elimination pursuant to an applicable tax treaty and to statutory exemptions such as the portfolio interest exemption). Although there
is no guidance on point, it is likely that any ordinary income recognized by a Non-U.S. Shareholder as a result of a fork, airdrop or
similar occurrence would constitute FDAP income. It is unclear, however, whether any such FDAP income would be properly treated as U.S.-source
or foreign-source FDAP income. A non-U.S. Shareholder in the Trust should assume that, in the absence of guidance, a withholding agent
(including the Sponsor) is likely to withhold 30% from a Non-U.S. Shareholder&rsquo;s pro rata share of any such income, 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 Incidental Rights, IR Assets or proceeds from the disposition of Incidental Rights or IR Assets by the Sponsor. A Non-U.S.
Shareholder that is a resident of a country that maintains an income tax treaty with the United States may be eligible to claim the benefits
of that treaty to reduce or eliminate, or to obtain a partial or full refund of, the 30% U.S. withholding tax on its share of any such
income, but only if the Non-U.S. Shareholder&rsquo;s home country treats the Trust as &ldquo;fiscally transparent,&rdquo; as defined
in applicable Treasury Regulations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
the nature of the Incidental Rights and IR Assets that the Trust may hold in the future is uncertain and the Trust has sought to disclaim
such assets, it is unlikely that any such asset would give rise to income that is treated as &ldquo;effectively connected&rdquo; with
the conduct of a trade or business in the United States or that any income derived by a Non-U.S. Shareholder from any such asset would
otherwise be subject to U.S. income or withholding tax, except as discussed above in connection with the fork, airdrop or similar occurrence
giving rise to Incidental Rights or IR Assets. There can, however, be no complete assurance in this regard.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
Information Reporting and Backup Withholding</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trustee will file certain information returns with the IRS and provide certain tax-related information to Shareholders in connection
with the Trust. To the extent required by applicable regulations, each Shareholder will be provided with information regarding its allocable
portion of the Trust&rsquo;s annual income, expenses, gains and losses (if any). A U.S. Shareholder may be subject to U.S. backup withholding
tax, at a rate of 24%, in certain circumstances unless it provides its taxpayer identification number and complies with certain certification
procedures. Non-U.S. Shareholders may have to comply with certification procedures to establish that they are not a U.S. person, and
some Non-U.S. Shareholders may be required to meet certain information reporting or certification requirements imposed by the Foreign
Account Tax Compliance Act, in order to avoid certain information reporting and withholding tax requirements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
amount of any backup withholding will be allowed as a credit against a Shareholder&rsquo;s U.S. federal income tax liability and may
entitle the Shareholder to a refund, provided that the required information is furnished to the IRS in a timely manner.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Taxation
in Jurisdictions Other Than the United States</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prospective
purchasers of Shares that are based in or acting out of a jurisdiction other than the United States are advised to consult their own
tax advisers as to the tax consequences under the laws of such jurisdiction (or any other jurisdiction other than the United States to
which they are subject) of their purchase, holding, sale and redemption of or any other dealing in Shares and, in particular, as to whether
any value added tax, other consumption tax or any transfer tax is payable in relation to such purchase, holding, sale, redemption or
other dealing.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PROSPECTIVE
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE DECIDING WHETHER TO INVEST IN THE SHARES OF THE TRUST.</B></FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_033"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Purchases
By Employee Benefit Plans</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
there can be no assurance that an investment in the Trust will achieve the investment objectives of an employee benefit plan in making
such investment, the Trust has certain features that may be of interest to such a plan. For example, because they are not taxpaying entities,
employee benefit plans are not subject to paying annual tax on profits (if any) of the Trust.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">General</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following section sets forth certain consequences under the Employee Retirement Income Security Act of 1974 (&ldquo;ERISA&rdquo;) and
the Code, which a fiduciary of an &ldquo;employee benefit plan&rdquo; as defined in, and subject to the fiduciary responsibility provisions
of, ERISA or of a &ldquo;plan&rdquo; as defined in and subject to Section&nbsp;4975 of the Code who has investment discretion should
consider before deciding to invest the plan&rsquo;s assets in the Trust (such &ldquo;employee benefit plans&rdquo; and &ldquo;plans&rdquo;
being referred to herein as &ldquo;Plans,&rdquo; and such fiduciaries with investment discretion being referred to herein as &ldquo;Plan
Fiduciaries&rdquo;). The following summary is intended not to be complete, but only to address certain questions under ERISA and the
Code that are likely to be raised by the Plan Fiduciary&rsquo;s own counsel.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
general, the terms &ldquo;employee benefit plan&rdquo; as defined in ERISA and &ldquo;plan&rdquo; as defined in Section&nbsp;4975 of
the Code together refer to any plan or account of various types that provide retirement benefits or welfare benefits to an individual
or to an employer&rsquo;s employees and their beneficiaries. Such plans and accounts include, but are not limited to, corporate pension
and profit sharing plans, &ldquo;simplified employee pension plans,&rdquo; Keogh plans for self-employed individuals (including partners),
individual retirement accounts described in Section&nbsp;408 of the Code and medical benefit plans.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Trust, including
the role that such an investment in the Trust would play in the Plan&rsquo;s overall investment portfolio. Each Plan Fiduciary, before
deciding to invest in the Trust, must be satisfied that such investment in the Trust is a prudent investment for the Plan, that the investments
of the Plan, including the investment in the Trust, are diversified so as to minimize the risk of large losses and that an investment
in the Trust complies with the documents of the Plan and related trust.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">EACH
PLAN FIDUCIARY CONSIDERING ACQUIRING SHARES MUST CONSULT WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN INVESTMENT IN THE TRUST
IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THE TRUST IS NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Plan
Assets</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ERISA
and a regulation issued thereunder (the &ldquo;Plan Asset Rules&rdquo;) contain rules for determining when an investment by a Plan in
an entity will result in the underlying assets of such entity being assets of the Plan for purposes of ERISA and Section&nbsp;4975 of
the Code (i.e., &ldquo;plan assets&rdquo;). Those rules provide that assets of an entity will not be plan assets of a Plan that purchases
an interest therein if certain exceptions apply, including (i)&nbsp;an exception applicable if the equity interest purchased is a &ldquo;publicly-offered
security&rdquo; (the &ldquo;Publicly-Offered Security Exception&rdquo;) and (ii)&nbsp;an exception applicable if the investment by all
&ldquo;benefit plan investors&rdquo; is not &ldquo;significant&rdquo; or certain other exceptions apply (the &ldquo;Insignificant Participation
Exception&rdquo;).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Publicly-Offered Security Exception applies if the equity interest is a security that is (1)&nbsp;&ldquo;freely transferable,&rdquo;
(2)&nbsp;part of a class of securities that is &ldquo;widely held,&rdquo; and (3)&nbsp;either (a)&nbsp;part of a class of securities
registered under Section 12(b) or 12(g) of the Exchange Act, or (b)&nbsp;sold to the Plan as part of a public offering pursuant to an
effective registration statement under the 1933 Act and the class of which such security is a part is registered under the Exchange Act
within 120&nbsp;days (or such later time as may be allowed by the SEC) after the end of the fiscal year of the issuer in which the offering
of such security occurred. The Plan Asset Rules state that the determination of whether a security is &ldquo;freely transferable&rdquo;
is to be made based on all relevant facts and circumstances. Under the Plan Asset Rules, a class of securities is &ldquo;widely held&rdquo;
only if it is of a class of securities owned by 100 or more shareholders independent of the issuer and of each other.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Shares of the Trust should be considered to be publicly offered securities. First, the Shares will be sold as part of a public offering
pursuant to an effective registration statement under the 1933 Act, and the Shares will be timely registered under the Exchange Act.
Second, it appears that the Shares will be freely transferable because the Shares of the Trust will be freely tradable on the Exchange
like any other exchange-listed security. Finally, it is anticipated that the Shares will be owned by at least 100 Shareholders independent
of the Trust. Therefore, the underlying assets of the Trust should not be considered to constitute assets of any Plan that purchases
Shares.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ineligible
Purchasers</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
general, Shares may not be purchased with the assets of a Plan if the Sponsor, the Administrator, the Trustee, the Transfer Agent, the
Bitcoin and Ether Custodian, the Marketing Agent, the Exchange, or any of their respective affiliates or any of their respective employees
either: (a)&nbsp;has investment discretion with respect to the investment of such plan assets; (b)&nbsp;has authority or responsibility
to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding
that such advice will serve as a primary basis for investment decisions with respect to such plan assets and that such advice will be
based on the particular investment needs of the Plan; or (c)&nbsp;is an employer maintaining or contributing to such Plan. A party that
is described in clause&nbsp;(a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and
any such purchase might result in a &ldquo;prohibited transaction&rdquo; under ERISA and the Code.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in the Trust are
based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder.
No assurance can be given that administrative, judicial or legislative changes will not occur that will not make the foregoing statements
incorrect or incomplete.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ALLOWING
AN INVESTMENT IN THE TRUST IS NOT TO BE CONSTRUED AS A REPRESENTATION BY THE SPONSOR OR ANY OF ITS AFFILIATES, AGENTS OR EMPLOYEES THAT
THIS INVESTMENT MEETS SOME OR ALL OF THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS
INVESTMENT IS APPROPRIATE FOR ANY SUCH PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH THE PLAN&rsquo;S ATTORNEY
AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN THE TRUST IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN, CURRENT
TAX LAW AND ERISA.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_034"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Information
You Should Know</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
Prospectus contains information investors should consider when making an investment decision about the Shares. Investors should rely
only on the information contained in this Prospectus or any applicable prospectus supplement. None of the Trust or the Sponsor has authorized
any person to provide investors with different information and, if anyone provides investors with different or inconsistent information,
investors should not rely on it. This Prospectus is not an offer to sell the Shares in any jurisdiction where the offer or sale of the
Shares is not permitted.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
information contained in this Prospectus was obtained from the Sponsor and other sources the Sponsor believed to be reliable.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investors
should disregard anything we said in an earlier document that is inconsistent with what is included in this Prospectus or any applicable
prospectus supplement. Where the context requires, when the Sponsor refers to this &ldquo;Prospectus,&rdquo; it is referring to this
Prospectus and (if applicable) the relevant prospectus supplement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investors
should not assume that the information in this Prospectus or any applicable prospectus supplement is current as of any date other than
the date on the front page of this Prospectus or the date on the front page of any applicable prospectus supplement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cross
references in this Prospectus to captions in these materials indicate where an investor can find further related discussions. The table
of contents assists in locating these captions.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_035"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Summary
of Promotional and Sales Material</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust expects to use the following sales material it has prepared:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
Trust&rsquo;s website, _________.com; and</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
Trust Fact Sheet found on the Trust&rsquo;s website.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
materials described above are not a part of this Prospectus or the registration statement of which this Prospectus is a part.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_036"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intellectual
Property</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor owns trademark registrations for the Trust. The Sponsor relies upon these trademarks through which it markets its services and
strives to build and maintain brand recognition in the market and among current and potential investors. So long as the Sponsor continues
to use these trademarks to identify its services, without challenge from any third party, and properly maintains and renews the trademark
registrations under applicable laws, rules and regulations, it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Sponsor also owns trademark registrations for the Sponsor. The Sponsor relies upon these trademarks through which it markets its services
and strives to build and maintain brand recognition in the market and among current and potential investors. So long as the Sponsor continues
to use these trademarks to identify its services, without challenge from any third party, and properly maintains and renews the trademark
registrations under applicable laws, rules and regulations; it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A NAME="a_037"></A>Where
You Can Find More Information</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust has filed a registration statement on Form S-1 with the SEC under the 1933 Act. This Prospectus does not contain all of the information
set forth in the registration statement (including the exhibits to the registration statement), parts of which have been omitted in accordance
with the rules and regulations of the SEC. For further information about the Trust or the Shares, please refer to the registration statement,
which is available online at www.sec.gov.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Information
about the Trust and the Shares can also be obtained from the Trust&rsquo;s website, which is _______.com. The Trust&rsquo;s website address
is only provided here as a convenience and the information contained on or connected to the website is not part of this Prospectus or
the registration statement of which this Prospectus is part. The Trust is subject to the informational requirements of the Exchange Act
and will file certain reports and other information with the SEC under the Exchange Act. The Sponsor will file an updated Prospectus
annually on behalf of the Trust pursuant to the requirements of the 1933 Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
reports and other information are available online at <U STYLE="text-decoration: none">www.sec.gov</U>.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_038"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Privacy
Policy</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust and the Sponsor may collect or have access to certain nonpublic personal information about current and former investors. Nonpublic
personal information may include information received from investors, such as an investor&rsquo;s name, social security number and address,
as well as information received from brokerage firms about investor holdings and transactions in Shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust and the Sponsor do not disclose nonpublic personal information except as required by law or as described in their Privacy Policy.
In general, the Trust and the Sponsor restrict access to the nonpublic personal information they collect about investors to those of
their and their affiliates&rsquo; employees and service providers who need access to such information to provide products and services
to investors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust and the Sponsor maintain safeguards that comply with federal law to protect investors&rsquo; nonpublic personal information. These
safeguards are reasonably designed to (1) ensure the security and confidentiality of investors&rsquo; records and information, (2) protect
against any anticipated threats or hazards to the security or integrity of investors&rsquo; records and information, and (3) protect
against unauthorized access to or use of investors&rsquo; records or information that could result in substantial harm or inconvenience
to any investor.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Third-party
service providers with whom the Trust and the Sponsor share nonpublic personal information about investors must agree to follow appropriate
standards of security and confidentiality, which includes safeguarding such nonpublic personal information physically, electronically
and procedurally.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
copy of the Sponsor&rsquo;s current Privacy Policy, which is applicable to the Trust, is provided to investors annually and is also available
at _______.com.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_039"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Report
of independent registered public accounting firm</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">[to
be provided in a subsequent amendment]</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><A NAME="a_040"></A><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Statement
of financial condition</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">[to
be provided in a subsequent amendment]</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>NOTES
TO FINANCIAL STATEMENT</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">[to
be provided in a subsequent amendment]</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>Bitwise
Bitcoin &amp; Ethereum ETF</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>shares</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>prospectus</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>__________,
2025</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Until
_________, 2025 (25 calendar days after the date of this Prospectus) all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers&rsquo; obligation
to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART
II</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">INFORMATION
NOT REQUIRED IN PROSPECTUS</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item
13. Other Expenses of Issuance and Distribution.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust shall not bear any expenses incurred in connection with the issuance and distribution of the securities being registered. These
expenses shall be paid by Bitwise Investment Advisers, LLC, the sponsor of the Trust. Except for the Securities and Exchange Commission
Registration Fee and Exchange Listing Fee, all such expenses are estimated:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1.5pt; width: 88%; text-align: left">SEC registration fee (actual)</TD><TD STYLE="padding-bottom: 1.5pt; width: 1%">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">0</TD><TD STYLE="padding-bottom: 1.5pt; width: 1%; text-align: left">*</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1.5pt">Listing fee (actual)</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">Auditor&rsquo;s fees and expenses</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">Legal fees and expenses</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">Printing expenses</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1.5pt; text-align: left">Miscellaneous expenses</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1.5pt">Total</TD><TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1.5pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1.5pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
indeterminate number of the securities is being registered as may from time to time be sold at indeterminate prices. In accordance with
Rules 456(d) and 457(u), the Trust is deferring payment of all of the additional registration fee and will pay the additional registration
fee subsequently on an annual basis.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item
14. Indemnification of Directors and Officers.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Trust Agreement provides that the Sponsor and its shareholders, members, directors, officers, employees, Affiliates and subsidiaries
(each a &ldquo;Sponsor Indemnified Party&rdquo;) will be indemnified by the Trust and held harmless against any loss, liability or expense
incurred under the Trust Agreement without gross negligence, bad faith, or willful misconduct on the part of such Sponsor Indemnified
Party arising out of or in connection with the performance of its obligations hereunder or any actions taken in accordance with the provisions
of the Trust Agreement. Any amounts payable to a Sponsor Indemnified Party under Section 4.06 of the Trust Agreement may be payable in
advance or will be secured by a lien on the Trust. The Sponsor will not be under any obligation to appear in, prosecute or defend any
legal action that in its opinion may involve it in any expense or liability; provided, however, that the Sponsor may, in its discretion,
undertake any action that it may deem necessary or desirable in respect of the Trust Agreement and the rights and duties of the parties
hereto and the interests of the Shareholders and, in such event, the legal expenses and costs of any such action will be expenses and
costs of the Trust and the Sponsor will be entitled to be reimbursed therefor by the Trust. The obligations of the Trust to indemnify
the Sponsor Indemnified Parties will survive the termination of the Trust Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item
15. Recent Sales of Unregistered Securities.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item
16. Exhibits and Financial Statement Schedules.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exhibit.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
exhibits to this registration statement are listed in the Exhibit Index to this registration statement, which is incorporated herein
by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
Statement Schedules. Not applicable.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item
17. Undertakings.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
undersigned registrant hereby undertakes:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            file, during any period in which offers or sales are being made, a post-effective amendment
                                            to this registration statement:</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)
To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the &ldquo;Calculation of Registration
Fee&rdquo; table in the effective registration statement; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Provided,
however, that: (1)(i), (ii), and (iii) of this section do not apply if the registration statement is on Form S-1, Form S-3, Form SF-3
or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed
with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement, or, as to a registration statement on Form S-3, Form SF-3 or Form F-3,
is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">That,
                                            for the purpose of determining any liability under the Securities Act of 1933, each such
                                            post-effective amendment shall be deemed to be a new registration statement relating to the
                                            securities offered therein, and the offering of such securities at that time shall be deemed
                                            to be the initial bona fide offering thereof.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            remove from registration by means of a post-effective amendment any of the securities being
                                            registered that remain unsold at the termination of the offering.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">That,
                                            for the purpose of determining liability under the Securities Act of 1933 to any purchaser:</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the registrant is relying on Rule 430B:</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier
of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the
offering described in the Prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date
an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date; or</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as
                                            part of a registration statement relating to an offering, other than registration statements
                                            relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
                                            deemed to be part of and included in the registration statement as of the date it is first
                                            used after effectiveness; provided, however, that no statement made in a registration statement
                                            or prospectus that is part of the registration statement or made in a document incorporated
                                            or deemed incorporated by reference into the registration statement or prospectus that is
                                            part of the registration statement will, as to a purchaser with a time of contract of sale
                                            prior to such first use, supersede or modify any statement that was made in the registration
                                            statement or prospectus that was part of the registration statement or made in any such document
                                            immediately prior to such date of first use.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">That,
                                            for the purpose of determining the liability of the registrant under the Securities Act of
                                            1933 to any purchaser in the initial distribution of the securities:</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold
to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such purchaser:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insofar
                                            as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
                                            to directors, officers and controlling persons of the registrant pursuant to the foregoing
                                            provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
                                            and Exchange Commission such indemnification is against public policy as expressed in the
                                            Act and is, therefore, unenforceable. In the event that a claim for indemnification against
                                            such liabilities (other than the payment by the registrant of expenses incurred or paid by
                                            a director, officer or controlling person of the registrant in the successful defense of
                                            any action, suit or proceeding) is asserted by such director, officer or controlling person
                                            in connection with the securities being registered, the registrant will, unless in the opinion
                                            of its counsel the matter has been settled by controlling precedent, submit to a court of
                                            appropriate jurisdiction the question whether such indemnification by it is against public
                                            policy as expressed in the Act and will be governed by the final adjudication of such issue.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">SIGNATURES</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of San Francisco, State of California, on November 26, 2024.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Bitwise Investment Advisers, LLC</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sponsor of the Bitwise Bitcoin &amp; Ethereum
    ETF</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 5%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 35%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</FONT></TD>
    <TD STYLE="border-bottom: black 1.5pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>&nbsp;/s/
    Hunter Horsley</I></FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hunter Horsley</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">President and Treasurer</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities*
and on the dates indicated.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: top; width: 32%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Signature</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: top; width: 44%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title</FONT></TD>
    <TD STYLE="vertical-align: top; width: 1%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 22%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date</FONT></TD></TR>
  <TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>/s/
    Hunter Horsley </I></FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">President</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">November
    26, 2024</FONT></TD></TR>
  <TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hunter Horsley</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Principal Executive Officer)*</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD STYLE="border-bottom: black 1.5pt solid; vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>/s/
    Paul (&ldquo;Teddy&rdquo;) Fusaro</I></FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Operating Officer</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">November
    26, 2024</FONT></TD></TR>
  <TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Paul (&ldquo;Teddy&rdquo;)
    Fusaro</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Principal Financial Officer
    and Principal Accounting Officer)*</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
registrant is a trust and the persons are signing in their capacities as officers of Bitwise Investment Advisers, LLC, the Sponsor of
the registrant.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">EXHIBIT
INDEX</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1.5pt solid; width: 9%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exhibit
    No.</FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1.5pt solid; width: 90%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exhibit Description</FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.1</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><A HREF="ea022250101ex3-1_bitwise.htm"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Declaration of Trust and Trust Agreement<SUP>(1)</SUP></FONT></A></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.2</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><A HREF="ea022250101ex3-2_bitwise.htm"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certificate of Trust<SUP>(1)</SUP></FONT></A></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.3</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">First Amended and Restated Declaration of Trust and
    Trust Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.1</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Opinion of Chapman and Cutler LLP as to legality<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Opinion of Chapman and Cutler LLP as to tax matters<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.1</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sponsor Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.2</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Authorized Participant Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.3</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Marketing Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.4</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prime Execution Agreement (with Bitcoin and Ether Custody
    Agreement and Trade Financing Agreement included as exhibits thereto)<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.5</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash Custody Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.6</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fund Administration and Accounting Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.7</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transfer Agency and Service Agreement<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.8</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form of Master Purchase and Sale Agreement for Digital
    Assets<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">23.1</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consent of Independent Registered Public Accounting
    Firm<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">23.2</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chapman and Cutler LLP (included in Exhibits 5.1 and
    8.1)<SUP>(2)</SUP></FONT></TD></TR>
  <TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">107</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><A HREF="ea022250101ex-fee_bitwise.htm"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filing Fee Table<SUP>(1)</SUP></FONT></A></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed
herewith.</FONT></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
be filed by amendment.</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">II-5</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "ea0222501-s1_bitwise.htm", "description": "REGISTRATION STATEMENT", "secsgml_size_bytes": 1574239}]
{"company-data": {"conformed-name": "Bitwise Bitcoin & Ethereum ETF", "cik": "0002046328", "organization-name": "", "irs-number": "000000000", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-283463", "film-number": "241502183"}, "business-address": {"street1": "250 MONTGOMERY STREET", "street2": "SUITE 200", "city": "SAN FRANCISCO", "state": "CA", "zip": "94104", "phone": "415-707-3663"}, "mail-address": {"street1": "250 MONTGOMERY STREET", "street2": "SUITE 200", "city": "SAN FRANCISCO", "state": "CA", "zip": "94104"}}
As filed with the Securities and Exchange Commission
on 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)
Delaware
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
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 sale
to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this
Form 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 securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is 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.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this
Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus
dated November 26, 2024
PROSPECTUS
Shares
Bitwise
Bitcoin & 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 listed
on the NYSE Arca, Inc. (the "Exchange") under the ticker symbol "_____." The Trust's investment objective
is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust's operations
and other liabilities. The Trust's allocation of its assets to bitcoin and ether will approximate the relative market capitalization
of 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") and
to 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 Benchmarks
Ltd. based on an aggregation of executed trade flow of major bitcoin and ether trading platforms. The Trust is sponsored and managed by
Bitwise Investment Advisers, LLC (the "Sponsor").
The Trust will pay to the Sponsor a unitary management
fee 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 each
Share 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 needed
to purchase the Basket Amount (plus a per-order transaction fee), as calculated by the Administrator (as defined below). For an order
to 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-order
transaction fee) distributed. The Trust only creates and redeems Baskets in transactions with financial firms that are authorized to purchase
or redeem Shares with the Trust (each, an "Authorized Participant"). Shares initially comprising the same Basket but offered
by the Authorized Participants to the public at different times may have different offering prices that depend on various factors, including
the supply and demand for Shares, the value of the Trust's assets, and market conditions at the time of a transaction. Investors
who 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 of
the Sponsor, served as seed capital investor to the Trust (the "Seed Capital Investor"). The Seed Capital Investor agreed
to 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 sections
entitled "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" and "STATEMENT OF FINANCIAL CONDITION."
Bitwise Investment Manager, LLC, an affiliate
of 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 listing
of Shares on the Exchange. Bitwise Investment Manager, LLC will act as a statutory underwriter in connection with the initial purchase
of the Seed Baskets.
Neither the Trust, nor the Sponsor, nor the Bitcoin
and Ether Custodian (defined below), nor any other person associated with the Trust will, directly or indirectly, engage in actions where
any portion of the Trust's ether becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ether or
generate income or other earnings.
Investors who decide to buy or sell Shares of
the Trust will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to this
offering, there has been no public market for the Shares. Investing in the Trust involves risks similar to those involved with an investment
directly in ether and other significant risks.
See "RISK FACTORS" beginning on page 14
.
The offering of the Shares is registered with
the 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 intended
to be a continuous offering. The Trust is not a fund registered or subject to regulation under the Investment Company Act of 1940. The
Trust is not a commodity pool for purposes of the Commodity Exchange Act of 1936, and the Sponsor is not subject to regulation by the
Commodity Futures Trading Commission as a commodity pool operator or a commodity trading adviser.
AN INVESTMENT IN THE TRUST MAY NOT BE SUITABLE
FOR INVESTORS THAT ARE NOT IN A POSITION TO ACCEPT MORE RISK THAN MAY BE INVOLVED WITH OTHER EXCHANGE-TRADED PRODUCTS THAT DO NOT HOLD
BITCOIN AND ETHER OR INTERESTS RELATED TO BITCOIN AND ETHER. THE SHARES ARE SPECULATIVE SECURITIES. THEIR PURCHASE INVOLVES A HIGH DEGREE
OF 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 COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________,
2025
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
14
Bitcoin AND THE Bitcoin MARKET
82
ETHER AND THE ETHER MARKET
87
REGULATION OF BITCOIN AND ETHER
98
THE TRUST AND BITCOIN and ETHER PRICES
101
Calculation of NAV
111
ADDITIONAL INFORMATION ABOUT THE TRUST
113
The Trust's Service Providers
118
Custody of the Trust's Assets
120
THE PRIME EXECUTION AGENT AND the TRADE CREDIT LENDER
122
Form of Shares
129
Transfer of Shares
129
SEED CAPITAL INVESTOR
130
Plan of Distribution
130
Creation and Redemption of Shares
131
Use of Proceeds
137
OWNERSHIP OR BENEFICIAL INTEREST IN THE TRUST
137
Conflicts of Interest
137
FIDUCIARY AND REGULATORY DUTIES AND OBLIGATIONS OF THE SPONSOR
138
Liability and Indemnification
140
Provisions of Law
141
Management; Voting by Shareholders
142
Meetings
142
Books and Records
142
STATEMENTS, FILINGS, AND REPORTS TO SHAREHOLDERS
143
Fiscal Year
143
GOVERNING LAW; CONSENT TO DELAWARE JURISDICTION
143
Legal Matters
143
Experts
143
Material Contracts
144
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
150
Purchases By Employee Benefit Plans
1
55
Information You Should Know
157
SUMMARY OF PROMOTIONAL AND SALES MATERIAL
157
Intellectual Property
157
Where You Can Find More Information
158
Privacy Policy
158
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
f-1
Statement of financial condition
F-2
This Prospectus contains information you should
consider when making an investment decision about the Shares. You may rely on the information contained in this Prospectus. The Trust
and the Sponsor have not authorized any person to provide you with different information and, if anyone provides you with different or
inconsistent information, you should not rely on it. This Prospectus is not an offer to sell the Shares in any jurisdiction where the
offer or sale of the Shares is not permitted.
Until __________, 2024 (25 days after the date
of this Prospectus), all dealers effecting transactions in the Shares, whether or not participating in this distribution, may be required
to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters
and with respect to unsold allotments or subscriptions. The Sponsor first intends to use this Prospectus on ___________, 2024.
The Shares are not registered for public sale
in any jurisdiction other than the United States.
i
STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking
statements" that generally relate to future events or future performance. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential," or the negative of these terms or other
comparable terminology. All statements (other than statements of historical fact) included in this 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's
operations, the Sponsor's plans, and references to the Trust's future success and other similar matters, are forward-looking
statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain
assumptions and analyses 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 developments
will conform to the Sponsor's expectations and predictions is subject to a number of risks and uncertainties, including:
●
the
                                            special considerations discussed in this Prospectus;
●
general
                                            economic, market and business conditions;
●
technology
                                            developments regarding the use of bitcoin, ether and other digital assets, including the
                                            systems used by the Sponsor and the Trust's custodian in their provision of services
                                            to the Trust;
●
changes
                                            in laws or regulations, including those concerning taxes, made by governmental authorities
                                            or regulatory bodies; and
●
other
                                            world economic and political developments, including, without limitation, global pandemics
                                            and the societal and government responses thereto.
See
"RISK FACTORS." Consequently, all the forward-looking statements made in this prospectus are qualified by these cautionary
statements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized or, even if
substantially realized, that they will result in the expected consequences to, or have the expected effects on, the Trust's operations
or the value of the Shares. Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conform
such statements to actual results or to reflect a change in the Sponsor's expectations or predictions.
EMERGING
GROWTH COMPANY STATUS
The
Trust is an
"
emerging growth company
"
as that term is used in the Jumpstart Our Business Startups Act (the
"
JOBS
Act
")
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:
●
provide
                                            an auditor's attestation report on management's assessment of the effectiveness
                                            of its system of internal control over financial reporting pursuant to Section 404(b) of
                                            the Sarbanes-Oxley Act of 2002;
●
comply
                                            with any new requirements adopted by the Public Company Accounting Oversight Board ("PCAOB")
                                            requiring mandatory auditor rotation or a supplement to the auditor's report in which
                                            the auditor would be required to provide additional information about the audit and the financial
                                            statements of the issuer;
●
comply
                                            with any new audit rules adopted by the PCAOB after April 5, 2012, unless the Securities
                                            and Exchange Commission determines otherwise;
●
provide
                                            certain disclosure regarding executive compensation required of larger public companies;
                                            or
●
obtain
                                            shareholder approval of any golden parachute payments not previously approved.
The Trust will cease to be an "emerging
growth 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 large
accelerated filer under Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934; (iii) when it issues more than $1.0 billion
of non-convertible debt over a three-year period; or (iv) the last day of the fiscal year following the fifth anniversary of its initial
public offering.
In addition, Section 107 of the JOBS Act provides
that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act of 1933 for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies; however, the Trust is choosing to "opt
out" of such extended transition period, and as a result, the Trust will comply with new or revised accounting standards on the
relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides
that the Trust's decision to opt out of the extended transition period for complying with new or revised accounting standards is
irrevocable.
ii
Prospectus Summary
This is only a summary of the Prospectus and,
while it contains material information about the Trust and its Shares, it does not contain or summarize all of the information about the
Trust and the Shares contained in this Prospectus that is material and/or which may be important to you. You should read this entire Prospectus
before making an investment decision about the Shares.
As used below, Bitcoin with an uppercase "B"
is used to describe the software and network system as a whole that is involved in maintaining the ledger of bitcoin ownership and facilitating
the transfer of bitcoin among parties. When referring to the cryptocurrency within and native to the Bitcoin network, bitcoin is written
with a lower case "b." "Ethereum" with an uppercase "E" is used to describe the system as a whole
that is involved in maintaining the ledger of ether ownership and facilitating the transfer of ether among parties. When referring to
the digital asset within the Ethereum network, "ether" is written with a lowercase "e."
Overview of the Trust
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 listed on the NYSE Arca, Inc. (the "Exchange") under the ticker symbol "______." The
Trust's investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses
of the Trust's operations and other liabilities. The Trust's allocation of its assets to bitcoin and ether will approximate
the relative market capitalization of 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") and to 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 Benchmarks Ltd. (the "Benchmark Provider"). The Trust is sponsored and managed by Bitwise Investment Advisers, LLC
(the "Sponsor").
Bitcoin and ether are each
relatively new digital assets with the potential to provide a globally exchangeable unit of value that can be transferred on a peer-to-peer
basis. Bitcoin and ether are both decentralized, meaning that the supply of bitcoin and ether are not determined by a central government,
but rather by software protocols that limit the total amount of bitcoin and ether that will be produced and the rate at which such bitcoin
and ether is released into the network. In addition, the official ledger or record of who owns what bitcoin and ether is not maintained
by any central entity, but rather, is maintained by multiple different independent computers and entities simultaneously. Bitcoin and
ether have certain features associated with several types of assets, most notably commodities and currencies. U.S. regulators have made
limited pronouncements regarding the treatment of bitcoin, the Bitcoin network and ether and the Ethereum network under federal and state
laws; however, the Sponsor believes that, on balance, the important features of bitcoin and ether are those that are characteristics of
commodities and therefore has referred to and discussed these assets as such. This interpretation is supported by regulatory actions and
court determinations that regard bitcoin as a commodity under the Commodity Exchange Act of 1936 (the "Commodity Exchange Act")
and the Commodity Futures Trading Commission ("CFTC") regulations thereunder. In addition, the Sponsor is not aware of any
current U.S. court or regulatory interpretation that regards bitcoin or ether as either legal tender – although it may be used as
a medium of exchange or form of money – or a security. It is not known whether all U.S. or foreign regulators or courts will share
this view, adopt a single, different view or espouse a variety of differing views.
However, while bitcoin and
the Bitcoin network and ether and the Ethereum network share the similarities detailed above, they also have key differences, particularly
in their intended applications and use cases, which are reflective of how the blockchains are designed. For instance, the primary use
cases of bitcoin today are as a decentralized store of value and as a peer-to-peer tool for transferring value. By comparison, many of
the primary use cases of ether are reflective of the Ethereum network's ability to process complex smart contracts, which allow
it to be used as a platform to create markets, store registries of debts or promises, represent the ownership of property, move funds
in accordance with conditional instructions and create digital assets other than ether on the Ethereum network, among other uses. The
Bitcoin network and Ethereum network differ in other ways, as well. In particular, the Ethereum network has historically adopted significant
upgrades in its software at a faster pace than the Bitcoin network, which allows for more flexibility, but also creates a higher risk
that software bugs or other issues may be introduced into the protocol.
1
As bitcoin and ether remain
relatively new assets, buying, holding and selling bitcoin and ether is very different from buying, holding and selling more conventional
investments like stocks and bonds or other physical commodities. For example, bitcoin generally may be acquired through the process of
"mining," purchased or received as consideration in a private transaction, or purchased on a digital asset trading platform.
Ether, on the other hand, may generally be acquired through the process of "validation," purchased or received as consideration
in a private transaction, or purchased on a digital asset trading platform. Private transactions may be difficult to arrange, and involve
complex and potentially risky procedures around safekeeping, transferring and holding bitcoin or ether. Meanwhile, there are also currently
over 200 digital asset trading platforms from which to choose, the quality and regulation of which vary significantly. Purchasing bitcoin
or ether on a trading platform generally requires choosing a platform, opening an account, and transferring money or a different digital
asset to the trading platform in order to purchase bitcoin or ether. Some trading platforms have been "hacked," resulting
in significant losses to the platform or its users.
The Trust intends to provide
direct exposure to the value of the bitcoin and ether held by the Trust with
Coinbase Custody Trust
Company, LLC ("Coinbase Custody" or
the "Bitcoin and Ether Custodian"). The Bitcoin and Ether Custodian
is chartered as a New York State limited liability trust company that provides custody services for digital assets. The Bitcoin and Ether
Custodian is not insured by the Federal Deposit Insurance Corporation (the "FDIC")-insured but carries insurance provided
by private insurance carriers. The net assets of the Trust and its Shares are valued on a daily basis with reference to the Pricing Benchmarks,
each a standardized reference rate published by the Benchmark Provider that is designed to reflect the performance of bitcoin or ether
in U.S. dollars, as applicable. The Pricing Benchmarks are calculated by the Benchmark Provider based on an aggregation of executed trade
flow of major bitcoin and ether trading platforms ("Constituent Platforms"). The Pricing Benchmarks each utilize the same
Constituent Platforms. As of September 3, 2024, the Constituent Platforms were: Bitstamp, Coinbase, Gemini, itBit, LMAX and Kraken. The
value of the Pricing Benchmarks is calculated as of 4:00 p.m. Eastern time ("ET").
The Trust provides investors
with the opportunity to access the market for bitcoin and ether through a traditional brokerage account without the potential barriers
to entry or risks involved with acquiring and holding bitcoin or ether directly. The Trust will not use derivatives that could subject
the Trust to additional counterparty and credit risks. The Sponsor believes that the design of the Trust will enable certain investors
to more effectively and efficiently implement strategic and tactical asset allocation strategies that use ether by investing in the Shares
rather than purchasing, holding and trading bitcoin and ether directly.
Bitcoin and the Bitcoin Network
Bitcoin is based on the decentralized,
open-source protocol of a peer-to-peer network and associated blockchain ledger (the "Bitcoin blockchain, and together, the "Bitcoin
network") first described in 2008 and launched in 2009. No single entity owns or administers the Bitcoin network, and bitcoin are
not issued by governments, banks or similar organizations. The infrastructure of the Bitcoin network is collectively maintained by a decentralized
user base and developers who donate their time to maintain and improve the network. The Bitcoin network is accessed through software,
and software protocols govern the creation, movement, and ownership of bitcoin, as reflected on the distributed ledger of transactions
known as the Bitcoin blockchain. The value of bitcoin is determined, in part, by the supply of, and demand for, bitcoin in global trading
markets, market expectations for the adoption of bitcoin as a decentralized store of value, the number of merchants and/or institutions
that accept bitcoin as a form of payment and the volume of private end-user-to-end-user transactions.
Bitcoin transaction and ownership
records are reflected on the Bitcoin blockchain, which is a digital public record or ledger of all transactions completed on the Bitcoin
network. This ledger is decentralized, meaning that a copy is stored and updated continuously on the computers of each Bitcoin network
node (a node is a computer or other device running a version of the Bitcoin network software that maintains a copy of the Bitcoin blockchain
and directly communicates transactions to other nodes on the Bitcoin network). Commentators have identified Bitcoin's primary innovation
as the ability to trust that the Bitcoin blockchain is updated properly for each node without having to trust any single party to ensure
the integrity of the ledger or the network. Transaction data is permanently recorded on the Bitcoin blockchain in files called "blocks,"
which reflect transactions that have been recorded and authenticated by Bitcoin network participants. The Bitcoin network software includes
protocols that govern the creation of bitcoin and the cryptographic system that secures and verifies bitcoin transactions. By operating
Bitcoin network software, users agree to and contribute to consensus around such software protocols.
2
While the Bitcoin network
and trading markets for bitcoin are still relatively new, the Sponsor believes that various objective factors indicate that the Bitcoin
ecosystem has matured, including, without limitation, the following:
●
increased
                                            certainty regarding the regulation of the Bitcoin network and the uses thereof;
●
the
                                            launch of futures contracts for bitcoin on major, established and regulated commodity futures
                                            exchanges in the United States ("U.S.");
●
the
                                            subsequent growth of significant trading volume in bitcoin futures;
●
increased
                                            participation by institutional investors;
●
the
                                            arrival of major, established market makers that rely on sophisticated and technologically
                                            enabled trading systems to arbitrage bitcoin price discrepancies that may appear between
                                            different trading platforms;
●
the
                                            development of a robust bitcoin lending market;
●
a
                                            significant expansion in the availability of institutional-quality custody services from
                                            regulated third-party custodians; and
●
the
                                            advent and increasing ubiquity of significant insurance on custodied assets held at third-party
                                            custodians.
The Sponsor believes that
these factors have combined to improve the efficiency of the bitcoin market, creating a dynamic, institutional-quality, two-sided market
(discussed below). For more information on bitcoin and the Bitcoin network, see "BITCOIN AND THE BITCOIN MARKET" below.
Ether and the Ethereum Network
Ether is a digital asset that
is created and transmitted through the operations of the Ethereum peer-to-peer network and associated blockchain ledger (the "Ethereum
blockchain, and together, the "Ethereum network"), a decentralized network of computers that operates on cryptographic protocols.
No single entity owns or operates the Ethereum network, the infrastructure of which is collectively maintained by a decentralized user
base. The Ethereum network allows people to exchange tokens of value, called "ether" or "ETH," which are recorded
on a public transaction ledger known as a blockchain. Ether can be used to pay for goods and services, including computational power on
the Ethereum network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading
platforms or in individual end-user-to-end-user transactions under a barter system. Furthermore, the Ethereum network also allows users
to write and implement smart contracts—that is, general-purpose code that executes on every computer in the network and can instruct
the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts, users can create
markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional instructions
and create digital assets other than ether on the Ethereum network. Smart contract operations are executed on the Ethereum blockchain
in exchange for payment of ether. The Ethereum network is one of a number of projects intended to expand blockchain use beyond just a
peer-to-peer money system.
Although there are many alternatives,
the Ethereum network is the longest-running and largest smart contract platform in terms of market cap, availability of decentralized
applications ("DApps"), and development activity. Smart contracts can be utilized across several different applications ranging
from art to finance. Currently, one of the most popular applications is the use of smart contracts for underpinning the operability of
decentralized financial services ("DeFi"). DeFi, which consists of numerous highly interoperable protocols and applications,
offers many opportunities for innovation and has the potential to create an open, transparent, and immutable financial infrastructure,
with democratized access.
3
The Ethereum network was originally
described in a 2013 white paper by Vitalik Buterin, a programmer involved with bitcoin, with the goal of creating a global platform for
decentralized applications powered by smart contracts. The formal development of the Ethereum network began through a Swiss firm called
Ethereum Switzerland GmbH ("EthSuisse"), in conjunction with several other entities. Subsequently, the Ethereum Foundation,
a Swiss non-profit organization, was set up to oversee the protocol's development. The Ethereum network went live on July 30, 2015.
Unlike other digital assets, such as bitcoin, which are solely created through a progressive digital mining process, 72.0 million ether
or "ETH" were created in connection with the launch 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 raised
approximately $18 million which was used to fund the development of the Ethereum network.
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 sale price.
Following the launch of the
Ethereum network, ether supply initially increased through a progressive validation process. After the introduction of EIP-1559, described
below, ether supply and issuance rate vary based on factors such as recent use of the network.
Coinciding with the network
launch, it was decided that EthSuisse would be dissolved, designating the Ethereum Foundation as the sole organization dedicated to protocol
development. The Ethereum network is decentralized in that it does not require governmental authorities or financial institution intermediaries
to create, transmit or determine the value of ether. Rather, following the initial distribution of ether, ether is created, burned and
allocated by the Ethereum network protocol through a process that is currently subject to an issuance and burn rate. Among other things,
ether is used to pay for transaction fees and computational services (i.e., smart contracts) on the Ethereum network; users of the Ethereum
network pay for the computational power of the machines executing the requested operations with ether. Requiring payment in ether on the
Ethereum network incentivizes developers to write quality applications and increases the efficiency of the Ethereum network because wasteful
code costs more. It also ensures that the Ethereum network remains economically viable by compensating people for their contributed computational
resources.
Because the Ethereum network
has no central authority, the release of updates to the network's source code by developers does not guarantee that the updates
will be automatically adopted by the other participants. Users and validators must accept any changes made to the source code by downloading
the proposed modification and that modification is effective only with respect to those users and validators who choose to download it.
If a modification is accepted
by only a percentage of users and validators, a division will occur such that one network will run the pre-modification source code and
the other network will run the modified source code. Such a division is known as a "fork." A fork may be intentional, as when
EIP-1559, known as the Ethereum "Merge," was implemented on September 15, 2022. The Merge represents the Ethereum network's
shift from proof-of-work to proof-of-stake. This means that instead of being required to solve complex mathematical problems in order
to validate data on the blockchain ledger, validators are required to stake ether.
The Trust will not benefit
from any forks or airdrops occurring on the Ethereum network. A right to receive any such benefit of a fork or airdrop is referred to
as an "Incidental Right" and any digital asset acquired
through
an Incidental Right is known as an "IR Assets." Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental
Rights and IR Assets. Such assets are not considered assets of the Trust at any point in time and will not be taken into account for purposes
of determining the Trust's NAV and the NAV per Share.
New ether is created as a
result of "staking," or posting collateral, of ether by validators. Validators are required to stake ether in order to be
selected to perform validation activities and then, once selected, as a reward, they earn newly created ether. Validation activities include
verifying transactions, storing data, and adding to the Ethereum blockchain. Holders of ether must stake at least 32 ether to become an
Ethereum validator. The Ethereum network provides the ability to execute peer-to-peer transactions to realize, via smart contracts, automatic,
conditional transfers of value and information, including money, voting rights, and property.
Neither the 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 to earn additional ether
or generate income or other earnings.
Assets in the Ethereum network
are 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 anywhere
in the world.
4
Ether may be regarded as a
currency or digital commodity depending on its specific use in particular transactions. Ether may be used as a medium of exchange or unit
of account. Although a number of large and small retailers accept ether as a form of payment in the United States and foreign markets,
there is relatively limited use of ether for commercial and retail payments. Similarly, ether may be used as a store of value (
i.e.
,
an asset that maintains its value rather than depreciating), although it has experienced significant periods of price volatility.
The value of ether is determined
by the value that various market participants place on ether through their transactions. Price discovery occurs through secondary market
trading on ether exchanges, over-the-counter trading desks and direct peer-to-peer payments. Many ether exchanges are open 24 hours a
day, 7 days a week. Ether exchanges and over-the-counter trading desks have a relatively limited history, limited liquidity and limited
trading across exchange-order books, which has resulted in periods of high volatility and price divergence among exchanges. Furthermore,
during high volatility periods, in addition to price divergences, some ether exchanges have experienced issues related to account access
and trade execution.
For more information on ether
and the Ethereum network, see "ETHER AND THE ETHER MARKET" below.
The Trust's Investment Objective and
Strategies
The Trust's investment
objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust's operations.
The Trust's allocation of its assets to bitcoin and ether will approximate the relative market capitalization of bitcoin and ether
to one another. In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and accrue the Sponsor's management
fee (the "Sponsor Fee") in U.S. dollars. The Trust will value its bitcoin and ether holdings, net assets and the Shares daily
based on the Pricing Benchmarks. The Trust is passively managed and does not pursue active management investment strategies, and the Sponsor
does not actively manage the bitcoin or ether held by the Trust. Nonetheless, the Sponsor believes that the Trust's allocation to
bitcoin and ether will generally approximate the relative market capitalization of bitcoin and ether to one another, although this cannot
be guaranteed. Additionally, the Sponsor does not sell bitcoin or ether at times when the price of bitcoin or ether is high, nor does
it acquire bitcoin or ether at low prices in the expectation of future price increases. The Sponsor does not make use of any of the hedging
techniques available to professional bitcoin and ether investors to attempt to reduce the risks of losses resulting from price decreases.
The Trust will not utilize leverage or any similar arrangements in seeking to meet its investment objective. Bitcoin and ether will be
the only digital assets held by the Trust.
Although the Shares are not
the exact equivalent of a direct investment in bitcoin and ether, they provide investors with an alternative that constitutes a relatively
cost-effective way to obtain bitcoin and ether exposure through the securities market.
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 each Share 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 needed to purchase the Basket Amount (plus a per-order transaction fee), as calculated by the Administrator (as defined
below). For an order to redeem a Basket, the Sponsor shall arrange for the Basket Amount to be sold and the cash proceeds (minus a per-order
transaction fee) distributed. The Trust only creates and redeems Baskets in transactions with financial firms that are authorized to purchase
or redeem Shares with the Trust (each, an "Authorized Participant"). Shares initially comprising the same Basket but offered
by the Authorized Participants to the public at different times may have different offering prices that depend on various factors, including
the supply and demand for Shares, the value of the Trust's assets, and market conditions at the time of a transaction.
The Basket Amount required
to create each Basket changes from day to day. On each day that the Exchange is open for regular trading, the Administrator adjusts the
quantity of bitcoin and ether constituting the Basket Amount as appropriate to reflect accrued expenses and any loss of bitcoin and ether
that may occur. The computation is made by the Administrator each business day prior to the commencement of trading on the Exchange. The
Administrator determines the bitcoin included in the Basket Amount for a given day by dividing the number of bitcoin held by the Trust
as of the close of business on the prior business day, adjusted for the amount of bitcoin constituting estimated accrued but unpaid fees
and expenses of the Trust as of the close of business on the prior business day, by the quotient of the number of Shares outstanding at
the opening of business, multiplied by 10,000. The same procedure (except substituting ether for bitcoin) would be followed to determine
the number of ether to include in the Basket Amount. Fractions of a bitcoin smaller than a satoshi (0.00000001 bitcoin) and fractions
of ether smaller than 0.00000000001 are disregarded for purposes of the computation of the Basket Amount. The Basket Amount so determined
is communicated via electronic mail message to all Authorized Participants and made available on the Sponsor's website for the Shares.
5
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 and
ether, the Trust would first need to seek certain regulatory approvals, including an amendment to Exchange's listing rules and an
amendment to the Trust's registration statement, of which this prospectus forms a part. There can be no guarantee that the Trust
will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful
in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in
a prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.
Purchases and Sales of Bitcoin
and Ether
Because the Trust will conduct
creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin and ether in 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 pay for such expenses, the
Sponsor, on behalf of the Trust, will sell bitcoin and ether on a pro rata basis based upon the relative amount of bitcoin and ether held
by the Trust.
The Sponsor, on behalf of
the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing Benchmark as practical.
Such purchase and sale transactions may be conducted pursuant to two models: (i) the "Trust-Directed Trade Model"; and
(ii) the "Agent Execution Model." The Trust intends to utilize the Trust-Directed Trade Model for all purchases and sales
of bitcoin and ether and will only utilize the Agent Execution Model in the event that no Digital Asset Trading Counterparty (as defined
below) is willing or able to effectuate the Trust's purchase or sale of ether.
Under the Trust-Directed Trade
Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin and ether from a trading counterparty that has been approved
by the Sponsor (each, a "Digital Asset Trading Counterparty"). As of _______, 2025, ____________, ____________, ____________,
____________ and ____________ have been approved as Digital Asset Trading Counterparties. The Sponsor has entered into contractual agreements
with the Digital Asset Trading Counterparties, and these agreements set forth the general parameters under which a transaction in bitcoin
and ether will be effectuated, should any transaction with a Digital Asset Trading 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 for creations or redemptions. All transactions between the Sponsor,
on behalf of the Trust, and a Digital Asset Trading Counterparty will be done on an arm's-length basis.
Under the Agent Execution
Model, Coinbase, Inc. ("Coinbase Inc." or the "Prime Execution Agent," which is an affiliate of the Ether Custodian),
acting in an agency capacity, conducts ether purchases and sales on behalf of the Trust with third parties through its Coinbase Prime
service pursuant to an agreement (the "Prime Execution Agreement"). To utilize the Agent Execution Model, the Trust may maintain
some bitcoin, ether or cash in a trading account (the "Trading Balance") with the Prime Execution Agent. To avoid having to
pre-fund purchases or sales of bitcoin or ether in connection with cash creations and redemptions and sales of bitcoin or ether to pay
Trust expenses not assumed by the Sponsor, to the extent applicable, the Trust may borrow bitcoin, ether or cash as trade credit ("Trade
Credit") from Coinbase Credit, Inc. (the "Trade Credit Lender") on a short-term basis pursuant to the Coinbase Credit
Committed Trade Financing Agreement (the "Trade Financing Agreement").
The Pricing Benchmarks
On a daily basis, to calculate
the aggregate U.S. dollar value of the bitcoin held by the Trust (the "Trust Bitcoin Value"), the Trust references the 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"), the
Trust 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.
6
The Administrator uses the
Trust Bitcoin Value and the Trust Ether Value to calculate the Trust's NAV, which is the aggregate of the Trust Bitcoin Value and
Trust Ether Value, based on the Bitcoin Pricing Benchmark and Ether Pricing Benchmark, respectively, less the Trust's liabilities
and expenses. "NAV per Share" is calculated by dividing NAV by the number of Shares currently outstanding.
Additional information regarding
the Pricing Benchmarks is set forth below.
The CME CF Bitcoin Reference Rate –
New York Variant
The CME CF Bitcoin Reference
Rate – New York Variant, the Bitcoin Pricing Benchmark, was designed to provide a daily, 4:00 p.m. ET reference rate of the U.S.
dollar price of one bitcoin that may be used to develop financial products. The Bitcoin Pricing Benchmark uses the same methodology as
the CME CF Bitcoin Reference Rate ("BRR"), which was designed by the CME Group and the Benchmark Provider to facilitate the
cash settlement of bitcoin futures contracts traded on the Chicago Mercantile Exchange ("CME"). The only material difference
between the Bitcoin Pricing Benchmark and the BRR is that the BRR measures the U.S. dollar price of one bitcoin as of 4:00 p.m. London
time and the Bitcoin Pricing Benchmark measures the U.S. dollar price of one bitcoin as of 4:00 p.m. ET. The CME Group also publishes
the CME CF Bitcoin Real Time Index (the "CME Bitcoin Real Time Price"), which is a continuous measure of the U.S. dollar price
of one bitcoin calculated once per second. Each of the Bitcoin Pricing Benchmark, BRR and the CME Bitcoin Real Time Price are representative
of the bitcoin trading activity on the Constituent Platforms, which include, as of October 1, 2024, Bitstamp, Coinbase, Gemini,
itBit, LMAX and Kraken.
When calculating the value
of its bitcoin when determining its indicative trust value ("ITV"), the Trust uses the CME Bitcoin Real Time Price. The ITV
is intended to provide additional information not otherwise available to the public that may be useful to investors and market professionals
in connection with the trading of the Shares on the Exchange. It is calculated by using the prior day's holdings at close of business
and the most recently reported price level of the CME Bitcoin Real Time Price and, as discussed below, the CME Ether Real Time Price.
The ITV will be disseminated on a per-Share basis every 15 seconds during regular Exchange trading hours of 9:30 a.m. to 4:00 p.m. ET.
For more information on the
Bitcoin Pricing Benchmark, BRR and CME Bitcoin Real Time Price, see "THE TRUST AND BITCOIN AND ETHER PRICES" below.
The CME CF Ether – Dollar Reference
Rate – New York Variant
The CME CF Ether – Dollar
Reference Rate – New York Variant, the Ether Pricing Benchmark, was designed to provide a daily, 4:00 p.m. ET reference rate of
the U.S. dollar price of one ether that may be used to develop financial products. The Ether Pricing Benchmark uses the same methodology
as the CME CF Ether-Dollar Reference Rate ("ERR"), which was designed by the CME Group and the Benchmark Provider to facilitate
the cash settlement of ether futures contracts traded on the CME. The only material difference between the Ether Pricing Benchmark and
the ERR is that the ERR measures the U.S. dollar price of one ether as of 4:00 p.m. London time and the Ether Pricing Benchmark measures
the U.S. dollar price of one ether as of 4:00 p.m. ET. The CME Group also publishes the CME CF Ether Real Time Index (the "CME Ether
Real Time Price"), which is a continuous measure of the U.S. dollar price of one ether calculated once per second. Each of the Ether
Pricing Benchmark, the ERR and the CME Ether Real Time Price is representative of the ether trading activity on the Constituent Platforms,
which include, which include, as of September 3, 2024, Bitstamp, Coinbase, Gemini, itBit, LMAX and Kraken. As of October 1,
2024, the Bitcoin Pricing Benchmark, BRR, CME Bitcoin Real Time Price, Ether Pricing Benchmark, ERR and CME Ether Real Time Price each
utilize the same Constituent Platforms.
When calculating the value
of its ether to determine its ITV, the Trust uses the CME Ether Real Time Price.
For more information on the
Ether Pricing Benchmark, the ERR and the CME Ether Real Time Price, see "THE TRUST AND BITCOIN AND ETHER PRICES" below.
7
The Trust's Legal Structure
The Trust is a Delaware statutory
trust, formed pursuant to the Delaware Statutory Trust Act (the "DSTA"). The Trust continuously issues common shares (Shares)
representing units of undivided beneficial ownership of the Trust that may be purchased and sold on the Exchange. The Trust operates pursuant
to the First Amended and Restated Declaration of Trust and Trust Agreement (the "Trust Agreement"), dated as of __________,
2025. Delaware Trust Company, a Delaware trust company, is the Delaware trustee of the Trust (the "Trustee"). The Trust is
managed and controlled by the Sponsor pursuant to the terms of the Trust Agreement and the Sponsor Agreement, dated as of ___________, 2025,
between the Trust and the Sponsor. The Sponsor is a limited liability company formed in the State of Delaware on June 4, 2018. Except
as required under applicable federal law or under the rules or regulations of the Exchange, shareholders of the Trust ("Shareholders")
do not have any 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's Service Providers
The Sponsor
Bitwise Investment Advisers,
LLC serves as the Sponsor for the Trust. The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration
of the Shares for their public offering in the United States and the listing of the Shares on the Exchange. The Sponsor will develop a
marketing plan for the Trust, will prepare marketing materials regarding the Shares, and will operate the marketing plan of the Trust
on an ongoing basis. The Sponsor also oversees the additional service providers of the Trust and exercises managerial control of the Trust
as permitted under the Trust Agreement.
The Trustee
Delaware Trust Company serves
as the Trustee, as required to create a Delaware statutory trust in accordance with the Trust Agreement and the DSTA.
The Administrator
The Bank of New York Mellon
("BNY Mellon") serves as the Trust's administrator (in such capacity, the "Administrator"). Under the Trust
Administration and Accounting Agreement, the Administrator provides necessary administrative, tax and accounting services and financial
reporting for the maintenance and operations of the Trust. In addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services. The Administrator's principal address is 240 Greenwich Street, New York,
New York 10286.
The Transfer Agent
BNY Mellon serves as the transfer
agent for the Trust (in such capacity, the "Transfer Agent"). The Transfer Agent: (1) issues and redeems Shares of the Trust;
(2) responds to correspondence by Shareholders and others relating to its duties; (3) maintains Shareholder accounts; and (4) makes periodic
reports to the Trust.
The Bitcoin and Ether Custodian
Coinbase
Custody Trust Company, LLC
serves as the Trust's Bitcoin and Ether Custodian pursuant to an agreement between it and the
Trust (the "Bitcoin and Ether Custody Agreement"). The Bitcoin and Ether Custodian is a fiduciary under § 100 of the
New York Banking Law. Under the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian is responsible for safekeeping the
bitcoin and ether owned by the Trust. The Bitcoin and Ether Custodian was selected by the Sponsor. The Bitcoin and Ether Custodian has
responsibility for opening a special account that holds the Trust's bitcoin (the "Trust Bitcoin Account") and responsibility
for opening a special account that holds the Trust's ether (the "Trust Ether Account," and together with the Trust Bitcoin
Account, the "Trust Digital Asset Accounts") and implementing the controls designed by the Sponsor for the Trust Digital Asset
Accounts, as well as facilitating the transfer of bitcoin and ether required for the operation of the Trust. The Bitcoin and Ether Custodian
will also enter into an agreement with the Sponsor to open custody accounts to receive payment of the Sponsor Fee (the "Sponsor
Accounts").
8
The Bitcoin and Ether Custodian
is a third-party limited-purpose trust company that was chartered in 2018 upon receiving a trust charter from the New York Department
of Financial Services. The Bitcoin and Ether Custodian has one of the longest track records in the industry of providing custodial services
for digital asset private keys. The Sponsor believes that the Bitcoin and Ether Custodian's policies, procedures, and controls for
safekeeping, exclusively possessing, and controlling the Trust's bitcoin and ether holdings are consistent with industry best practices
to protect against theft, loss, and unauthorized and accidental use of the private keys. The Trust Digital Asset Accounts and Sponsor
Accounts are segregated accounts and are therefore not commingled with corporate or other customer assets.
The Trust may retain additional
bitcoin/ether custodians from time to time pursuant to a bitcoin/ether custodian agreement to perform certain services that are typical
of a bitcoin/ether custodian. The Sponsor may, in its sole discretion, add or terminate bitcoin/ether custodians at any time.
The Cash Custodian
The Bank of New York Mellon
also serves as the Cash Custodian pursuant to an agreement between it and the Trust (the "Cash Custody Agreement"). The Cash
Custodian is the custodian of the Trust's cash holdings. The Trust may retain additional cash custodians from time to time pursuant
to a cash custodian agreement to perform certain services that are typical of a cash custodian. The Sponsor may, in its sole discretion,
add or terminate cash custodians at any time.
The Marketing Agent
Foreside Fund Services, LLC
(the "Marketing Agent") is responsible for: (1) working with the Transfer Agent to review and approve, or reject, purchase
and redemption orders of Shares placed by Authorized Participants with the Transfer Agent; and (2) reviewing and approving the marketing
materials prepared by the Trust for compliance with applicable U.S. Securities and Exchange Commission ("SEC") and Financial
Industry Regulatory Authority ("FINRA") advertising laws, rules, and regulations.
Except for the specific, limited
circumstance and time in which the Trust is using the Agent Execution Model, the Trust, the Sponsor and the service providers will not
loan or pledge the Trust's assets, nor will the Trust's assets serve as collateral for any loan or similar arrangement. During
the specific, limited circumstance and time when the Trust is using the Agent Execution Model, the Trust's ether may be subject
to a lien to secure outstanding Trade Credits in favor of the Trade Credit Lender, as is discussed in further detail below.
The Trust's Fees and Expenses
The Trust will pay the unitary
Sponsor Fee of 0.___% per annum of the Trust's bitcoin and ether holdings.
The Sponsor Fee is paid by
the Trust to the Sponsor as compensation for services performed under the Trust Agreement and Sponsor Agreement. Except during periods
in which all or a portion of the Sponsor Fee is being waived, the Sponsor Fee will accrue daily and will be payable in bitcoin and ether
monthly in arrears.
The Administrator will calculate
the Sponsor Fee on a daily basis by applying a 0.__% annualized rate to the Trust Bitcoin Value (by reference to the Bitcoin Pricing Benchmark)
and to the Trust Ether Value (by reference to the Ether Pricing Benchmark). The amount of bitcoin and ether payable in respect of each
such daily accrual shall also be determined by reference to the Bitcoin Pricing Benchmark and Ether Pricing Benchmark, respectively. The
NAV of the Trust is reduced each day by the amount of the Sponsor Fee calculated each day. On or about the last day of each month, an
amount of bitcoin and ether will be transferred from the Trust Bitcoin Account or Trust Ether Account, as applicable, to the Sponsor Accounts
equal to the sum of all daily Sponsor Fees accrued in bitcoin for the month in U.S. dollars divided by the Bitcoin Pricing Benchmark on
the last day of the month and the sum of all daily Sponsor Fees accrued in ether for the month in U.S. dollars divided by the Ether Pricing
Benchmark on the last day of the month. The Trust is not responsible for paying any fees or costs associated with the transfer of bitcoin
or ether to the Sponsor.
The Trust is not responsible
for paying any fees or costs associated with the transfer of bitcoin or ether to the Sponsor. The Sponsor, from time to time, may temporarily
waive all or a portion of the Sponsor Fee in its sole discretion. To the extent not already disclosed in the Prospectus, the Sponsor may
notify Shareholders of its intent to commence, or cease, waiving the Sponsor Fee on the Trust's website, in a prospectus supplement,
through a current report on Form 8-K and/or in the Trust's annual or quarterly reports.
9
In exchange for the Sponsor
Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee's monthly fee
and out-of-pocket expenses, the fees of the Trust's regular service providers (Cash Custodian, Ether Custodian, Prime Execution
Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing
and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole
discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor will also pay the costs of the
Trust's organization.
The Trust may incur certain
extraordinary, non-recurring expenses that are not assumed by the Sponsor, including, but not limited to, taxes and governmental charges,
any applicable brokerage commissions, financing fees, Bitcoin network fees, Ethereum network fees and similar transaction fees, expenses
and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the
Trust or the Shareholders (including, for example, in connection with any fork of the Bitcoin blockchain or Ethereum blockchain, any Incidental
Rights (as defined below) and any IR Asset (as defined below)), any indemnification of the Cash Custodian, Ether Custodian, Prime Execution
Agent, Transfer Agent, Administrator or other agents, service providers or counterparties of the Trust, and extraordinary legal fees and
expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.
The Administrator and/or the Sponsor will direct the Bitcoin and Ether Custodian to transfer bitcoin and ether from the applicable Trust
Digital Asset Account to the applicable Sponsor Account to pay the Sponsor Fee and any other Trust expenses not assumed by the Sponsor.
To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the
Trust's bitcoin and ether as necessary to pay such expenses. The Sponsor will sell bitcoin and ether to pay such expenses on a pro
rata basis based upon the relative amount of bitcoin and ether held by the Trust.
Custody of the Trust's Assets
The Trust's Bitcoin
and Ether Custodian will maintain custody of all of the Trust's bitcoin and ether, other than that which is maintained in a trading
account (the "Trading Balance") with Coinbase, Inc. ("Coinbase Inc." or the "Prime Execution Agent,"
which is an affiliate of the Bitcoin and Ether Custodian), in the Trust Digital Asset Accounts. The Trading Balance will only be used
in the limited circumstances in which the Trust is using the Agent Execution Model to effectuate the purchases and sales of bitcoin or
ether. The Bitcoin and Ether Custodian provides safekeeping of digital assets using a multi-layer cold storage security platform designed
to provide offline security of the digital assets held by the Bitcoin and Ether Custodian. However, the Bitcoin and Ether Custodian is
not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (the "FDIC") and, therefore,
deposits held with or assets held by the Bitcoin and Ether Custodian are not insured by the FDIC. In addition, neither the Trust nor the
Sponsor insures the Trust's bitcoin or ether. The Bitcoin and Ether Custodian has insurance coverage as a subsidiary under its parent
company, Coinbase Global, Inc., which procures fidelity (e.g., crime) insurance to protect the organization from risks such as theft of
funds. Specifically, the fidelity program provides coverage for the theft of funds held in hot or cold storage. The insurance program
is provided by a syndicate of industry-leading insurers. The insurance program does not cover, insure or guarantee the performance of
the Trust.
The bitcoin and ether in the
Trust Digital Asset Accounts may be held across multiple wallets, any of which will feature the following safety and security measures
to be implemented by the Bitcoin and Ether Custodian:
●
Cold
                                            Storage
: Cold storage in the context of ether means keeping the reserve of bitcoin and
                                            ether offline, which is a widely used security precaution, especially when dealing with a
                                            large amount of bitcoin and ether. Bitcoin and ether held under custodianship with the Bitcoin
                                            and Ether Custodian will be kept in high-security, offline, multi-layer cold storage vaults.
                                            This means that the private keys, the cryptographic component that allows a user to access
                                            bitcoin or ether, are stored offline on hardware that has never been connected to the internet.
                                            Storing the private key offline minimizes the risk of the bitcoin or ether being stolen.
                                            The Sponsor expects that all of the Trust's bitcoin and ether will be held in cold
                                            storage of the Bitcoin and Ether Custodian on an ongoing basis. In connection with creations
                                            or redemptions, the Trust will, under most circumstances, process redemptions by selling
                                            bitcoin and ether from the portion of its bitcoin and ether held in cold storage.
●
Private
                                            Keys
: All private keys are securely stored using multiple layers of high-quality encryption
                                            and in Bitcoin and Ether Custodian-owned offline hardware vaults in secure environments.
                                            No customers or third parties are given access to the Bitcoin and Ether Custodian's
                                            private keys.
10
●
Whitelisting
:
                                            Transactions are only sent to vetted, known addresses. The Bitcoin and Ether Custodian's
                                            platform supports pre-approval and test transactions. The Bitcoin and Ether Custodian requires
                                            authentication when adding or removing addresses for whitelisting. All instructions to initiate
                                            a whitelist addition or removal must be submitted via the Coinbase Custody platform. When
                                            a whitelist addition or removal request is initiated, the initiating user will be prompted
                                            to authenticate its request using a two-factor authentication key. A consensus mechanism
                                            on the Coinbase Custody platform dictates how many approvals are required in order for the
                                            consensus to be achieved to add or remove a whitelisted address. Only when the consensus
                                            is met is the underlying transaction considered officially approved. An account's roster
                                            and user roles are maintained by the Bitcoin and Ether Custodian in a separate log, an Authorized
                                            User List ("AUL"). Any changes to the account's roster must be reflected
                                            on an updated AUL first and executed by an authorized signatory.
●
Audit
                                            Trails
: Audit trails exist for all movement of bitcoin and ether within Bitcoin and Ether
                                            Custodian-controlled bitcoin and ether wallets and are audited annually for accuracy and
                                            completeness by an independent external audit firm.
In addition to the above measures,
in accordance with the Bitcoin and Ether Custody Agreement, bitcoin and ether held in custody with the Bitcoin and Ether Custodian will
be segregated from both the proprietary property of the Bitcoin and Ether Custodian and the assets of any other customer in accounts that
clearly identify the Trust as the owner of the accounts.
Under the rare and limited
circumstances when the Trust is utilizing the Agent Execution Model to acquire bitcoin or ether, a portion of the Trust's bitcoin,
ether or cash holdings may be held with the Prime Execution Agent in the Trading Balance. The Trust will only utilize the Agent Execution
Model when the Trust-Directed Trading Model is unavailable. Within the Trust's Trading Balance, the Prime Execution Agreement provides
that the Trust does not have an identifiable claim to any particular bitcoin or ether (or cash). Instead, the Trust's Trading Balance
represents an entitlement to a pro rata share of the bitcoin and ether (and cash) the Prime Execution Agent holds on behalf of customers
who hold similar entitlements against the Prime Execution Agent. In this way, the Trust's Trading Balance represents an omnibus
claim on the Prime Execution Agent's bitcoin and ether (and cash) held on behalf of the Prime Execution Agent's customers.
The Prime Execution Agent holds the bitcoin and ether associated with customer entitlements across a combination of omnibus cold wallets,
omnibus "hot" wallets (meaning wallets whose private keys are generated and stored online, in internet-connected computers
or devices) or in omnibus accounts in the Prime Execution Agent's name on a trading venue (including third-party venues and the
Prime Execution Agent's own execution venue) where the Prime Execution Agent executes orders to buy and sell bitcoin or ether on
behalf of its clients. Within such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor
that it keeps the majority of assets in cold wallets, to promote security, while the balance of assets is kept in hot wallets to facilitate
rapid withdrawals. However, the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the
Sponsor, the percentage of bitcoin and ether that the Prime Execution Agent holds for customers holding similar entitlements as the Trust,
which are kept in omnibus cold wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent's name
on a trading venue. The Prime Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot
storage is determined by ongoing risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated
liquidity needs for its customers as a class against the anticipated greater security of cold storage.
To the extent that the Trust
engages an additional Bitcoin and Ether Custodian in the future (a "Future Bitcoin Ether Custodian," and with Coinbase Custody,
the "Bitcoin and Ether Custodians"), other than the bitcoin and ether held with the Prime Execution Agent in the Trust's
Trading Balance, the Sponsor will allocate the Trust's bitcoin and ether between the Trust Digital Asset Accounts at Coinbase Custody
and the special accounts that hold the Trust's bitcoin or ether at the Future Bitcoin and Ether Custodian (the "Future Trust
Digital Asset Accounts," and with the Trust Digital Asset Accounts, the "Trust Digital Asset Accounts"). In determining
the amount and percentage of the Trust's bitcoin and ether to allocate to each Trust Digital Asset Account, the Sponsor will consider
(i) the concentration of the Trust's bitcoin and ether at each Bitcoin and Ether Custodian, (ii) the Sponsor's assessment
of the safety and security policies and procedures of each Bitcoin and Ether Custodian, (iii) the insurance policies of each Bitcoin and
Ether Custodian, (iv) the fees and expenses associated with the storage of the Trust's bitcoin and ether at each Bitcoin and Ether
Custodian, (v) the fees and expenses associated with the transfer to or from the Trust Digital Asset Account at each Bitcoin and Ether
Custodian, and (vi) any other factor the Sponsor deems relevant in making the allocation determination. The Sponsor does not intend to
disclose the amount or percentage of the Trust's bitcoin or ether held at either Coinbase Custody or any Future Bitcoin and Ether
Custodian, and the Sponsor may change the allocation between the Bitcoin and Ether Custodians at any time and without notice to Shareholders.
The fees and expenses associated with the transfer of bitcoin and ether between the Trust Digital Asset Accounts at each Bitcoin and Ether
Custodian will be borne by the Sponsor, not the Trust or the Shareholders. Any transfer of bitcoin and ether between the Trust Digital
Asset Accounts at each Bitcoin and Ether Custodian will occur "on-chain" over the Bitcoin network or Ethereum network, as
applicable. On-chain transactions are subject to all of the risks of the Bitcoin network and Ethereum network, as applicable, including
the risk that transactions will be made erroneously and are generally irreversible.
11
The Trust relies on the Cash
Custodian to hold any cash related to the creation and redemption of Shares, purchase or sale of bitcoin or ether or held for payment
of expenses not assumed by the Sponsor.
The Transfer Agent will facilitate
the settlement of Shares in response to the placement of purchase and redemption orders from Authorized Participants.
Plan of Distribution
When the Trust sells or redeems
its Shares, it will do so in Baskets. The Trust only creates and redeems Baskets in transactions with Authorized Participants. In connection
with an order to purchase Shares, an Authorized Participant shall deliver to the Transfer Agent the amount of U.S. dollars needed to purchase
the Basket Amount of bitcoin and ether, as well as the per-order transaction fee. In connection with an order to redeem Shares, an Authorized
Participant shall deliver to the Trust's account at DTC the Basket(s) to be redeemed and the Sponsor shall arrange for the Basket
Amount of bitcoin and ether to be sold and the resulting U.S. dollars to be distributed to the Authorized Participant. BNY Mellon will
facilitate the processing of purchase and redemption orders in Baskets from the Trust in its capacity as Transfer Agent and will custody
the Trust's cash holdings in its capacity as Cash Custodian.
Authorized Participants may
then offer Shares to the public at prices that depend on various factors, including the supply and demand for Shares, the value of the
Trust's assets, and market conditions at the time of a transaction. Investors who 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.
Investors who decide to buy
or sell Shares will place their trade orders through their brokers and may incur customary brokerage commissions and charges. Prior to
this offering, there has been no public market for the Shares. The Shares are expected to be listed for trading, subject to notice of
issuance, on the Exchange under the ticker symbol "_______."
Federal Income Tax Considerations
Owners of Shares are treated,
for U.S. federal income tax purposes, as if they owned a proportionate share of the assets of the Trust. They are also viewed as if they
directly received a proportionate share of any income of the Trust, or as if they had incurred a proportionate share of the expenses of
the Trust. Consequently, each sale of ether by the Trust (which includes under current Internal Revenue Service ("IRS") guidance
using ether to pay expenses of the Trust) constitutes a taxable event to Shareholders. See "UNITED STATES FEDERAL INCOME TAX CONSEQUENCES—Taxation
of U.S. Shareholders."
Use of Proceeds
Proceeds received by the Trust
from Purchase Orders of Baskets will be used to acquire bitcoin and ether. Such deposits of cash are held by the Cash Custodian on behalf
of the Trust until (i) used to acquire bitcoin and ether, (ii) accrued and distributed to pay Trust expenses and liabilities not assumed
by the Sponsor, (iii) distributed to Authorized Participants in connection with redemptions of Baskets, or (iv) disposed of in a liquidation
of the Trust.
Principal Investment Risks of an Investment
in the Trust
An investment in the Trust
involves risks. Investors may choose to use the Trust as a means of investing indirectly in bitcoin or ether. Because the value of the
Shares is correlated with the value of the bitcoin and ether held by the Trust, it is important to understand the investment attributes
of, and the market for, bitcoin and ether. As noted, there are significant risks and hazards inherent in the bitcoin and ether market
that may cause the price of bitcoin or ether to widely fluctuate. Investors considering a purchase of Shares should carefully consider
how much of their total assets should be exposed to the bitcoin and ether market, and should fully understand, be willing to assume, and
have the financial resources necessary to withstand, the risks involved in the Trust's investment strategy, and be in a position
to bear the potential loss of their entire investment in the Trust.
12
Bitcoin and ether are a relatively
new technological innovation with a limited history. There is no assurance that usage of the Bitcoin network and bitcoin, or the Ethereum
network and ether, will continue to grow. A contraction in the use or adoption of bitcoin or ether may result in increased volatility
or a reduction in the price of bitcoin or ether, which could adversely impact the value of the Shares. Sales of newly created bitcoin
or ether may cause the price of bitcoin or ether to decline, which could negatively affect an investment in the Shares. Bitcoin and ether
markets have a limited history, bitcoin and ether trading prices have exhibited high levels of volatility, and in some cases such volatility
has been sudden and extreme. Because of such volatility, Shareholders could lose all or substantially all of their investment in the Trust.
Regulation of the use of bitcoin, ether, the Bitcoin network or the Ethereum network continues to evolve both in the United States and
in foreign jurisdictions, which may restrict the use of bitcoin or ether or otherwise impact the demand for bitcoin or ether. Disruptions
at digital asset trading platforms could adversely affect the availability of bitcoin or ether and the ability of Authorized Participants
to purchase or sell bitcoin or ether and, therefore, their ability to create and redeem Shares.
Custody of digital assets
such as bitcoin and ether includes unique risks of loss. The loss or destruction of private keys could prevent the Trust from accessing
its bitcoin or ether. Loss of these private keys may be irreversible and could result in the loss of all or substantially all of an investment
in the Trust. Similarly, transactions on both the Bitcoin network and Ethereum network generally may not be reversed or corrected, meaning
that errors in transactions from the Trust Digital Asset Accounts could result in the loss of all or substantially all of an investment
in the Trust.
There is no assurance as to
whether the Trust will be profitable or whether the Trust will meet its expenses and liabilities. Any investment made in the Trust may
result in a total loss of the investment.
The Trust's return may
not match the performance of the Pricing Benchmarks because the Trust incurs operating expenses. The NAV of the Trust may not always correspond
to the market price of its Shares for a number of reasons, including price volatility, trading activity, normal trading hours for the
Trust, the calculation methodology of the NAV, and/or the closing of digital asset trading platforms due to fraud, failure, security breaches
or otherwise. As a result, Baskets may be created or redeemed at a U.S. dollar value that differs from the market price of the Shares.
13
Risk Factors
You should consider carefully
the 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. These
risk factors may be amended, supplemented or superseded from time to time by risk factors contained in any periodic report, prospectus
supplement, post-effective amendment or in other reports filed with the SEC in the future.
Risks Related to Digital Assets and Digital
Asset Networks
The trading prices
of 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 effect
on the value of the Shares and the Shares could lose all or substantially all of their value.
The trading prices of many
digital 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 steep
drawdowns throughout 2018 in digital asset trading prices, including for bitcoin and ether. These drawdowns notwithstanding, digital asset
prices, including bitcoin and ether, increased significantly again during 2019, decreased significantly again in the first quarter of
2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder
of 2020 and the first quarter of 2021. Digital asset prices, including bitcoin and ether, continued to experience significant and sudden
changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022, and digital asset prices
have continued to fluctuate through 2023 and to date in 2024.
Extreme volatility in the
future, including further declines in the trading price of bitcoin and ether, could have a material adverse effect on the value of the
Shares and the Shares could lose all or substantially all of their value. Furthermore, negative perception and a lack of stability and
standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatility
in the price of bitcoin and ether and other digital assets, including a depreciation in value. The Trust is not actively managed and will
not take any actions to take advantage, or mitigate the impacts, of volatility in the price of bitcoin and ether.
The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of bitcoin and ether as digital assets, including
the fact that digital assets are bearer instruments and loss, theft, or compromise of the associated private keys could result in permanent
loss of the asset, and the capabilities and development of blockchain technologies such as the Bitcoin and Ethereum blockchains.
Digital assets were only introduced
in 2009, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development
of blockchain technologies, such as the recentness of their development, their dependence on the internet and other technologies, their
dependence on the role played by users, developers and validators 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:
●
Digital
                                            asset networks, including the Bitcoin network and Ethereum network, and the software used
                                            to operate them are in the early stages of development. Given the recentness of the development
                                            of digital asset networks, digital assets may not function as intended and parties may be
                                            unwilling to use digital assets, which would dampen the growth, if any, of digital asset
                                            networks. Because bitcoin and ether are each a digital asset, the value of the Shares is
                                            subject to a number of factors relating to the fundamental investment characteristics of
                                            digital assets, including the fact that digital assets are bearer instruments and loss, theft,
                                            compromise, or destruction of the associated private keys could result in permanent loss
                                            of the asset.
●
Digital
                                            assets, including bitcoin and ether, are controllable only by the possessor of both the unique
                                            public key and private key or keys relating to the Bitcoin or Ether network address, or "wallet,"
                                            at which the digital asset is held. Private keys must be safeguarded and kept private in
                                            order to prevent a third party from accessing the digital asset held in such wallet. The
                                            loss, theft, compromise or destruction of a private key required to access a digital asset
                                            may be irreversible. If a private key is lost, stolen, destroyed or otherwise compromised
                                            and no backup of the private key is accessible, the owner would be unable to access the digital
                                            asset corresponding to that private key and the private key will not be capable of being
                                            restored by the digital asset network resulting in the total loss of the value of the digital
                                            asset linked to the private key.
●
Digital
                                            asset networks are dependent upon the internet. A disruption of the internet or a digital
                                            asset network, such as the Bitcoin network or Ethereum network, would affect the ability
                                            to transfer digital assets, including bitcoin and ether, and, consequently, a disruption
                                            may impact their value.
14
A decline in the adoption
of digital assets generally, and bitcoin and ether specifically, could negatively impact the Trust.
The Sponsor will not adopt
or employ any strategy that seeks to increase the usage of digital assets generally, or that seeks to spur further development of either
bitcoin and the Bitcoin network or ether and the Ethereum network. However, a lack of expansion in usage of bitcoin and the Bitcoin network
or 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 that
employs 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 technological
innovations continue to develop and evolve.
Today, there is limited use
of bitcoin or ether in the retail, commercial, or payments spaces, and, on a relative basis, speculators make up a significant portion
of users. Certain merchants and major retail and commercial businesses have only recently begun accepting bitcoin or ether as a means
of payment for goods and services. This pattern may contribute to outsized price volatility, which in turn can make bitcoin and ether
less attractive to merchants and commercial parties as a means of payment. A lack of expansion by bitcoin or ether into retail and commercial
markets or a contraction of such use may result in a reduction in the price of bitcoin or ether, which could adversely affect an investment
in the Trust.
In addition, there is no assurance
that bitcoin or ether will maintain its value over the long term. The value of both bitcoin and ether is subject to risks related to its
usage. Even if growth in Bitcoin or Ethereum network adoption occurs in the near or medium term, there is no assurance that bitcoin or
ether usage will continue to grow over the long term. A contraction in the use of bitcoin or ether may result in increased volatility
or a reduction in the price of bitcoin or ether, which would adversely impact the value of the Shares.
Bitcoin's adoption has
been 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 some
respects when compared with the increase in the price of bitcoin. The continued adoption of bitcoin will require growth in its usage and
in the usage of the Bitcoin network for various applications, as well as an accommodating regulatory environment, including with respect
to the tax treatment of transactions denominated in bitcoin. In addition, alternative forms of digital assets and innovations in legacy
payments systems may reduce use of the Bitcoin network and demand for bitcoin. A lack of expansion in usage of bitcoin and the Bitcoin
network could adversely affect the market for bitcoin and may have a negative impact on an investment in the Shares. Even if growth in
bitcoin 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 impact
the value of an investment in the Trust.
Similarly, the further development
and acceptance of the Ethereum network is subject to a variety of factors that are difficult to evaluate. For example, the Ethereum network
faces 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, stopping
or reversing of the development, acceptance or usage of the Ethereum network and associated smart contracts may adversely affect the price
of ether and therefore an investment in the Shares. The further adoption of ether will require growth in its usage and in the Ethereum
network. Adoption of ether will also require an accommodating regulatory environment.
15
Digital assets represent
a new and rapidly evolving industry, and the value of the Shares depends on the acceptance of bitcoin and ether.
The
first digital asset, bitcoin, was launched in 2009. The Ethereum network launched in 2015 (though some ether was sold in a pre-mine in
2014). 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 the
issuance of digital assets, represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to
evaluate. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:
●
Bitcoin
                                            and ether are only selectively accepted as a means of payment by retail and commercial outlets,
                                            and use of bitcoin and ether by consumers to pay such retail and commercial outlets remains
                                            limited. Banks and other established financial institutions may refuse to process funds for
                                            bitcoin or ether transactions; refuse to process wire transfers to or from digital asset
                                            exchanges, bitcoin- and ether-related companies or service providers; or refuse to maintain
                                            accounts for persons or entities transacting in bitcoin or ether. As a result, the price
                                            of bitcoin and ether may be influenced to a significant extent by speculators, thus contributing
                                            to price volatility that makes retailers less likely to accept bitcoin or ether in the future.
●
Banks
                                            may not provide banking services, or may cut off banking services, to businesses that provide
                                            digital asset-related services or that accept digital assets as payment, which could dampen
                                            liquidity in the market and damage the public perception of digital assets generally or any
                                            one digital asset in particular, such as bitcoin and ether, and their or its utility as a
                                            payment system, which could decrease the price of digital assets generally or individually.
                                            Further, the lack of availability of banking services could prevent the Trust from being
                                            able to complete creations and redemptions of Baskets, the timely liquidation of bitcoin
                                            or ether and withdrawal of assets from the Bitcoin and Ether Custodian even if the Sponsor
                                            determined that such liquidation was appropriate or suitable, or otherwise disrupt the Trust's
                                            operations.
●
Certain
                                            privacy-preserving features have been or are expected to be introduced to digital asset networks,
                                            including the Bitcoin network and Ethereum network. For example, some prominent contributors
                                            to the Ethereum network have proposed the concept of "privacy pools," zero-knowledge
                                            proofs, and other privacy-preserving features. If any such features are introduced to the
                                            Bitcoin network or Ethereum network, any digital asset trading platforms or businesses that
                                            facilitate transactions in bitcoin or ether may be at an increased risk of criminal or civil
                                            lawsuits, or of having banking services cut off if there is a concern that these features
                                            interfere with the performance of anti-money laundering duties and economic sanctions checks
                                            or facilitate illicit financing or crime.
●
Users,
                                            protocol and application developers and validators may otherwise switch to or adopt certain
                                            digital assets at the expense of their engagement with other digital asset networks, which
                                            may negatively impact those networks, including the Bitcoin network or Ethereum network.
The
Trust is not actively managed and will not have any formal strategy relating to the development of the Bitcoin network or Ethereum network.
Recent developments
in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants
of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.
Beginning
in the fourth quarter of 2021, and continuing throughout 2022 and 2023, digital asset prices fell precipitously. This has led to volatility
and disruption in the digital asset markets and financial difficulties for several prominent industry participants, including digital
asset trading platforms, hedge funds and lending platforms. For example, in the first half of 2022, digital asset lenders Celsius Network
LLC 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 assets
more broadly, and market-wide declines in digital asset trading prices and liquidity.
16
Thereafter,
in November 2022, FTX, the third largest digital asset trading platform by volume at the time, halted customer withdrawals amid rumors
of the company's liquidity issues and likely insolvency. Shortly thereafter, FTX's CEO resigned and FTX and numerous affiliates
of FTX filed for bankruptcy. The U.S. Department of Justice subsequently brought criminal charges, including charges of fraud, violations
of 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 conspiracy
to 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 various
regulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experienced
extreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the
SEC, the CFTC, the White House and Congress. Following FTX's bankruptcy filing, several other entities in the digital asset industry
filed for bankruptcy, such as BlockFi Inc. and Genesis Global Capital, LLC. Additionally, in November 2023, the U.S. Department of the
Treasury settled charges against Binance for violations of U.S. anti-money laundering and sanctions laws. The SEC also brought charges
against Genesis Global Capital, LLC and Gemini Trust Company, LLC on January 12, 2023, for their alleged unregistered offer and sale of
securities to retail investors.
The
collapse of TerraUSD and the bankruptcy filings of FTX, Celsius, Voyager and BlockFi have resulted in calls for heightened scrutiny and
regulation of the digital asset industry, with a specific focus on digital asset trading platforms, and custodians. Federal and state
legislatures 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. Congress
and certain U.S. agencies (e.g., the SEC, the CFTC, the Financial Crimes Enforcement Network ("FinCEN"), the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Bureau of Investigation) as well as the White House—have
issued reports and releases concerning digital assets, including ether and digital asset markets. However, the extent and content of any
forthcoming laws and regulations are not yet ascertainable with certainty and may not be ascertainable in the near future. It is possible
that new laws and increased regulation and regulatory scrutiny may require the Trust to comply with certain regulatory regimes, which
could result in new costs for the Trust. The Trust may have to devote increased time and attention to regulatory matters, which could
increase costs to the Trust. New laws, regulations and regulatory actions could significantly restrict or eliminate the market for, or
uses of, digital assets including ether, which could have a negative effect on the value of ether, which in turn would have a negative
effect on the value of the Trust's Shares.
These
events 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 to
the Sponsor and the Trust and their respective affiliates and/or the Trust's third-party service providers, or to the digital asset
industry as a whole.
Continued
disruption and instability in the digital asset markets as these events develop, including further declines in the trading prices and
liquidity of ether, could have a material adverse effect on the value of the Shares, and the Shares could lose all or substantially all
of their value.
Digital assets may
have concentrated ownership, and large sales or distributions by holders of such digital assets could have an adverse effect on the market
price of such digital assets.
The
largest 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 bitcoin
or ether, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the same
person or entity. As a result of this concentration of ownership, large sales or distributions by such holders could have an adverse effect
on the market price of bitcoin and ether.
Changes in the
governance of a digital asset network may not receive sufficient support from users and miners or validators, which may negatively affect
that digital asset network's ability to grow and respond to challenges.
The governance of decentralized
networks, such as the Bitcoin network and Ethereum network, is by voluntary consensus and open competition. As a result, there may be
a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network's
utility and ability to grow and face challenges. The foregoing notwithstanding, the protocols for some decentralized networks, such as
the Bitcoin network and Ethereum network, are informally managed by a group of core developers that propose amendments to the relevant
network's source code. Core developers' roles evolve over time, largely based on self-determined participation. If a significant
majority of users and miners/validators adopt amendments to a decentralized network based on the proposals of such core developers, such
network will be subject to new protocols that may adversely affect the value of the relevant digital asset.
17
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, on
digital asset networks.
The loss or destruction
of a private key required to access a digital asset may be irreversible. The Bitcoin and Ether Custodian's loss of access to a private
key 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 one
user 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 ether
to and from Authorized Participants is directed by the Sponsor. The Sponsor has evaluated the procedures and internal controls of the
Trust's Bitcoin and Ether Custodian to safeguard the Trust's bitcoin and ether holdings. If the Bitcoin and Ether Custodian's
internal procedures and controls are inadequate to safeguard the Trust's bitcoin and ether holdings, and the Trust's private
key(s) is(are) lost, destroyed or otherwise compromised and no backup of the private key(s) is(are) accessible, the Trust will be unable
to 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 and
ether holdings, which could adversely impact an investment in the Shares.
Competition from
central bank digital currencies ("CBDCs") and emerging payments initiatives involving financial institutions could adversely
affect the value of bitcoin, ether and other digital assets.
Central banks in various countries
have introduced digital forms of legal tender ("CBDCs"). China's CBDC project, known as Digital Currency Electronic
Payment, has reportedly been tested in a live pilot program conducted in multiple cities in China. Central banks representing at least
130 countries have published retail or wholesale CBDC work ranging from research to pilot projects. Whether or not they incorporate blockchain
or 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 announced
cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce
friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently
announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their
payments and settlement activities, which could compete with, or reduce the demand for, bitcoin and ether. As a result of any of the foregoing
factors, the value of bitcoin and ether could decrease, which could adversely affect an investment in the Trust.
The price of digital
assets, including bitcoin and ether, may be affected due to stablecoins (including Tether and USDC), the activities of stablecoin issuers
and their regulatory treatment.
While
the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for digital asset markets. Stablecoins
are digital assets designed to have a stable value over time as compared to typically volatile digital assets, and are typically marketed
as being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to be
stable, their market value may fluctuate. This volatility has in the past apparently impacted the price of bitcoin and ether. Stablecoins
are a relatively new phenomenon and it is impossible to know all of the risks that they could pose to participants in the bitcoin and
ether markets. In addition, some have argued that some stablecoins, particularly Tether, are improperly issued without sufficient backing
in a way that, when the stablecoin is used to pay for bitcoin or ether, could cause artificial rather than genuine demand for such digital
asset, artificially inflating the digital asset's price, and also argue that those associated with certain stablecoins may be involved
in laundering money. On February 17, 2021, the New York Attorney General entered into an agreement with Tether's operators, requiring
them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements
made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether's operators in which
they 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 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 record ERC-20
Tether transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could cause the
price of ether to decrease, affecting the value of the Shares.
18
USDC
is 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 reserves
were held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Stablecoins are reliant on the U.S. banking system
and U.S. treasuries, and the failure of either to function normally could impede the function of stablecoins, and therefore could adversely
affect the value of the Shares. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDC
were 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 record
ERC-20 USDC transactions on the Ethereum blockchain, and a substantial source of demand for ether could be eliminated, which could cause
the price of ether to decrease, affecting the value of the Shares.
Given
the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact on
the broader digital asset market, including the market for bitcoin and ether. Because a large portion of the digital asset market still
depends 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 to
dramatic 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 manipulative
activity when unbacked stablecoins are used to pay for other digital assets (including bitcoin and ether), or regulatory concerns about
stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, could impact individuals' willingness to trade
on 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 and
illicit financing risk.
Although transaction details
of peer-to-peer bitcoin and ether transactions are recorded on the Bitcoin and Ethereum blockchains, a buyer or seller of bitcoin or ether
on a peer-to-peer basis directly on the Bitcoin and Ethereum networks may never know to whom the public key belongs or the true identity
of 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 custody
of digital assets. The opaque nature of the market poses asset verification challenges for market participants, regulators and auditors
and gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump-and-dump
schemes. Digital assets have in the past been used to facilitate illicit activities. If bitcoin or ether was used to facilitate illicit
activities, businesses that facilitate transactions in bitcoin or ether could be at increased risk of potential criminal or civil liability
or lawsuits, or of having banking or other services cut off, and bitcoin or ether could theoretically be removed from digital asset trading
platforms. Any of the aforementioned occurrences could adversely affect the price of bitcoin or ether, the attractiveness of the Bitcoin
network or Ethereum network and an investment in the Shares. If the Trust or the Sponsor were to transact with a sanctioned entity, the
Trust or the Sponsor would be at risk of potential criminal or civil lawsuits or liability.
The Trust takes measures with
the objective of reducing illicit financing risks in connection with the Trust's activities. However, illicit financing risks are
present in the digital asset markets, including markets for bitcoin and ether. There can be no assurance that the measures employed by
the Trust will prove successful in reducing illicit financing risks, and the Trust is subject to the complex illicit financing risks and
vulnerabilities present in the digital asset markets. If such risks eventuate, the Trust, the Sponsor or their respective affiliates could
face civil or criminal liability, fines, penalties, or other punishments; be subject to investigation; have their assets frozen; lose
access to banking services or services provided by other service providers; or suffer disruptions to their operations, any of which could
negatively affect the Trust's ability to operate or could cause losses in value of the Shares.
The Trust and the Sponsor
have adopted and implemented policies and procedures that are designed to comply with applicable anti-money laundering laws and sanctions
laws and regulations, including applicable know-your-customer ("KYC") laws and regulations. The Sponsor and the Trust will
only interact with known third-party service providers with respect to whom the Sponsor or its affiliates have engaged in a thorough due
diligence process and/or a thorough KYC process, such as the Authorized Participants, Digital Asset Trading Counterparties, Prime Execution
Agent and Bitcoin and Ether Custodian. The Prime Execution Agent and Bitcoin and Ether Custodian must undergo counterparty due diligence
by the Sponsor. Each Authorized Participant must undergo onboarding by the Sponsor prior to placing creation or redemption orders with
respect to the Trust.
19
Furthermore, Authorized Participants,
as broker-dealers, and the Prime Execution Agent and Bitcoin and Ether Custodian, as entities licensed to conduct virtual currency business
activity 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 sanctions
laws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust that
they 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 or
by execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime Execution
Agent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to comply
with applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customers
as 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 deposits
to, and withdrawals from, the Trust's Trading Balance, as required by law.
The Prime Execution Agent
and Bitcoin and Ether Custodian have adopted and implemented anti-money laundering and sanctions compliance programs that provide additional
protections to ensure that the Sponsor and the Trust do not transact with a sanctioned party. Notably, the Prime Execution Agent and Bitcoin
and Ether Custodian perform screening using blockchain analytics to identify, detect, and mitigate the risk of transacting with a sanctioned
or other unlawful actor. Pursuant to the Bitcoin and Ether Custodian's and Prime Execution Agent's blockchain analytics screening
programs, any bitcoin or ether that is delivered to the Trust Bitcoin and Ether Account or the Trust's Trading Balance will undergo
screening designed to assess whether the origins of that ether are illicit.
The Prime Execution Agreement
provides, among others, that if the Prime Execution Agent conducts blockchain analytics screening on a bitcoin or ether transaction deposited
by an Authorized Participant and such screening results in the bitcoin or ether transaction being suspected or determined to be in violation
of 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 Execution
Agent and the Trust's account(s) involves such bitcoin or ether, so long as permitted by applicable law.
However, there is no guarantee
that such procedures will always prove to be effective or that the Prime Execution Agent and its affiliates will always perform their
obligations. 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 Trust
to attest that it has performed its own due diligence on the Digital Asset Trading Counterparties it has contracted with to source bitcoin
and ether from and has confirmed that the Digital Asset Trading Counterparties have implemented policies, procedures and controls designed
to comply with applicable anti-money laundering and applicable sanctions laws. Although the Sponsor arranges for such diligence to be
performed, including by the Trust's service providers, there is no guarantee such diligence will prove effective in identifying
all possible sources of illicit financing risks. Digital Asset Trading Counterparties represent to the Sponsor that they conduct due diligence
on their own counterparties from whom they source the bitcoin and ether they deposit with the Trust, and that they have formed a reasonable
belief that such bitcoin and ether being transferred by the Digital Asset Trading Counterparty to the Trust was not derived from, or associated
with, unlawful or criminal activity. However, there is the risk that Digital Asset Trading Counterparties may not conduct sufficient due
diligence 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 procedures
or diligence proves to be ineffective, violations of such laws could result, which could result in regulatory liability for the Trust
or the Sponsor under such laws, including governmental fines, penalties, and other punishments, as well as potential liability to or cessation
of services by the Prime Execution Agent and its affiliates, including the Bitcoin and Ether Custodian, under the Prime Execution Agreement
and Bitcoin and Ether Custody Agreement. Any of the foregoing could result in losses to the Shareholders or negatively affect the Trust's
ability to operate.
20
A temporary or
permanent "fork" of the Bitcoin blockchain or Ethereum blockchain could adversely affect an investment in the Trust.
The Bitcoin blockchain and
Ethereum blockchain both utilize open-source software. Any user can download the software, modify it and then propose that bitcoin users
and miners or ether users and validators adopt the modification. Bitcoin and Ethereum software updates are user driven, meaning they are
adopted when users of the software choose to update their software, in contrast to centralized software solutions where a development
company might "push" out mandatory software updates to the user community. When a change is proposed that modifies the operation
of the Bitcoin or Ethereum networks and a substantial majority of bitcoin users and miners or ether users and validators consent to the
modification, the change is implemented and the Bitcoin or Ethereum networks remain uninterrupted. However, if less than a substantial
majority of bitcoin users and miners or ether users and validators consent to the proposed modification, and the modification is nonetheless
implemented by some bitcoin users and miners or ether users and validators and the modification is not compatible or fully interoperable
with 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 and
the other running the modified software. The effect of such a fork would be the existence of two (or more) versions of the Bitcoin network
or Ethereum network running in parallel (and the Bitcoin or Ethereum blockchains), but with each version's bitcoin or ether tokens
lacking interchangeability across the respective networks. A party owning bitcoin or ether at the time of the fork would hold equal amounts
of both bitcoin or ether and the alternative forked digital asset (a "Forked Asset").
Forks have occurred already
to both the Bitcoin network and Ethereum network. A Bitcoin network fork in August 2017 was related to a several-year dispute over how
to 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 network
with differentiated features. To the extent such digital assets compete with bitcoin or ether, such competition could impact demand for
bitcoin or ether and could adversely impact the value of the Shares.
Forks may also occur as a
network community's response to a significant security breach. For example, in July 2016, Ethereum "forked" into Ethereum
and 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 ether
held by The DAO, a distributed autonomous organization, into a segregated account. In response to the hack, most participants in the Ethereum
community elected to adopt a "fork" that effectively reversed the hack. However, a minority of users continued to develop
the 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 flaw
in the various versions of otherwise compatible software that users run. Such a fork could lead to users and miners or validators abandoning
the digital asset and associated network with the flawed software. It is possible, however, that a substantial number of users and miners
or 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 that
will 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 hard
fork. However, the Pricing Benchmarks do not track forks involving bitcoin or ether. The Trust may receive or claim rights to any digital
assets created by a fork of the Bitcoin or Ethereum networks that are supported by the Custodian and for which the Trust's trading
counterparties support a secondary market. Furthermore, the Pricing Benchmarks do not track airdrops involving bitcoin or ether or the
Bitcoin or Ethereum networks. Accordingly, the Trust will disclaim, and the Sponsor will cause the Trust to irrevocably abandon, all rights
to digital assets airdropped to holders of bitcoin and ether. By investing in the Trust rather than directly in bitcoin and ether, you
forgo potential economic benefits associated with airdrops. Before the Trust claims any digital asset resulting from a fork in the Bitcoin
or 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 application
by the Exchange to amend its listing rules. If such approvals are not obtained, the Sponsor will cause the Trust to irrevocably abandon
such digital asset.
21
In the event of
a hard fork of the Bitcoin network or Ethereum network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion
to determine which network should be considered the appropriate network for the Trust's purposes, and in doing so may adversely
affect the value of the Shares.
In the event of a hard fork
of the Bitcoin network or Ethereum network, the Sponsor will use its discretion to determine, promptly and in good faith, which digital
asset network is generally accepted as the Bitcoin network or Ethereum network and should therefore be considered the appropriate 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 ether, users, services, businesses, miners
or validators and other constituencies, as well as the actual continued acceptance of, and miner or validator and community engagement
with, the Bitcoin network or Ethereum network, along with market capitalization and trading activity. There is no guarantee that the Sponsor
will choose the digital asset that is ultimately the most valuable fork, and the Sponsor's decision may adversely affect the value
of the Shares as a result. The Sponsor may also disagree with Shareholders, the Bitcoin and Ether Custodian, security vendors and the
Benchmark 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 of
a hard fork of the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian's operations may be interrupted or subject
to additional security risks that could disrupt the Trust's ability to process creations and redemptions of Shares or otherwise
threaten the security of the Trust's bitcoin or ether holdings.
In the event of a hard fork
of the Bitcoin network or Ethereum network, the Bitcoin and Ether Custodian may temporarily halt the ability of customers (including the
Trust) to deposit, withdraw or transfer bitcoin or ether on the Bitcoin and Ether Custodian's platform. Such a delay may be intended
to permit the Bitcoin and Ether Custodian to assess the resulting versions of the Bitcoin network or Ethereum network, to determine how
best to securely "split" the bitcoin or ether from the Forked Asset, and to prevent malicious users from conducting "replay
attacks" (
i.e.
, broadcasting transactions on both versions of the forked networks to put Bitcoin and Ether Custodian assets
at risk). As a result, the Trust is likely to suspend creations and redemptions during a period in which the Bitcoin and Ether Custodian's
operations are halted.
In addition, any losses experienced
by 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 will
not receive the benefits of any forks or "airdrops."
In addition to forks, a digital
asset, including bitcoin and ether, may become subject to a similar occurrence known as an "airdrop." In an airdrop, the promotors
of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the
new 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 holders
of set amounts of bitcoin and ether or to particular public addresses on the Bitcoin and Ethereum networks. Airdrops may involve a user
being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. A user
entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholders
may not receive the benefits of any forks; the Trust may not choose, or be able, to participate in an airdrop; and the timing of receiving
any benefits from a fork, airdrop or similar event is uncertain.
A right to receive any such
benefit of a fork or airdrop is referred to as an "Incidental Right" and any digital asset acquired through an Incidental
Right is known as an "IR Assets." Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rights
and IR Assets. Such assets are not considered assets of the Trust at any point in time and will not be taken into account for purposes
of 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 desirable
in 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 in
exchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash back to the
Trust, which in turn would distribute the cash to the Depository Trust Company ("DTC") to be distributed to Shareholders in
proportion to the number of Shares owned.
22
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 contribute
such 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 such
Incidental Right(s) and/or IR Asset(s). The Sponsor may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-case
basis in consultation with its legal advisers, tax consultants and custodian. In determining whether to attempt to acquire and/or retain
any 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
                                            availability of a safe and practical way to take custody of the Incidental Right or IR Asset;
●
the
                                            cost or operational burden of taking possession and/or maintaining ownership of the Incidental
                                            Right or IR Asset and whether such cost or burden exceeds the benefits of owning such Incidental
                                            Rights or IR Asset or the proceeds that would be realized from a sale thereof;
●
whether
                                            there are any legal or regulatory restrictions on or risks or consequences arising from,
                                            or tax implications with respect to, the acceptance, retention, ownership, sale, transfer,
                                            abandonment, distribution or disposal or disposition of the Incidental Right or IR Asset,
                                            regardless of whether there is a safe and practical way to take custody of and secure such
                                            Incidental Right or IR Asset;
●
the
                                            existence of a suitable market into which the Incidental Right or IR Asset may be sold; and
●
whether
                                            claiming, owning, selling, or otherwise taking any action in respect of Incidental Right
                                            or IR Asset may create legal or regulatory risks, liability, or burdens of any kind for the
                                            Sponsor (including, without limitation, if such Incidental Right or IR Asset is, or may be,
                                            a security under federal securities laws or a commodity interest under the Commodity Exchange
                                            Act).
The Sponsor is under no obligation
to 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 Trust
claims any Incidental Right(s) and/or IR Asset(s) resulting from a fork or airdrop in the Bitcoin or Ethereum networks (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 application by the Exchange to amend its listing rules.
Due to the unregulated
nature 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, including
spot markets for bitcoin and ether, are growing rapidly. The digital asset trading platforms through which bitcoin, ether and other digital
assets trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national and
international and include a broadening range of digital assets and participants. Significant trading may occur on systems and platforms
with minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or suspend
withdrawals entirely, rendering the exchange of digital assets for fiat currency difficult or impossible. Participation in spot markets
requires users to take on credit risk by transferring digital assets from a personal account to a third party's account.
23
Digital asset trading platforms
do not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms, such as national
securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate without
extensive supervision by governmental authorities, and do not provide the public with significant information regarding their ownership
structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the United
States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital asset
trading platforms may be out of compliance with existing regulations.
As a result, trading activity
on or reported by these digital asset trading platforms is generally significantly less regulated than trading in regulated U.S. securities
and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues. Furthermore, many digital
asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability of trading on the
platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of digital assets such as bitcoin and
ether on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more traditional
exchanges. 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 marketplace
may lose confidence in, or may experience problems relating to, these venues.
No digital asset trading platform
on which bitcoin and ether trade is immune from these risks. The closure or temporary shutdown of digital asset trading platforms due
to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the bitcoin and Ethereum networks
and can slow down the mass adoption of bitcoin and ether. Further, digital asset trading platform failures or the failure of any other
major component of the digital asset ecosystems can have an adverse effect on digital asset markets and the price of digital assets, including
bitcoin and ether, and could therefore have a negative impact on the performance of the Trust.
Negative perception, a lack
of stability in the digital asset trading platforms, manipulation of digital asset trading platforms by customers and/or the closure or
temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may
reduce confidence in digital assets generally and result in greater volatility in the market price of digital assets and the Shares of
the Trust. Furthermore, the closure or temporary shutdown of a digital asset trading platform may impact the Trust's ability to
determine the value of its bitcoin and ether holdings or for Authorized Participants to effectively arbitrage Shares.
Digital asset
trading platforms may be exposed to security breaches.
The nature of the assets held
at digital asset trading platforms makes them appealing targets for hackers and a number of digital asset trading platforms have been
victims of cybercrimes. Over the past several years, some digital asset trading platforms have been closed due to security breaches. In
many of these instances, the customers of such digital asset trading platforms were not compensated or made whole for the partial or complete
losses of their account balances in such digital asset trading platforms. While, generally speaking, smaller digital asset trading platforms
are less likely to have the infrastructure and capitalization that make larger digital asset trading platforms more stable, larger digital
asset trading platforms are more likely to be appealing targets for hackers and malware. For example, the collapse of Mt. Gox, which filed
for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset trading platforms could be
subject to abrupt failure with consequences both for users of digital asset trading platforms and for the digital asset industry as a
whole. In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the value of one
bitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in January 2015, Bitstamp
announced 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 value
of bitcoin and other digital assets immediately decreased by more than 10% following reports of the theft at Bitfinex. In July 2017, FinCEN
assessed a $110 million fine against BTC-e, a now-defunct digital asset exchange, for facilitating crimes such as drug sales and ransomware
attacks. In December 2017, Yapian, the operator of Seoul-based cryptocurrency exchange Youbit, suspended digital asset trading and filed
for bankruptcy following a hack that resulted in a loss of 17% of Yapian's assets. Following the hack, Youbit users were allowed
to withdraw approximately 75% of the digital assets in their exchange accounts, with any potential further distributions to be made following
Yapian's pending bankruptcy proceedings. In January 2018, the Japanese digital asset trading platform, Coincheck was hacked, resulting
in losses of approximately $535 million, and in February 2018, the Italian digital asset trading platform Bitgrail was hacked, resulting
in 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.
24
Digital asset
trading platforms may be exposed to fraud and market manipulation.
The blockchain infrastructure
could be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dump
and fraud across different systems, platforms or geographic locations. As a result of reduced oversight, these schemes may be more prevalent
in digital asset markets than in the general market for financial products.
The SEC has identified possible
sources 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 asset
network 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 demand
for 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 of
such digital asset trading platforms were not compensated or made whole for the partial or complete losses of their account balances in
such digital asset trading platforms.
In 2019, there were reports
claiming that 80.95% of bitcoin trading volume on digital asset trading platforms was false or noneconomic in nature, with specific focus
on unregulated exchanges located outside of the United States. Such reports alleged that certain overseas exchanges have displayed suspicious
trading activity suggestive of a variety of manipulative or fraudulent practices. Other academics and market observers have put forth
evidence to support claims that manipulative trading activity has occurred on certain digital asset exchanges. For example, in a 2017
paper titled "Price Manipulation in the Bitcoin Ecosystem" sponsored by the Interdisciplinary Cyber Research Center at Tel
Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction data from a 2014 Mt. Gox security
breach, 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 Bitfinex
without actually executing them, presumably in order to influence other investors into buying or selling by creating a false appearance
that greater demand existed in the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex'd) cited
publicly available trading data to support his or her claim that a trading bot nicknamed "Picasso" was pursuing a paint-the-tape-style
manipulation strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts in order to create the appearance of
substantial trading activity and thereby influence the price of such assets.
In November 2022, FTX, one
of the largest digital asset trading platforms by volume at the time, halted customer withdrawals amid rumors of the company's liquidity
issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX's CEO resigned and FTX and
many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar
proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and
CFTC 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 were
removed from FTX. The full facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, or
other improper behavior.
The potential consequences
of a digital asset trading platform's failure or failure to prevent market manipulation could adversely affect the value of the
Shares. Any market abuse, and a loss of investor confidence in bitcoin and ether, may adversely impact pricing trends in bitcoin and ether
markets broadly, as well as an investment in Shares of the Trust.
Digital asset
trading platforms may be exposed to wash trading.
Digital asset trading platforms
on which bitcoin and ether trade may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for other
than 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 attractiveness
to investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek
the most liquid and high-volume exchanges on which to list their coins. Results of wash trading may include unexpected obstacles to trade
and erroneous investment decisions based on false information.
25
In the United States, there
have been allegations of wash trading even on regulated trading venues. Any actual or perceived false trading in the digital asset trading
venue market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of bitcoin and ether and/or
negatively affect the market perception of bitcoin and ether.
To the extent that wash trading
either occurs or appears to occur on trading platforms on which bitcoin and ether trade, investors may develop negative perceptions about
bitcoin, 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 asset
trading platforms may be exposed to front-running.
Digital asset trading platforms
on which bitcoin and ether trade may be susceptible to "front-running," which refers to the process when someone uses technology
or market advantage to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralized
digital asset trading platforms. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of
the forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of a
front 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 bitcoin
and ether is not based on any kind of claim, nor is it backed by any physical asset. Instead, the market value depends on the expectation
of being usable in future transactions and continued interest from investors. This strong correlation between an expectation and market
value is the basis for the current (and probable future) volatility of the market value of bitcoin and ether and may increase the likelihood
of momentum pricing.
Momentum pricing typically
is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation
in value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices
and leads to increased volatility. As a result, bitcoin and ether may be more likely to fluctuate in value due to changing investor confidence
in future appreciation or depreciation in prices, which could adversely affect the price of bitcoin and ether and, in turn, an investment
in the Trust.
The value of bitcoin and ether
as 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 previously
resulted, 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 investment
in Trust.
Some market observers have
asserted that in time, the value of bitcoin and ether will fall to a fraction of its current value, or even to zero. Neither bitcoin nor
ether has been in existence long enough for market participants to assess these predictions with any precision, but if these observers
are even partially correct, an investment in the Shares may turn out to be substantially worthless.
Political or economic
crises may motivate large-scale sales of bitcoin and ether, which could result in a reduction in the price of bitcoin and ether and adversely
affect an investment in the Shares.
As an alternative to fiat
currencies that are backed by central governments, digital assets are subject to supply and demand forces based upon the desirability
of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be
impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of digital
assets, including bitcoin and ether, either globally or locally. Large-scale sales of bitcoin and ether would result in a reduction in
the price of bitcoin and ether and adversely affect an investment in the Shares.
26
Ownership of digital
assets, including bitcoin and ether, is pseudonymous, and the supply of accessible bitcoin and ether is unknown. Entities with substantial
holdings in bitcoin and ether may engage in large-scale sales or distributions, either on nonmarket terms or in the ordinary course, which
could result in a reduction in the price of bitcoin and ether and adversely affect an investment in the Shares.
There is no registry showing
which 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 of
the bitcoin and ether that has been created to date. There are no regulations in place that would prevent a large holder of bitcoin and
ether from selling the bitcoin and ether it holds. To the extent such large holders of bitcoin and ether engage in large-scale sales or
distributions, either on nonmarket terms or in the ordinary course, it could result in a reduction in the price of bitcoin and ether and
adversely affect an investment in the Shares. For example, in March 2018, it was reported that the trustee overseeing the bankruptcy of
the Mt. Gox exchange had sold roughly $400 million worth of bitcoin and bitcoin cash belonging to the Mt. Gox bankruptcy estate. While
the trustee has publicly stated that the sale was conducted in a manner that would avoid affecting the market price, others have speculated
that corresponding reductions in the trading price of bitcoin were a result of these large sales. A significant quantity of bitcoin and
bitcoin cash remain in the Mt. Gox bankruptcy estate, and the process for selling the estate's remaining bitcoin and bitcoin cash
has not yet been determined. Further large-scale sales or distributions, either by the Mt. Gox bankruptcy estate or other entities with
substantial holdings, could result in selling pressure that may reduce the price of bitcoin and adversely affect an investment in the
Shares.
Irrevocable nature of
blockchain-recorded transactions.
Digital asset transactions
recorded on the Bitcoin and Ethereum blockchains are not, from an administrative perspective, reversible without the consent and active
participation of the recipient of the transaction or, in theory, control or consent
of a majority
of the nodes on the Bitcoin network or
of a majority of the Ethereum network's aggregate hash rate. Once a transaction has
been verified and recorded in a block that is added to the blockchain, an incorrect transfer of bitcoin and ether or a theft of bitcoin
and ether generally will not be reversible, and the Trust may not be capable of seeking compensation for any such transfer or theft. It
is possible that, through computer or human error, or through theft or criminal action, the Trust's bitcoin and ether could be transferred
from custody accounts in incorrect quantities or to unauthorized third parties. To the extent that the Trust is unable to seek a corrective
transaction with such third party or is incapable of identifying the third party that has received the Trust's bitcoin and ether
through error or theft, the Trust will be unable to revert or otherwise recover incorrectly transferred bitcoin and ether. To the extent
that 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 the
internet may affect digital asset network operations, which may adversely affect the bitcoin and ether industries and an investment in
the Trust.
Digital asset networks, including
the Bitcoin and Ethereum networks, rely on the internet. A significant disruption of internet connectivity could disrupt a digital asset
network's functionality until such disruption is resolved. A disruption in the internet could adversely affect an investment in
the Trust or the ability of the Trust to operate. In particular, some variants of digital assets have experienced a number of denial-of-service
attacks, which have led to temporary delays in block creation and digital asset transfers.
Digital assets are also susceptible
to border gateway protocol hijacking ("BGP hijacking"). Such an attack can be a very effective way for an attacker to intercept
traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one another
to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and
other security issues. If BGP hijacking occurs on the Bitcoin network or Ethereum network, participants may lose faith in the security
of bitcoin or ether, which could affect such digital asset's value and consequently the value of the Shares.
Any internet failures or internet
connectivity-related attacks that impact the ability to transfer bitcoin or ether could have a material adverse effect on the price of
such digital asset and the value of an investment in the Shares.
27
Potential amendments
to a digital asset network's protocols and software could, if accepted and authorized by the digital asset network community, adversely
affect an investment in the Trust.
The Bitcoin and Ethereum networks
use cryptographic protocols to govern the interactions within the Bitcoin and Ethereum networks. A loose community known as the core developers
has evolved to informally manage the source code for the protocol. Membership in the community of core developers evolves over time, largely
based on self-determined participation in the resource section dedicated to Bitcoin and Ethereum networks on Github.com. The core developers
can propose amendments to the Bitcoin and Ethereum networks' source code that could alter the protocols and software of the Bitcoin
and Ethereum networks and the properties of ether. These alterations would occur through software upgrades and could potentially include
changes to the irreversibility of transactions and limitations on the mining of new bitcoin or the issuance of new ether or changes to
the ether supply, which could undermine the appeal and market value of bitcoin and ether. Alternatively, software upgrades and other changes
to 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 networks
or bitcoin and ether. As a result, the Bitcoin and Ethereum networks could be subject to changes to their protocols and software in the
future that may adversely affect an investment in the Trust.
Decentralized governance
of digital asset networks could have a negative impact on the performance of the Trust.
Governance of decentralized
networks, 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 agreement
other than through overwhelming consensus. The lack of clarity on governance may adversely affect bitcoin and ether's utility and
ability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-term
problems. For example, a seemingly simple technical issue once divided the Bitcoin and Ethereum networks community: namely, whether to
increase the block size of the blockchain or implement another change to increase the scalability of bitcoin and ether.
To the extent lack of clarity
in corporate governance of the Bitcoin and Ethereum networks leads to ineffective decision-making that slows development and growth, the
value of the Shares may be adversely affected.
Double-spending risks.
A malicious actor may attempt
to 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 release
of 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-confirmation
acceptance tend to be prone to these types of attacks. Accordingly, traders and merchants may execute instantaneous/zero-confirmation
transactions only if they are of sufficiently low value. Users and merchants can take additional precautions by adjusting their network
software 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 the
source code for digital asset networks have been exposed and exploited, including flaws that disabled some functionality for users, exposed
users' personal information and/or resulted in the theft of users' digital assets. Discovery of flaws in or exploitations
of the source code that allow malicious actors to take or create money in contravention of known network rules have occurred. The cryptography
underlying bitcoin and ether could prove to be flawed or ineffective, or developments in mathematics and/or technology, such as advances
in digital computing, algebraic geometry and quantum computing, could make cryptography ineffective. In any of these circumstances, a
malicious actor may be able to steal bitcoin and ether held by others, which could adversely affect the demand for bitcoin and ether and
therefore adversely impact the price of bitcoin and ether and the value of the Shares. Even if a digital asset other than bitcoin or ether
was affected by similar circumstances, any reduction in confidence in the robustness of the source code or cryptography underlying digital
assets generally could negatively affect the demand for all digital assets, including bitcoin and ether, and therefore adversely affect
the value of the Shares.
28
Congestion or delay
in a digital asset network may delay purchases or sales of bitcoin or ether by the Trust.
The size of each block on
digital asset networks, including the Bitcoin network and Ethereum network, 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 digital asset networks. Moreover, unforeseen system failures, disruptions in operations, or poor connectivity may
also result in delays in the recording of transactions on digital asset networks. Any delay in the Bitcoin and Ethereum networks could
affect an Authorized Participant's ability to buy or sell bitcoin and ether at an advantageous price resulting in decreased confidence
in the respective network. Over the longer term, delays in confirming transactions could reduce the attractiveness to merchants and other
commercial parties as a means of payment. As a result, the Bitcoin and Ethereum networks and the value of the Trust would be adversely
affected.
Any name change
and any associated rebranding initiative by the core developers of bitcoin or ether may not be favorably received by the digital asset
community, which could negatively impact the value of bitcoin or ether and the value of the Shares.
From time to time, digital
assets may undergo name changes and associated rebranding initiatives. For example, Bitcoin Cash may sometimes be referred to as Bitcoin
ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi's Vision, and in the third quarter
of 2018, the team behind ZEN rebranded and changed the name of ZenCash to "Horizen." The Sponsor cannot predict the impact
of any name change and any associated rebranding initiative on ether. After a name change and an associated rebranding initiative, a digital
asset may not be able to achieve or maintain brand-name recognition or status that is comparable to the recognition or status previously
enjoyed by such digital asset. The failure of any name change and any associated rebranding initiative by a digital asset may result in
such 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 Bitcoin
network
The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of bitcoin and the capabilities and development
of the Bitcoin blockchain.
Bitcoin
has 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 the
capabilities and development of the Bitcoin blockchain, such as the recentness of its development, its dependence on the internet and
other 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
                                            acceptance of software patches or upgrades by a significant, but not overwhelming, percentage
                                            of the users and miners in a digital asset network, such as the Bitcoin network, could result
                                            in a "fork" in such network's blockchain, resulting in the operation of
                                            multiple separate networks.
●
If
                                            the digital asset award for mining blocks and transaction fees for recording transactions
                                            on the Bitcoin network are not sufficiently high to incentivize miners, or if certain jurisdictions
                                            continue to limit mining activities, miners may cease expanding processing power or demand
                                            high transaction fees, which could negatively impact the value of bitcoin and the value of
                                            the Shares.
●
Governance
                                            of the Bitcoin network is by voluntary consensus and open competition. As a result, governance
                                            challenges such as lack of consensus may stymie the Bitcoin network's utility and ability
                                            to grow and face challenges. In particular, it may be difficult to find solutions or martial
                                            sufficient effort to overcome any future problems on the Bitcoin network, especially long-term
                                            problems.
●
The
                                            Bitcoin network's protocol is informally managed by a group of core developers that
                                            propose amendments to the Bitcoin network's source code. The core developers evolve
                                            over time, largely based on self- determined participation. To the extent that a significant
                                            majority of users and miners adopt amendments to the Bitcoin network, the Bitcoin network
                                            will be subject to new protocols that may adversely affect the value of bitcoin. In addition,
                                            if a digital asset network has high-profile contributors, a perception that such contributors
                                            will no longer contribute to the network could have an adverse effect on the market price
                                            of the related digital asset.
29
●
Over
                                            the past several years, digital asset mining operations, including those mining bitcoin,
                                            have evolved from individual users mining with computer processors, graphics processing units
                                            and first-generation application specific integrated circuit machines to "professionalized"
                                            mining operations using proprietary hardware or sophisticated machines. If the profit margins
                                            of digital asset mining operations are not sufficiently high, including due to an increase
                                            in electricity costs or a decline in the market price of the relevant digital asset issued
                                            as a mining reward, or if digital asset mining operations are unable to arrange alternative
                                            sources of financing (e.g., if lenders refuse to make loans to such miners), digital asset
                                            miners are more likely to immediately sell tokens earned by mining or sell more such digital
                                            assets than they otherwise would, resulting in an increase in liquid supply of that digital
                                            asset, which would generally tend to reduce that digital asset's market price.
●
Currently,
                                            the reward earned by miners for mining a block on the Bitcoin network is 3.125 bitcoins.
                                            This reward size is reduced by 50% every 210,000 blocks, which occurs roughly every four
                                            years. The most recent reward halving event occurred in April 2024, and the next reward halving
                                            event is expected to occur in or around March 2028, at which time the reward earned per block
                                            will fall to 1.5625. The reduction in mining rewards of bitcoin could be inadequate to incentivize
                                            miners to continue to perform mining activities, thereby jeopardizing the security of the
                                            Bitcoin network, which could harm the value of the Shares.
●
A
                                            reduction in the processing power expended by miners on the Bitcoin network could increase
                                            the likelihood of a malicious actor or botnet (a volunteer or hacked collection of computers
                                            controlled by networked software coordinating the actions of the computers) obtaining control.
                                            See "—If a malicious actor or botnet obtains control of more than 50% of the
                                            processing power on the Bitcoin network, or otherwise obtains control over the Bitcoin network
                                            through its influence over core developers or otherwise, such actor or botnet could manipulate
                                            the Bitcoin blockchain to adversely affect the value of the Shares or the ability of the
                                            Trust to operate."
●
Miners
                                            have historically accepted relatively low transaction confirmation fees on most digital asset
                                            networks. If miners demand higher transaction fees for recording transactions in the Bitcoin
                                            blockchain or a software upgrade automatically charges fees for all transactions on the Bitcoin
                                            network, the cost of using bitcoin may increase and the marketplace may be reluctant to accept
                                            bitcoin as a means of payment. Alternatively, miners could collude in an anti-competitive
                                            manner to reject low transaction fees on the Bitcoin network and force users to pay higher
                                            fees, thus reducing the attractiveness of the Bitcoin network. Higher transaction confirmation
                                            fees resulting through collusion or otherwise may adversely affect the attractiveness of
                                            the Bitcoin network, the value of bitcoin and the value of the Shares.
●
To
                                            the extent that any miners cease to record transactions that do not include the payment of
                                            a transaction fee in mined blocks or do not record a transaction because the transaction
                                            fee is too low, such transactions will not be recorded on the Bitcoin blockchain until a
                                            block is mined by a miner who does not require the payment of transaction fees or is willing
                                            to accept a lower fee. Also, some miners have financed the acquisition of mining equipment
                                            or the development or construction of infrastructure to perform mining activities by borrowing.
                                            If such miners experience financial difficulties and are unable to pay back their borrowings,
                                            their mining capacity could become unavailable to the Bitcoin network, which could conceivably
                                            result in disruptions in recording transactions on the Bitcoin network. Any widespread delays
                                            or disruptions in the recording of transactions could result in a loss of confidence in the
                                            Bitcoin network and could prevent the Trustee from completing transactions associated with
                                            the day-to-day management of the Trust, including creations and redemptions of the Shares
                                            in exchange for cash with Authorized Participants.
●
Digital
                                            asset mining operations can consume significant amounts of electricity, which may have a
                                            negative environmental impact and give rise to public opinion against allowing, or government
                                            regulations restricting, the use of electricity for mining operations. Additionally, miners
                                            may be forced to cease operations during an electricity shortage or power outage, or if electricity
                                            prices increase where the mining activities are performed. This could adversely affect the
                                            price of bitcoin and the value of the Shares.
●
The
                                            open-source structure of many digital asset network protocols, such as the protocol for the
                                            Bitcoin network, means that developers and other contributors are generally not directly
                                            compensated for their contributions in maintaining and developing such protocols. As a result,
                                            the developers and other contributors of a particular digital asset may lack a financial
                                            incentive to maintain or develop the network, or may lack the resources to adequately address
                                            emerging issues. Alternatively, some developers may be funded by companies whose interests
                                            are at odds with other participants in a particular digital asset network. A failure to properly
                                            monitor and upgrade the protocol of the Bitcoin network could damage that network.
30
The Bitcoin network
faces significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.
As
of October 2024, the Bitcoin network handled approximately seven transactions per second. In an effort to increase the volume of transactions
that can be processed on a given digital asset network, many digital assets are being upgraded with various features to increase the speed
and throughput of digital asset transactions. For example, in August 2017, the Bitcoin network was upgraded with a technical feature known
as "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 increase
transaction throughput (i.e., millions of transactions per second). Wallets and "intermediaries," or connecting nodes that
facilitate 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.
In
2021, the Bitcoin protocol implemented the Taproot upgrade to add enhanced support for complex transactions on the network such as multi-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 data written 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 which led to the
launch of the "ordinal protocol." The ordinal protocol takes advantage of Taproot's relaxed data requirements to allow
users to add graphic images and other data files to bitcoin transactions ("Ordinals"). By the end of 2023, nearly 53 million
Ordinals had been inscribed to the Bitcoin blockchain.
As
corresponding increases in throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase
considerably. For example, the Bitcoin network has been, at times, at capacity, which has led to increased transaction fees. Since January
1, 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. Increased
fees and decreased settlement speeds could preclude certain uses for bitcoin (e.g., micropayments), and could reduce demand for, and the
price of, bitcoin, which could adversely impact the value of the Shares. In May 2023, events related to the adoption of Ordinals caused
transaction fees to temporarily spike above $30 per transaction. As of January 1, 2025, bitcoin transaction fees were averaging $____
per transaction.
There
is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of transactions in bitcoin
will be effective, or how long these mechanisms will take to become effective, which could adversely impact an investment in the Shares.
Operational cost
may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin
network.
The
Bitcoin 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 during
2028. As the block reward continues to decrease over time, the mining incentive structure may transition to a higher reliance on transaction
confirmation fees in order to incentivize miners to continue to dedicate processing power to the blockchain. If transaction confirmation
fees become too high, the marketplace may be reluctant to use bitcoin. Increased transaction fees may motivate market participants, such
as merchants or commercial institutions, to switch from bitcoin to another digital asset or back to fiat currency as their preferred medium
of 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 to
incentivize 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 network
and could adversely affect the value of the bitcoin held by the Trust.
31
Miners
ceasing operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the confirmation
process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the blockchain until the next scheduled
adjustment in difficulty for block solutions) and make the Bitcoin network more vulnerable to a malicious actor or botnet obtaining sufficient
control to manipulate the blockchain and hinder transactions. Any reduction in confidence in the confirmation process or processing power
of the Bitcoin network may adversely affect the value of the Shares.
To the extent
that any miners exclude some or all transactions, significant increases in fees and widespread delays in the recording of transactions
could result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in Shares.
To
the extent that any miners solve blocks that exclude some or all transactions that have been transmitted to the Bitcoin network, such
transactions will not be recorded on the blockchain until another miner solves a block that incorporates those transactions. Some in the
bitcoin community have suspected that certain technologies (for example, before segregated witness was activated, ASICBoost) enhance speed
and 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 could
result in a loss of confidence in the Bitcoin network, which could adversely impact an investment in the Shares.
Miners could act
in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network.
Bitcoin
miners collect fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions
to new blocks in the blockchain. Miners are not forced to confirm any specific transaction, but they are economically incentivized to
confirm 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 of
transaction fees. Miners have historically accepted relatively low transaction confirmation fees because miners have a very low marginal
cost of validating unconfirmed transactions. If miners collude in an anticompetitive manner to reject low transaction fees, then bitcoin
users could be forced to pay higher fees, thus reducing the attractiveness of the Bitcoin network, or to wait longer times for their transactions
to be validated by a miner who does not require the payment of a transaction fee. Bitcoin mining occurs globally and it may be difficult
for authorities to apply antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact an investment
in the Trust or the ability of the Trust to operate.
As technology
advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline
in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust.
Miners
may be unable to acquire the proper mining equipment or suitable amounts of equipment necessary to continue their operations or develop
and launch their operations. In addition, because successful mining of a digital asset that uses "proof of work" validation
requires maintaining or exceeding a certain level of computing power relative to other validators, miners will need to upgrade their mining
hardware periodically to keep up with their competition. The development of supercomputers with disproportionate computing power may threaten
the integrity of the bitcoin market by concentrating mining power, which would make it unprofitable for other miners to mine. The expense
of purchasing or upgrading new equipment may be substantial and diminish returns to miners dramatically. A decline in miners may result
in a decrease in the value of bitcoin and the value of the Trust.
If profit margins
of bitcoin mining operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in
the price of bitcoin that could adversely affect an investment in the Trust.
Bitcoin
network mining operations have rapidly evolved over the past several years from individual users mining with computer processors, graphics
processing units and first-generation ASIC (application-specific integrated circuit) machines. New processing power is predominantly added
to the Bitcoin network currently by "professionalized" mining operations. Such operations may use proprietary hardware or
sophisticated 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 the
mining farms. As a result, professionalized mining operations are of a greater scale than prior Bitcoin network validators and have more
defined, regular expenses and liabilities. In past years, individual miners are believed to have been more likely to hold newly mined
bitcoin for extended periods.
32
A
professional mining operation operating at a low profit margin may be more likely to sell a higher percentage of its newly mined bitcoin
rapidly, and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higher
percentage of the new bitcoin mined each day will be sold into the bitcoin market more rapidly, thereby reducing bitcoin prices. The network
effect of reduced profit margins resulting in greater sales of newly mined bitcoin could result in a reduction in the price of bitcoin
that could adversely affect an investment in the Trust.
New competing
digital assets may pose a challenge to bitcoin's current market dominance, resulting in a reduction in demand for bitcoin, which
could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust.
The
Bitcoin network and bitcoin, as an asset, hold a "first-to-market" advantage over other digital assets. This first-to-market
advantage has resulted in the Bitcoin network having the broadest adoption and the estimated value of existing bitcoin is greater than
the aggregate value of any digital asset. The Bitcoin network enjoys the largest user base and has more mining power in use to secure
the Bitcoin blockchain than any other digital asset network. Having a large mining network provides users greater confidence in the security
and long-term stability of the Bitcoin network. This greater security may create a snowball effect that inures to the benefit of the Bitcoin
network – namely, the advantage of more users and miners makes a digital asset more secure, which potentially makes it more attractive
to new users and miners, resulting in a network effect that potentially strengthens the first-to-market advantage. However, despite the
marked first-mover advantage of the Bitcoin network over other digital assets, it is possible that real or perceived shortcomings in the
Bitcoin network, or technological, regulatory or other developments, could result in a decline in popularity and acceptance of bitcoin
and the Bitcoin network, and other digital assets and digital asset networks could become more widely accepted and used than the Bitcoin
network. In addition, central bank digital currencies may be attractive to some users due to lesser perceived volatility, greater trustworthiness
and/or any applicable federal insurance.
For
example, 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 upgrade
acceptance 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 delay
in the integration and inability to reach consensus on scaling solutions led to several hard forks of digital asset networks that had
greater block sizes on their blockchains (e.g., Bitcoin Cash in 2017). While projects such as Rootstock and Blockstream have sought to
augment the slow pace of core software upgrades with "second-layer" or "side-chain" solutions for the Bitcoin
network, digital asset networks with features that are differentiated from Bitcoin may attract developers, investors and users, which
may have a negative impact on an investment in the Shares.
The scheduled
creation of newly mined bitcoin and their subsequent sale may cause the price of bitcoin to decline, which could negatively affect an
investment in the Trust.
Newly created bitcoin ("newly
mined bitcoin") are generated through a process referred to as "mining." As of the date of this prospectus, the Bitcoin
network creates 3.125 bitcoin with each block added to the Bitcoin blockchain; these newly mined bitcoin are awarded to the bitcoin miner
that has added the block to the Bitcoin blockchain, which occurs on average approximately every 10 minutes. When the recipient makes newly
mined bitcoin available for sale, there can be downward pressure on the price of bitcoin as the new supply is introduced into the Bitcoin
market. A bitcoin mining operation may be more likely to sell a higher percentage of its newly created bitcoin, and more rapidly so, if
it is operating at a low profit margin, thus reducing the price of bitcoin. Lower bitcoin prices may result in further tightening of profit
margins for miners and decreasing profitability, thereby potentially causing even further selling pressure. Diminishing profit margins
and increasing sales of newly mined bitcoin could result in a reduction in the price of bitcoin, which could adversely impact an investment
in the Shares.
In addition, bitcoin mining
is highly sensitive to energy prices and bitcoin market prices. To mine bitcoin, a bitcoin miner acquires specialized computers that consume
significant amounts of energy. As energy prices fluctuate, the marginal cost of bitcoin mining increases and decreases. Conversely, the
price of bitcoin and amount of "hashrate" being expended by other bitcoin miners will impact the profitability and likelihood
of solving a block and receiving newly mined bitcoin. If the marginal cost of bitcoin mining exceeds the expected profit, miners may cease
to expend energy to mine bitcoin. If a material number of miners turn off their mining hardware, the speed of transaction processing on
the Bitcoin network may experience a temporary slowdown and the overall security of the Bitcoin network against a 51% attack (as described
below) may be reduced.
33
Environmental
concerns could slow or curtail the supply of bitcoin or the acceptance of bitcoin in payment.
Mining for the Bitcoin network
is 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 they
are replaced with faster models. Increased awareness of these issues has led some companies, notably Tesla and Greenpeace, to refuse acceptance
of bitcoin in payment. Certain localities, such as China, have recently banned mining altogether, while others seek to halt mining temporarily
until environmental impact studies can be conducted. These concerns could result in increased mining bans, as well as a slowing or decrease
in bitcoin payment acceptance, affecting both the supply of, and demand for, bitcoin.
The Bitcoin network
requires significant electricity to mine and it is possible that certain jurisdictions will implement regulations regarding the energy
consumption of the Bitcoin network, which could result in a significant reduction in mining activity and adversely affect the security
of 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" validation
mechanism 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 these
operations 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's
total energy consumption, including the costs of cooling the machines that perform these calculations. The availability and cost of electricity
will restrict the geographic locations of mining activities. High costs of electricity may incentivize miners to redirect their resources
to other validation protocols, such as proof-of-stake blockchains, or abandon their validation activities entirely. A significant decrease
in the computational resources dedicated to the Bitcoin network's validation protocol could reduce the security of the network which
may erode bitcoin's viability as a store of value or means of exchange.
Due to concerns around energy
consumption 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 moratoriums
would impede bitcoin mining and/or bitcoin use more broadly. For example, in November 2022, New York imposed a two-year moratorium on
new proof-of-work mining permits at fossil fuel plants in the state and, on May 26, 2021, Iran placed a temporary ban on bitcoin mining
in an attempt to decrease energy usage and help alleviate blackouts.
Depending on how futures regulations
are formulated and applied, such policies could have the potential to negatively affect the price of bitcoin, and, in turn, the value
of the Shares. Increased regulation and the corresponding compliance cost of these regulations could additionally result in higher barriers
to entry for bitcoin miners, which could increase the concentration of the hash rate, potentially having a negative impact on the price
of bitcoin.
The open-source structure
of the Bitcoin network protocol means that the core developers and other contributors are generally not directly compensated for their
contributions in maintaining and developing the Bitcoin network protocol. A failure to properly monitor and upgrade the Bitcoin network
protocol could damage the Bitcoin network and an investment in the Trust.
The Bitcoin network operates
based on an open-source protocol maintained by a group of core developers and other contributors, largely on the GitHub resource section
dedicated to development of the Bitcoin network. As the Bitcoin network protocol is not sold or made available subject to licensing or
subscription fees and its use does not generate revenues for its development team, the core developers are generally not compensated for
maintaining and updating the Bitcoin network protocol. Consequently, there is a lack of financial incentive for developers to maintain
or develop the Bitcoin network and the core developers may lack the resources to adequately address emerging issues with the Bitcoin network
protocol. Although the Bitcoin network is currently supported by the core developers, there can be no guarantee that such support will
continue or be sufficient in the future. Alternatively, entities whose interests are at odds with other participants in the Bitcoin network
may seek to obtain control over the Bitcoin network by influencing core developers. For example, malicious actors could attempt to bribe
a core developer or group of core developers to propose certain changes to the network core developers. To the extent that material issues
arise with the Bitcoin network protocol and the core developers and open-source contributors are unable to address the issues adequately
or in a timely manner, the Bitcoin network and an investment in the Trust may be adversely affected.
34
Decentralized governance
of the Bitcoin network could have a negative impact on the performance of the Trust.
Governance of decentralized
networks, such as the Bitcoin network, is achieved through voluntary consensus and open competition. In other words, the Bitcoin network
has 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 which
may require solutions and directed effort to overcome problems, especially long-term problems. For example, a seemingly simple technical
issue once divided the Bitcoin network community: namely, whether to increase the block size of the blockchain or implement another change
to increase the scalability of bitcoin.
To the extent lack of clarity
in corporate governance of the Bitcoin network leads to ineffective decision- making that slows development and growth, the value of the
Shares may be adversely affected.
Mathematical or technological
advances could undermine the Bitcoin network's consensus mechanism.
The Bitcoin network is premised
on multiple persons competing to solve cryptographic puzzles quickly. It is possible that mathematical or technological advances, such
as the development of quantum computers with significantly more power than computers presently available, could undermine or vitiate the
cryptographic consensus mechanism underpinning the Bitcoin blockchain.
Large-Scale Sales or
Distributions.
Some entities hold large amounts
of bitcoin relative to other market participants, and to the extent such entities engage in large-scale hedging, sales or distributions
on non-market terms, or sales in the ordinary course, it could result in a reduction in the price of bitcoin and adversely affect the
value 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 reduce
the 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 wallets
are controlled by the same person or entity. Moreover, it is possible that other persons or entities control multiple wallets that collectively
hold a significant number of bitcoin, even if each wallet individually only holds a small amount. As a result of this concentration of
ownership, large sales by such holders could have an adverse effect on the market price of bitcoin.
Congestion or delay
in the Bitcoin network may delay purchases or sales of bitcoin by the Trust.
The size of each block on
the 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 transactions
on the Bitcoin network. Any delay in the Bitcoin network could affect the Authorized Participant's ability to buy or sell bitcoin
at an advantageous price resulting in decreased confidence in the Bitcoin network. Over the longer term, delays in confirming transactions
could reduce the attractiveness to merchants and other commercial parties as a means of payment. As a result, the Bitcoin network and
the value of the Trust would be adversely affected.
35
Risks Associated with Ether and the Ethereum
network
The value of the Shares
is subject to a number of factors relating to the fundamental investment characteristics of ether and the capabilities and development
of the Ethereum blockchain.
Ether has only been in existence
since 2015 and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development
of the Ethereum blockchain, such as the recentness of its development, its dependence on the internet and other technologies, its dependence
on the role played by users, developers and validators 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
                                            acceptance of software patches or upgrades by some, but not all, nodes, users and validators
                                            in the Ethereum network could result in a "fork" in the Ethereum blockchain,
                                            resulting in the operation of multiple separate networks.
●
Governance
                                            of the Ethereum network is by voluntary consensus and open competition. As a result, there
                                            may be a lack of consensus or clarity on the governance of the Ethereum network, which may
                                            stymie the Ethereum network's utility and ability to grow and face challenges. In particular,
                                            it may be difficult to find solutions or martial sufficient effort to overcome any future
                                            problems on the Ethereum network, especially long-term problems.
●
The
                                            Ethereum network's protocol is informally overseen by a collective of core developers
                                            who, along with members of the Ethereum community, can introduce proposals, known as Ethereum
                                            Improvement Proposals ("EIPs"), for updating the Ethereum network. The core developers
                                            evolve over time, largely based on self-determined participation. An Ethereum client ("Ethereum
                                            Client") is a software application that implements the Ethereum network specification
                                            and communicates with the Ethereum network. A "node" is a computer or other device
                                            that has downloaded the Ethereum Client and is connected to other computers also running
                                            the Ethereum Client software, together forming the Ethereum network. To the extent that node
                                            operators update their individual Ethereum Client to new specifications, the Ethereum network
                                            could be subject to changes that may adversely affect the value of ether. In addition, if
                                            a digital asset network has high-profile contributors, a perception that such contributors
                                            will no longer contribute to the network could have an adverse effect on the market price
                                            of the related digital asset.
●
Over
                                            the past several years, digital asset validator operations have evolved from individual users
                                            to "professionalized" validating operations using proprietary hardware or sophisticated
                                            machines. If the profit margins of digital asset validating operations are not sufficiently
                                            high, including due to a decrease in transaction fees, validators are more likely to immediately
                                            sell tokens earned by validating, resulting in an increase in liquid supply of that digital
                                            asset, which would generally tend to reduce that digital asset's market price.
●
To
                                            the extent that any validators cease to record transactions that do not include the payment
                                            of a transaction fee in solved blocks or do not record a transaction because the transaction
                                            fee is too low, such transactions will not be recorded on the Ethereum blockchain until a
                                            block is validated by a validator who does not require the payment of transaction fees or
                                            is willing to accept a lower fee. Any widespread delays in the recording of transactions
                                            could result in a loss of confidence in a digital asset network.
●
The
                                            Ethereum network faces significant scaling challenges and may periodically be upgraded with
                                            various features designed to increase the speed of digital asset transactions and the number
                                            of transactions that can processed in a given period (known as "throughput").
                                            These attempts to increase the volume of transactions may not be effective or may result
                                            in unforeseen problems or issues, and such upgrades may fail, resulting in potentially irreparable
                                            damage to the Ethereum network and the value of ether.
36
●
In
                                            the past, bugs, defects, and flaws in the source code for digital assets have been exposed
                                            and exploited, including flaws that disrupted normal Ethereum network, Ethereum Client, or
                                            dApp and smart contract operations or disabled related functionality for users, exposed users'
                                            personal information and/or resulted in the theft of users' digital assets. For example,
                                            in May 2023, the main Ethereum network itself reportedly suffered outages or bugs that for
                                            a short time prevented transactions from finalizing and being recorded in blocks twice in
                                            two days. Major Ethereum Clients which nodes use to access the Ethereum network, such as
                                            Geth, Besu and Nethermind, have in the past suffered outages or disruptions due to bugs.
                                            For more on an unplanned fork involving Geth clients, see "—A temporary or permanent
                                            "fork" could adversely affect the value of the Shares." The cryptography
                                            underlying the Ethereum network or ether as an asset could prove to be flawed or ineffective,
                                            or developments in mathematics and/or technology, including advances in digital computing,
                                            algebraic geometry and quantum computing, could result in such cryptography becoming ineffective.
                                            In any of these circumstances, a malicious actor may be able to compromise the security of
                                            the Ethereum network or take the Trust's ether, which would adversely affect the value
                                            of the Shares. Moreover, normal operations and functionality of the Ethereum network may
                                            be negatively affected. Such losses of functionality could lead to the Ethereum network losing
                                            attractiveness to users, nodes, validators, or other stakeholders, thereby dampening demand
                                            for ether. Even if another digital asset other than ether were affected by similar circumstances,
                                            any reduction in confidence in the source code or cryptography underlying digital assets
                                            generally could negatively affect the demand for digital assets and therefore adversely affect
                                            the value of the Shares.
●
The
Ethereum network has been in the process of implementing a series of software upgrades and other changes to its protocol, which were
previously referred to collectively as "Ethereum 2.0" and some of which were implemented during 2022, such as the Bellatrix
and Paris planned forks (defined below) that transitioned the Ethereum network from a proof-of-work consensus mechanism to a proof-of-stake
consensus mechanism ("the Merge"). These upgrades have resulted in, and are expected to continue to result in, changes to
the Ethereum network. Many of the contemplated upgrades to the Ethereum network will include updates to material aspects of its source
code. Although some of these upgrades have been successfully implemented, such as the Merge, which was completed in September 2022, there
is no guarantee that there are not undiscovered flaws that will emerge in the future even in upgrades previously considered successful,
and previously successful upgrades do not guarantee that future upgrades will be successful. Any such undiscovered flaws, or the failure
to properly implement future changes, could have a material adverse effect on the value of ether and the value of the Shares. One completed
upgrade is known as the "Shanghai" upgrade, which allows users to unstake their ether and remove it from the relevant smart
contract. As a result of this or future upgrades, it is possible that significant volumes of currently locked and illiquid ether becomes
unlocked and sold, which could increase volatility in ether prices or have a material adverse effect on the value of ether and the value
of the Shares. Upgrades currently being considered to increase throughput and promote scaling, such as "sharding" the Layer
1 Ethereum network or greater reliance on so-called "Layer 2" solutions, could have effects which are difficult to anticipate
at this time, but could – if unsuccessfully implemented, or if they contain undiscovered flaws – materially adversely impact
or even effectively eliminate the value of ether, and therefore impact the price of the Shares. In addition, the acceptance of software
patches or upgrades by a significant, but not overwhelming, percentage of the users and validators in a digital asset network could result
in a "fork" in such network's blockchain, resulting in the operation of multiple separate networks.
●
The
Ethereum network is still in the process of developing and making significant decisions that will affect policies that govern the supply
and issuance of ether as well as other Ethereum network protocols. For example, the Ethereum network has on three occasions reduced the
quantity of ether rewarded per block and may make additional changes in the future, see "Overview of the Ethereum Industry—Creation
of New Ether" for additional information. The open-source nature of many digital asset network protocols, such as the protocol
for the Ethereum network, means that developers and other contributors are generally not directly compensated for their contributions
in maintaining and developing such protocols. As a result, the developers and other contributors of a particular digital asset may lack
a financial incentive to maintain or develop the network, or may lack the resources to adequately address emerging issues. Alternatively,
some developers may be funded by companies whose interests are at odds with other participants in a particular digital asset network.
If the Ethereum network does not successfully develop its policies on supply and issuance and other major design decisions, or does so
in a manner that is not attractive to network participants, it could lead to a decline in adoption of the Ethereum network and price
of ether.
●
Decentralized
application and smart contract developers depend on being able to obtain ether to be able to run their programs and operate their businesses.
In particular, decentralized applications and smart contracts require ether in order to pay the gas fees needed to power such applications
and smart contracts and execute transactions. As such, they represent a significant source of demand for ether. Ether's price volatility
(particularly where ether prices increase), or the Ethereum network's wider inability to meet the demands of decentralized applications
and smart contracts in terms of inexpensive, reliable, and prompt transaction execution (including during congested periods), or to solve
its scaling challenges or increase its throughput, may discourage such decentralized application and smart contract developers from using
the Ethereum network as the foundational infrastructure layer for building their applications and smart contracts. If decentralized application
and smart contract developers abandon the Ethereum blockchain for other blockchain or digital asset networks or protocols for whatever
reason, the value of ether could be negatively affected.
37
The Ethereum network
faces 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 tradeoff
between security and scalability. One means through which public blockchains achieve security is decentralization, meaning that no intermediary
is responsible for securing and maintaining these systems. For example, a greater degree of decentralization generally means a given digital
asset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a given
digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible
for maintaining a copy of the entire state of the network. As a result, a digital asset network may be limited in the number of transactions
it can process by the fact that all validators participate in validating in each block and the capabilities of each single fully participating
node.
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's
consensus mechanism to a process known as proof-of-stake, and was intended to address the perceived shortcomings of the proof-of-work
consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known under proof-of-work
as "miners") who did not win the race, under proof of work, to be the first in time to solve the cryptographic puzzle that
would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was only given
to the first validator to successfully solve the puzzle and hash a given block, and not to others). Instead, under proof-of-stake, a single
validator is randomly selected to solve the cryptographic puzzle needed to validate a block, which it proposes to a committee of other
validators, 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, core
development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput
and scalability and also improve existing or next generation uses. Future upgrades to the Ethereum protocol and Ethereum blockchain to
address scaling issues – such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network
demand – have been discussed by network participants, such as sharding. The purpose of sharding 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 validators being responsible for the entire blockchain, allowing
for parallel processing and validation of transactions. However, there appears to be uncertainty and a lack of existing widespread consensus
among network participants about how to solve the scaling challenges faced by the Ethereum network.
The rapid development of other
competing scalability solutions, such as those which would rely on handling the bulk of computational work relating to transactions or
smart 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 network
and Ethereum blockchain, has caused alternatives to sharding to emerge. "Layer 2" is a collective term for solutions which
are 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 Layer
1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of
how this is done vary significantly between different Layer 2 technologies and implementations. For example, "rollups" perform
transaction execution outside the Layer 1 Ethereum network and then post the data, typically in batches, back to the Layer 1 Ethereum
network 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 proof of validity of a batch of transactions (not the entire transactions
themselves) that is recorded on the Layer 1 Ethereum network. By contrast, "optimistic rollups" assume transactions are valid
by 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 Layer
2 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 capabilities
to the existing Layer 1 Ethereum network runs in parallel with the existing Layer 1 Ethereum network 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.
38
There is no guarantee that
any of the mechanisms in place or being explored for increasing the speed and throughput of settlement of Ethereum network transactions
will be effective, or how long these mechanisms will take to become effective, which could cause the Ethereum network to not adequately
resolve scaling challenges and adversely impact the adoption of ether and the Ethereum network and the value of the Shares. There is no
guarantee that any potential scaling solution, whether a change to the Layer 1 Ethereum network like sharding or the introduction of a
Layer 2 solution like rollups, state channels or side chains, will achieve widespread adoption. It is possible that proposed changes to
the Layer 1 Ethereum network could divide the community, potentially even causing a hard fork, or that the decentralized governance of
the Ethereum network causes network participants to fail to coalesce overwhelmingly around any particular solution, causing the Ethereum
network to suffer reduced adoption or causing nodes, users or validators to migrate to other blockchain networks. It is also possible
that scaling solutions could fail to work as intended or could introduce bugs, coding defects or flaws, security risks, or other problems
that could cause them to suffer operational disruptions. For example, in April 2024, Starknet, a Layer 2 built on the Layer 1 Ethereum
network, suffered an outage reportedly caused by a rounding error bug that halted production of new blocks on Starknet's Layer 2
blockchain network. Similar outages, bugs, defects, or other problems could affect Layer 2s in the future. Similarly, in multiple instances
throughout 2022 and 2023, the Arbitrum Layer 2 network experienced outages due to failures in its primary node responsible for submitting
transactions 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 widely
used Layer 2 network were to fail, it could reduce demand for ether because it would eliminate a source of demand for using ether to record
transactions from the Layer 2 onto the Layer 1 Ethereum network. Any of the foregoing could adversely affect the price of ether or the
value of the Shares.
As of ________, 2025, the
Ethereum network handled approximately [13] transactions per second (according to Dune analytics). In an effort to increase the volume
of transactions that can be processed on a given digital asset network, many digital assets are being upgraded with various features to
increase the speed and throughput of digital asset transactions. As corresponding increases in throughput lag behind growth in the use
of digital asset networks, average fees and settlement times may increase considerably. For example, the Ethereum network has been, at
times, at capacity, which has led to increased transaction fees. In December 2017, the popularity of the blockchain-based game Cryptokitties
led to significant network congestion on the Ethereum network. The game, which allows players to trade and create virtual kitties, represented
by non-fungible tokens ("NFTs"), was reported by some sources to have accounted for more than 10% of the entire Ethereum network
traffic at the time causing increases in transaction fees and delays in transaction processing times, and driving Ethereum network traffic
to a reported then-all time high. Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction fees
per 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 preclude
certain uses for ether (
e.g.
, micropayments), and could reduce demand for, and the price of, ether, which could adversely impact
the value of the Shares.
If the digital asset
award or transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or if
certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding validating power or
demand high transaction fees, which could negatively impact the value of ether and the value of the Shares.
In 2021, the Ethereum network
implemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate transaction fees paid to ether validators in such
a manner that reduced the total net issuance of ether fees paid to validators. If the digital asset awards for validating blocks or the
transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators, or if certain
jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating power to validate
blocks and confirmations of transactions on the Ethereum blockchain could be slowed. For example, the realization of one or more of the
following risks could materially adversely affect the value of the Shares:
●
A
reduction in the processing power expended by validators on the Ethereum network could increase the likelihood of a malicious actor or
botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtaining
control. See "—If a malicious actor or botnet obtains control of more than 50% of the validating power on the Ethereum network,
or otherwise obtains control over the Ethereum network through its influence over core developers or otherwise, such actor or botnet
could manipulate the Ethereum blockchain to adversely affect the value of the Shares or the ability of the Trust to operate."
39
●
Validators
                                            have historically accepted relatively low transaction confirmation fees on most digital asset
                                            networks. If validators demand higher transaction fees for recording transactions in the
                                            Ethereum blockchain or a software upgrade automatically charges fees for all transactions
                                            on the Ethereum network, the cost of using ether may increase and the marketplace may be
                                            reluctant to accept ether as a means of payment. Alternatively, validators could collude
                                            in an anti-competitive manner to reject low transaction fees on the Ethereum network and
                                            force users to pay higher fees, thus reducing the attractiveness of the Ethereum network.
                                            Higher transaction confirmation fees resulting through collusion or otherwise may adversely
                                            affect the attractiveness of the Ethereum network, the value of ether and the value of the
                                            Shares.
●
To
                                            the extent that any validators cease to record transactions that do not include the payment
                                            of a transaction fee in blocks or do not record a transaction because the transaction fee
                                            is too low, such transactions will not be recorded on the Ethereum blockchain until a block
                                            is validated by a validator who does not require the payment of transaction fees or is willing
                                            to accept a lower fee. Any widespread delays or disruptions in the recording of transactions
                                            could result in a loss of confidence in the Ethereum network and could prevent the Trust
                                            from completing transactions associated with the day-to-day operations of the Trust, including
                                            creations and redemptions of the Shares in exchange for ether with Authorized Participants.
●
During
                                            the course of the block validation processes, validators exercise the discretion to select
                                            which transactions to include within a block and in what order to include these transactions.
                                            Beyond the standard block reward and transaction fees, validators have the ability to extract
                                            what is known as Maximal Extractable Value ("MEV") by strategically choosing,
                                            reordering, or excluding certain transactions during block production in return for increased
                                            transaction fees or other forms of profit for such validators. In blockchain networks that
                                            facilitate DeFi protocols in particular, such as the Ethereum network, users may attempt
                                            to gain an advantage over other users by offering additional fees to validators for effecting
                                            the order or inclusions of transactions within a block. Certain software solutions, such
                                            as MEV Boost by Flashbots, have been developed which facilitate validators and other parties
                                            in the ecosystem in capturing MEV. The presence of MEV may incentivize associated practices
                                            such as sandwich attacks or front running that can have negative repercussions on DeFi users.
                                            A "sandwich attack" is executed by placing two transactions around a large, detected
                                            transaction to capitalize on the expected price impact. For instance, a market participant
                                            might identify a sizable transaction within the publicly visible so-called memory pool ("mempool")
                                            of pending but unexecuted transactions awaiting validation that will significantly alter
                                            an asset's price on a decentralized exchange. The participant could then for example
                                            orchestrate a transaction bundle: one transaction to acquire the asset prior to the detected
                                            transaction, followed by the large transaction itself, and a final transaction to sell the
                                            asset after the market price has increased due to the large transaction's execution.
                                            Such transaction bundles can be submitted to validators through mechanisms like MEV-Boost,
                                            with validators receiving a share of the profits as an incentive to include the specific
                                            transaction bundle in the block. In the context of MEV, "front running" is said
                                            to occur when a user spots a transaction in the mempool, and then pays a high transaction
                                            fee to a validator to have their transaction executed on a priority basis in a manner designed
                                            to profit from the pending but unexecuted transaction that is still in the mempool. MEV may
                                            also compromise the predictability of transaction execution, which may deter usage of the
                                            network as a whole. Although based on widely available information given that transactions
                                            in the mempool are publicly visible, any potential perception of MEV as unfair manipulation
                                            may also discourage users and other stakeholders from engaging with DeFi protocols or the
                                            Ethereum network in general. In addition, it is possible regulators or legislators could
                                            enact rules which restrict practices associated with MEV, which could diminish the popularity
                                            of the Ethereum network among users and validators. Any of these or other outcomes related
                                            to MEV may adversely affect the value of ether and the value of the Shares.
40
If a malicious actor
or botnet obtains control of more than 33% of the validating stake on the Ethereum network, or otherwise obtains control over the Ethereum
network through its influence over core developers or otherwise, such actor or botnet could delay or manipulate the Ethereum blockchain
in the short term, which could adversely affect the value of the Shares or the ability of the Trust to operate.
Following the Merge and the
switch to proof-of-stake validation, the Ethereum network is currently vulnerable to several types of attacks, including:
●
">33%
                                            attack" where, if a validator or group of validators were to gain control of more than
                                            33% of the total staked ether on the Ethereum network, a malicious actor could temporarily
                                            impede or delay block confirmation or even cause a temporary fork in the blockchain. This
                                            is believed to be temporary, as the Ethereum network's inactivity leak would be expected
                                            to eventually penalize the attacker enough for the chain to finalize again (i.e., the honest
                                            majority would be expected to reclaim 2/3rd stake as the attacker's stake is penalized).
                                            However, it is not believed that with 33% control, a malicious actor could engage in double-spending
                                            or fraudulent block propagation.
●
">50%
                                            attack" where, if a validator or group of validators acting in concert were to gain
                                            control of more than 50% of the total staked ether on the Ethereum network, a malicious actor
                                            would be able to gain full control of the Ethereum network and the ability to manipulate
                                            future transactions on the blockchain, including censoring transactions, double-spending
                                            and fraudulent block propagation, potentially for an extended period or even permanently.
                                            In theory, the minority non-attackers might reach social consensus to reject blocks proposed
                                            by the malicious majority attacker, reducing the attacker's ability to engage in malicious
                                            activity, but there can be no assurance this would happen or that non-attackers would be
                                            able to coordinate effectively.
●
">66%
                                            attack" where, if a validator or group of validators acting in concert were to gain
                                            control of more than 66% of the total staked ether on the Ethereum network, a malicious actor
                                            could permanently and irreversibly manipulate the blockchain, including censorship, double-spending
                                            and fraudulent block propagation. The attacker could finalize their preferred chain without
                                            any consideration for the votes of other stakers and could also revert finalized blocks.
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 ether
rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious
actor or botnet could also control, exclude or modify the ordering of transactions. Although the malicious actor or botnet would not be
able to generate new tokens or transactions using such control, it could "double-spend" its own tokens (i.e., spend the same
tokens 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 network
or the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum blockchain may
not be possible. If the malicious actor were to gain control of more than 33% of the total staked ether on the Ethereum network, they
could temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain, but it is not believed that they
could in double-spending or fraudulent block propagation. Even without 33% control, a malicious actor or botnet could create a flood of
transactions 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 the
processing power of the Ethereum Classic Network. The attacks resulted in reorganizations of the Ethereum Classic Blockchain that allowed
the attacker or attackers to reverse previously recorded transactions in excess of $5.0 million and $1.0 million.
41
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 unknown
miner 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 the
two attacks described above took place on proof-of-work-based networks, it is possible that a similar attack may occur on the proof-of-stake
Ethereum network, which could negatively impact the value of ether and the value of the Shares.
Although there are no known
reports of malicious activity on, or control of, the Ethereum network, it is possible that certain groups of coordinating or connected
ether holders may together have more than 50% of outstanding ether, which if staked and if the users run validators, would permit them
to exert authority over the validation of ether transactions. This risk is heightened if over 50% of the processing power on the network
falls within the jurisdiction of a single governmental authority. If network participants, including the core developers and the administrators
of validating pools, do not act to ensure greater decentralization of ether, the feasibility of a malicious actor obtaining control of
the validating power on the Ethereum network will increase, which may adversely affect the value of the Shares. See also"—Liquid
staking applications pose centralization concerns" below.
A malicious actor may also
obtain control over the Ethereum network through its influence over core developers by gaining direct control over a core developer or
an otherwise influential programmer. To the extent that nodes, users and validators accept amendments to the source code proposed by the
controlled core developer, other core developers do not counter such amendments, and such amendments enable the malicious exploitation
of 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 the
initial or current core developer group, or are otherwise influential members of the Ethereum community. To the extent that the initial
or current core developer groups also control more than 50% of outstanding ether, as some believe, the risk of and arising from this particular
group of users obtaining control of the validating power on the Ethereum network will be even greater, and should this materialize, it
may adversely affect the value of the Shares.
Liquid staking applications
pose centralization concerns.
Validators must 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 deposit that is staked, a unique validator key pair is generated. An application built
on the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that provides
a so-called "liquid staking" solution which permits holders of ether to deposit them with Lido, which stakes the ether while
issuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing
32 staked ether) divided across over 30 node operators. At times, Lido has reportedly controlled around or in excess of 33% of the total
staked ether on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transaction
finality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus
lost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most of
the third party node operators where its ether is staked, and finally since the occurrence of such manipulation of the Ethereum network's
consensus 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 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.
42
A temporary or
permanent "fork" in the Ethereum network could adversely affect the value of the Shares.
The Ethereum network operates
using open-source protocols, meaning that any user can become a node by downloading the Ethereum Client and participating in the Ethereum
network, and no permission of a central authority or body is needed to do so. In addition, anyone can propose a modification to the Ethereum
network's source code and then propose that the Ethereum network community support the modification. These proposed modifications to the
Ethereum network's source code, if adopted, can lead to forks (referred to as "planned forksˮ because they take place
through 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 network
source code and, as a result, they are typically responsible for proposing quasi-official or widely publicized releases of updates and
other changes to the Ethereum network's source code called EIPs. Any user can propose an idea for modifying the Ethereum network's
source code, and the core developers are responsible for merging the proposed idea into the EIP repository on GitHub, where it formally
becomes an EIP. However, the release of proposed updates to the Ethereum network's source code by core developers does not guarantee
that the updates will be automatically adopted. The developers of each Ethereum Client must agree to implement the EIP's changes
to the Ethereum network in the source code for their respective client software, nodes must accept the changes made available by the developers
of the Ethereum Client software they use by choosing to individually download the modified Ethereum Client software, and ultimately a
critical 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 lack
adoption.
Typically in the case of a
planned fork, once the EIPs are formally introduced by being merged into the EIP repository on GitHub, a robust debate within the Ethereum
community as to the advisability of the proposed change ordinarily follows. Assuming the core developers at the protocol level and the
developers of individual Ethereum Clients reach a broad consensus among themselves in favor of introducing the change into the respective
source code they are responsible for developing and maintaining, the source code modification will be introduced and made available to
download. A modification of the Ethereum network's source code is only effective with respect to the Ethereum nodes that download
it and modify their Ethereum Clients accordingly, and in practice such decisions are heavily influenced by the preferences of validators
and users. Typically, after a modification is introduced and if a sufficiently broad critical mass of users and validators support the
modification and nodes download the modification into their individual Ethereum Clients, the change is implemented and the Ethereum network
continues to operate uninterrupted, assuming there are no software issues (e.g., bugs, outages, etc.). However, if less than a sufficiently
broad critical mass (in practice, amounting to a substantial majority) of users and validators support the proposed modification and nodes
refuse to download the modification to their Ethereum Clients, and the modification is not backwards compatible with the Ethereum blockchain
or 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-modified
software, while the other group would adopt and run the modified software. The effect of such a hard fork would be the existence of two
versions 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 possible
result of a hard fork is an inherent decrease in the level of security due to significant amounts of validating power remaining on one
network or migrating instead to the new forked network. After a hard fork, it may become easier for an individual validator or validating
pool's validating power to exceed 50% of the total on either network, thereby making them both more susceptible to attack.
43
A future fork in the Ethereum
network could adversely affect the value of the Shares or the ability of the Trust to operate. A fork could also adversely affect the
price of ether at the time of announcement or adoption or subsequently. For example, the announcement of a hard fork could lead to increased
demand for the pre-fork digital asset, in anticipation that ownership of the pre-fork digital asset would entitle holders to a new digital
asset following the fork. The increased demand for the pre-fork digital asset may cause the price of the digital asset to rise. After
the hard fork, it is possible the aggregate price of the two versions of the digital asset running in parallel would be less than the
price of the digital asset immediately prior to the fork. Alternatively, as with any change to software code, software upgrades and other
changes 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 which
has 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-fork
network or blockchain, the digital assets associated with the affected network could lose some or all of their value. Furthermore, while
the Sponsor will, as permitted by the terms of the Trust Agreement, determine which network is generally accepted as the Ethereum network
and should therefore be considered the appropriate network for the Trust's purposes, and there is no guarantee that the Sponsor
will choose the network and the associated digital asset that is ultimately the most valuable fork. Any of these events could therefore
adversely impact the value of the Shares.
On March 13, 2024, the Ethereum
network underwent a planned fork called "Dencunˮ implementing a series of EIPs. EIP 4844, which some commentators perceive
to be the most significant EIP within the Dencun series, is intended to improve the economics of Layer 2s by reducing transaction fees
for 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 Ethereum
network. Among other objectives, the Dencun software upgrade was designed to provide Layer 2 scaling solutions a designated storage space
on the Layer 1 Ethereum network, called Binary Large Objects ("blobsˮ), which attach large data chunks to transactions on the
Layer 1 Ethereum network and are recorded on its blockchain. The data in blobs become inaccessible on the Layer 1 Ethereum network after
a 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 to
be substantially lower than the cost of storing the data on the Ethereum Layer 1 network permanently, making Layer 2s more cost-efficient
to operate and, some commentators hope, making them more attractive as a scaling solution. Immediately following the upgrade, some Layer
2s reportedly experienced reduced transaction fees when batching transactions to the main Layer 1 Ethereum network, which in turn lowered
the transaction costs for executing transactions on such Layer 2s, but this also is believed to have resulted in ether prices (ether being
the native asset of the Layer 1 Ethereum network) dropping as well due, in part, to the reduced demand for ether to pay the transaction
costs 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 restored
afterward. As with any change to software code, planned forks such as Dencun could introduce bugs, coding defects, unanticipated or undiscovered
problems, flaws, security risks, problematic incentive structures, or otherwise fail to work as intended or achieve the expected benefits
that proponents hope for in the short term or the long term, which could also have an adverse effect on adoption of the Ethereum network
and the value of ether, and therefore the Shares.
In September 2022, the Ethereum
network transitioned to a proof-of-stake consensus model, in an upgrade referred to as the "Merge." Following the Merge, a
hard fork of the Ethereum network occurred, as a small number of Ethereum validators and network participants planned to maintain the
proof-of-work consensus mechanism that was removed as part of the Merge. This version of the network, which is not backwards compatible
with the Ethereum Layer 1 blockchain, is considered a forked branch and was rebranded as "Ethereum Proof-of-Work." To the
extent significant developer talent, users or validators abandon the Ethereum Layer 1 network and adopt the Ethereum Proof-of-Work blockchain
instead, the value of the Shares could be adversely affected.
44
As illustrated by Dencun and
the Merge, the Ethereum network regularly implements planned forks in an effort to achieve its development roadmap, advance the scalability
process, and to improve the network generally. For example, in connection with the Ethereum development roadmap, the Ethereum network
executed planned forks to transition from the initial Frontier development stage into the Homestead development stage in 2016; to transition
from the Homestead development stage to the first sub-stage, Byzantium, of the Metropolis development stage in 2017; to transition from
the Byzantium sub-stage to the St. Petersburg sub-stage in early 2019; and to transition from the St. Petersburg sub-stage to the Istanbul
sub-phase, in late 2019. In April 2021, the Ethereum network underwent the Berlin and Altair planned forks, among others. In 2022, Ethereum
underwent the Bellatrix and Paris planned forks in connection with the Merge. In 2023, Ethereum underwent the Capella and Shanghai planned
forks (collectively, "Shapella"), which enabled withdrawals of staked assets to the Ethereum Layer 1 blockchain mainnet for
the first time (they had previously been locked on the Beacon Chain testnet following the Merge). Any of these or future planned forks
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 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 Ethereum
network or ether. Alternatively, such hard forks could be contentious, leading to a split and fracture in the Ethereum community to its
collective detriment, as discussed above. Any such outcomes could adversely affect the value of the Shares.
Forks may also occur as a
digital asset network community's response to a significant security breach. For example, in July 2016, Ethereum underwent a hard
fork 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 exploited
a smart contract running on the Ethereum network to syphon approximately $60 million of ether held by The DAO, a distributed autonomous
organization, into a segregated account. In response to the hack, and after a contentious debate, most participants in the Ethereum community
elected to adopt a hard fork that effectively reversed the hack, and this network constitutes the Layer 1 Ethereum network. However, a
minority of users continued to develop the original blockchain, now referred to as "Ethereum Classic", which is not backwards
compatible with the Layer 1 Ethereum network and is considered a forked branch, with the native digital asset on that blockchain now referred
to as Ethereum Classic, or ETC. ETC now trades on several digital asset platforms. Following the July 2016 hard fork between the Ethereum
and Ethereum Classic networks, new security concerns surfaced. Replay attacks, in which transactions from one network were rebroadcast
to nefarious effect on the other network, plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced in
July 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks. Similar replay attack
concerns occurred in connection with the Bitcoin Cash and Bitcoin Satoshi's Vision networks split in November 2018, and security
concerns could similarly surface in connection with future hard forks.
An unplanned fork may also
occur as a result of an unintentional or unanticipated software flaw in the various versions of Ethereum Client software that nodes run
and 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 supported
by 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 Ethereum
blockchain than the patched Geth nodes and nodes using other Ethereum Clients. This temporarily created two conflicting versions of the
Ethereum blockchain, causing the nodes using the non-patched Geth version to be unable to reach consensus with the rest of the nodes on
the Ethereum blockchain, interrupting the non-patch Geth nodes' access to the Ethereum network. For example, Infura, which is a
node 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 reportedly
used the outdated, non-patched Geth version initially, which is said to have caused those nodes to be on the minority blockchain, impacting
transaction execution, validation, and recording on the main Layer 1 Ethereum network for Infura's customers – such as Ethereum-based
smart contracts, wallet providers like MetaMask, ether trading platforms, etc. – until Infura was able to apply the software update
released by the Geth client developers to Infura's nodes that use Geth as their Ethereum Client. Ultimately, the problem was reportedly
fixed by releasing a new upgraded version of Geth that all nodes using the Geth client were to promptly download. This reportedly harmonized
the conflicting versions and restored synchronization among Geth nodes, fixing the problem and restoring access to the Ethereum network,
including for Infura and its customers.
45
In the future, if an accidental
or unintentional fork similar to what happened within the Geth client in November 2020 were to reoccur within Geth (or any other major
Ethereum Client), or were to happen to the Ethereum network as a whole (instead of being limited to a single Ethereum Client, in this
case Geth), such a fork could lead to nodes, users and validators losing confidence in the Ethereum network and abandoning it in favor
of other blockchain protocols. Furthermore, it is possible that, in a future unplanned fork, a substantial number of nodes, users and
validators could adopt an incompatible version of the digital asset while resisting community-led efforts to merge the two chains, resulting
in a permanent fork. Moreover, following the Merge, nodes on the Ethereum network must run two Ethereum Clients,
i.e.
, an Execution
Client and a Consensus Client paired together, with the implementations selected at the discretion of the node operator. There are multiple
groups independently developing and implementing their respective Execution Clients and Consensus Clients; while some individual Execution
Clients or Consensus Clients are more popular or widely adopted than others, there remains heterogeneity among Ethereum Clients. Each
Execution Client and Consensus Client needs to interoperate effectively with each other Execution Client and Consensus Client. Although
this 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 Execution
Client to fail to interoperate effectively with any other individual Execution Client or any Consensus Client, the Ethereum network as
a whole could suffer an unplanned fork, major disruption, catastrophic outage, system failure, loss of confidence or adoption among users
or validators, or a variety of other problems. Any of these events could cause ether to decline in value, adversely affecting the price
of 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 from
the new "clone" network and, in contrast to forks, holders of tokens of the existing network that was cloned do not receive
any tokens of the new network. A "clone" results in a competing network that has characteristics substantially similar to
the network it was based on, subject to any changes as determined by the developer(s) that initiated the clone. For example, following
the DAO hack in July 2016, holders of Ethereum voted on-chain to reverse the hack, effectively causing a hard fork. For the days following
the 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 Classic
block 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 version
of the Zcash Network that eliminated the Founders' Reward. For the days following the date the first Zclassic block was mined, the
price 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 beginning
immediately after the Zcash Network launch on October 28, 2016.
Moving from Proof-of-Work
(PoW) to Proof-of-Stake (PoS) Consensus Mechanism.
In
September 2022, the Ethereum network moved from a proof-of-work to a proof-of-stake mechanism called Serenity, or Ethereum 2.0. Unlike
proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion
to the amount of computational resources expended, in proof-of-stake, validators risk or "stake" coins to compete to be randomly
selected to validate transactions and are rewarded coins in proportion to the total amount of coins staked. Any malicious activity, such
as 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 guarantee
that the Ethereum community will embrace Ethereum 2.0, and the new protocol may never fully scale.
The
possibility exists that Ethereum 2.0 may never achieve the goals of the Ethereum community, which may have a negative impact on the market
value of ether, and consequently on the NAV of the Trust.
46
The open-source structure
of the Ethereum network protocol means that the core developers and other contributors are generally not directly compensated for their
contributions in maintaining and developing the Ethereum network protocol. A failure to properly monitor and upgrade the Ethereum network
protocol could damage the Ethereum network and an investment in the Trust.
The Ethereum network operates
based on an open-source protocol maintained by the core developers and other contributors, largely on the GitHub resource section dedicated
to Ethereum network development. As new ether are rewarded solely for validator activity (other than the 2014 pre-mine) and are not sold
on an ongoing basis to generate revenue to support development activity, and the Ethereum network protocol itself is made available for
free rather than sold or made available subject to licensing or subscription fees and its use does not generate revenues for its development
team, 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 developers
may lack the resources to adequately address emerging issues with the Ethereum network protocol. Although the Ethereum network is currently
supported 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's
source code in the GitHub repository is relatively small, although there are believed to be a larger number of developers who contribute
to the overall development of the source code of the Ethereum network. The perception that high-profile contributors may no longer contribute
to the network may have an adverse effect on the market price of any related digital assets. For example, in June 2017, an unfounded rumor
circulated 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 contribute
to the Ethereum network due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is valid, it could
negatively affect the price of ether, which could adversely impact the value of the Shares.
Alternatively, some developers
may be funded by entities whose interests are at odds with other participants in the Ethereum network. In addition, a bad actor could
also 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 unable
to 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 adverse
impact on the value of ether.
Smart contracts are programs
running on the Ethereum blockchain that execute automatically when certain conditions are met. Since smart contracts typically cannot
be stopped or reversed, vulnerabilities in their programming can have damaging effects. For example, in June 2016, a vulnerability in
the smart contracts underlying The DAO allowed an attack by a hacker to syphon approximately $60 million worth of ether from The DAO's
accounts 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 approximately
35% in the aftermath of the attack and subsequent hard fork. In addition, in July 2017, a vulnerability in a smart contract for a multi-signature
wallet software developed by Parity led to a reportedly $30 million theft of ether, and in November 2017, a new vulnerability in Parity's
wallet 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 number
of smart contract tokens, causing multiple crypto asset platforms worldwide to shut down ERC20-compatible token trading. Similarly, in
March 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, such
as bridges between blockchain networks and decentralized finance ("DeFi") protocols, have also been manipulated, exploited
or used in ways that were not intended or envisioned by their creators such that attackers syphoned over $3.8 billion worth of digital
assets from smart contracts in 2022. Problems with the development, deployment, and operation of smart contracts may have an adverse effect
on the value of ether.
In some cases, smart contracts
can be controlled by one or more "admin keys" or users with special privileges, or "super users." These super
users may have the ability to unilaterally make changes to the smart contract, enable or disable features on the smart contract, change
how the smart contract receives external inputs and data or transmits ether or other digital assets, and make other changes to the smart
contract. Furthermore, in some cases inadequate public information may be available about certain smart contracts or applications, and
information asymmetries may exist, even with respect to open-source smart contracts or applications; certain participants may have hidden
informational or technological advantages, making for an uneven playing field. There may be opportunities for bad actors to perpetrate
fraudulent schemes and engage in illicit activities and other misconduct, such as exit scams and rug pulls (orchestrated by developers
and/or influencers who promote a smart contract or application and, ultimately, escape with the money at an agreed time), or Ponzi or
similar fraud schemes.
47
Many DeFi applications are
currently deployed on the Ethereum network, and smart contracts relating to DeFi applications currently represent a significant source
of 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 facilitate
these transactions. These investments may earn interest for the investor based on the rates at which borrowers repay the loan, and can
generally be withdrawn by the investor. For smart contracts that hold a pool of digital asset reserves, smart contract super users or
admin key holders may be able to extract funds from the pool, liquidate assets held in the pool, or take other actions that decrease the
value of the digital assets held by the smart contract in reserves. Even for digital assets that have adopted a decentralized governance
mechanism, such as smart contracts that are governed by the holders of a governance token, such governance tokens can be concentrated
in 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, features
and value of the smart contract and its related digital assets may be harmed. In addition, assets held by the smart contract in reserves
may be stolen, misused, burnt, or locked up or otherwise become unusable and irrecoverable. Super users can also become targets of hackers
and malicious attackers. If an attacker is able to access or obtain the super user privileges of a smart contract, or if a smart contract's
super users or core community members take actions that adversely affect the smart contract, users who transact with the smart contract
may experience decreased functionality of the smart contract or may suffer a partial or total loss of any digital assets they have used
to 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 could
cause the DeFi application to be the subject of negative publicity. Because DeFi applications may be built on the Ethereum network and
represent a significant source of demand for ether, public confidence in the Ethereum network itself could be negatively affected, such
sources 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 may
suffer losses due to staking, which could make the Ethereum network less attractive.
Validation on the Ethereum
network requires ether to be transferred into smart contracts on the underlying blockchain networks not under the Trust's or anyone
else'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 types
of 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 timely
attestation to a block proposed by another validator. Under this scenario, a validator's staked ether could be burned in an amount
equal 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. Slashing
can result in the validator having a portion of its staked ether immediately confiscated, withdrawn or burned by the network, resulting
in 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 of
ether burned and time period determined by the network regardless of whether the validator makes any further slashable errors, at which
point the validator is automatically removed from the validator pool. Staked ether may also be burned through a process known as an "inactivity
leak," which is triggered if the Ethereum network has gone too long without finalizing a new block. For a new block to be successfully
added to the blockchain, validators that account for at least two-thirds of all staked ether must agree on the validity of a proposed
block. 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 these
inactive validators represent less than one-third of the total stake, thereby allowing the remaining active validators to finalize proposed
blocks. This provides a further incentive for validators to remain online and continue performing validation activities. Within the post-Merge
network, as part of the "activating" and "exiting" processes of staking, staked ether will be inaccessible for
a variable period of time determined by a range of factors, including network congestion, resulting in potential inaccessibility during
those periods. "Activation" is the funding of a validator to be included in the active set, thereby allowing the validator
to participate in the Ethereum network's proof-of-stake consensus protocol. "Exit" is the request to exit from the active
set 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. The
duration 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 and
the practice of paying tips is common, and such fees can become significant as the amount and complexity of the transaction grows, depending
on 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 from
serving as such, and adversely impact the Ethereum network's adoption or the price of ether. Any disruption of validation on the
Ethereum network could interfere with network operations 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. The limited liquidity during the "activation"
or "exiting" processes could dissuade potential validators from participating, which could interfere with network operations
or 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.
48
Proof-of-stake
blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of
time as traditional proof-of-work blockchains.
Certain
digital assets, such as bitcoin, use a "proof-of-work" consensus algorithm. The genesis block on the Bitcoin blockchain was
mined 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 governance
systems underlying many newer blockchain protocols, including the Ethereum network following the Merge, and their associated digital assets—including
the 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 use
or adoption as, for example, bitcoin's proof-of-work consensus mechanism has. This could lead to these blockchains, and their associated
digital 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 as
intended, could lead to outright failure to function entirely causing a total outage or disruption of network activity, or could cause
the blockchains to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value
of the associated digital assets, including the Trust's assets. Over the long term, there can be no assurance that the proof-of-stake
blockchain on which the Trust's assets rely will achieve widespread scale or adoption or perform successfully; any failure to do
so could negatively impact the value of the Trust's assets.
The Trust will
not directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards or
other income.
Neither
the 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 to
earn additional ether or generate rewards or other income. The Trust's inability to participate in staking will cause the Trust
to forgo any additional ether, rewards or other income from which the Trust could have benefitted had the Trust been able to stake the
Trust'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 staking
applications pose centralization concerns.
Validators
must 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 deposit
that is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, can
manage many validator key pairs. For example, Lido, an application that provides a so-called "liquid staking" solution which
permits holders of ether to deposit them with Lido, which stakes the ether while issuing the holder a transferrable token, is reported
by some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ether) divided across over 30 node
operators. At times, Lido has reportedly controlled around or in excess of 33% of the total staked ether on the Ethereum network. While
it is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using its
reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliated
with Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where its
ether is staked, and finally since the occurrence of such manipulation of the Ethereum network's consensus process by Lido or any
other actor would likely cause ether to lose substantial value (which would 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 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.
49
Competition from the
emergence or growth of other digital assets or methods of investing in ether could have a negative impact on the price of ether and adversely
affect the value of the Shares.
As of October 1, 2024, ether
was the second largest digital asset by market capitalization as tracked by CoinMarketCap.com. As of October 1, 2024, there were over
8,000 alternative digital assets tracked by CoinMarketCap.com, having a total market capitalization of approximately $2.15 trillion (including
the 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 into
private or permissioned smart contracts platforms rather than open platforms like the Ethereum network. Competition from the emergence
or growth of alternative digital assets and smart contracts platforms, such as Solana, Avalanche or Cardano, could have a negative impact
on the demand for, and price of, ether and thereby adversely affect the value of the Shares.
In addition, some digital
asset 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 called
Ethereum Classic. As a result, some users of the Ethereum Classic network may harbor ill will toward the Ethereum network. These users
may attempt to negatively impact the use or adoption of the Ethereum network.
Investors may invest in ether
through means other than the Shares, including through direct investments in ether and other potential financial vehicles, possibly including
securities backed by or linked to ether and digital asset financial vehicles similar to the Trust, or ether futures-based products. Market
and financial conditions, and other conditions beyond the Sponsor's control, may make it more attractive to invest in other financial
vehicles or to invest in ether directly, which could limit the market for, and reduce the liquidity of, the Shares. In addition, to the
extent digital asset financial vehicles other than the Trust tracking the price of ether are formed and represent a significant proportion
of the demand for ether, large purchases or redemptions of the securities of these digital asset financial vehicles, or private funds
holding ether, could negatively affect the Ether Pricing Benchmark, the Trust's ether holdings, the price of the Shares, and the
NAV of the Trust.
The Trust and the Sponsor
face competition with respect to the creation of competing exchange-traded ether products. If the SEC were to approve many or all of the
currently pending applications for such exchange-traded 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's
Fee in order to achieve initial market acceptance and scale. Accordingly, the Sponsor's competitors may commercialize a competing
product more rapidly or effectively than the Sponsor is able to, which could adversely affect the Sponsor's competitive position
and the likelihood that the Trust will achieve initial market acceptance, and could have a detrimental effect on the scale and sustainability
of the Trust. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue
to cover the costs associated with launching and maintaining the Trust and such shortfalls could impact the Sponsor's ability to
properly invest in robust ongoing operations and controls of the Trust to minimize the risk of operating events, errors, or other forms
of 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 significant
premium or discount in the Shares for extended periods and the Trust's failure to reflect the performance of the price of ether.
50
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 was
first 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 calculation
time) 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 reference
rate calculated using volume-weighted trading price data from the Constituent Platforms. A longer history of actual performance through
various 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 obligation
to take into consideration the needs of the Trust, the Shareholders, or anyone else in connection with such changes. There is no guarantee
that the methodology currently used in calculating the Pricing Benchmarks will appropriately track the price of bitcoin and ether in the
future. Neither the CME Group nor the Benchmark Provider has any obligation to take into consideration the needs of the Trust or the Shareholders
in determining, composing, or calculating the Pricing Benchmarks or in the selection of the Constituent Platforms used. The Constituent
Platforms are chosen by the Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee.
Although the Pricing Benchmarks
are intended to accurately capture the market prices 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 Platforms, and such transactions may take place at prices materially
higher or lower than the Pricing Benchmarks' prices. Moreover, there may be variances in the price of bitcoin and ether on the various
Constituent 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 bitcoin
and ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform may not be equal to the value
of bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoin and ether on the Constituent Platforms
could be materially higher or lower than the prices of the Pricing Benchmarks. To the extent the prices of the Pricing Benchmarks differ
materially from the actual prices available on a Constituent Platform, or from the global market prices of bitcoin and ether, the price
of the Shares may no longer track, whether temporarily or over time, the global market prices of bitcoin and ether, which could adversely
affect an investment in the Trust by reducing investors' confidence in the Shares' ability to track the market prices 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 prices of bitcoin and ether, which could adversely affect the value of the Shares.
The pricing sources (Constituent
Platforms) used by the Pricing Benchmarks are digital asset trading venues that facilitate the buying and selling of bitcoin, ether and
other digital assets. Although many pricing sources refer to themselves as "exchanges," they are not registered with, or supervised
by, 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 disruptions
due to various factors, including the lack of liquidity in the markets and government regulation and intervention. These circumstances
could affect the prices of bitcoin and ether used in Pricing Benchmarks calculations and, therefore, could adversely affect the bitcoin
and ether prices as reflected by the Pricing Benchmarks.
51
The Constituent Platforms
have changed over time. For example, effective April 2017, Bitfinex and OKcoin were removed from the Bitcoin Pricing Benchmark due to
trading restrictions and on January 25, 2019, itBit was suspended from the Pricing Benchmarks due to data quality issues, which suspension
was lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify the
errors 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 Constituent
Platforms 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 are
based on various inputs which may include price data from various third-party digital asset trading platforms. Neither the CME Group nor
the 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 Pricing
Benchmarks to establish its NAV and NAV per Share. In the event that the Pricing Benchmarks are incorrectly calculated, is not timely
calculated or changes its calculation methodology in the future, such an occurrence may adversely impact an investment in the Shares or
the Trust's operations.
The CME Bitcoin Real Time
Price and CME Ether Real Time Price also have a limited history and share some of the same structural and methodological features and
risks 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 and
ether market price of ether, Shareholders may use the ITV as a data point in their assessment of the value of the Shares. In the event
that the CME Bitcoin Real Time Price and CME Ether Real Time Price are incorrectly calculated, is not timely calculated or changes its
calculation methodology in the future, such an occurrence may adversely impact the utility of the ITV to Shareholders.
Although the Pricing Benchmarks
and 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 Platforms
of the Pricing Benchmarks and CME Ether Real Time Price, and such transactions may take place at prices materially higher or lower than
the level of the Pricing Benchmarks used to establish the NAV. To the extent such prices differ materially from the level of the Pricing
Benchmarks used to establish the NAV, investors may lose confidence in the Shares' ability to track the market price of bitcoin
and ether, which could adversely affect an investment in the Shares.
The Benchmark
Provider could experience systems failures or errors.
If the computers or other
facilities of the Benchmark Provider, data providers and/or relevant stock exchange malfunction for any reason, calculation and dissemination
of the Pricing Benchmarks may be delayed. Errors in Pricing Benchmarks data, the Pricing Benchmarks computations and/or construction may
occur 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 on
the Trust and the Shareholders. Any of the foregoing may lead to errors in the Pricing Benchmarks, which may lead to a different investment
outcome for the Trust and its Shareholders than would have been the case had such events not occurred. The Pricing Benchmarks are the
reference price for calculating the Trust's NAV. Consequently, losses or costs associated with the Pricing Benchmarks' errors
or other risks described above will generally be borne by the Trust and the Shareholders and neither the Sponsor nor its affiliates or
agents make any representations or warranties regarding the foregoing.
If the Pricing Benchmarks
are not available, the Trust's holdings may be fair valued in accordance with the policy approved by the Sponsor. If the Pricing
Benchmarks are not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect accurate
bitcoin and ether prices, the Trust's holdings may be "fair valued" in accordance with the valuation policies approved
by the Sponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all available
factors the Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using
third-party valuation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted median
price of bitcoin and ether provided by a secondary pricing source ("Secondary Source"). If a Secondary Source is not available
or the Sponsor in its sole discretion determines the Secondary Sources are unreliable, the price set by the Trust's principal market
as of 4:00 p.m. ET, on the valuation date would be considered for utilization. In the event the principal market price is not available
or the Sponsor in its sole discretion determines the principal market valuation is unreliable the Sponsor will use its best judgment to
determine a good faith estimate of fair value based upon all available factors. The Sponsor does not anticipate that the need to "fair
value" bitcoin and ether will be a common occurrence.
52
To the extent the valuation
determined 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 could
adversely affect an investment in the Trust by reducing investors' confidence in the Shares' ability to track the global market
price of bitcoin and ether. To the extent such prices differ materially from the market price for bitcoin and ether, investors may lose
confidence in the Shares' ability to track the market price of bitcoin and ether, which could adversely affect the value of the
Shares. The Sponsor does not anticipate that the need to "fair value" bitcoin and ether will be a common occurrence.
The Pricing Benchmarks
could fail to track the global bitcoin and ether prices, and a failure of the Pricing Benchmarks could adversely affect the value of the
Shares.
Although the Pricing Benchmarks
are intended 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 Platforms, and such transactions may take place at prices materially higher
or lower than the prices of the Pricing Benchmarks. Moreover, there may be variances in the price of bitcoin and ether on the various
Constituent 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-weighted
price of bitcoin and ether on certain Constituent Platforms, at any given time, the prices on each such Constituent Platform or pricing
source may not be equal to the value of bitcoin and ether as represented by the Pricing Benchmarks. It is possible that the price of bitcoin
and ether on the Constituent Platforms could be materially higher or lower than the prices of the Pricing Benchmarks. To the extent the
prices of the Pricing Benchmarks differs materially from the actual prices available on a Constituent Platform, or from the global 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 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 affect
the value of the Shares.
The Sponsor can
discontinue 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, with
prior notice to the Shareholders, if investment conditions change or the Sponsor believes that another index, benchmark or standard better
aligns 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 prices
of bitcoin and ether and/or that third parties are able to purchase and sell bitcoin and ether on public or private markets not included
among the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the price of the Pricing
Benchmarks. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the event that the Sponsor
intends to establish the Trust's NAV by reference to an index, benchmark or standard other than the Pricing Benchmarks, it will
provide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in the Trust's annual
or quarterly reports.
53
The Pricing Benchmarks
price 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 ether
on public digital asset trading platforms has a limited history, and during this history, bitcoin and ether prices on the digital asset
markets 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 digital
asset trading platforms, the prices of the Pricing Benchmarks, and the prices of bitcoin and ether generally, remains subject to volatility
experienced by digital asset exchanges, and such volatility could adversely affect the value of the Shares.
Furthermore, because the number
of liquid and credible digital asset trading platforms is limited, the Pricing Benchmarks will necessarily be composed of a limited number
of 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 could
skew the price of bitcoin and ether as represented by the Pricing Benchmarks. Trading on a limited number of digital asset trading platforms
may result in less favorable prices and decreased liquidity of bitcoin and ether and, therefore, could have an adverse effect on the value
of the Shares.
The prices of
the Pricing Benchmarks being used to determine the NAV of the Trust may not be consistent with GAAP. To the extent that the Trust's
financial statements are determined using a different pricing source that is consistent with GAAP, the NAV reported in the Trust's
periodic financial statements may differ, in some cases significantly, from the Trust's NAV determined using the Pricing Benchmarks
pricing.
The Trust will determine the
NAV of the Trust on each business day based on the value of bitcoin and ether as reflected by the Pricing Benchmarks. The methodology
used to calculate the prices of the Pricing Benchmarks to value bitcoin and ether in determining the NAV of the Trust may not be deemed
consistent with GAAP. To the extent the methodology used to calculate the Pricing Benchmarks is deemed inconsistent with GAAP, the Trust
will utilize an alternative GAAP-consistent pricing source for purposes of the Trust's periodic financial statements. Creation and
redemption of Baskets, the Sponsor Fee and other expenses borne by the Trust will be determined using the Trust's NAV determined
daily based on the Pricing Benchmarks. Such NAV of the Trust determined using the prices of the Pricing Benchmarks may differ, in some
cases significantly, from the NAV reported in the Trust's periodic financial statements.
Risks Related to Pricing.
The Trust's portfolio
will 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 will
change 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, including
price 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-demand
forces influencing the market price of bitcoin and ether.
Shareholders also should note
that the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created and
redeemed.
In the event that the value
of the Trust's bitcoin and ether holdings or bitcoin and ether holdings per Share is incorrectly calculated, neither the Sponsor
nor the Administrator will be liable for any error and such misreporting of valuation data could adversely affect the value of the Shares.
54
Risks Associated with Investing in the Trust
Investment-Related Risks
.
Investing
in bitcoin and ether and, consequently, the Trust, is speculative. The prices of bitcoin and ether are volatile, and market movements
of bitcoin and ether are difficult to predict. Supply-and-demand changes rapidly are affected by a variety of factors, including regulation
and 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 investment
program will be successful, that the Trust will achieve its investment objective or that there will be any return of capital invested
to investors in the Trust, and investment results may vary.
The Trust is subject
to market risk.
Market risk refers to the
risk that the market prices of bitcoin and ether held by the Trust will rise or fall, sometimes rapidly or unpredictably. An investment
in the Shares is subject to market risk, including the possible loss of the entire principal of the investment.
Different from directly
owning bitcoin and ether
.
The performance of the Trust
will 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 conferred
by owning bitcoin and ether directly, such as the right to claim airdrops. See
"Shareholders may not receive the benefits of
any forks or "airdrops."
The Trust is a
passive 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 actively
manage the bitcoin and ether held by the Trust. This means that the Sponsor does not sell bitcoin and ether at times when their price
is high, or acquire bitcoin and ether at low prices in the expectation of future price increases. It also means that the Sponsor does
not make use of any of the hedging techniques available to professional bitcoin and ether investors to attempt to reduce the risks of
losses resulting from price decreases. Any losses sustained by the Trust will adversely affect the value of the Shares.
The value of the Shares may be
influenced by a variety of factors unrelated to the value of bitcoin and ether.
The value of the Shares may
be influenced by a variety of factors unrelated to the prices of bitcoin and ether that may have an adverse effect on the price of the
Shares. These factors include, but are not limited to, the following:
●
Unanticipated problems or issues with respect to the mechanics
of the Trust's operations and the trading of the Shares may arise, in particular due to the fact that the mechanisms and procedures
governing the creation and offering of the Shares and storage of bitcoin and ether have been developed specifically for this product;
●
The Trust could experience difficulties in operating and maintaining
its technical infrastructure, including in connection with expansions or updates to such infrastructure, which are likely to be complex
and could lead to unanticipated delays, unforeseen expenses and security vulnerabilities;
●
The Trust could experience unforeseen issues relating to the
performance and effectiveness of the security procedures used to protect the Trust's account with the Custodian, or the security
procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust's technical infrastructure,
which could result in theft, loss or damage of its assets; or
●
Service providers may decide to terminate their relationships
with the Trust due to concerns that the introduction of privacy-enhancing features to the Bitcoin and Ethereum networks may increase
the potential for bitcoin and ether to be used to facilitate crime, exposing such service providers to potential reputational harm.
Any of these factors could
affect the value of the Shares, either directly or indirectly through their effect on the Trust's assets.
55
The NAV may not
always correspond to the market prices of bitcoin and ether and, as a result, Baskets may be created or redeemed at a value that is different
from the market price of the Shares.
The NAV of the Trust will
change as fluctuations occur in the market price of the Trust's bitcoin and ether holdings. Shareholders should be aware that the
public trading price per Share may be different from the NAV for a number of reasons, including price volatility; trading activity; the
closing of digital asset 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-demand forces influencing
the market price of bitcoin and ether.
An Authorized Participant
may 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 therefore
maintain its intended fractional exposure to a specific amount of bitcoin and ether per Share.
Shareholders also should note
that the size of the Trust in terms of total bitcoin and ether held may change substantially over time and as Baskets are created and
redeemed.
When acquiring bitcoin and
ether, it is possible that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoin and ether by the
Pricing Benchmarks, the rate used to calculate the Trust's NAV. This is known as "slippage." While transactions 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 consummate a creation
order for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and ether ascribed
by the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippage from time
to time.
The Shares may
trade at a discount or premium in the trading price relative to the NAV as a result of non-concurrent trading hours between the Exchange
and digital asset trading platforms. Non-concurrent trading hours may also result in the Shares gapping at the open of trading on the
Exchange.
The value of a Share may be
influenced by non-concurrent trading hours between the Exchange and various digital asset trading platforms, including the Constituent
Platforms of the Pricing Benchmarks. Additionally, Shares may be traded at other times and in other venues. While U.S. equity markets
are open for trading in the Shares for a limited period each day, the bitcoin and ether markets are a 24-hour marketplace; however, trading
volume and liquidity on the bitcoin and ether markets are not consistent throughout the day and digital asset trading platforms, including
the larger-volume markets, have been known to shut down temporarily or permanently due to security concerns, directed denial-of-service
attacks and other reasons. As a result, during periods when U.S. equity markets are open but large portions of the bitcoin and ether markes
are 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 investment
in the Shares if a Shareholder sells or acquires its Shares during a period of discount or premium, respectively.
During periods when U.S. equity
markets are closed but digital asset trading platforms are open, significant changes in the prices of bitcoin and ether could result in
a difference in performance between the prices of bitcoin and ether and the most recent Share price. To the extent that the prices of
bitcoin and ether moves significantly in a negative direction after the close of U.S. equity markets, the trading price of the Shares
may "gap" down to the full extent of such negative price shift when U.S. equity markets reopen. To the extent that the prices
of bitcoin and ether drops significantly during hours in which U.S. equity markets are closed, investors may not be able to sell their
Shares until after the "gap" down has been fully realized, resulting in an inability to mitigate losses in a rapidly negative
market.
Buying and selling
activity associated with the purchase and redemption of Baskets may adversely affect an investment in the Shares.
There is no limit on the number
of bitcoin and ether the Trust may acquire (other than the overall limit on the number of bitcoin and ether in existence established by
the original bitcoin and ether protocol and any limit on the number of Shares registered by the Trust).
56
The Sponsor's purchase
of bitcoin and ether in connection with Basket purchase orders may cause the prices of bitcoin and ether to increase, which will result
in higher prices for the Shares. Increases in the bitcoin and ether prices may also occur as a result of bitcoin and ether purchases by
other 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 associated
with sales of bitcoin and ether by the Sponsor in connection with redemption orders may decrease the bitcoin and ether prices, which will
result in lower prices for the Shares. Decreases in bitcoin and ether prices may also occur as a result of selling activity by other market
participants.
In addition to the effect
that 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 represent
a substantial portion of demand for bitcoin and ether at any given time and the sales and purchases by such investment vehicles may impact
the prices of bitcoin and ether. If the prices of bitcoin and ether declines, the trading price of the Shares will generally also decline.
The inability
of Authorized Participants and market makers to hedge their bitcoin and ether exposure may adversely affect the liquidity of Shares and
the value of an investment in the Shares.
Authorized Participants and
market makers will generally want to hedge their exposure in connection with Basket purchase and redemption orders. To the extent Authorized
Participants and market makers are unable to hedge their exposure due to market conditions (e.g., insufficient bitcoin and ether liquidity
in the market, inability to locate an appropriate hedge counterparty, extreme volatility in the prices of bitcoin and ether, wide spreads
between 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 not
create or redeem Baskets. In addition, the hedging mechanisms employed by Authorized Participants and market makers to hedge their exposure
to bitcoin and ether may not function as intended, which may make it more difficult for them to enter into such transactions. Such events
could negatively impact the market price of Shares and the spread at which Shares trade on the open market. To the extent Authorized Participants
wish to use futures to hedge their exposure, note that while growing in recent years, the market for exchange-traded bitcoin and ether
futures 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, the
adoption of bitcoin and ether and the commercial and speculative interest in the market.
Arbitrage transactions
intended to keep the price of Shares closely linked to the prices of bitcoin and ether may be problematic if the process for the purchase
and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares.
If the processes of creation
and redemption of Shares (which depend on timely transfers of bitcoin and ether to and by the Bitcoin and Ether Custodian) encounter any
unanticipated 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, the
closing 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, then
potential market participants, such as the Authorized Participants and their customers, who would otherwise be willing to purchase or
redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the prices
of the underlying bitcoin and ether may not take the risk that, as a result of those difficulties, they may not be able to realize the
profit they expect.
Alternatively, in the case
of a network outage or other problems affecting the Bitcoin and Ethereum networks, the processing of transactions on the Bitcoin and Ethereum
networks may be disrupted, which in turn may prevent Digital Asset Trading Counterparties from depositing or withdrawing bitcoin and ether
from their custody accounts, which in turn could affect the creation or redemption of Baskets. If this is the case, the liquidity of the
Shares may decline and the price of the Shares may fluctuate independently of the prices of bitcoin and ether and may fall or otherwise
diverge from NAV. Furthermore, in the event that the markets for bitcoin and ether should become relatively illiquid and thereby materially
restrict opportunities for arbitraging by delivering bitcoin and ether in return for Baskets, the price of Shares may diverge from the
value of bitcoin and ether.
57
Investors may
be 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 during
which 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 distribution
is not reasonably practicable (for example, as a result of an interruption in services or availability of the Prime Execution Agent, Bitcoin
and 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, internet
services, 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 and
Ethereum networks outage, or similar event), or (3) such other period as the Sponsor determines to be necessary for the protection of
the Shareholders of the Trust (for example, where acceptance of the U.S. dollars needed to create each Basket would have certain adverse
tax consequences to the Trust or its Shareholders). In addition, the Trust may reject a redemption order if the order is not in proper
form 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 impact
how the Shares are traded and arbitraged in the secondary market, which could cause Shares to trade at levels materially different (premiums
and discounts) from the value of their underlying bitcoin and ether.
Investors may
be adversely affected by an overstatement or understatement of the NAV calculation of the Trust due to the valuation method employed on
the 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 established
by the Pricing Benchmarks. The value established by using the Pricing Benchmarks may be different from what would be produced through
the use of another methodology. The value of bitcoin and ether or other digital asset investments valued using techniques other than those
employed by the Pricing Benchmarks, including "fair valuation measures," may differ from the value of bitcoin and ether determined
by reference to the Pricing Benchmarks.
If the Pricing Benchmarks
are not available, or if the Sponsor determines, in its sole discretion, that the Pricing Benchmarks do not reflect an accurate bitcoin
and ether price, the Trust's holdings may be "fair valued" in accordance with the valuation policies approved by the
Sponsor. Those valuation policies stipulate that when seeking to fair value bitcoin and ether, the Sponsor may apply all available factors
the Sponsor deems relevant at the time of the determination, and may be based on analytical values determined by the Sponsor using third-party
valuation models. Pursuant thereto, the Sponsor expects to utilize a volume-weighted average price or volume-weighted median prices of
bitcoin and ether provided by a Secondary Source. If a Secondary Source is not available or the Sponsor in its sole discretion determines
the Secondary Sources are unreliable, the price set by the Trust's principal market as of 4:00 p.m. ET, on the valuation date would
be considered for utilization. In the event the principal market price is not available or the Sponsor in its sole discretion determines
the principal market valuation is unreliable the Sponsor will use its best judgment to determine a good faith estimate of fair value based
upon all available factors. The Sponsor does not anticipate that the need to "fair value" bitcoin and ether will be a common
occurrence.
As an owner of
Shares, you will not have the rights normally associated with ownership of other types of shares.
Shares are not entitled to
the same rights as shares issued by a corporation. By acquiring Shares, you are not acquiring the right to elect directors, to receive
dividends, to vote on certain matters regarding the issuer of the Shares or to take other actions normally associated with the ownership
of shares. You will only have the limited rights described under "MANAGEMENT; VOTING BY SHAREHOLDERS."
58
The Sponsor and
the Trustee may agree to amend the Trust Agreement or Sponsor Agreement without the consent of the Shareholders.
The Sponsor and the Trustee
may agree to amend the Trust Agreement or Sponsor Agreement without Shareholder consent. The Sponsor shall determine the contents and
manner of delivery of any notice of any Trust Agreement amendment. Such notice may be provided on the Trust's website, in a prospectus
supplement, through a current report on Form 8-K and/or in the Trust's annual or quarterly reports. If an amendment to the Trust
Agreement or Sponsor Agreement imposes new fees and charges or increases existing fees or charges, including the Sponsor Fee (except for
taxes and other governmental charges, registration fees or other such expenses), or prejudices a substantial right of Shareholders, it
will become effective for outstanding Shares 30 days after notice of such amendment is given to registered owners. Shareholders that are
not registered owners (which most Shareholders will not be) may not receive specific notice of a fee increase other than through an amendment
to the Prospectus. Moreover, at the time an amendment becomes effective, by continuing to hold Shares, Shareholders are deemed to agree
to the amendment and to be bound by the Trust Agreement and Sponsor Agreement as amended without specific agreement to such increase.
The Trust is subject
to risks due to its concentration of investments in a single asset class.
Unlike other funds that may
invest in diversified assets, the Trust's investment strategy is concentrated in two asset classes: bitcoin and ether. This concentration
maximizes the degree of the Trust's exposure to a variety of market risks associated with bitcoin and ether. By concentrating its
investment strategy solely on bitcoin and ether, any losses suffered as a result of a decrease in the value of bitcoin and ether can be
expected 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 underlying
assets that were diversified.
A possible "short
squeeze" 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 Shares
to 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 exceeds
the number of Shares available for purchase (for example, in the event that large redemption requests by Authorized Participants dramatically
affect Share liquidity), investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders. Those
repurchases 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 that
are not directly correlated to the prices of bitcoin and ether.
As the Sponsor
and its management have a limited history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable
to manage the Trust.
The Sponsor has no history
of 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 Advisers
Act 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 that
hold bitcoin and ether individually, private funds that hold bitcoin and ether individually and traditional exchange-traded funds investing
in securities, are an imperfect indication of their ability to manage an investment vehicle such as the Trust. If the experience of the
Sponsor and its management is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust
may be adversely affected.
Security threats
and 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 Ethereum
blockchains, thefts can be difficult to trace, which may make bitcoin and ether particularly attractive targets for theft. Cyber security
failures or breaches of one or more of the Trust's service providers (including, but not limited to, the Transfer Agent, the Marketing
Agent, the Administrator, the Cash Custodian or the Bitcoin and Ether Custodian) have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, violations of applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, and/or additional compliance costs.
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The Trust and its service
providers' 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 believes
that the Trust's bitcoin and ether held in the Trust Bitcoin Account and/or Trust Ether Account at the Bitcoin and Ether Custodian
or 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 extent
that the Trust, Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent is unable to identify and mitigate or stop new security
threats or otherwise adapt to technological changes in the digital asset industry, the Trust's bitcoin and ether may be subject
to theft, loss, destruction or other attack.
The Sponsor believes that
the security procedures in place for the Trust, including, but not limited to, offline storage, or cold storage, multiple encrypted private
key "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 be
borne by the Trust and the security procedures may not protect against all errors, software flaws or other vulnerabilities in the Trust's
technical infrastructure, which could result in theft, loss or damage of its assets. The Sponsor does not control the Bitcoin and Ether
Custodian's or Prime Execution Agent's operations or implementation of such security procedures and there can be no assurance
that such security procedures will actually work as designed or prove to be successful in safeguarding the Trust's assets against
all possible sources of theft, loss or damage. Assets not held in cold storage, such as assets held in a trading account, may be more
vulnerable to security breach, hacking or loss than assets held in cold storage. Furthermore, assets held in a trading account, including
the Trust's Trading Balance at the Prime Execution Agent, are held on an omnibus, rather than segregated basis, which creates greater
risk of loss.
The security procedures and
operational 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 Trust
Bitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust's Trading Balance with the Prime Execution Agent, the
private keys (and therefore bitcoin and ether) or other data of the Trust. Additionally, outside parties may attempt to fraudulently induce
employees of the Sponsor, Bitcoin and Ether Custodian, Prime Execution Agent or the Trust's other service providers to disclose
sensitive 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 and
often are not recognized until launched against a target, the Sponsor, Bitcoin and Ether Custodian or Prime Execution Agent may be unable
to anticipate these techniques or implement adequate preventative measures.
An actual or perceived breach
of the Trust Bitcoin and Ether Account with the Bitcoin and Ether Custodian or the Trust's Trading Balance with the Prime Execution
Agent could harm the Trust's operations, result in partial or total loss of the Trust's assets, damage the Trust's reputation
and 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 result
in a reduction in the price of the Shares.
While the Sponsor and the
Trust's service providers have established business continuity plans and systems that they respectively believe are reasonably designed
to prevent cyber attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not
been, or cannot be, identified. Service providers may have limited indemnification obligations to the Trust, which could be negatively
impacted as a result.
If the Trust's holdings
of bitcoin and ether are lost, stolen or destroyed under circumstances rendering a party liable to the Trust, the responsible party may
not have the financial resources sufficient to satisfy the Trust's claim. For example, as to a particular event of loss, the only
source 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 satisfy
a valid claim of the Trust. Similarly, as noted below, the Bitcoin and Ether Custodian and Prime Execution Agent have limited liability
to the Trust, which could adversely affect the Trust's ability to seek recovery from them, even when the Bitcoin and Ether Custodian's
or Prime Execution Agent's actions or failure to act are the cause of the Trust's loss.
It may not be possible, either
because of a lack of available policies or because of prohibitive cost, for the Trust to obtain insurance that would cover losses of the
Trust's bitcoin and ether. If an uninsured loss occurs or a loss exceeds policy limits, the Trust could lose all of its assets.
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The Trust's
risk management processes and policies may prove to not be adequate to prevent any loss of the Trust's bitcoin and ether.
The Sponsor is continuing
to monitor and evaluate the Trust's risk management processes and policies and believes that the current risk management processes
and procedures are reasonably designed and effective. The Sponsor believes that the security procedures that the Sponsor, Bitcoin and
Ether Custodian and Prime Execution Agent utilize, such as hardware redundancy, segregation and offline data storage (i.e., the maintenance
of data on computers and/or storage media that is not directly connected to or accessible from the internet and/or networked with other
computers, also known as "cold storage") protocols are reasonably designed to safeguard the Trust's bitcoin and ether
from theft, loss, destruction or other issues relating to hackers and technological attack. Despite the number of security procedures
that the Sponsor, Bitcoin and Ether Custodian and Prime Execution Agent employ, it is impossible to guarantee the prevention of any loss
due to a security breach, software defect, act of God, pandemic or riot that may be borne by the Trust. Notwithstanding the above, the
Sponsor, Bitcoin and Ether Custodian and Prime Execution Agent are responsible for their own gross negligence, willful misconduct or bad
faith. In the event that the Trust's risk management processes and policies prove to not be adequate to prevent any loss of the
Trust's bitcoin and ether and such loss is not covered by insurance or is otherwise recoverable, the value of the Shares will decrease
as a result and investors would experience a decrease in the value of their investment.
The development
and commercialization of the Trust is subject to competitive pressures.
The Trust and the Sponsor
face competition with respect to the creation of competing products. The Sponsor's competitors may have greater financial, technical
and 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 large
and established companies. If the SEC were to approve many or all of the currently pending applications for such exchange-traded bitcoin
and 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 acceptance
and scale. Accordingly, the Sponsor's competitors may commercialize a competing product more rapidly or effectively than the Sponsor
is able to, which could adversely affect the Sponsor's competitive position and the likelihood that the Trust will achieve initial
market acceptance, and could have a detrimental effect on the scale and sustainability of the Trust. For exchange-traded products similar
to 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 the
SEC were to approve other exchange-traded bitcoin and ether products prior to approving the Trust, the Trust could be significantly negatively
affected.
If the Trust fails to achieve
sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue to cover the costs associated with launching
and maintaining the Trust, and such shortfalls could impact the Sponsor's ability to properly invest in robust ongoing operations
and 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 number
of Authorized Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in
the Shares for extended periods and the Trust's failure to reflect the performance of the prices of bitcoin and ether.
In addition, the Trust will
compete with direct investments in bitcoin and ether, bitcoin and ether futures-based products, other digital assets and other potential
financial vehicles, possibly including securities backed by or linked to digital assets and other investment vehicles that focus on other
digital assets. Market and financial conditions, and other conditions beyond the Trust's control, may make it more attractive to
invest directly or in other vehicles, which could adversely affect the performance of the Trust.
To the extent that the Trust
incurs transaction expenses in connection with the creation and redemption process, litigation expenses, indemnification obligations under
the Trust's service provider agreements and other extraordinary expenses that are not borne by the Sponsor, such expenses will be
borne by the Trust. To the extent that the Trust fails to attract a sufficiently large amount of investors, the effect of such expenses
on the value of the Shares may be significantly greater than would be the case if the Trust had attracted more assets.
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The lack of active
trading markets for the Shares may result in losses on investors' investments at the time of disposition of Shares.
Although Shares are expected
to be publicly listed and traded on the Exchange, there can be no guarantee that an active trading market for the Trust will develop or
be maintained. If investors need to sell their Shares at a time when no active market for them exists, the price investors receive for
their Shares, assuming that investors are able to sell them, likely will be lower than the price that investors would receive if an active
market did exist and, accordingly, a Shareholder may suffer losses.
Possible illiquid
markets may exacerbate losses or increase the variability between the Trust's NAV and its market price.
Ether is a novel asset with
a very limited trading history. Therefore, the markets for bitcoin and ether may be less liquid and more volatile than other markets for
more established products, such as futures contracts for traditional physical commodities. It may be difficult to execute bitcoin and
ether trades at a specific price when there is a relatively small volume of buy and sell orders in the bitcoin and ether market. A market
disruption can also make it more difficult to liquidate a position or find a suitable counterparty at a reasonable cost.
Market illiquidity may cause
losses for the Trust. The large size of the positions that the Trust may acquire will increase the risk of illiquidity by both making
the positions more difficult to liquidate and increasing the losses incurred while trying to do so should the Trust need to liquidate
its bitcoin and ether. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Trust will typically
invest in bitcoin and ether, which is highly concentrated.
The Trust's
bitcoin and ether may be subject to loss, damage, theft or restriction on access.
There is a risk that part
or all of the Trust's bitcoin and ether could be lost, stolen or destroyed, potentially by the loss or theft of the private keys
held by the Bitcoin and Ether Custodian or Prime Execution Agent associated with Trust's bitcoin and ether. The Sponsor believes
that the Bitcoin and Ether Custodian's and Prime Execution Agent's operations are an appealing target to hackers or malware
distributors seeking to destroy, damage or steal bitcoin and ether or private keys. Although the Bitcoin and Ether Custodian and Prime
Execution Agent use multiple means and layers of security to minimize the risk of loss, damage and theft, neither the Bitcoin and Ether
Custodian, the Prime Execution Agent nor the Sponsor can guarantee that such security will prevent such loss, damage or theft, whether
caused intentionally, accidentally or by act of God. Access to the Trust's bitcoin and ether could also be restricted by natural
events (such as an earthquake or flood), human actions (such as a terrorist attack) or security or compliance measures (such as in response
to a hard fork). Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.
Several factors
may affect the Trust's ability to achieve its investment objective on a consistent basis.
There is no guarantee that
the 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 portfolio
holdings to comply with investment restrictions or policies or regulatory or tax law requirements; (6) early or unanticipated closings
of the markets on which bitcoin and ether trade, resulting in the inability of the Authorized Participants to execute intended portfolio
transactions; (7) operational or methodological issues with the Pricing Benchmarks that result in the benchmark used by the Trust not
accurately representing the true value of the Trust's bitcoin and ether holdings; and (8) accounting standards.
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The amount of
bitcoin and ether represented by a Share will decline over time.
The amount of bitcoin and
ether represented by a Share will continue to be reduced during the life of the Trust due to the transfer of the Trust's bitcoin
and ether to pay the Sponsor Fee and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. This dynamic will occur
irrespective 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 assumed
by the Sponsor, any interest payable on the Trade Credits will be the responsibility of the Trust.
Each outstanding Share represents
a unit of undivided beneficial ownership of the Trust. The Trust does not generate any income and transfers bitcoin and ether to pay the
Sponsor Fee, and to pay for extraordinary, non-recurring expenses not assumed by the Sponsor. Therefore, the amount of bitcoin and ether
represented by each Share will gradually decline over time. This is also true with respect to Shares that are issued in exchange for additional
deposits of bitcoin and ether or cash used to acquire bitcoin and ether over time, as the amount of bitcoin and ether required to create
Shares proportionally reflects the amount of bitcoin and ether represented by the Shares outstanding at the time of such Basket being
created. Assuming a constant bitcoin and ether prices, the trading price of the Shares is expected to gradually decline relative to the
prices of bitcoin and ether as the amount of bitcoin and ether represented by the Shares gradually declines.
Investors should be aware
that the gradual decline in the amount of bitcoin and ether represented by the Shares will occur regardless of whether the trading price
of the Shares rises or falls in response to changes in the price of bitcoin and ether.
Extraordinary
expenses resulting from unanticipated events may become payable by the Trust, adversely affecting an investment in the Shares.
In consideration for the Sponsor
Fee, the Sponsor has contractually assumed certain operational and periodic expenses of the Trust. See "ADDITIONAL INFORMATION ABOUT
THE TRUST—The Trust's Fees and Expenses." Extraordinary, non-recurring expenses that are not assumed by the Sponsor
are borne by the Trust and paid through the sale of the Trust's bitcoin and ether. Any incurring of extraordinary expenses by the
Trust could adversely affect an investment in the Shares.
The value of the
Shares will be adversely affected if the Trust is required to indemnify the Trustee, the Administrator, the Transfer Agent, the Bitcoin
and Ether Custodian, the Prime Execution Agent or the Cash Custodian.
Under the Trust Agreement
and the Trust's service provider agreements, each of the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, Prime
Execution Agent, Cash Custodian and Sponsor has a right to be indemnified by the Trust for any liability or expense it incurs, subject
to certain exceptions. Therefore, the Trustee, Administrator, Transfer Agent, Bitcoin and Ether Custodian, Prime Execution Agent, Cash
Custodian or Sponsor may require that the assets of the Trust be sold in order to cover losses or liability suffered by it. Any sale of
that kind would reduce the net assets of the Trust and the NAV.
Unforeseeable risks
.
Bitcoin and ether have gained
commercial 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 bitcoin
and ether may expose investors in the Trust to additional risks that are impossible to predict.
63
Regulatory Risk
Future and current
regulations 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 bitcoin
and ether and related products and services continues to evolve, may take many different forms and will, therefore, impact the Bitcoin
and Ethereum networks and bitcoin and ether and their usage in a variety of manners. The inconsistent and sometimes conflicting regulatory
landscape may make it more difficult for bitcoin and ether businesses to provide services, which may impede the growth of the bitcoin
and ether economies and have an adverse effect on consumer adoption of bitcoin and ether. There is a possibility of future regulatory
change 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 regulatory
determinations of bitcoin or ether's status under federal or state securities laws, changes to regulations surrounding bitcoin and
ether futures or related products, or actions by a U.S. or foreign government or quasi-governmental agency exerting regulatory authority
over bitcoin and ether, the Bitcoin and Ethereum networks, bitcoin and ether trading, or related activities impacting other parts of the
digital asset market, may adversely impact bitcoin and ether and therefore may have an adverse effect on the value of an investment in
the Trust.
The Trust is not
a registered investment company and is not subject to the Commodity Exchange Act.
The Trust is not a registered
investment company subject to the Investment Company Act of 1940 ("Investment Company Act"). Consequently, Shareholders of
the Trust do not have the regulatory protections provided to Shareholders in registered and regulated investment companies, which, for
example, require investment companies to have a certain percentage of disinterested directors and regulate the relationship between the
investment company and certain of its affiliates. Further, the Trust will not hold or trade in commodity futures contracts regulated by
the 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 are
deemed to be commodity futures under the Commodity Exchange Act and subject to CFTC jurisdiction. Furthermore, the Sponsor believes that
the Trust is not a commodity pool for purposes of the Commodity Exchange Act. Consequently, Shareholders will not have the regulatory
protections provided to Shareholders in Commodity Exchange Act-regulated instruments or commodity pools.
Trading on digital
asset 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's
trading is conducted on digital asset trading platforms outside the United States, trading on such trading platforms is not regulated
by any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. trading platforms. Certain foreign markets
may be more susceptible to disruption than U.S. trading platforms. These factors could adversely affect the performance of the Trust.
As the Bitcoin
and Ethereum networks and the broader digital assets ecosystem have grown, they have begun to attract more regulatory attention around
the globe. The future regulatory environment is uncertain and may vary by country or even within countries. Failure to appropriately regulate
the 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 classification
and clearing purposes. In particular, bitcoin and ether may be classified by the CFTC as a "commodity interest" under the
Commodity Exchange Act and certain transactions in bitcoin and ether may be deemed to be commodity futures or bitcoin and ether may be
classified by the SEC as a "security" under U.S. federal securities laws. As of the date of this Prospectus, the Sponsor is
not 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 commodity
interest), these rulings are not definitive and the Sponsor and the Trust cannot be certain as to how future regulatory developments will
impact the treatment of bitcoin and ether under U.S. law. In the face of such developments, the required registrations and compliance
steps may result in extraordinary, non-recurring expenses to the Trust. If the Sponsor decides to terminate the Trust in response to the
changed regulatory circumstances, the Trust may be dissolved or liquidated at a time that is disadvantageous to Shareholders.
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The SEC has not asserted regulatory
authority over bitcoin or ether or trading or ownership of bitcoin or ether and has not expressed the view that bitcoin or ether should
be classified or treated as a security for purposes of U.S. federal securities laws. In fact, senior members of the staff of the SEC have
expressed 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 recent
letter regarding the SEC's review of proposed rule changes to list and trade shares of certain bitcoin- and ether-related investment
vehicles on public markets, the SEC staff stated that it has significant investor protection concerns regarding the markets for digital
assets, including the potential for market manipulation and fraud. In March 2018, it was reported that the SEC was examining as many as
100 investment funds with strategies focused on digital assets. The reported focus of the examinations is on the accuracy of risk disclosures
to 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 been
reported that some of these funds have received subpoenas from the SEC's Enforcement Division. The SEC also has determined that
certain digital assets are securities under U.S. securities laws. In these determinations, the SEC reasoned that the unregistered offer
and sale of digital assets can, in certain circumstances, including ICOs, be considered illegal public offering of securities. A significant
amount of funding for digital asset startups has come from ICOs, and if ICOs are halted or face obstacles, or companies that rely on them
face 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 certain
digital assets may be considered "securities" under federal securities laws. The test for determining whether a particular
digital asset is a "security" is complex and the outcome is difficult to predict. In April 2019, the SEC's Strategic
Hub for Innovation and Financial Technology published a framework for the analysis of digital assets; however, this framework is not a
rule, 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 have
material adverse consequences for bitcoin and ether as digital assets. For example, it may become more difficult for bitcoin and ether
to be traded, cleared and custodied as compared to other digital assets that are not considered to be securities, which could in turn
negatively 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 laws
by the SEC or any other agency, or in a proceeding in a court of law or otherwise, it may have material adverse consequences for bitcoin
and ether as digital assets due to negative publicity or a decline in the general acceptance of digital assets. In addition, trading platforms
that feature digital assets that are determined to be securities may face penalties or be required to shut down if they do not have the
licenses required to facilitate electronic markets in securities, which could result in a reduction of the liquidity of bitcoin and ether
markets. As such, any determination that bitcoin, ether or any other digital asset is a security under federal or state securities laws
may adversely affect the value of bitcoin and ether and, as a result, the value of the Shares.
To the extent that bitcoin
and ether are deemed to fall within the definition of a security under U.S. federal securities laws, the Trust and the Sponsor may be
subject to additional requirements under the Investment Company Act and the Advisers Act. The Sponsor or the Trust may be required to
register as an investment adviser under the Advisers Act. Such additional registration may 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 may terminate the Trust. Any such termination could result
in the liquidation of the Trust's bitcoin and ether at a time that is disadvantageous to Shareholders.
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The CFTC has regulatory jurisdiction
over 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 bitcoin
and ether. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions
involving 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, the
NFA does not have regulatory oversight authority for the cash or spot markets for bitcoin and ether trading or transactions.
To the extent that bitcoin
and ether are deemed to fall within the definition of a "commodity interest" under the Commodity Exchange Act, the Trust and
the Sponsor may be subject to additional regulation under the Commodity Exchange Act and CFTC regulations. These additional requirements
may 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 may
terminate the Trust. Any such termination could result in the liquidation of the Trust's bitcoin and ether at a time that is disadvantageous
to Shareholders.
Further, if any other digital
asset with widespread markets is determined to be a "commodity interest" under the Commodity Exchange Act, it may have material
adverse consequences for bitcoin and ether as a digital asset due to negative publicity or a decline in the general acceptance of digital
assets. In addition, trading platforms that feature digital assets that are determined to be commodity interests may face penalties or
be 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 other
digital assets currently face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China, the United
Kingdom, Australia, Russia, Israel, Poland, India and Canada. Cybersecurity attacks by state actors, particularly for the purpose of evading
international economic sanctions, are likely to attract additional regulatory scrutiny to the acquisition, ownership, sale and use of
digital assets, including bitcoin and ether. The effect of any existing regulation or future regulatory change on the Trust or bitcoin
and ether is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Shares. Various
foreign jurisdictions have adopted, and may continue to adopt in the near future, laws, regulations or directives that affect digital
assets, 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 down
on bitcoin mining in China. Over the subsequent weeks, multiple regions began to shut down mining operations, including what was estimated
to be the three largest Chinese mining regions in Xinjiang, Sichuan, and Inner Mongolia. This resulted in a material decrease in the global
bitcoin hash rate. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance
of digital assets by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability
of the digital assets economy in these jurisdictions as well as in the United States and elsewhere, or otherwise negatively affect the
value of digital assets, including bitcoin and ether, and, in turn, the value of the Shares.
In addition to financial regulation
of bitcoin and ether, because of the high energy usage required for bitcoin mining, bitcoin may be subject to regulation stemming from
energy usage and/or climate concerns. For example, as of December 31, 2022, approximately 245 million tera hashes are performed every
second in connection with mining on the Bitcoin network. Although measuring the electricity consumed by this process is difficult because
these 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 addition
to the direct energy costs of performing calculations on any given digital asset network, there are indirect costs that impact a network's
total energy consumption, including the costs of cooling the machines that perform these calculations. A number of states and countries
have adopted, or are considering the adoption of, regulatory frameworks to impede bitcoin mining and/or bitcoin use more broadly. For
example, on May 26, 2021, Iran placed a temporary ban on bitcoin mining in an attempt to decrease energy usage and help alleviate
blackouts. New York State recently failed to pass a bill that would place a moratorium on mining operations for proof-of-work blockchains
such as bitcoin. Depending on how futures regulations are formulated and applied, such policies could have the potential to negatively
affect the price of bitcoin, and, in turn, the value of the Shares. Increased regulation and the corresponding compliance cost of these
regulations could additionally result in higher barriers to entry for bitcoin miners, which could increase the concentration of the hash
rate, potentially having a negative impact on the price of bitcoin.
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Notwithstanding Ethereum's
move 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 consequently
adversely impact the value of the Shares. This could adversely affect the price of ether, or the operation of the Bitcoin and Ethereum
networks, and accordingly decrease the value of the Shares, by creating negative sentiment around digital assets generally.
It may be illegal
now, or in the future, to acquire, own, hold, sell or use bitcoin and ether in one or more countries, and ownership of, holding or trading
in the Shares may also be considered illegal and subject to sanction.
Although currently bitcoin
and 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 bitcoin
and ether or to exchange bitcoin and ether for fiat currency. Such an action may also result in the restriction of ownership, holding
or trading in the Shares. Such a restriction could result in the termination and liquidation of the Trust at a time that is disadvantageous
to Shareholders, or may adversely affect an investment in the Shares.
Tax Risk
The IRS may disagree
with or seek to challenge the Trust's treatment as a grantor trust.
The Sponsor intends to take
the position that the Trust is properly treated as a grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a
grantor trust, the Trust will not be subject to U.S. federal income tax. Rather, if the Trust is a grantor trust, each beneficial owner
of Shares will be treated as directly owning its pro rata share of the Trust's assets and a pro rata portion of the Trust's
income, gain, losses and deductions will "flow through" to each beneficial owner of Shares.
Shareholders could
incur 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 bitcoin
and ether as a result of the Trust using bitcoin and ether to pay its expenses, including the Sponsor Fee) that is otherwise not associated
with a distribution to Shareholders, or in connection with the receipt cash from the Sponsor in connection with the Sponsor's sale
of Incidental Right(s) and/or IR Asset(s). Shareholders may be subject to tax due to the grantor trust status of the Trust even though
there is not a corresponding distribution from the Trust.
The tax treatment
of bitcoin and ether and transactions involving bitcoin and ether for U.S. federal income tax purposes may change.
The tax treatment of digital
assets is still evolving and subject to change. Current IRS guidance indicates that bitcoin and ether should be treated as property for
federal income tax purposes and that transactions involving the exchange of bitcoin and ether in return for goods and services should
be 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 bitcoin
and ether or in transactions relating to investments in bitcoin and ether, including without limitation the tax treatment of a fork or
airdrop, may evolve and change from those described in this Prospectus, possibly with retroactive effect. For example, current guidance
indicates 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 or
a currency, the tax rate incurred by investors would be higher. Additional disclosure requirements may also apply to an investment in
digital assets. Investors should consult their individual tax advisers to determine if such disclosure requirements apply to them.
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Any change in the U.S. federal
income tax treatment of bitcoin and ether may have a negative effect on the prices of bitcoin and ether and may adversely affect the value
of the Shares. Whether any additional guidance will adversely affect the U.S. federal income tax treatment of an investment in bitcoin
and ether or in transactions relating to investments in bitcoin and ether is unknown. There can be no assurance that the IRS will not
alter its position with respect to digital assets in the future or that a court would uphold the treatment set forth in the Notice and
the Rulings & FAQs.
The tax treatment
of bitcoin and ether and transactions involving bitcoin and ether for state and local tax purposes is not settled.
Because bitcoin and ether
are new technological innovations, the tax treatment of bitcoin and ether for state and local tax purposes, including without limitation
state and local income and sales and use taxes, is not settled. It is uncertain what guidance, if any, on the treatment of bitcoin and
ether for state and local tax purposes may be issued in the future. A state or local government authority's treatment of bitcoin
and ether may have negative consequences, including the imposition of a greater tax burden on investors in bitcoin and ether or the imposition
of a greater cost on the acquisition and disposition of bitcoin and ether generally. Any such treatment may have a negative effect on
the 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 Bitcoin
or Ethereum blockchains, the Trust Agreement requires that the Sponsor analyze the transaction according to several criteria and promptly
determine which digital asset network is generally accepted as the Bitcoin or Ethereum networks and should therefore be considered the
appropriate 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 engagement
with, 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 Rights
and IR Assets, including Forked Assets. Such assets are not considered assets of the Trust at any point in time. Once it has been determined
by 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 desirable
in connection with its acquisition of such asset. In the event that the Sponsor decides to sell the Forked Asset, it will seek to do so
for cash. This may be a sale of the Forked Asset directly in exchange for cash, or in exchange for another digital asset which may subsequently
be exchanged for cash. The Sponsor would then contribute that cash back to the Trust, which in turn would distribute the cash to DTC to
be distributed to Shareholders in proportion to the number of Shares owned. The receipt of cash in connection with this distribution may
cause Shareholders to incur a U.S. federal, state, local, or foreign tax liability. In addition, the IRS may not accept the Trust's
position that disclaimed Incidental Rights or IR Assets do not represent a taxable incident. Any tax liability could adversely impact
an investment in the Shares and may require Shareholders to prepare and file tax returns. Any tax liability could adversely impact an
investment in the Shares and may require Shareholders to prepare and file tax returns.
Under the IRS guidance on
digital assets, hard forks, airdrops and similar occurrences with respect to digital assets will under certain circumstances be treated
as taxable events giving rise to ordinary income. In the absence of guidance to the contrary, it is possible that any such income recognized
by a U.S. tax-exempt Shareholder would constitute "unrelated business taxable income" ("UBTI"). A tax-exempt Shareholder
should consult its tax adviser regarding whether such Shareholder may recognize UBTI as a consequence of an investment in Shares.
Non-U.S. Holders
may be subject to U.S. federal withholding tax on income derived from forks, airdrops and similar occurrences.
IRS guidance on digital assets
does not address whether income recognized by a non-U.S. person as a result of a fork, airdrop or similar occurrence could be subject
to the 30% withholding tax imposed on U.S.-source "fixed or determinable annual or periodical" income. Non-U.S. Shareholders
should assume that, in the absence of guidance, a withholding agent (including the Sponsor) is likely to withhold 30% of any such income
recognized 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 sale
of an IR Right and/or IR Asset and contributing such cash back to the Trust.
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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 develops
and 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 the
option of the Sponsor.
As a new fund, there can be
no assurance that the Trust will grow to or maintain an economically viable size, in which case the Sponsor may elect to terminate the
Trust, which could result in the liquidation of the Trust's bitcoin and ether at a time that is disadvantageous to an investor in
the Shares. If the Trust fails to achieve sufficient scale due to competition, the Sponsor may have difficulty raising sufficient revenue
to cover the costs associated with launching and maintaining the Trust, and such shortfalls could impact the Sponsor's ability to
properly invest in robust ongoing operations and 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 number of Authorized
Participants willing to make a market in the Shares, which in turn could result in a significant premium or discount in the Shares for
extended periods and the Trust's failure to reflect the performance of the prices of bitcoin and ether.
The Trust may
be required to terminate and liquidate at a time that is disadvantageous to Shareholders.
If the Trust is required to
terminate and liquidate, such termination and liquidation could occur at a time that is disadvantageous to Shareholders, such as when
the prices of bitcoin and ether are lower than they was at the time when Shareholders purchased their Shares. In such a case, when the
Trust's bitcoin and ether is sold as part of the Trust's liquidation, the resulting proceeds distributed to Shareholders will
be less than if the prices of bitcoin and ether were higher at the time of sale. See "ADDITIONAL INFORMATION ABOUT THE TRUST—Termination
of the Trust" for more information about the termination of the Trust, including when the termination of the Trust may be triggered
by events outside the direct control of the Sponsor, the Trustee or Shareholders.
The Exchange on
which 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 for
trading on the Exchange under the market symbol "[___]." Trading in Shares may be halted due to market conditions or, in light
of 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 require
trading to be halted for a specified period based on a specified market decline. Additionally, there can be no assurance that the requirements
necessary to maintain the listing of the Shares will continue to be met or will remain unchanged.
The liquidity
of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market
price of the Shares.
In the event that one or more
Authorized Participants or market makers that have substantial interests in the Shares withdraw or "step away" from participation
in the purchase (creation) or sale (redemption) of the Shares, the liquidity of the Shares will likely decrease, which could adversely
affect the market price of the Shares and result in investors incurring a loss on their investment.
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The market infrastructure
of the bitcoin and ether spot markets could result in the absence of active Authorized Participants able to support the trading activity
of 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 guarantee
that the Sponsor will be able to find an Authorized Participant to actively and continuously support the Trust.
Digital asset
trading platforms are not subject to the same regulatory oversight as traditional equity exchanges, which could negatively impact the
ability of Authorized Participants to implement arbitrage mechanisms.
The trading for bitcoin and
ether occurs on multiple digital asset trading platforms that have various levels and types of regulation, but are not regulated in the
same 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 Authorized
Participants serve in such capacity for several competing exchange-traded bitcoin and ether products, which could adversely affect the
market for the Shares.
Only an Authorized Participant
may engage in creation or redemption transactions directly with the Trust. Some or all of the Trust's Authorized Participants are
expected to serve as authorized participants or market makers for one or more exchange-traded bitcoin and ether products that compete
with the Trust. This may make it more difficult to engage or retain Authorized Participants for the Trust. Furthermore, because there
is no obligation on the part of the Authorized Participants to engage in creation and redemption or market making activities with respect
to the Trust's Shares, decisions by the Authorized Participants to not engage with the Trust or its Shares may result in a decline
in 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 that
are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with
trading in secondary markets may adversely affect investors' investment in the Shares.
Only Authorized Participants
may purchase or redeem Baskets. All other investors that desire to purchase or sell Shares must do so through the Exchange or in other
markets, if any, in which the Shares may be traded. Shares may trade at a premium or discount to the NAV per Share.
The Sponsor is
leanly staffed and relies heavily on key personnel to manage its activities.
The Sponsor is leanly staffed
and relies heavily on key personnel to manage its activities. These key personnel intend to allocate their time managing the Trust in
a manner that they deem appropriate. If such key personnel were to leave or be unable to carry out their present responsibilities, it
may have an adverse effect on the management of the Sponsor.
Conducting creations
and redemptions for cash has drawbacks.
In the near term, the Trust
will effect all of its creations and redemptions for cash, rather than in kind. The use of cash creations and redemptions may cause Shares
to trade in the market at greater bid-ask spreads or greater premiums or discounts to their NAV per Share. The use of cash for redemptions
will also limit the tax efficiency of the Trust. Additionally, the Trust's need to purchase bitcoin and ether in connection with
creation orders introduces the possibility that the Trust will pay higher prices for bitcoin and ether than the value ascribed to bitcoin
and ether by the Pricing Benchmarks, the rate used to calculate the Trust's NAV. This is known as "slippage." While
transactions 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 consummate
a creation order for Baskets on the prices the Trust actually paid for the bitcoin and ether rather than on the value of bitcoin and ether
ascribed by the Pricing Benchmarks. Nonetheless, there can be no guarantee that the Trust will not be negatively affected by slippage
from time to time. The Trust will also incur transaction costs it would not otherwise have incurred if it received and distributed bitcoin
and ether in kind and was not required to purchase and sell bitcoin and ether in connection with creation and redemption orders.
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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 and
ether, the Trust would first need to seek certain regulatory approvals, including an amendment to Exchange's listing rules and an
amendment to the Trust's registration statement of which this prospectus forms a part. There can be no guarantee that the Trust
will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful
in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in
a prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.
Potential conflicts
of interest may arise among the Sponsor or its affiliates and the Trust.
The Trust operations will
be managed by the Sponsor. It is possible that conflicts may arise between the Sponsor, affiliates, the Trust and its Shareholders.
In resolving conflicts of
interest, the Sponsor is allowed to take into account the interests of other parties. Conflicts of interest may arise as a result of:
●
Sponsor and its affiliates will be indemnified pursuant to
the Trust Agreement;
●
The Sponsor's allocation of resources (including the
time and attention of management and business development) among different clients and potential future business ventures, to each of
which they may owe fiduciary duties, the determination of which is the responsibility of the Sponsor and its affiliates;
●
The staff of the Sponsor may also directly or indirectly serve
affiliates and clients of the Sponsor;
●
The Trust Agreement does not prohibit the Sponsor, its respective
affiliates and their respective officers and employees from engaging in other businesses or activities that might be in direct competition
with the Trust;
●
The Sponsor and its staff may take direct positions in bitcoin
and ether or in other investments, or may advise other clients to take such positions, that may be in conflict with the investment objective
of the Shares or that may be of a size that could impact the prices of bitcoin and ether;
●
There has been no independent due diligence conducted with
respect to this offering, where applicable, and there is an absence of arm's-length negotiation with respect to certain terms of
the Trust;
●
The Sponsor decides whether to obtain third-party services
for the Trust.
By investing in the Shares,
investors agree and consent to the provisions set forth in the Trust Agreement.
For a further discussion of
the conflicts of interest among the Sponsor, Bitcoin and Ether Custodian, Cash Custodian, Trust and others, see
"Conflicts of
Interest."
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 Trust
does 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 assets
are sold as part of the Trust's liquidation, the resulting proceeds distributed to Shareholders may be less than those that may
be realized in a sale outside of a liquidation context. Investors may be adversely affected by redemption or creation orders that are
subject to postponement, suspension or rejection under certain circumstances.
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The Sponsor may
discontinue its services, which may be detrimental to the Trust.
Sponsor may be unwilling or
unable to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities and is unable to
be replaced, the Trust may have to terminate and liquidate the bitcoin and ether held by the Trust. A substitute sponsor's appointment
will not guarantee the Trust's continued operation even if a substitute sponsor is found, the appointment of a substitute sponsor
may not necessarily be beneficial to the Trust or an investment in the Shares and the Trust may terminate.
Any of the service
providers could resign or be removed by the Trust, which could trigger early termination of the Trust.
Any service provider may resign
or be removed under its respective governing agreement. The Trust may dissolve in accordance with the terms of the Trust Agreement if
any service provider resigns or is removed and is unable to be replaced.
The lack of independent
advisers representing investors in the Trust may cause Shareholders to be adversely affected.
Counsel, accountants and other
advisers have been consulted by the Sponsor regarding the formation and operation of the Trust. Potential investors should consult their
own legal, tax and financial advisers regarding the desirability of an investment in the Shares. No counsel has been appointed to represent
an investor in connection with the offering of the Shares. Failure to consult with their own legal, tax and financial advisers may lead
to 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 represents
the Sponsor. The Trust does not have counsel separate and independent from counsel to the Sponsor. Chapman and Cutler LLP does not represent
Shareholders, and no independent counsel has been retained to represent Shareholders. Chapman and Cutler LLP is not responsible for any
acts or omissions of the Sponsor, the Administrator, the Trustee, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime Execution
Agent, 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 by
the Sponsor, the Administrator, the Bitcoin and Ether Custodian, the Cash Custodian, the Prime Execution Agent, the Transfer Agent, and
the 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 do
not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by
limited voting and distribution rights.
The Shares have limited voting
and distribution rights under the Trust Agreement. For example, except as required under applicable federal law or under the rules or
regulations 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 is
not required to pay regular distributions. The Trust will not have regular Shareholder meetings. The right to authorize actions, appoint
service providers or take other actions will not be held by Shareholders, unlike shareholders of other trusts.
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An investment
in 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 with
direct investments in bitcoin and ether, other digital assets and other potential financial vehicles, possibly including securities backed
by or linked to digital assets and other investment vehicles that focus on other digital assets. Market and financial conditions, and
other conditions beyond the Trust's control, may make it more attractive to invest in other vehicles, which could adversely affect
the performance of the Trust.
Investors cannot
be assured of the Sponsor's continued services, the discontinuance of which may be detrimental to the Trust.
Investors cannot be assured
that the Sponsor will be able to continue to service the Trust for any length of time. If the Sponsor discontinues its activities on behalf
of 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 could
result in termination of the Trust.
The liability
of the Sponsor and the Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required to indemnify
the 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 negligence
or 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. As
a 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 of
that 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 and
Bitcoin and Ether Custodian and the Trust's lack of direct insurance protection expose the Trust and its Shareholders to the risk
of loss of the Trust's bitcoin and ether for which no person is liable.
The Trust is not a banking
institution and is not a member of the FDIC or Securities Investor Protection Corporation ("SIPC") and, therefore, investments
in the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. Likewise, the Bitcoin and
Ether Custodian is not a depository institution and is not a member of the FDIC or SIPC and, therefore, the Trust's assets held
with the Bitcoin and Ether Custodian are not subject to FDIC or SIPC insurance coverage. In addition, neither the Trust nor the Sponsor
insures 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 Coinbase
Global and all of its subsidiaries, including the Bitcoin and Ether Custodian and the Prime Execution Agent (collectively, Coinbase Global
and its subsidiaries are referred to as the "Coinbase Insureds"), including from employee collusion or fraud, physical loss
including theft, damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by Coinbase Global
is shared among all of Coinbase's customers, is not specific to the Trust or to customers holding bitcoin and ether with the Bitcoin
and Ether Custodian or Prime Execution Agent, and may not be available or sufficient to protect the Trust from all possible losses or
sources of losses. Coinbase Global's insurance may not cover the type of losses experienced by the Trust. Alternatively, the Trust
may be forced to share such insurance proceeds with other clients or customers of the Coinbase Insureds, which could reduce the amount
of such proceeds that are available to the Trust. In addition, the bitcoin and ether insurance market is limited, and the level of insurance
maintained by Coinbase Global may be substantially lower than the assets of the Trust. While the Bitcoin and Ether Custodian maintains
certain capital reserve requirements depending on the assets under custody, and such capital reserves may provide additional means to
cover client asset losses, the Trust cannot be assured that the Bitcoin and Ether Custodian will maintain capital reserves sufficient
to cover actual or potential losses with respect to the Trust's digital assets.
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Furthermore, under the Bitcoin
and Ether Custody Agreement, the Bitcoin and Ether Custodian's liability is limited as follows, among others: (i) other than with
respect 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 exceed
the 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 the
12 months prior to the event giving rise to the Bitcoin and Ether Custodian's liability, and (B) the value of the affected bitcoin
and ether or cash giving rise to the Bitcoin and Ether Custodian's liability; (ii) in respect of the Bitcoin and Ether Custodian's
obligations 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 information
security obligations, or violation of any law, rule or regulation with respect to the provision of its services (the "Mutually Capped
Liabilities"), the Bitcoin and Ether Custodian's liability shall not exceed the greater of (A) $5 million and (B) the aggregate
fees 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's
liability; and (iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin and Ether
Custodian 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, suspension
of operations, failure in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the
reasonable control of the Bitcoin and Ether Custodian. In the event of potential losses incurred by the Trust as a result of the Bitcoin
and Ether Custodian losing control of the Trust's bitcoin and ether or failing to properly execute instructions on behalf of the
Trust, the Bitcoin and Ether Custodian's liability with respect to the Trust will be subject to certain limitations which may allow
it to avoid liability for potential losses or may be insufficient to cover the value of such potential losses, even if the Bitcoin and
Ether Custodian directly caused such losses.
Similarly, under the Prime
Execution Agreement, the Prime Execution Agent's liability is limited as follows, among others: (i) other than with respect to claims
and losses arising from spot trading of bitcoin and ether, or fraud or willful misconduct, or the PB Mutually Capped Liabilities (defined
below), 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 Execution
Agent's liability, and (B) the value of the cash or affected bitcoin and ether giving rise to the Prime Execution Agent's
liability; (ii) in respect of the Prime Execution Agent's obligations 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 Prime Execution Agent's gross negligence, violation
of its confidentiality, data protection and/or information security obligations, violation of any law, rule or regulation with respect
to the provision of its services, or the full amount of the Trust's assets lost due to the insolvency of or security event at a
Connected Trading Venue (as defined below) (the "PB Mutually Capped Liabilities"), the Prime Execution Agent's liability
shall 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 months
prior 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 advised
of 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, material
violation of applicable law or willful misconduct. The Prime Execution Agent is not liable for delays, suspension of operations, failure
in performance, or interruption of service to the extent it is directly due to a cause or condition beyond the reasonable control of the
Prime Execution Agent. These and the other limitations on the Prime Execution Agent's liability may allow it to avoid liability
for potential losses or may be insufficient to cover the value of such potential losses, even if the Prime Execution Agent directly caused
such losses. Both the Trust and the Prime Execution Agent and its affiliates (including the Bitcoin and Ether Custodian) are required
to indemnify each other under certain circumstances.
Moreover, in the event of
an insolvency or bankruptcy of the Prime Execution Agent (in the case of the Trading Balance) or the Bitcoin and Ether Custodian (in the
case of the Trust Bitcoin and Ether Account) in the future, given that the contractual protections and legal rights of customers with
respect to digital assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Bitcoin
and Ether Custodian or Prime Execution Agent in the virtual currency industry, there is a risk that customers' assets—including
the Trust's assets—may be considered the property of the bankruptcy estate of the Prime Execution Agent (in the case of the
Trading Balance) or the Bitcoin and Ether Custodian (in the case of the Trust Bitcoin and Ether Account), and customers—including
the Trust—may be at risk of being treated as general unsecured creditors of such entities and subject to the risk of total loss
or markdowns on value of such assets.
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The Bitcoin and Ether Custody
Agreement contains an agreement by the parties to treat the bitcoin and ether credited to the Trust Bitcoin and Ether Account as financial
assets under Article 8 of the New York Uniform Commercial Code ("Article 8"), in addition to stating that the Bitcoin and
Ether Custodian will serve as fiduciary and custodian on the Trust's behalf. The Bitcoin and Ether Custodian's parent, Coinbase
Global Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisions
relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event the
Bitcoin and Ether Custodian were to experience insolvency. However, due to the novelty of digital asset custodial arrangements courts
have not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how they
would rule in such a scenario. If the Bitcoin and Ether Custodian became subject to insolvency proceedings and a court were to rule that
the 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 and
the Trust could be subject to the loss of all or a significant portion of its assets. Moreover, in the event of the bankruptcy of the
Bitcoin and Ether Custodian, an automatic stay could go into effect and protracted litigation could be required in order to recover the
assets held with the Bitcoin and Ether Custodian, all of which could significantly and negatively impact the Trust's operations
and the value of the Shares.
With respect to the Prime
Execution Agreement, there is a risk that the Trading Balance, in which the Trust's bitcoin and ether and cash is held in omnibus
accounts by the Prime Execution Agent (in the latter case, as described below in "RISK FACTORS—Loss of a critical banking
relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust's ability to create
or redeem Baskets, or could cause losses to the Trust"), could be considered part of the Prime Execution Agent's bankruptcy
estate in the event of the Prime Execution Agent's bankruptcy. The Prime Execution Agreement contains an Article 8 opt-in clause
with respect to the Trust's assets held in the Trading Balance.
The Prime Execution Agent
is 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 Prime
Execution Agent has allocated to the omnibus wallets the Prime Execution Agent holds, as well as the accounts in the Prime Execution Agent's
name that the Prime Execution Agent maintains at Connected Trading Venues (the "Connected Trading Venue") (which are typically
held on an omnibus, rather than segregated, basis). If the Prime Execution Agent suffers an insolvency event, there is a risk that the
Trust's assets held in the Trading Balance could be considered part of the Prime Execution Agent's bankruptcy estate and the
Trust 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 litigation
could be required in order to recover the assets held with the Prime Execution Agent, all of which could significantly and negatively
impact 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 bitcoin
and ether by the Bitcoin and Ether Custodian or Prime Execution Agent, absent gross negligence, bad faith or willful misconduct on the
part 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 bitcoin
and ether by the Bitcoin and Ether Custodian or Prime Execution Agent, is limited.
The Shareholders' recourse
against 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, is
limited. For the avoidance of doubt, neither the Sponsor, the Trustee, nor any of their affiliates nor any other party has guaranteed
the assets or liabilities, or otherwise assumed the liabilities, of the Trust, or the obligations or liabilities of any service provider
to the Trust, including, without limitation, the Bitcoin and Ether Custodian and Prime Execution Agent. The Prime Execution Agreement
and Bitcoin and Ether Custody Agreement provide that neither the Sponsor nor its affiliates shall have any obligation of any kind or nature
whatsoever, 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's
insurance 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.
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During the rare
and limited circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. If the Trade Credits are not
available 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 limited
circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits (defined below). To avoid having to pre-fund
purchases or sales of bitcoin and ether, the Trust may borrow bitcoin, ether or cash as trade credit ("Trade Credit") from
Coinbase Credit, Inc. (the "Trade Credit Lender") on a short-term basis pursuant to the Coinbase Credit Committed Trade Financing
Agreement (the "Trade Financing Agreement"). The Trade Credit Lender is only required to extend Trade Credits to the Trust
to the extent such bitcoin, ether or cash is actually available to the Trade Credit Lender. To the extent that Trade Credits are not available
or become exhausted, (1) there may be delays in the buying and selling of bitcoin and ether related to cash creations and redemptions
or the selling of bitcoin and ether related to paying Trust expenses not assumed by the Sponsor, to the extent applicable, (2) Trust assets
may be in held the Trading Balance for a longer duration than if Trade Credits were available, and (3) the execution price associated
with such trades may deviate significantly from the Pricing Benchmarks price used to determine the NAV of the Trust. To the extent that
the execution price for purchases and sales of bitcoin and ether deviate significantly from the Pricing Benchmarks price used to determine
the Trust's NAV, Shareholders may be negatively impacted because the added costs of such price deviations would be incurred by the
Authorized Participants and may be passed onto the Shareholders in the secondary market.
To the extent the Trust
utilizes Trade Credits when using the Agent Execution Model, such Trade Credits are secured by the Trust's assets, including any
cash and bitcoin and ether held in the Trading Balance with the Prime Execution Agent and the Trust Bitcoin and Ether Account held with
the Bitcoin and Ether Custodian, and such assets may be liquidated by the Trade Credit Lender to repay Trade Credit debt owed by the Trust
in the event the Trust fails to repay the Trade Credit debt.
During the rare and limited
circumstances when the Trust utilizes the Agent Execution Model, it may utilize Trade Credits. The Trust generally must repay Trade Credits
by 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 a
security interest, lien on, and right of set off against all of the Trust's right, title and interest, in the Trust's Trading
Balance 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 for
Cause, as defined in the Prime Execution Agreement, which includes a failure by the Trust to pay and settle in full its obligations to
the Trade Credit Lender in respect of the financing it provides to the Trust in the form of Trade Credits, the Bitcoin and Ether Custodian
and the Prime Execution Agent have agreed to comply with instructions from the Trade Credit Lender with respect to the disposition of
the assets in the Trust Bitcoin and Ether Account and Trading Balance respectively without further consent by the Trust. If the Trust
fails 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's
assets and liquidate them to repay the Trade Credit debt owed by the Trust to the Trade Credit Lender.
Loss of a critical
banking relationship for, or the failure of a bank used by, the Prime Execution Agent could adversely impact the Trust's ability
to create or redeem Baskets, or could cause losses to the Trust, in the limited circumstances when the Trust utilizes the Agent Execution
Model.
The Prime Execution Agent
relies on bank accounts to provide its trading platform services and including temporarily holding any cash related to a customer's
purchase or sale of bitcoin and ether. In particular, the Prime Execution Agent has disclosed that customer cash held by the Prime Execution
Agent, including the cash associated with the Trust's Trading Balance, is held in one or more banks' accounts for the benefit
of the Prime Execution Agent's customers, or in money market funds in compliance with Rule 2a-7 under the Investment Company Act
and rated "AAA" by S&P (or the equivalent from any eligible rating service), provided that such investments are held in
accounts 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 policy
with respect to the cash associated with the Trust's Trading Balance. First, any cash related to the Trust's purchase or sale
of 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 cash
held 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 in
a Money Market Fund. The Prime Execution Agent has agreed to title the accounts in a manner designed to enable receipt of FDIC deposit
insurance where applicable on a pass-through basis, but does not guarantee that pass-through insurance will apply since such insurance
is dependent on the compliance of the bank. Second, to the extent the Trust's cash in the Trading Balance in aggregate exceeds the
amounts that can be maintained at the banks on the foregoing basis, the Prime Execution Agent has represented that it currently conducts
an overnight sweep of the excess into U.S. government money market funds. The Sponsor has not independently verified the Prime Execution
Agent'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 partners
and the inability of the Prime Execution Agent to utilize other financial institutions may result in a disruption of creation and redemption
activity of the Trust, or cause other operational disruptions or adverse effects for the Trust. In the future, it is possible that the
Prime Execution Agent could be unable to establish accounts at new banking partners or establish new banking relationships, or that the
banks with which the Prime Execution Agent is able to establish relationships may not be as large or well-capitalized or subject to the
same degree of prudential supervision as the existing providers.
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The Trust could also suffer
losses in the event that a bank in which the Prime Execution Agent holds customer cash, including the cash associated with the Trust's
Trading Balance (which is used by the Prime Execution Agent to move cash flows associated with the Trust's orders to sell bitcoin
and ether in connection with payment of Trust expenses not assumed by the Sponsor), fails, becomes insolvent, enters receivership, is
taken 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 Protection
and Innovation ("DFPI") announced that Silvergate Bank had entered voluntary liquidation, and on March 10, 2023, Silicon Valley
Bank ("SVB") was closed by the DFPI, which appointed the FDIC as receiver. Similarly, on March 12, 2023, the New York Department
of Financial Services took possession of Signature Bank and appointed the FDIC as receiver. A joint statement by the Department of the
Treasury, the Federal Reserve and the FDIC on March 12, 2023, stated that depositors in Signature and SVB will have access to all of their
funds, including funds held in deposit accounts, in excess of the insured amount. On May 1, 2023, First Republic Bank was closed by the
California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Following a bidding process, the FDIC
entered into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, to acquire the substantial majority of
the assets and assume certain liabilities of First Republic Bank from the FDIC.
The Prime Execution Agent
has historically maintained banking relationships with Silvergate Bank and Signature Bank. While the Sponsor does not believe there is
a direct risk to the Trust's assets from the failures of Silvergate Bank or Signature Bank, in the future, changing circumstances
and market conditions, some of which may be beyond the Trust's or the Sponsor's control, could impair the Trust's ability
to access the Trust's cash held with the Prime Execution Agent in the Trust's Trading Balance or associated with the Trust's
orders to sell bitcoin and ether in connection with payment of Trust expenses not assumed by the Sponsor. If the Prime Execution Agent
were to experience financial distress or its financial condition is otherwise affected by the failure of its banking partners, the Prime
Execution Agent's ability to provide services to the Trust could be affected. Moreover, the future failure of a bank at which the
Prime Execution Agent maintains customer cash, in the Trust's Trading Balance associated with the Trust's orders to sell bitcoin
and ether in connection with payment of Trust expenses not assumed by the Sponsor, could result in losses to the Trust, to the extent
the balances are not subject to deposit insurance, notwithstanding the regulatory requirements to which the Prime Execution Agent is subject
or other potential protections. Although the Prime Execution Agent has made certain representations to the Sponsor regarding the Prime
Execution Agent's maintenance of records in a manner reasonably designed to qualify for FDIC insurance on a pass-through basis in
connection with the accounts in which the Prime Execution Agent maintains cash on behalf of its customers (including the Trust), there
can be no assurance that such pass-through insurance will ultimately be made available. In addition, the Trust may maintain cash balances
with the Prime Execution Agent that are not insured or are in excess of the FDIC's insurance limits, or which are maintained by
the 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 Execution
Agent routes orders through Connected Trading Venues in connection with trading services under the Prime Execution Agreement. The loss
or failure of any such Connected Trading Venues may adversely affect the Prime Execution Agent's business and cause losses for the
Trust.
In connection with trading
services 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 connection
with these activities, the Prime Execution Agent may hold bitcoin and ether with such Connected Trading Venues in order to effect customer
orders, including the Trust's orders. However, the Prime Execution Agent has represented to the Sponsor that no customer cash is
held at Connected Trading Venues. If the Prime Execution Agent were to experience a disruption in the Prime Execution Agent's access
to these Connected Trading Venues, the Prime Execution Agent's trading services under the Prime Execution Agreement could be adversely
affected to the extent that the Prime Execution Agent is limited in its ability to execute order flow for its customers, including the
Trust. In addition, while the Prime Execution Agent has policies and procedures to help mitigate the Prime Execution Agent's risks
related 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, or
loss of customer assets, the Prime Execution Agent might not be able to fully recover the customer's bitcoin and ether that the
Prime Execution Agent has deposited with these third parties. As a result, the Prime Execution Agent's business, operating results
and financial condition could be adversely affected, potentially resulting in its failure to provide services to the Trust or perform
its obligations under the Prime Execution Agreement, and the Trust could suffer resulting losses or disruptions to its operations. The
failure of a Connected Trading Venue at which the Prime Execution Agent maintains customer bitcoin and ether, including bitcoin and ether
associated with the Trust, could result in losses to the Trust, notwithstanding the regulatory requirements to which the Prime Execution
Agent is subject or other potential protections.
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A loss of confidence
or breach of the Bitcoin and Ether Custodian may adversely affect the Trust and the value of an investment in the Shares.
Custody and security services
for the Trust's bitcoin and ether are provided by Coinbase Custody, although the Trust may retain one or more additional custodians
at 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's
bitcoin and ether holdings may be custodied by Coinbase Custody and another portion by another third-party custodian). Over time, the
Trust may change the custody or security arrangement for all or a portion of its holdings. The Sponsor will decide the appropriate custody
and arrangements based on, among other factors, the availability of experienced custodians and the Trust's ability to securely safeguard
the bitcoin and ether.
If the Bitcoin
and Ether Custody Agreement or Prime Execution Agreement is terminated or the Bitcoin and Ether Custodian or Prime Execution Agent fails
to provide services as required, the Sponsor may need to find and appoint a replacement custodian or prime broker, which could pose a
challenge to the safekeeping of the Trust's bitcoin and ether, and the Trust's ability to continue to operate may be adversely
affected.
The Trust is dependent on
the 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 Ether
Account, and its affiliate, Coinbase Inc., in its capacity as Prime Execution Agent under the Agent Execution Model. If Coinbase Custody
or 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 Prime
Execution Agent and its parent (such parent, "Coinbase Global" and together with Coinbase Inc., the "Relevant Coinbase
Entities") 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 securities
laws, including the Exchange Act and the 1933 Act. According to Coinbase Global's public reporting company disclosure, based on
discussions with the SEC staff, the Relevant Coinbase Entities believe these potential enforcement actions would relate to aspects of
the Relevant Coinbase Entities' Coinbase Prime service, spot market, staking service Coinbase Earn, and Coinbase Wallet, and the
potential civil action may seek injunctive relief, disgorgement, and civil penalties. On June 6, 2023, the SEC filed a complaint against
the Relevant Coinbase Entities in federal district court in the Southern District of New York, alleging, inter alia: (i) that Coinbase
Inc. has violated the Exchange Act by failing to register with the SEC as a national securities exchange, broker-dealer, and clearing
agency, 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 of
the Exchange Act to the same extent as Coinbase Inc. The SEC's complaint against the Relevant Coinbase Entities does not allege
that bitcoin and ether is a security nor does it allege that Coinbase Inc's activities involving bitcoin and ether caused the alleged
registration violations, and the Bitcoin and Ether Custodian was not named as a defendant. The SEC's complaint seeks a permanent
injunction against the Relevant Coinbase Entities to prevent them from violations of the Exchange Act or 1933 Act, disgorgement, civil
monetary penalties, and such other relief as the court deems appropriate or necessary. Coinbase Inc., as Prime Execution Agent, could
be required, as a result of a judicial determination, or could choose, to restrict or curtail the services it offers, or its financial
condition 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 services
it offers, it could negatively affect the Trust's ability to operate or process creations or redemptions of Baskets, which could
force 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 could
negatively affect the Trust's ability to operate.
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Alternatively, the Sponsor
could decide to replace Coinbase Custody as the Bitcoin and Ether Custodian with custody of the Trust's bitcoin and ether, pursuant
to the Bitcoin and Ether Custody Agreement. Similarly, Coinbase Custody or Coinbase Inc. could terminate services under the Bitcoin and
Ether Custody Agreement or the Coinbase Prime Broker Agreement (the "Prime Execution Agreement"), respectively upon providing
the applicable notice to the Trust for any reason, or immediately for Cause (a "Termination for Cause" is defined in the Bitcoin
and Ether Custody Agreement as (i) the Trust materially breaching any provision of the Bitcoin and Ether Custody Agreement; (ii) the Trust
becomes 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 custodian
will likely be complex and could subject the Trust's bitcoin and ether to the risk of loss during the transfer, which could have
a 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. Under
certain circumstances, Coinbase Inc. is permitted to halt or suspend trading on its trading platform, or impose limits on the amount or
size of, or reject, the Trust's orders, including in the event of, among others, (a) delays, suspension of operations, failure in
performance, 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 amount
of Trade Credits extended to exceed the maximum amount of Trade Credit (as defined below) that the Trust's agreement with the Trade
Credit Lender permits to be outstanding at any one time, or (d) a security or technology issue occurred and is continuing that results
in Coinbase Inc. being unable to provide trading services or accept the Trust's order, in each case, subject to certain protections
for the Trust. Also, if Coinbase Custody or Coinbase Inc. becomes insolvent, suffers business failure, ceases business operations, defaults
on or fails to perform its obligations under its contractual agreements with the Trust, or abruptly discontinues the services it provides
provide to the Trust for any reason, the Trust's operations would be adversely affected.
The Sponsor may not be able
to find a party willing to serve as the custodian of the Trust's bitcoin and ether or as the Trust's prime execution agent
under the same terms as the current Bitcoin and Ether Custody Agreement or Prime Execution Agreement or at all. To the extent that Sponsor
is not able to find a suitable party willing to serve as the custodian or prime execution agent, the Sponsor may be required to terminate
the Trust and liquidate the Trust's bitcoin and ether. In addition, to the extent that the Sponsor finds a suitable party but must
enter into a modified Bitcoin and Ether Custody Agreement or Prime Execution Agreement that is less favorable for the Trust, the value
of the Shares could be adversely affected. If the Trust is unable to find a replacement prime execution agent, its operations could be
adversely affected.
Coinbase Custody
serves as the bitcoin and ether custodian and Coinbase Inc. serves as the prime broker for several competing exchange-traded bitcoin and
ether products, which could adversely affect the Trust's operations and ultimately the value of the Shares.
The Bitcoin and Ether Custodian
and Prime Execution Agent are both affiliates of Coinbase Global. As of the date hereof, Coinbase Global is the largest publicly traded
crypto asset company in the world by market capitalization and is also the largest crypto asset custodian in the world by assets under
custody. By virtue of its leading market position and capabilities, and the relatively limited number of institutionally capable providers
of crypto asset brokerage and custody services, Coinbase Custody serves as the bitcoin and ether custodian and Coinbase Inc. serves as
the prime broker for several competing exchange-traded bitcoin and ether products. Therefore, Coinbase Global has a critical role in supporting
the U.S. spot bitcoin and ether exchange-traded product ecosystem, and its size and market share create the risk that Coinbase Global
may 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 ether
because no Ether Trading Counterparties were willing or able to effectuate the Trust's transactions, and the Prime Execution Agent
were to favor the interests of certain products over others, it could result in inadequate attention or comparatively unfavorable commercial
terms to less favored products, which could adversely affect the Trust's operations and ultimately the value of the Shares.
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The Sponsor may
need to find and appoint a replacement Bitcoin and Ether Custodian or Cash Custodian quickly, which could pose a challenge to the safekeeping
of the Trust's bitcoin, ether and cash.
The Sponsor may need to replace
Coinbase Custody as the bitcoin and ether custodian of the Trust's bitcoin and ether or BNY Mellon as the cash custodian of the
Trust'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 Ether
Custodian and/or Cash Custodian to another party will likely be complex and could subject the Trust's bitcoin and ether to the risk
of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the Trust's
assets. The Sponsor may not be able to find a party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian under the same
terms as the current Bitcoin and Ether Custody Agreement or Cash Custody Agreement, respectively. To the extent that Sponsor is not able
to find a suitable party willing to serve as the Bitcoin and Ether Custodian or Cash Custodian, as applicable, the Sponsor may be required
to terminate the Trust and liquidate the Trust's bitcoin and ether. In addition, to the extent that the Sponsor finds a suitable
party but must enter into modified custodial services agreements that cost more, the value of the Shares could be adversely affected.
The Bitcoin and
Ether Custodian could become insolvent.
The Trust's assets will
be held in one or more accounts maintained for the Trust by the Bitcoin and Ether Custodian and Cash Custodian. The Bitcoin and Ether
Custodian is not a depository institution as it is not insured by the FDIC. The insolvency of the Bitcoin and Ether Custodian or of any
broker, custodian bank or clearing corporation used by the Bitcoin and Ether Custodian, may result in the loss of all or a substantial
portion of the Trust's assets or in a significant delay in the Trust having access to those assets. Additionally, custody of digital
assets presents inherent and unique risks relating to access, loss, theft and means of recourse in such scenarios. These risks are applicable
to the Trust's use of Coinbase Custody.
Bitcoin and Ether
held by the Trust is not subject to FDIC or SIPC protections.
The Trust is not a banking
institution or otherwise a member of the FDIC or SIPC and, therefore, deposits held with or assets held by the Trust are not subject to
the protections enjoyed by depositors with FDIC or SIPC member institutions. The undivided interests in the Trust's bitcoin and
ether represented by the Shares in the Trust are not insured.
Third parties
may infringe upon or otherwise violate intellectual property rights or assert that the Sponsor has infringed or otherwise violated their
intellectual property rights, which may result in significant costs and diverted attention.
It is possible that third
parties 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 their
trademarks, proprietary software and other technology. Also, third parties may independently develop business methods, trademarks or proprietary
software and other technology similar to that of the Trust or claim that the Trust has violated their intellectual property rights, including
their copyrights, trademark rights, trade names, trade secrets and patent rights. As a result, the Trust may have to litigate in the future
to protect its trade secrets, determine the validity and scope of other parties' proprietary rights, defend itself against claims
that 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 its
resources from the Trust, or require it to change its proprietary software and other technology or enter into royalty or licensing agreements.
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Due to the increased
use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks.
With the increased use of
technologies such as the internet and the dependence on computer systems to perform necessary business functions, the Trust is susceptible
to 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 assets
or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does
not require gaining unauthorized access, such as causing denial-of-service attacks on websites. Cyber security failures or breaches of
one or more of the Trust's third-party service providers (including, but not limited to, the Administrator, Transfer Agent, the
Sponsor, 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 and
other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance
costs.
In addition, substantial costs
may be incurred in order to prevent any cyber incidents in the future. The Trust and its Shareholders could be negatively impacted as
a result. While the Trust has established business continuity plans, there are inherent limitations in such plans.
The Trust faces
risks related to the novel coronavirus (COVID-19) outbreak, which could negatively impact the value of the Trust's holdings and
significantly disrupt its operations.
Health crises caused by the
outbreak of infectious diseases or other public health issues, may exacerbate other pre-existing political, social, economic, market and
financial risks. The impact of any such events, could negatively affect the global economy, as well as the economies of individual countries
or regions, the financial performance of individual companies, sectors and industries, and the markets in general in significant and unforeseen
ways. Any such impact could adversely affect the prices and liquidity of the Shares.
For example, an outbreak of
a respiratory disease designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The
transmission of COVID-19 and efforts to contain its spread resulted in international, national and local border closings and other significant
travel restrictions and disruptions, significant disruptions to business operations, supply chains and customer activity, event cancellations
and 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 caused
significant volatility and declines in global financial markets, including increased volatility and uncertainty in crypto markets, which
have caused losses for investors. The emergence of new COVID variants or other infectious diseases could result in a substantial economic
downturn or recession.
In addition, the operations
of the Trust, the Sponsor and other service providers may be significantly impacted, or even temporarily or permanently halted, as a result
of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public
health emergency, including its potential adverse impact on the health of any such entity's personnel. Any disruption of operations
could adversely impact the price and liquidity of the Shares, including, without limitation, the Trust's ability to process orders
for Baskets.
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Bitcoin AND THE
Bitcoin MARKET
This section of the Prospectus
provides a more detailed description of bitcoin, including information about the historical development of bitcoin, how a person holds
bitcoin, how to use bitcoin in transactions, how to trade bitcoin, the "spot" trading platform market where bitcoin can be
bought, held and sold, the bitcoin over-the-counter ("OTC") trading market and bitcoin mining.
Bitcoin
Bitcoin is the digital asset
that is native to, and created and transmitted through the operations of, the peer-to-peer Bitcoin network, a decentralized network of
computers that operates on cryptographic protocols. No single entity owns or operates the Bitcoin network, the infrastructure of which
is 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 individual
end-user-to-end-user transactions under a barter system. Although nascent in use, bitcoin may be used as a medium of exchange, unit of
account or store of value.
The Bitcoin network is decentralized
and 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 as
decentralized and censorship resistant.
The value of bitcoin is determined
by 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 updated
to 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 settled
and validated through such recording, the Bitcoin blockchain represents a complete, transparent and unbroken history of all transactions
of the Bitcoin network.
Bitcoin Network
Bitcoin was first described
in a white paper released in 2008 and published under the name "Satoshi Nakamoto." The protocol underlying Bitcoin was subsequently
released in 2009 as open-source software and currently operates on a worldwide network of computers. The Bitcoin network and its software
has been under active development since that time by a group of computer engineers known as core developers, each of whom operates under
a volunteer basis and without strict hierarchical administration.
The Bitcoin network utilizes
a digital asset known as "bitcoin," which can be transferred among parties via the Internet. Unlike other means of electronic
payments such as credit card transactions, one of the advantages of bitcoin is that it can be transferred without the use of a central
administrator 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 transacting
in bitcoin is generally not afforded some of the protections that may be offered by intermediaries.
The first step in directly
using the Bitcoin network for transactions is to download specialized software referred to as a "bitcoin wallet." A user's
bitcoin wallet can run on a computer or smartphone, and can be used both to send and to receive bitcoin. Within a bitcoin wallet, a user
can generate one or more unique "bitcoin addresses," which are conceptually similar to bank account numbers. After establishing
a bitcoin address, a user can send or receive bitcoin from his or her bitcoin address to another user's bitcoin address. Sending
bitcoin from one bitcoin address to another is similar in concept to sending a bank wire from one person's bank account to another
person's bank account; however, such transactions are not managed by an intermediary and erroneous transactions generally may not
be reversed or remedied once sent.
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The amount of bitcoin associated
with each bitcoin address, as well as each bitcoin transaction to or from such bitcoin address, is transparently reflected in the Bitcoin
blockchain and can be viewed by websites that operate as "Bitcoin blockchain explorers." Copies of the Bitcoin blockchain
exist on thousands of computers on the Bitcoin network throughout the Internet. A user's bitcoin wallet will either contain a copy
of the Bitcoin blockchain or be able to connect with another computer that holds a copy of the Bitcoin blockchain. The innovative design
of the Bitcoin network protocol allows each Bitcoin user to trust that their copy of the Bitcoin blockchain will generally be updated
consistent with each other user's copy.
When a Bitcoin user wishes
to transfer bitcoin to another user, the sender must first request a Bitcoin address from the recipient. The sender then uses his or her
Bitcoin wallet software to create a proposed transaction that is confirmed and settles when included in the Bitcoin blockchain. The transaction
would reduce the amount of bitcoin allocated to the sender's address and increase the amount allocated to the recipient's
address, in each case by the amount of bitcoin desired to be transferred. The transaction is completely digital in nature, similar to
a file on a computer, and it can be sent to other computers participating in the Bitcoin network; however, the use of cryptographic verification
is believed to prevent the ability to duplicate or counterfeit bitcoin.
Bitcoin Protocol
The Bitcoin protocol is built
using open source software allowing for any developer to review the underlying code and suggest changes. There is no official company
or group that is responsible for making modifications to Bitcoin. There are, however, a number of individual developers that regularly
contribute to the reference software known as "Bitcoin Core," a specific distribution of Bitcoin software that provides the
de-facto standard for the Bitcoin protocol.
Significant changes to the
Bitcoin protocol are typically accomplished through a so-called "Bitcoin Improvement Proposal" or BIP. Such proposals are
generally posted on websites, and the proposals explain technical requirements for the protocol change as well as reasons why the change
should be accepted by users. Because Bitcoin has no central authority, updating the reference software's Bitcoin protocol will not
immediately change the Bitcoin network's operations. Instead, the implementation of a change is achieved by users (including transaction
validators known as "miners") downloading and running the updated versions of Bitcoin Core or other Bitcoin software that
abides by the new Bitcoin protocol. Users and miners must accept any changes made to the Bitcoin source code by downloading a version
of their Bitcoin software that incorporates the proposed modification of the Bitcoin network's source code. A modification of the
Bitcoin network's source code or protocol is only effective with respect to those Bitcoin users and miners who download it. If an
incompatible modification is accepted by a less than overwhelming percentage of users and miners, a division in the Bitcoin network will
occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such a
division is known as a "fork" in the Bitcoin network.
Recent development on the
Bitcoin network has enabled some functionality other than the transfer of value on the Bitcoin blockchain. Following the recent activation
of Segregated Witness on the Bitcoin network, an alpha version of the Lightning Network was released. The Lightning Network is an open-source
decentralized 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 as
multi-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 data
written 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 which
led to the launch of the "ordinal protocol." The ordinal protocol takes advantage of Taproot's relaxed data requirements
to allow users to add graphic images and other data files to Bitcoin transactions. By the end of 2023, nearly 53 million Ordinals had
been inscribed to the Bitcoin blockchain.
Other efforts include increased
use of smart contracts and distributed registers built into, built atop or pegged alongside the Bitcoin blockchain. The Trust's
activities will not directly relate to such projects, though such projects may utilize bitcoin as tokens for the facilitation of their
non-financial uses, thereby potentially increasing the utility of the Bitcoin network as a whole. Conversely, projects that operate and
are built within the Bitcoin blockchain may increase the data flow on the Bitcoin network and could either "bloat" the size
of the Bitcoin blockchain or slow confirmation times. At this time, such projects remain in early stages.
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Bitcoin Transactions
A bitcoin transaction is similar
in concept to an irreversible digital check. The transaction contains the sender's bitcoin address, the recipient's bitcoin
address, the amount of bitcoin to be sent, a transaction fee and the sender's digital signature. Bitcoin transactions are secured
by cryptography known as "public-private key cryptography," represented by the bitcoin addresses and digital signature in
a transaction's data file. Each Bitcoin network address, or wallet, is associated with a unique "public key" and "private
key" pair, both of which are lengthy alphanumeric codes, derived together and possessing a unique relationship.
The use of key pairs is a
cornerstone of the Bitcoin network technology. This is because the use of a private key is the only mechanism by which a bitcoin transaction
can be signed. If a private key is lost, the corresponding bitcoin is thereafter permanently non-transferable. Moreover, the theft of
a private key provides the thief immediate and unfettered access to the corresponding bitcoin. Bitcoin users must therefore understand
that in this regard, bitcoin is similar to cash: that is, the person or entity in control of the private key corresponding to a particular
quantity of bitcoin has de facto control of the bitcoin. For large quantities of bitcoin, holders often embrace sophisticated security
measures.
The public key is visible
to the public and analogous to the Bitcoin network address. The private key is a secret and is used to digitally sign a transaction in
a way that proves the transaction has been signed by the holder of the public-private key pair, and without having to reveal the private
key. A user's private key must be kept safe in accordance with appropriate controls and procedures to ensure it is used only for
legitimate and intended transactions. If an unauthorized third person learns of a user's private key, that third person could apply
the user's digital signature without authorization and send the user's bitcoin to their or another bitcoin address, thereby
stealing 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 possibility
of double-spending of bitcoin, each validated transaction is recorded, time stamped and publicly displayed in a "block" in
the Bitcoin blockchain, which is publicly available. Thus, the Bitcoin network provides confirmation against double-spending by memorializing
every transaction in the Bitcoin blockchain, which is publicly accessible and downloaded in part or in whole by all users of the Bitcoin
network software program. Any user may validate, through their Bitcoin wallet or a blockchain explorer, that each transaction in the Bitcoin
network was authorized by the holder of the applicable private key, and Bitcoin network mining software consistent with reference software
requirements validates each such transaction before including it in the Bitcoin blockchain. This cryptographic security ensures that bitcoin
transactions may not generally be counterfeited, although it does not protect against the "real world" theft or coercion of
use 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 between
two parties is recorded if included in a valid block added to the Bitcoin blockchain, when that block is accepted as valid through consensus
formation among Bitcoin network participants. Validation of a block is achieved by confirming the cryptographic hash value included in
the 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 reference
to the immediately preceding block, additional blocks appended to and incorporated into the Bitcoin blockchain constitute additional confirmations
of 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 further
back one goes in the Bitcoin blockchain.
To undo past transactions
in a block recorded on the Bitcoin blockchain, a malicious actor would have to exert tremendous hashrate in re-solving each block in the
Bitcoin blockchain starting with and after the target block and broadcasting all such blocks to the Bitcoin network. The Bitcoin network
is generally programmed to consider the longest Bitcoin blockchain containing solved and valid blocks to be the most accurate Bitcoin
blockchain. In order to undo multiple layers of confirmation and alter the Bitcoin blockchain, a malicious actor must re-solve all of
the old blocks sought to be regenerated and be able to continuously add new blocks to the Bitcoin blockchain at a speed that would have
to outpace that of all of the other miners on the Bitcoin network, who would be continuously solving for and adding new blocks to the
Bitcoin blockchain. Given the size and speed of the Bitcoin network, it is generally agreed that the cost of amassing such computational
power exceeds the profit to be obtained by double-spending or attempting to fabricate prior blocks.
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If a malicious actor is able
to amass ten (10) percent of the Bitcoin network's aggregate hashrate, there is estimated to be a 0.1 percent chance that it would
be able to overcome six (6) confirmations. Therefore, given the difficulty in amassing such hashrate, six (6) confirmations is an often-cited
standard for the validity of transactions. The Trust has adopted a policy whereby a transaction will be deemed confirmed upon this industry
standard of six (6) confirmations (the "Confirmation Protocol"). As one (1) block is added to the Bitcoin blockchain approximately
every six (6) to twelve (12) minutes, a Bitcoin transaction will be, on average, confirmed using the Confirmation Protocol beyond a reasonable
doubt in approximately one (1) hour. Merchants selling high-value goods and services, as well as bitcoin trading platforms and many experienced
users, are believed to generally use the six (6) confirmations standard. This confirmation system, however, does not mean that merchants
must always wait for multiple confirmations for transactions involving low-value goods and services. As discussed below, the value of
a successful double-spending attack involving a low-value transaction may, and perhaps likely will, be significantly less than the cost
involved in arranging and executing such double-spending attacks. Furthermore, merchants engaging in low-value transactions may then view
the reward of quicker transaction settlements with limited or no Bitcoin blockchain confirmation as greater than the related risk of not
waiting for six (6) confirmations with respect to low-value transactions at points of sale. Conversely, for high-value transactions that
are not time sensitive, additional settlement security can be provided by waiting for more than six (6) confirmations.
Bitcoin Mining
The process by which bitcoin
are created and bitcoin transactions are verified is called "mining." To begin mining, a user, or "miner," can
download and run a mining "client," which, like regular Bitcoin network software programs, turns the user's computer
into a "node" on the Bitcoin network, and in this case has the ability to validate transactions and add new blocks of transactions
to the Bitcoin blockchain.
Miners, through the use of
the bitcoin software program, engage in a set of prescribed complex mathematical calculations in order to verify transactions and compete
for the right to add a block of verified transactions to the Bitcoin blockchain and thereby confirm bitcoin transactions included in that
block's data. The miner who successfully "solves" the complex mathematical calculations has the right to add a block
of transactions to the Bitcoin blockchain and is then rewarded by a grant of bitcoin, known as a "coinbase," plus any transaction
fees paid for the transactions included in such block.
Confirmed and validated bitcoin
transactions are recorded in blocks added to the Bitcoin blockchain. Each block contains the details of some or all of the most recent
transactions 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 pools
on the Bitcoin network must engage in a competitive process of constantly increasing their computing power to improve their likelihood
of solving for new blocks. As more miners join the Bitcoin network and its processing power increases, the Bitcoin network adjusts the
complexity of a block-solving equation to maintain a predetermined pace of adding a new block to the Bitcoin blockchain approximately
every ten minutes.
Mathematically Controlled Supply
The method for creating new
bitcoin 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 for
solving 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 estimated
to halve again in 2028. This deliberately controlled rate of bitcoin creation means that the number of bitcoin in existence will never
exceed twenty-one (21) million and that bitcoin cannot be devalued through excessive production unless the Bitcoin network's source
code (and the underlying protocol for bitcoin issuance) is altered. As of July 2024, it was estimated that over 19.7 million bitcoins
were 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 Trading
Platforms
In addition to using bitcoin
to engage in transactions, investors may purchase and sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or as
a long-term investment to diversify their portfolio. The value of bitcoin within the market is determined, in part, by (i) the supply
of and demand for bitcoin in the bitcoin market, (ii) market expectations for the expansion of investor interest in bitcoin and the adoption
of 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-user
transactions.
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Although the value of bitcoin
is determined by the value that two transacting market participants place on bitcoin through their transaction, the most common means
of determining a reference value is by surveying one or more trading platforms where secondary markets for bitcoin exist. The most prominent
digital asset trading platforms are often referred to as "exchanges", although they neither report trade information nor are
they regulated in the same way as a national securities exchange. As such, there is some difference in the form, transparency and reliability
of trading data from digital asset trading platforms. Generally speaking, bitcoin data is available from these trading platforms with
publicly disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S. dollar or Euro (such as
the 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 many
digital asset trading platforms operating worldwide and trading platforms represent a substantial percentage of bitcoin buying and selling
activity, and, therefore, provide large data sets for market valuation of bitcoin. A digital asset trading platform provides investors
with a way to purchase and sell bitcoin, similar to stock exchanges like the New York Stock Exchange or NASDAQ, which provide ways for
investors to buy stocks and bonds in the so-called "secondary market." Unlike stock exchanges, which are regulated to monitor
securities trading activity, digital asset trading platforms are largely regulated as money services businesses (or a foreign regulatory
equivalent) and are required to monitor for and detect money-laundering and other illicit financing activities that may take place on
the platform. Digital asset trading platforms operate websites designed to permit investors to open accounts with the trading platform
and then purchase and sell bitcoin.
As with conventional stock
exchanges, an investor opening a trading account and wishing to transact at a digital asset trading platform must deposit an accepted
government-issued currency into their account, or a previously acquired digital asset. The process of establishing an account with a digital
asset trading platform and trading bitcoin is different from, and should not be confused with, the process of users sending bitcoin from
one bitcoin address to another bitcoin address, such as to pay for goods and services. This latter process is an activity that occurs
wholly within the confines of the Bitcoin network, while the former is an activity that occurs largely on private websites and databases
owned by the trading platform.
Although bitcoin was the first
cryptocurrency, since 2009, the number of digital assets, market participants and companies in the space has increased dramatically. In
addition to bitcoin, other well-known digital assets include ether, bitcoin cash, and litecoin. The digital asset marketplace is still
being defined and evolving, including the practices of exchanges, behavior of investors, and the protocols and prominence of particular
digital assets. Prior to 2017, bitcoin accounted for approximately 85% or more of the total market capitalization of all digital assets.
Authorized Participants and
the Trust have the option of purchasing and selling bitcoin used in Basket transactions either on digital asset trading platforms, in
the OTC markets or in direct bilateral transactions. OTC trading of bitcoin is generally accomplished via bilateral agreements on a principal-to-principal
basis. All risks and issues related to creditworthiness are between the parties directly involved in the transaction.
The bitcoin OTC market demonstrates
flexibility 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 a
price – often via phone, email, or chat – and then one of the two parties will initiate the transaction. For example, a seller
of bitcoin could initiate the transaction by sending the bitcoin to the buyer's bitcoin address. The buyer would then wire US Dollars
to the seller's bank account. OTC trading tends to occur in large blocks of bitcoin. All risks and issues related to creditworthiness
are 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 offer
two-sided liquidity for bitcoin.
Bitcoin futures contracts
are traded on CME, the Intercontinental Exchange and smaller regulated platforms such as ErisX and LedgerX. Authorized Participants may
utilize bitcoin futures contracts to hedge bitcoin exposure relating to the purchase and redemption of Baskets. Since their launch in
2017, bitcoin futures contracts on the CME have seen significant growth in average daily volume traded, open interest, and the number
of large participants. Bitcoin futures contracts on the CME are cash-settled based on the BRR, which shares the same methodology as the
Bitcoin Pricing Benchmark.
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Bitcoin Market Participants
Miners
Miners range from Bitcoin
enthusiasts to professional mining operations that design and build dedicated machines and data centers, but the vast majority of mining
is 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 investment
and 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 financial
services institutions are publicly reported to have limited involvement in investment and trading in bitcoin; however, this trend appears
to be eroding and more platforms seek to offer exposure to digital assets and more institutional investors seek to deploy capital in the
space. Major financial institutions have cited advisory client demand in adding direct, equity or synthetic means of obtaining digital
asset exposure.
Retail Sector
The retail sector includes
users transacting in direct peer-to-peer Bitcoin transactions through the direct sending of bitcoin over the Bitcoin network. The retail
sector also includes transactions between consumers paying for goods or services from commercial or service businesses through direct
transactions or third-party service providers such as BitPay, which provides a merchant platform for instantaneous transactions whereby
the consumer sends bitcoin to BitPay, which then provides either the bitcoin or the cash value thereof to the commercial or service business
utilizing the platform. PayPal, Square and Shopify are examples of traditional merchant payment processors or merchant platforms that
have also added Bitcoin payment options for their merchant customers. Payment processing through the Bitcoin network may reduce the transaction
cost for merchants, relative to the costs paid for credit card transaction processing, and eliminates the potential for consumer chargebacks.
Service Sector
This sector includes companies
that provide a variety of services including the buying, selling, payment processing and storing of bitcoin. Coinbase and Fidelity are
examples of multi-service financial institutions that provide wallets that store bitcoin for users and also serve as a retail or exchange
gateway whereby users can purchase bitcoin for fiat currency. BitPay is an example of Bitcoin payment processors that allow merchants
to accept bitcoin as payment. As the Bitcoin network continues to grow in acceptance, it is anticipated that service providers will expand
the currently available range of services and that additional parties will enter the service sector for the Bitcoin network.
Ether AND THE Ether
MARKET
This section of the Prospectus
provides 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 and
sold, the ether over-the-counter ("OTC") trading market and the proof-of-stake concept.
Ether and the Ethereum network
Ether is a digital asset that
is created and transmitted through the operations of the peer-to-peer Ethereum network, a network of computers, known as nodes, that operates
on cryptographic computer-code based logic, called a protocol. No single entity owns or operates the Ethereum network, the infrastructure
of 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 recorded
on a public transaction ledger known as the Ethereum blockchain. Ether can be used to pay for goods and services, including computational
power on the Ethereum network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset
exchanges or in individual end-user-to-end-user transactions under a barter system.
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The Ethereum network allows
users to write and implement computer programs called smart contracts—that is, general-purpose code that executes on every computer
in the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smart
contracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance
with conditional instructions and create digital assets other than ether on the Ethereum network. Smart contract operations are executed
on the Ethereum blockchain in exchange for payment of ether. The Ethereum network is one of a number of projects intended to expand blockchain
use beyond just a peer-to-peer money system.
The Ethereum network is commonly
understood to be decentralized and does not require governmental authorities or financial institution intermediaries to create, transmit
or determine the value of ether. Rather, following the initial distribution of ether, ether is created, burned and allocated by the Ethereum
network protocol through a process that is currently subject to an issuance and burn rate as further described under "Limits on
ether supply" below. The value of ether is determined by the supply of and demand for ether on the digital asset exchanges or in
private end-user-to-end-user transactions. There is no hard cap which would limit the number of outstanding ether at any one time to a
predetermined maximum.
New ether is created and rewarded
to the validators of a block in the Ethereum blockchain for verifying transactions. The Ethereum blockchain is effectively a decentralized
database that includes all blocks that have been validated and it is updated to include new blocks as they are validated. Each ether transaction
is broadcast to the Ethereum network and, when included in a block, recorded in the Ethereum blockchain. As each new block records outstanding
ether transactions, and outstanding transactions are settled and validated through such recording, the Ethereum blockchain represents
a complete, transparent and unbroken history of all transactions of the Ethereum network. For further details, see "Creation of
New Ether."
Among other things, ether
is used to pay for transaction fees and computational services (i.e., smart contracts) on the Ethereum network; users of the Ethereum
network pay for the computational power of the machines executing the requested operations with ether. Requiring payment in ether on the
Ethereum network incentivizes developers to write quality applications and increases the efficiency of the Ethereum network because wasteful
code costs more. It also ensures that the Ethereum network remains economically viable by compensating people for their contributed computational
resources.
Assets in the Ethereum network
are 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 anywhere
in 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 transaction
fee process. Instead of performing complex calculations to estimate the fee that is charged ("gas"), users instead pay an
algorithmically determined transaction fee set by the protocol itself. Gas price is often a small fraction of ether, which is denoted
in the unit of Gwei (10^9 Gwei = 1 ether). Gas is essential in sustaining the Ethereum network. It motivates validators to process and
verify transactions for a monetary reward. Gas price fluctuates with supply. Gas has another important function in preventing unintentional
waste 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 facilitate
transactions. When gas runs out, the program will be terminated, and no additional energy would be used.
The Ethereum network recently
implemented software upgrades and other changes to its protocol, including the adoption of network upgrades collectively referred to as
Serenity, 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 Ethereum
2.0, in mid-September 2022, a shift from the proof-of-work to the proof-of-stake model occurred. Ethereum 2.0 also encompassed the addition
of 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 nodes
and allowing for parallel processing and validation of transactions. Sharding makes it easier to run a node by keeping hardware requirements
low. A digital asset network's consensus mechanism is an aspect of its source code, and any failure to properly implement such a
change could have a material adverse effect on the value of ether and the value of the Shares. The move to proof-of-stake may subject
Ethereum and ether to new and unexpected vulnerabilities not applicable to proof-of-work consensus models.
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History of Ethereum
The Ethereum network was originally
described in a 2013 white paper by Vitalik Buterin, a programmer involved with bitcoin, with the goal of creating a peer-to-peer, open-source
network enabling users to create so-called decentralized applications powered by smart contracts, which are general-purpose code that
executes on the Ethereum network. By combining the Ethereum blockchain with a flexible scripting language that is designed to be capable
of implementing sophisticated logic and execute a wide variety of instructions, the Ethereum network was designed to act as a programmable
infrastructure layer that would enable users to create their own rules for ownership, transaction formats and state transition functions
that they could build into custom software programs of their own creation. The formal development of the Ethereum network began through
a Swiss firm called Ethereum Switzerland GmbH ("EthSuisse") in conjunction with several other entities. Subsequently, the
Ethereum Foundation, a Swiss non-profit organization, was set up to oversee the protocol's development. The Ethereum network went
live on July 30, 2015. Decentralized applications may be controlled by a single user or small group. See "RISK FACTORS—Risks
Related to Digital Assets." 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 adverse impact on the value of ether.
Ether is the digital asset
that powers the Ethereum network and serves as the network's native unit of account used to pay transaction fees to the protocol
itself 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, designating
the Ethereum Foundation as the sole organization dedicated to protocol development.
Smart Contracts and Development on the Ethereum
Network
Smart contracts are programs
that run on a blockchain that can execute automatically when certain conditions are met. Smart contracts facilitate the exchange of anything
representative of value, such as money, information, property, or voting rights. Using smart contracts, users can send or receive digital
assets, create markets, store registries of debts or promises, represent ownership of property or a company, move funds in accordance
with conditional instructions and create new digital assets, among other actions.
Development on the Ethereum
network involves building more complex tools on top of smart contracts, such as DApps; organizations that are autonomous, known as decentralized
autonomous organizations ("DAOs"); and entirely new decentralized networks. For example, a company that distributes charitable
donations on behalf of users could hold donated funds in smart contracts that are paid to charities only if the charities satisfy certain
pre-defined conditions.
Moreover, the Ethereum network
has 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 Ethereum
network, with such assets representing a significant amount of the total market value of all digital assets.
More recently, the Ethereum
network 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 on
their digital assets, exchange one digital asset for another and create derivative digital assets such as stablecoins, which are digital
assets pegged to a reserve asset such as fiat currency. Over the course of 2023, between $32.1 billion and $67.1 billion worth of digital
assets were locked up as collateral on DeFi platforms on the Ethereum network.
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In addition, the Ethereum
network and other smart contract platforms have been used for creating NFTs. Unlike digital assets native to smart contract platforms
which are fungible and enable the payment of fees for smart contract execution. Instead, NFTs allow for digital ownership of assets that
convey 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 exists
in an online game or a DApp, and users can trade their NFTs in the DApp or game, and carry them to other digital experiences, creating
an entirely new free-market internet-native economy that can be monetized in the physical world.
The DAO and Ethereum Classic
In July 2016, the Ethereum
network experienced what is referred to as a permanent hard fork that resulted in two different versions of its blockchain: Ethereum and
Ethereum Classic.
In April 2016, a blockchain
solutions company known as Slock.it announced the launch of a decentralized autonomous organization, known as "The DAO" on
the Ethereum network. The DAO was designed as a decentralized crowdfunding model, in which anyone could contribute ether tokens to The
DAO in order to become a voting member and equity stakeholder in the organization. Members of The DAO could then make proposals about
different projects to pursue and put them to a vote. By committing to profitable projects, members would be rewarded based on the terms
of 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 anonymous
hacker 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 Ethereum
community 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 direct
interference with the protocol (i.e., a hard fork) would be necessary. The argument for the hard fork was that it would create an entirely
new version of the Ethereum blockchain, erasing any record of the theft, and restoring the stolen funds to their original owners. The
counterargument was that it would be antithetical to the core principle of immutability of the Ethereum blockchain.
The decision over whether
or not to hard fork the Ethereum blockchain was put to a vote of Ethereum community members. A majority of votes were cast in favor of
a hard fork. On July 15, 2016, a hard fork specification was implemented by the Ethereum Foundation. On July 20, 2016, the Ethereum network
completed the hard fork, and a new version of the blockchain, without recognition of the theft, was born.
Many believed that after the
hard fork the original version of the Ethereum blockchain would dissipate entirely. However, a group of validators continued to mine the
original Ethereum blockchain for philosophical and economic reasons. On July 20, 2016, the original Ethereum protocol was rebranded as
Ethereum 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's
Operations
In order to own, transfer
or use ether directly on the Ethereum network on a peer-to-peer basis (as opposed to through an intermediary, such as a custodian or centralized
exchange), a person generally must have internet access to connect to the Ethereum network. Ether transactions may be made directly between
end-users without the need for a third-party intermediary. To prevent the possibility of double-spending ether, a user must notify the
Ethereum network of the transaction by broadcasting the transaction data to its network peers. The Ethereum network provides confirmation
against 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 network
validation process, which adds "blocks" of data, including recent transaction information, to the Ethereum blockchain.
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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 Ethereum
network to send some ether or execute some code. A "transaction" refers to a fulfilled transaction request and the associated
change in the Ethereum network's state. An Ethereum Client is a software application that implements the Ethereum network specification
and communicates with the Ethereum network. A node is a computer or other device, such as a mobile phone, running an individual Ethereum
Client that is connected to other computers also running their own Ethereum Clients, which collectively form the Ethereum network. Nodes
can be full nodes (meaning they host a local copy of the entire Ethereum blockchain) or light nodes, which only host a local copy of a
sub-portion of the full Ethereum blockchain with reduced data. Nodes may (but do not have to) be validators, which requires them to download
an 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 transaction
request 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 operated
by 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 request
by the validator results in a change to the state of the Ethereum network once the transaction is broadcast to all other nodes across
the Ethereum network. Transactions can include, for example, sending ether from one account to another, as discussed below; publishing
a new smart contract onto the Ethereum network; or activating and executing the code of an existing smart contract, in accordance with
the terms and conditions specified in the sender's transaction request.
The Ethereum blockchain can
be thought of as a ledger recording a history of transactions and the balances associated with individual accounts, each of which has
an 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 controlled
by 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 being
used to execute transactions. Smart contract accounts contain, and are controlled by, their own executable code: every time the smart
contract 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 contract
accounts can be used to send, hold, or receive ether, and both can interact with other smart contracts. However, only externally owned
accounts have the power to initiate transactions; smart contract accounts can only send transactions of their own after they are first
activated or called by another transaction. An externally owned account is associated with both a public address on the Ethereum network
and a private key, while a smart contract account is only associated with a public address. While a smart contract account does not use
a 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, enable
or disable features on the smart contract, or change how the smart contract receives external inputs and data, among others.
Accounts depend on nodes to
access the peer-to-peer Ethereum network. Through the node's Ethereum Client, a user's Ethereum wallet and its associated
Ethereum 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 its
own Ethereum Client) and connect that node to its Ethereum wallet, allowing it to make transactions from its Ethereum wallet on the Ethereum
network, or a user's wallet can connect to third-party nodes operated as a service (e.g., Infura) and access the Ethereum network
that way. Multiple accounts can access the Ethereum network through one node.
Each user's Ethereum
wallet 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. dollars
providing a routing address in wire instructions to the payor so that cash may be wired to the recipient's account. The sender approves
the transfer to the address provided by the recipient by "signing" a transaction that consists of the recipient's public
key with the private key of the address from which the sender is transferring the ether. The recipient, however, does not make public
or provide to the sender the recipient's related private key, only its public key.
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Neither the recipient nor
the sender reveals its private keys in a peer-to-peer transaction, because the private key authorizes transfer of the funds in that address
to other users. Therefore, if a user loses its private key, the user may permanently lose access to the ether contained in the associated
address. Likewise, ether is irretrievably lost if the private key associated with it is deleted and no backup has been made. When sending
ether, a user's Ethereum wallet must sign the transaction with the sender's associated private key. In addition, since every
computation on the Ethereum network requires processing power, there is a mandatory transaction fee involved with the transfer that is
paid by the sender to the Ethereum network itself ("base fee"), plus additional transaction fees the sender can elect (or
not) to pay at their discretion to the validators who validate their transaction ("tip"). The resulting digitally signed transaction
is 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 validators
record and confirm transactions when they validate and add blocks of information to the Ethereum blockchain. Validators operate through
nodes whose Ethereum Clients have an extra piece of software that permits the node to perform validation transactions. In a proof-of-stake
consensus protocol like that used by the Ethereum network, validators compete to be randomly selected to validate transactions. A validator
must stake 32 ether to become a validator, which allows it to activate a unique validator key pair (consisting of a public and private
validator key). Each stake of 32 ether results in issuance of a validator key pair, meaning that multiple validators can operate through
a single validator node (including a validator node operated by a third party as a service). There are two types of validators, those
who 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 a
validator is randomly selected by the protocol's algorithm to propose a block, it creates that block, which includes data relating
to (i) the verification of newly submitted transaction requests submitted by senders and (ii) a reference to the prior block in the Ethereum
blockchain to which the new block is being added. The proposing validator becomes aware of outstanding transaction requests through peer-to-peer
data packet transmission and distribution enforced by the Ethereum protocol rules, which connects the proposer to users who want transactions
recorded. 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 the
transaction request is also executed (provided the base fee is paid for the Ethereum network's computational power associated with
executing the code, and up to the amount of the base fee). Upon the addition of a block included in the Ethereum blockchain, an adjustment
to 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 services
in adding the block to the Blockchain, both the proposing validator and the attesting validators receive newly minted ether from the Ethereum
network. If the proposing validator's block is determined by the approving validator committee to be faulty or to break protocol
rules, the proposer is penalized by having its staked ether reduced. Validators can also be penalized for attesting to transactions that
break protocol rules or are inconsistent with the majority of other validators, or for inactivity or missing attestations that the Ethereum
network protocol assigned to them. In extreme cases, a proposing or attesting validator can be "slashed," meaning forcibly
ejected 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 are
conducted "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 certain
ether in a pooled-ownership digital wallet, such as a digital wallet owned by a digital asset exchange. If a transaction can also take
place through a centralized digital asset exchange or a custodian's internal books and records, it is not broadcast to the Ethereum
network or recorded on the Ethereum blockchain. In contrast to on-blockchain transactions, which are publicly recorded on the Ethereum
blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain
transactions are not peer-to-peer ether transactions in that they do not involve a transaction on the Ethereum network and do not reflect
a movement of ether between addresses recorded in the Ethereum blockchain. For these reasons, off-blockchain transactions are not immutable
or irreversible as any such transfer of ether ownership is not cryptographically protected by the protocol behind the Ethereum network
or recorded in, and validated through, the blockchain mechanism.
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Ether has generally exhibited
high price volatility relative to more traditional asset classes. One volatility measure, standard deviation, is based on the variability
of historical price returns. A higher standard deviation indicates a wider dispersion of past price returns and thus greater historical
volatility.
Ethereum Markets and Exchanges
Ether can be transferred in
direct peer-to-peer transactions through the direct sending of ether over the Ethereum blockchain from one ether address to another. Among
end-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 the
Ethereum blockchain or through third-party service providers.
In addition to using ether
to 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-term
investment to diversify their portfolio. The value of ether within the market is determined, in part, by the supply of and demand for
ether in the global ether market, market expectations for the adoption of ether as a store of value, the number of merchants that accept
ether as a form of payment, and the volume of peer-to-peer transactions, among other factors.
Ether spot markets typically
permit investors to open accounts with the market and then purchase and sell ether via websites or through mobile applications. Prices
for trades on ether spot markets are typically reported publicly. An investor opening a trading account must deposit an accepted government-issued
currency into its account with the spot market, or a previously acquired digital asset, before they can purchase or sell assets on the
spot market. The process of establishing an account with an ether market and trading ether is different from, and should not be confused
with, the process of users sending ether from one ether address to another ether address on the Ethereum blockchain. This latter process
is an activity that occurs on the Ethereum network, while the former is an activity that occurs entirely within the order book operated
by the spot market. The spot market typically records the investor's ownership of ether in its internal books and records, rather
than on the Ethereum blockchain. The spot market ordinarily does not transfer ether to the investor on the Ethereum blockchain unless
the 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 institutional
entities, such as firms that offer two-sided liquidity for ether, investment managers, proprietary trading firms, high-net-worth individuals
that trade ether on a proprietary basis, entities with sizeable ether holdings, and family offices. The OTC market provides a relatively
flexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of ether. The OTC market
has no formal structure and no open-outcry meeting place. Parties engaging in OTC transactions will agree upon a price—often via
phone or email—and then one of the two parties will then initiate the transaction. For example, a seller of ether could initiate
the transaction by sending the ether to the buyer's ether address. The buyer would then wire U.S. dollars to the seller's
bank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on ether spot markets.
In addition, ether futures
and options trading occurs on exchanges in the United States regulated by the CFTC. The market for CFTC-regulated trading of ether derivatives
has developed substantially. As of March 28, 2024, regulated ether futures represented approximately $837 million in notional trading
volume on Chicago Mercantile Exchange ("CME"). Ether futures on the CME traded around $562 million per day in the one year
ending March 28, 2024 and represented around $546 million in open interest per day. Through the common membership of the Exchange and
the CME Ethereum Futures market in the Intermarket Surveillance Group (the "ISG"), the Exchange may obtain information regarding
trading in the Shares and listed ether derivatives from the CME Ethereum Futures market via the ISG and from other exchanges who are members
or affiliates of the ISG. Such an arrangement with the ISG and the CME Ethereum Futures market allows for the surveillance of ether futures
market conditions and price movements on a real-time and ongoing basis in order to detect and prevent price distortions, including price
distortions caused by manipulative efforts. The sharing of surveillance information between the Exchange and the CME Ethereum Futures
market regarding market trading activity, clearing activity and customer identity assists in detecting, investigating and deterring fraudulent
and 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 sessions
and to deter and detect violations of Exchange rules and the applicable federal securities laws.
As discussed in more detail
below, barring the liquidation of the Trust or extraordinary circumstances, the Trust will not directly purchase or sell ether, although
the Sponsor may direct the Ether Custodian to sell ether to pay certain expenses. Instead, Authorized Participants will deliver ether
to 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.
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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 the
launch 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 raised
approximately $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 sale
price.
Following
the launch of the Ethereum network, ether supply initially increased through a progressive validation process. Following the introduction
of 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, Ethereum
operated using a proof-of-work consensus mechanism. Under proof-of-work, in order to incentivize those who incurred the computational
costs of securing the network by validating transactions, there was a reward given to the computer (under proof-of-work, validators were
known as "miners") that was able to create the latest block on the chain. Every 12 seconds, on average, a new block was added
to the Ethereum blockchain with the latest transactions processed by the network, and the miner that generated this block was awarded
a variable amount of ether, depending on use of the network at the time. In certain validation scenarios, ether was sometimes sent from
one 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/aunt
reward." Due to the nature of the algorithm for block generation, this process (generating a "proof-of-work") was guaranteed
to be random. Prior to the Merge upgrade, described below, miners on the Ethereum network engaged in a set of prescribed complex mathematical
calculations in order to add a block to the Ethereum blockchain and thereby confirm ether transactions included in that block's
data.
Proof-of-Stake Process
In
the second half of 2020, the Ethereum network began the first of several stages of an upgrade that was initially known as "Ethereum
2.0" and eventually became known as the "Merge" to transition the Ethereum network from a proof-of-work consensus mechanism
to a proof-of-stake consensus mechanism. The Merge was completed on September 15, 2022, and the Ethereum network has operated on a proof-of-stake
model since such time.
Unlike
proof-of-work, in which validators expend computational resources to compete to validate transactions and are rewarded coins in proportion
to the amount of computational resources expended, in proof-of-stake, validators risk or "stake" coins to compete to be randomly
selected to validate transactions and are rewarded coins in proportion to the amount of coins staked. Any malicious activity, such as
validating 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 than
proof-of-work. Approximately every 12 seconds, a new block is added to the Ethereum blockchain with the latest transactions processed
by the network, and the validator that generated this block is awarded ether.
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Limits
on Ether Supply
The
rate at which new ether are issued and put into circulation is expected to vary. In September 2022 the Ethereum network converted from
proof-of-work to a new proof-of-stake consensus mechanism. Following the Merge, approximately 1,700 ether are issued per day, though
the issuance rate varies based on the number of validators on the network. In addition, the issuance of new ether could be partially
or completely offset by the burn mechanism introduced by the EIP-1559 modification, under which ether are removed from supply at a rate
that varies with network usage. See "Modifications to the Ethereum Protocol." On many occasions, the ether supply has been
deflationary 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 deflationary
over the long term.
As
of September 1, 2024, approximately 120.3 million ether were outstanding.
Modifications
to the Ethereum Protocol
The
Ethereum network is an open-source project with no official developer or group of developers that controls it. However, historically
the Ethereum network's development has been overseen by the Ethereum Foundation and other core developers. The Ethereum Foundation
and core developers are able to access and alter the Ethereum network source code and, as a result, they are responsible for quasi-official
releases of updates and other changes to the Ethereum network's source code. However, the release of proposed updates to the Ethereum
network's source code by core developers does not guarantee that the updates will be automatically adopted. Nodes must accept any
changes made to the Ethereum source code by choosing to download the proposed modification of the Ethereum network's source code
in their individual Ethereum Client, and ultimately a critical mass (in practice, a substantial majority) of validators and users—such
as DApp and smart contract developers, as well as 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 lack adoption. A modification of the Ethereum network's
source code is only effective with respect to the Ethereum nodes that download it and modify their Ethereum Clients accordingly, and
in practice such decisions are heavily influenced by the preferences of validators and users. If a modification is accepted only by a
percentage of nodes, a division in the Ethereum network will occur such that one network will run the pre-modification source code and
the other network will run the modified source code. Such a division is known as a "fork." See "RISK FACTORS—Risks
Related to Digital Assets." A temporary or permanent "fork" of the Ethereum blockchain could adversely affect the value
of the Shares. Consequently, as a practical matter, a modification to the source code becomes part of the Ethereum network only if accepted
by a sufficiently broad cross-section of the Ethereum network's participants.
For
example, in 2019 the Ethereum network completed a network upgrade called Metropolis that was designed to enhance the usability of the
Ethereum network and was introduced in two stages. The first stage, called Byzantium, was implemented in October 2017. The purposes of
Byzantium were to increase the network's privacy, security, and scalability and to reduce the block reward for validators (at that
time, validators on the proof-of-work consensus version of Ethereum were known as "miners") who created new blocks in proof-of-work
consensus from 5.0 ether to 3.0 ether. The second stage, called Constantinople, was implemented in February 2019, along with another
upgrade, called St. Petersburg. Another network upgrade, called Istanbul, was implemented in December 2019. The purpose of Istanbul was
to make the network more resistant to denial-of-service attacks, to enable greater ether and Zcash interoperability as well as other
Equihash-based proof-of-work digital assets, and to increase the scalability and performance for solutions on zero-knowledge privacy
technology like SNARKs and STARKs. The purposes of these upgrades were to prepare the Ethereum network for the introduction of a proof-of-stake
algorithm and reduce the block reward from 3.0 ether to 2.0 ether.
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's consensus mechanism to include proof-of-stake and was intended to address the perceived shortcomings of
the proof-of-work consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known
under proof-of-work as "miners") who did not win the race, under proof of work, to be the first in time to solve the cryptographic
puzzle that would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was
only given to the first validator to successfully solve the puzzle and hash a given block, and not to others).
95
Following
the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase
speed, throughput and scalability and also improve existing or next-generation uses. Future upgrades to the Ethereum protocol and Ethereum
blockchain to address scaling issues—such as network congestion, slow throughput and periods of high transaction fees owing to
spikes in network demand—have been discussed by network participants, such as sharding. The purpose of sharding, which has been
discussed 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 validators
being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. However, there appears
to be uncertainty and a lack of existing widespread consensus among network participants about how to solve the scaling challenges faced
by the Ethereum network.
The
rapid development of other competing scalability solutions, such as those which would rely on handling the bulk of computational work
relating to transactions or smart contracts and DApps outside of the main Ethereum network and Ethereum blockchain, has caused alternatives
to sharding to emerge. "Layer 2" is a collective term for solutions that are 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 Layer 1 Ethereum network by uploading the transactions validated
on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer
2 technologies and implementations. For example, "rollups" perform transaction execution outside the Layer 1 blockchain and
then 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 proof
of validity of a batch of transactions (not the entire transactions themselves). By contrast, "optimistic rollups" assume
transactions are valid by 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 Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening
the state channel, and the transaction closing the channel); and "side chains," in which an entire Layer 2 blockchain network
with similar capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum
blockchain 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.
Apart
from solutions designed to address scalability challenges, there have been other upgrades as well. In 2021, the Ethereum network
implemented the EIP-1559 upgrade. EIP-1559 changed the methodology used to calculate the fees paid to validators. EIP-1559 resulted in
the 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 from
circulation, or "burnt," and the tip is paid to validators. EIP-1559 has reduced the total net issuance of ether fees to
validators. Future updates may impact the supply of or demand for ether or its price.
The
Trust's activities will not directly relate to scalability or upgrade projects, though such projects may potentially increase demand
for ether and the utility of the Ethereum network as a whole. Conversely, if they are unsuccessful or they cause users or application
or smart contract developers to migrate away from the Ethereum blockchain, demand for ether could potentially be reduced. Also, projects
that operate and are built within the Layer 1 Ethereum blockchain and network may increase the data flow on the Ethereum network and
could either "bloat" the size of the Ethereum blockchain or slow confirmation times.
Forms
of Attack Against the Ethereum Network
All
networked 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 validators
acting in concert were to gain control of more than 50% of the staked ether, a malicious actor would be able to gain full control of
the network and the ability to manipulate the Ethereum blockchain. As of the date of this Prospectus, the top three largest staking pools
controlled nearly 50% of the ether staked on the Ethereum network.
Many
digital asset networks have been subjected to a number of denial-of-service attacks, which has led to temporary delays in block creation
and in the transfer of Ethereum. Any similar attacks on the Ethereum network that impact the ability to transfer ether could have a material
adverse effect on the price of ether and the value of the Shares.
This
is not intended as an exhaustive list of all forms of attack against the Ethereum network. For additional information, see the "RISK
FACTORS" section of this Prospectus.
96
Market
Participants
Validators
In
proof-of-stake, validators risk or stake coins to compete to be randomly selected to validate transactions and are rewarded for performing
their responsibilities and behaving in accordance with protocol rules. Any malicious activity, such as validating multiple blocks, disagreeing
with the eventual consensus or otherwise violating protocol rules, results in the penalization or, in extreme cases, slashing of a portion
of the staked coins.
Validators
range from Ethereum enthusiasts to professional operations that design and build dedicated machines and data centers. On the Ethereum
network, 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 validating
blocks, validators may be able to prioritize certain transactions in return for increased transaction fees, particularly tips, an incentive
system known as "Maximal Extractable Value," or MEV. For example, in blockchain networks that facilitate DeFi protocols in
particular, such as the Ethereum network, users may attempt to gain an advantage over other users by increasing offered transaction fees
to incentivize validators to give their submitted transaction requests priority. Certain software services, such as Flashbots, have been
developed to facilitate validators in capturing MEV produced by these increased fees.
Investment
and Speculative Sector
This
sector includes the investment and trading activities of both private and professional investors and speculators. Historically, larger
financial services institutions are publicly reported to have limited involvement in investment and trading in digital assets, although
the participation landscape is beginning to change. Currently, there is relatively limited use of digital assets in the retail and commercial
marketplace in comparison to relatively extensive use by speculators, and a significant portion of demand for digital assets is generated
by speculators and investors seeking to profit from the short- or long-term holding of digital assets.
Retail
Sector
The
retail sector includes users transacting in direct peer-to-peer ether activity through the direct sending of ether over the Ethereum
network. The retail sector also includes transactions in which consumers pay for goods or services from commercial or service businesses
through direct transactions or third-party service providers, although the use of ether as a means of payment is still developing and
has not been accepted in the same manner as bitcoin due to ether's relative nascency and because ether has a generally different
purpose than bitcoin.
Service
Sector
This
sector 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. Coinbase
Custody Trust Company, LLC, the Custodian of the Trust, is a digital asset custodian that provides custodial accounts that store ether
for users. As the Ethereum network continues to grow in acceptance, it is anticipated that service providers will expand the currently
available range of services and that additional parties will enter the service sector for the Ethereum network.
Competition
As
of December 31, 2023, more than 8,000 other digital assets, as tracked by CoinMarketCap.com, have been developed since the inception
of bitcoin, which is currently the most developed digital asset because of the length of time it has been in existence, the investment
in the infrastructure that supports it, and the network of individuals and entities that are using bitcoin in transactions. While ether
has enjoyed some success in its limited history, the aggregate value of outstanding ether is smaller than that of bitcoin and may be
eclipsed by the more rapid development of other digital assets. In addition, while ether was the first digital asset with a network that
served 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.
97
REGULATION
OF BITCOIN AND ETHER
As
digital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including
Financial 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 institution
and 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 criminal
or terrorist enterprises, and the safety and soundness of exchanges or other service providers that hold or have custody of digital assets
for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed to investors by digital
assets. President Biden's March 9, 2022 Executive Order, asserting that technological advances and the rapid growth of the digital
asset markets "necessitate an evaluation and alignment of the United States Government approach to digital assets," signals
an ongoing focus on digital asset policy and regulation in the United States. A number of reports issued pursuant to the Executive Order
have 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 treatment
of digital asset transactions or requirements for businesses engaged in digital asset activity.
Many
of 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, perhaps
to a materially adverse extent, the nature of an investment in the Shares and/or the ability of the Trust to continue to operate. For
example, the events of 2022, including among others the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius
Network, Voyager Digital, Genesis, BlockFi and others, and other developments in the digital asset markets, have resulted in calls for
heightened 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 to
regulate 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-asset
risks to banking organizations following events which exposed vulnerabilities in the crypto-asset sector, including the risk of fraud
and scams, legal uncertainties, significant volatility, and contagion risk. Although banking organizations are not prohibited from crypto-asset
related activities, the agencies have expressed significant safety and soundness concerns with business models that are concentrated
in 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, Financial
Technology and Inclusion Subcommittee and the Commodity Markets, Digital Assets, and Rural Development Subcommittee, each of which were
formed in part to analyze issues concerning crypto assets and demonstrate a legislative intent to develop and consider the adoption of
federal 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 ascertainable
in the near future. A divided Congress makes any prediction difficult.
FinCEN
requires any administrator or exchanger of convertible digital assets to register with FinCEN as a money transmitter and comply with
the anti-money laundering regulations applicable to money transmitters. In 2015, FinCEN assessed a $700,000 fine against a sponsor of
a digital asset for violating several requirements of the Bank Secrecy Act by acting as a money services business and selling the digital
asset without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering program. In 2017, FinCEN
assessed a $110 million fine against BTC-e, a now defunct digital asset exchange, for similar violations. The requirement that exchangers
that do business in the U.S. register with FinCEN and comply with anti-money laundering regulations may increase the cost of buying and
selling bitcoin and therefore may adversely affect the price of bitcoin and an investment in the Shares. In a March 2018 letter from
FinCEN's assistant secretary for legislative affairs to U.S. Senator Ron Wyden, the assistant secretary indicated that under current
law both the developers and the exchanges involved in the sale of tokens in an initial coin offering ("ICO") may be required
to register with FinCEN as money transmitters and comply with the anti-money laundering regulations applicable to money transmitters.
98
The
Office 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 whose
assets are blocked, and with whom U.S. persons are generally prohibited from dealing. Such actions by OFAC, or by similar organizations
in other jurisdictions, may introduce uncertainty in the market as to whether bitcoin that has been associated with such addresses in
the past can be easily sold. This "tainted" bitcoin may trade at a substantial discount to untainted bitcoin. Reduced fungibility
in the Bitcoin markets may reduce the liquidity of bitcoin and therefore adversely affect their price.
Under
regulations from the New York State Department of Financial Services ("NYDFS"), businesses involved in digital asset business
activity for third parties in or involving New York, excluding merchants and consumers, must apply for a license, commonly known as a
BitLicense, from the NYDFS and must comply with anti-money laundering, cyber security, consumer protection, and financial and reporting
requirements, among others. As an alternative to a BitLicense, a firm can apply for a charter to become a limited purpose trust company
under New York law qualified to engage in digital asset business activity. Other states have considered or approved digital asset business
activity statutes or rules, passing, for example, regulations or guidance indicating that certain digital asset business activities constitute
money transmission requiring licensure.
The
inconsistency in applying money transmitting licensure requirements to certain businesses may make it more difficult for these businesses
to provide services, which may affect consumer adoption of bitcoin and its price. In an attempt to address these issues, the Uniform
Law Commission passed a model law in July 2017, the Uniform Regulation of Virtual Currency Businesses Act, which has many similarities
to the BitLicense and features a multistate reciprocity licensure feature, wherein a business licensed in one state could apply for accelerated
licensure procedures in other states. It is still unclear, however, how many states, if any, will adopt some or all of the model legislation.
In
addition, the chair of the SEC has stated that the SEC has authority under existing laws to regulate the digital asset sector and the
SEC, U.S. state securities regulators and several foreign governments have issued warnings and instituted legal proceedings in which
they argue that certain digital assets may be classified as securities and that both those digital assets and any related initial coin
offerings 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 continue
to operate. Additionally, U.S. state and federal, and foreign, regulators and legislatures have taken action against virtual currency
businesses or enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming
from virtual currency activity.
In
June 2023, the SEC filed lawsuits against Coinbase and Binance, two large U.S. digital asset trading platforms, alleging that Coinbase
and Binance had been operating as unregistered securities exchanges, brokers and clearing agencies in violation of U.S. federal securities
laws. While the SEC has not alleged that bitcoin is a security, the outcome of these enforcement actions and others may result in the
substantial restructuring of the digital asset market in the United States. However, the SEC has recently faced setbacks in U.S. courts
in its attempt to regulate the digital asset markets. In July 2023, the U.S. District Court for the Southern District of New York ruled
on the SEC's action against Ripple Labs, Inc. The court found that offers and sales of XRP, a digital token, to institutions and
sophisticated individuals constituted securities transactions, but that offers and sales of XRP on crypto exchanges, distributions to
employees, and other third-party developers were not securities transactions. More recently, the D.C. Circuit Court found that the SEC's
denial of the Grayscale Bitcoin Trust's listing was "arbitrary and capricious" under the Administrative Procedures
Act in light of the SEC's approval of two similar bitcoin futures-based ETPs. Nonetheless, until the SEC's numerous actions
against digital asset market participants are resolved, the structure of the digital asset market in the United States will remain subject
to substantial regulatory risk, which may impact the demand for digital assets and the continued availability of existing exchanges and
offerings.
The
SEC has also recently proposed amendments to the custody rules under Rule 406(4)-2 of the Investment Advisers Act. The proposed rule
changes would amend the definition of a "qualified custodian" under Rule 206(4)-2(d)(6) and expand the current custody
rule under Rule 406(4)-2 to cover digital assets and related advisory activities. If enacted as proposed, these rules would likely impose
additional regulatory requirements with respect to the custody and storage of digital assets and could lead to additional regulatory
oversight of the digital asset ecosystem more broadly. In addition, it is possible the market turbulence in late 2022, which led to the
failure 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.
99
The
CFTC has regulatory jurisdiction over the bitcoin and ether futures markets. In addition, because the CFTC has determined that bitcoin
and ether are each a "commodity" under the CEA and the rules thereunder, it has jurisdiction to prosecute fraud and manipulation
in the cash, or spot, market for bitcoin and ether. The CFTC has pursued enforcement actions relating to fraud and manipulation involving
bitcoin, ether and bitcoin and ether markets. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or
spot market exchanges or transactions involving bitcoin or ether that do not use collateral, leverage, or financing.
Various
foreign jurisdictions have adopted and may continue in the near future to adopt laws, regulations or directives that affect a digital
asset network, the digital asset markets, and their users, particularly digital asset exchanges and service providers that fall within
such jurisdictions' regulatory scope. For example:
●
China
has made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow. China
has banned initial coin offerings and there have been reports that Chinese regulators have taken action to shut down a number of China-based
digital asset exchanges.
●
South
Korea determined to amend its Financial Information Act in March 2020 to require virtual asset service providers to register and comply
with its AML and counter-terrorism funding framework. These measures also provide the government with the authority to close digital
asset exchanges that do not comply with specified processes. South Korea has also banned initial coin offerings.
●
The
Reserve Bank of India in April 2018 banned the entities it regulates from providing services to any individuals or business entities
dealing with or selling digital assets. In March 2020, this ban was overturned in the Indian Supreme Court, although the Reserve Bank
of India is currently challenging this ruling.
●
The
United Kingdom's Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and exchange-traded
notes that reference certain types of digital assets, contending that they are "ill-suited" to retail investors citing extreme
volatility, valuation challenges and association with financial crime. A new bill, the Financial Services and Markets Bill (the "FSMB"),
has made its way through the House of Commons and is expected to work through the House of Lords and become law in 2023. The FSMB would
bring digital asset activities within the scope of existing laws governing financial institutions, markets and assets.
●
The
European Council of the European Union approved the text of the Markets in Crypto-Assets Regulation ("MiCA") in October 2022,
establishing a regulatory framework for digital asset services across the European Union. MiCA is intended to serve as a comprehensive
regulation of digital asset markets and imposes various obligations on digital asset issuers and service providers. The main aims of
MiCA are industry regulation, consumer protection, prevention of market abuse and upholding the integrity of digital asset markets. MiCA
was ratified by the European Parliament on April 20, 2023, and will take begin to take effect in June 2024.
●
There
remains significant uncertainty regarding foreign governments' future actions with respect to the regulation of digital assets
and digital asset exchanges. Such laws, regulations or directives may conflict with those of the United States and may negatively impact
the acceptance of ether by users, merchants and service providers outside the United States and may therefore impede the growth or sustainability
of the Ethereum ecosystem in the United States and globally, or otherwise negatively affect the value of ether held by the Trust.
The
transparency of blockchains has in the past facilitated investigations by law enforcement agencies. However, certain privacy-enhancing
features have been or are expected to be introduced to a number of digital asset networks, and these features may provide law enforcement
agencies with less visibility into transaction histories. Although no regulatory action has been taken to treat privacy-enhancing digital
assets differently, this may change in the future.
The
effect of any future regulatory change on the Trust or the bitcoin or ether held by the Trust is impossible to predict, but such change
could be substantial and adverse to the Trust and the value of the Shares.
100
THE
TRUST AND BITCOIN and ETHER PRICES
Overview
of the Trust
The
Trust's investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses
of 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 daily
based on the Pricing Benchmarks. Bitcoin and ether will be the only digital assets held by the Trust. The Trust's allocation of
its assets to bitcoin and ether will approximate the relative market capitalization of bitcoin and ether to one another.
The
Sponsor believes that the Trust will provide a cost-efficient way for investors to implement strategic and tactical asset allocation
strategies 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 opening
an account or arranging a private transaction, and initiating a fiat transaction to initiate or settle such acquisition. An investor
would then also be required to custody such bitcoin or ether by selecting a retail or institutional custodial platform or establishing
a personal computer or hardware security module-based system capable of transacting directly on the blockchain, and incurring the risk
associated with cybersecurity and maintaining a private key that is irrecoverable if lost, among other difficulties.
Purchase
and Sale of Bitcoin and Ether
Because
the Trust will conduct creations and redemptions of Shares for cash, it will be responsible for purchasing and selling bitcoin and ether
in 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 pay
for such expenses, the Sponsor, on behalf of the Trust, will sell bitcoin and ether on a pro rata basis based upon the relative amount
of bitcoin and ether held by the Trust.
The
Sponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing
Benchmark as practical. When choosing between potential counterparties, the Sponsor may consider factors other than simply the most favorable
price. However, the most favorable price will be the predominant factor in determining the counterparty with which the Sponsor effectuates
the contemplated transaction. Other factors that the Sponsor may consider include the size of the proposed order, as well as a counterparty's
execution capabilities, reliability and responsiveness.
The
Trust's purchase and sale of bitcoin and ether may be conducted pursuant to either of two models: (i) the "Trust-Directed
Trade Model"; or the (ii) the "Agent Execution Model." The Trust intends to utilize the Trust-Directed Trade Model
for all purchases and sales of bitcoin and ether and will only utilize the Agent Execution Model in the event that no Digital Asset Trading
Counterparty is able or willing to effectuate the Trust's purchase or sale of bitcoin or ether.
Whether
utilizing either the Trust-Directed Trade Model or the Agent Execution Model, the Authorized Participants will deliver only cash to create
Shares 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 with
respect 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 from
a third party that is not the Authorized Participant, and the Sponsor, on behalf of the Trust—not the Authorized Participant—is
responsible for selecting the third party to deliver the bitcoin or ether. Moreover, the third party will not be acting as an agent of
the Authorized Participant with respect to the delivery of the bitcoin or ether to the Trust or acting at the direction of the Authorized
Participant with respect to the delivery of the bitcoin or ether to the Trust. Additionally, the Trust will redeem Shares by delivering
bitcoin or ether to a third party that is not the Authorized Participant and the Sponsor, on behalf of the Trust—not the Authorized
Participant—is responsible for selecting the third party to receive the bitcoin or ether. The third party will also not be acting
as an agent of the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust or acting at the direction
of the Authorized Participant with respect to the receipt of the bitcoin or ether from the Trust.
101
Trust-Directed
Trade Model
Under
the Trust-Directed Trade Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin from a bitcoin trading counterparty
that has been approved by the Sponsor (a Bitcoin Trading Counterparty) and ether from an ether trading counterparty that has been approved
by 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 the
general parameters under which a transaction in bitcoin and/or ether will be effectuated, should any transaction with a Digital Asset
Trading 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 for
creations or redemptions. All transactions between the Sponsor, on behalf of the Trust, and a Digital Asset Trading Counterparty will
be done on an arm's-length basis.
While
it is expected and intended that the Digital Asset Trading Counterparties are unaffiliated third-parties, it is possible that a Digital
Asset Trading Counterparty may on any given day be or become considered an affiliate of the Trust if it acquires Shares in an amount
that would cause it to become considered an affiliate of the Trust, as the Shares are publicly traded. Digital Asset Trading Counterparties
are not required to have a custody account with the Bitcoin and Ether Custodian. When seeking to purchase or sell bitcoin or ether on
behalf of the Trust, the Sponsor will typically seek to buy and sell bitcoin or ether at a price as close to the applicable Pricing Benchmark
as practical from any of the approved Digital Asset Trading Counterparties. Upon notification that the Trust needs to purchase or sell
bitcoin or ether, the Sponsor will obtain indicative prices from multiple Digital Asset Trading Counterparties at which they would be
willing to execute the contemplated transaction. The Sponsor then determines the Digital Asset Trading Counterparty with which it wishes
to 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-chain
transfer of bitcoin or ether will be paid by the Bitcoin and Ether Custodian.
The
Sponsor maintains a process for approving and monitoring Digital Asset Trading Counterparties, which is overseen by the Bitwise Portfolio
Oversight Committee, which is responsible for investment activities and related risk, as well as counterparty risk. All Digital Asset
Trading Counterparties must be approved by the Bitwise Portfolio Oversight Committee before the Sponsor, on behalf of the Trust, will
engage in transactions with the entity. The Bitwise Portfolio Oversight Committee continuously reviews all approved Digital Asset Trading
Counterparties at its quarterly meetings and will reject the approval of any previously approved Digital Asset Trading Counterparty if
new information arises regarding the entity that puts the appropriateness of that entity as an approved ether trading counterparty in
doubt. In considering which Digital Asset Trading Counterparties to approve, the Bitwise Portfolio Oversight Committee has instituted
rigorous policies and procedures that include, but are not limited to, (i) a review of all sanctioned entities, including, but not limited
to, the various categories of sanctioned persons and entities identified by the Office of Foreign Assets Control; (ii) a review of all
publicly available information regarding the entity, including a review of all information that has been filed pursuant to the requirements
of U.S. or non-U.S. regulators, with a particular emphasis on the identity of the entity's owners, disclosure events and reports
of disciplinary action; and (iii) a review of the entity's policies and procedures regarding various topics, including, but not
limited to, anti-money laundering and "know-your-customer" requirements, trade surveillance, auditing and testing and cybersecurity
capabilities.
As
of __________, 2025, _________________, _________________, _________________ and _________________ have been approved as Digital Asset
Trading Counterparties.
Agent
Execution Model
In
the event that every Digital Asset Trading Counterparty is either unable or unwilling to effectuate the Trust's purchase or sale
of bitcoin or ether, the Sponsor, on behalf of the Trust, may execute the trade using the Agent Execution Model.
Under
the 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 pursuant
to the Prime Execution Agreement. To avoid having to pre-fund purchases or sales of bitcoin and ether, the Trust may borrow bitcoin or
ether or cash as Trade Credit from the Trade Credit Lender on a short-term basis pursuant to the Trade Financing Agreement. As the Trust
intends 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.
102
In
the case of a purchase of bitcoin or ether, the extension of Trade Credits allows the Trust to purchase bitcoin or ether through the
Prime Execution Agent on the date the Trust wishes to effectuate the transaction (for instance, on the evening of the day when an order
to create Shares is received), with such bitcoin or ether being deposited in the Trust's Trading Balance. On the day following
a trade when Trade Credits have been utilized, the Trust uses cash (for instance, from the Authorized Participant who submitted the creation
order) to repay the Trade Credits borrowed from the Trade Credit Lender. The bitcoin or ether purchased by the Trust is then swept from
the Trust's Trading Balance with the Prime Execution Agent to the applicable Trust Digital Asset Account with the Bitcoin and Ether
Custodian pursuant to a regular end-of-day sweep process. Transfers of bitcoin and ether into the Trust's Trading Balance are off-chain
transactions and transfers from the Trust's Trading Balance to the Trust Digital Asset Accounts are "on-chain" transactions
represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit Lender is deemed
part of trade execution costs and embedded in the trade price for each transaction.
In
the 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 wishes
to effectuate the transaction (for instance, on the evening a day when an order to redeem Shares is received) because the bitcoin or
ether remains in the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian. In those circumstances the Trust may borrow Trade
Credits in the form of bitcoin or ether from the Trade Credit Lender, which allows the Trust to sell bitcoin or ether through the Prime
Execution Agent at the desired time, and the cash proceeds are deposited in the Trust's Trading Balance with the Prime Execution
Agent. On the business day following the trade, the Trust will use the bitcoin or ether that is moved from the Trust Digital Asset Account
with the Bitcoin and Ether Custodian to the Trading Balance with the Prime Execution Agent to repay the Trade Credits borrowed from the
Trade 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 Credit
Lender is deemed part of trade execution costs and embedded in the trade price for each transaction.
The
Pricing Benchmarks
On
a daily basis, to calculate the aggregate U.S. dollar value of the bitcoin held by the Trust (the Trust Bitcoin Value), the Trust references
the 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), the
Trust 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.
The
Administrator uses the Trust Bitcoin Value and the Trust Ether Value to calculate the Trust's NAV, which is the aggregate of the
Trust Bitcoin Value and Trust Ether Value, based on the Bitcoin Pricing Benchmark and Ether Pricing Benchmark respectively, less the
Trust's liabilities and expenses.
"NAV
per Share" is calculated by dividing NAV by the number of Shares currently outstanding. NAV and NAV per Share are not measures
calculated in accordance with GAAP. NAV is not intended to be a substitute for the Trust's Principal Market NAV calculated in accordance
with GAAP, and NAV per Share is not intended to be a substitute for the Trust's Principal Market NAV per Share calculated in accordance
with GAAP.
Additional
information regarding the Pricing Benchmarks is set forth below.
The
CME CF Bitcoin Reference Rate – New York Variant
The
Trust'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 designed
to reflect the performance of bitcoin in U.S. dollars. The Bitcoin Pricing Benchmark was created to facilitate financial products based
on 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 between
3:00 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 substantially
the same methodology as the CME CF Bitcoin Reference Rate, the BRR, including utilizing the same constituent bitcoin exchanges, which
is the underlying rate to determine settlement of CME bitcoin futures contracts, except that the Bitcoin Pricing Benchmark is calculated
as 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 February
28, 2022, is based on materially the same methodology (except calculation time) as the BRR, which was first introduced on November 14, 2016.
103
The
Sponsor, in its sole discretion, may cause the Trust to price its portfolio of bitcoin based upon an index, benchmark or standard other
than the Bitcoin Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor
believes that another index, benchmark or standard better aligns 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 Bitcoin Pricing Benchmark price
of bitcoin differs materially from the global market price of bitcoin and/or that third parties are able to purchase and sell bitcoin
on public or private markets not included among the Constituent Platforms, and such transactions may take place at prices materially
higher or lower than the Bitcoin Pricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changes
in any circumstance. In the event that the Sponsor intends to establish the Trust Bitcoin Value by reference to an index, benchmark or
standard other than the Bitcoin Pricing Benchmark, it will provide Shareholders with notice in a prospectus supplement and/or through
a current report on Form 8-K or in the Trust's annual or quarterly reports.
Bitcoin
Pricing Benchmark Methodology
The
Bitcoin Pricing Benchmark is calculated based on the "Relevant Transactions" (as defined below) of all of its constituent
bitcoin trading venues (the Constituent Platforms) as follows:
●
All
Relevant Transactions are added to a joint list, recording the time of execution, trade price and size for each transaction.
●
The
                                            list is partitioned by timestamp into twelve (12) equally sized time intervals of five (5)
                                            minutes in length.
●
For
                                            each partition separately, the volume-weighted median trade price is calculated from the
                                            trade prices and sizes of all Relevant Transactions, i.e., across all Constituent Platforms.
                                            A volume-weighted median differs from a standard median in that a weighting factor, in this
                                            case trade size, is factored into the calculation.
●
The
                                            Bitcoin Pricing Benchmark is then determined by the equally weighted average of the volume
                                            medians of all partitions.
As
of September 3, 2024, the Constituent Platforms included in the Bitcoin Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,
and LMAX Digital.
●
Bitstamp
:
                                            A U.K.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency
                                            business under the NYDFS BitLicense as well as a money transmitter in various U.S. states.
                                            It is also regulated as a Payments Institution within the European Union and is registered
                                            as a Crypto Asset business with the U.K. FCA.
●
Coinbase
:
                                            A U.S.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency
                                            business under the NYDFS BitLicense as well as a money transmitter in various U.S. states.
                                            Subsidiaries operating internationally are further regulated as e-money providers (Republic
                                            of Ireland, Central Bank of Ireland) and Major Payment Institutions (Singapore, Monetary
                                            Authority of Singapore).
●
Gemini
:
                                            A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.
                                            It is also registered with FinCEN as an MSB and is licensed as a money transmitter in various
                                            U.S. states. It is also registered with the FCA as a Crypto Asset Business.
●
itBit
:
                                            A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense.
                                            It is also registered FinCEN as an MSB and is licensed as a money transmitter in various
                                            U.S. states.
●
Kraken
:
                                            A U.S.-based exchange that is registered as an MSB with FinCEN in various U.S. states, Kraken
                                            is registered with the FCA as a Crypto Asset Business and is authorized by the Central Bank
                                            of Ireland as a Virtual Asset Service Provider. Kraken also holds a variety of other licenses
                                            and regulatory approvals, including from the Canadian Securities Administrators.
●
LMAX
                                            Digital
: A Gibraltar-based exchange regulated by the Gibraltar Financial Services Commission
                                            as a DLT provider for execution and custody services. LMAX Digital does not hold a BitLicense
                                            and is part of LMAX Group, a U.K.-based operator of an FCA-regulated Multilateral Trading
                                            Facility and Broker-Dealer.
104
An
oversight function is implemented by the Benchmark Provider in seeking to ensure that the Bitcoin Pricing Benchmark is administered through
the Benchmark Provider's codified policies for index integrity. The Bitcoin Pricing Benchmark is administered through the Benchmark
Provider's codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountability
framework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subject
to a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.
The
Bitcoin Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprised
of at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the Benchmark
Provider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. The
CME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee's Founding Charter and quarterly
meeting minutes are publicly available.
In
the 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 the
Bitcoin Pricing Benchmark that are set forth on the Benchmark Provider's website. Such rules dictate how the Benchmark Provider
will calculate the Bitcoin Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no Relevant
Transaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platform
but cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Bitcoin Pricing
Benchmark for that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions
that have been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the
calculation of the Bitcoin Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate
and publish the Bitcoin Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informing
Bitcoin Pricing Benchmark users, including the Trust, the calculation and publication have been delayed.
Since
the creation of the Bitcoin Pricing Benchmark, there have been several changes to Constituent Platforms comprising the Bitcoin Pricing
Benchmark, most recently in May 2022. Once it has actual knowledge of changes to the Constituent Platforms used to calculate the Bitcoin
Pricing Benchmark, or other material changes to the Bitcoin Pricing Benchmark calculation methodology, the Trust will notify Shareholders
in a prospectus supplement and a current report on Form 8-K or in its annual or quarterly reports.
A
trading venue is eligible as a "Constituent Platform" in any of the CME CF Cryptocurrency Pricing Products if it offers a
market that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including markets
where the quote asset is made fungible with Accepted Assets (the "Relevant Pair") and makes trade data and order data available
through an Automatic Programming Interface ("API") with sufficient reliability, detail and timeliness. The CME CF Oversight
Committee 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 of
the Bitcoin Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmark
can be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrieval
at 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:
1.
The
                                            venue's Relevant Pair spot trading volume for an index must meet the minimum thresholds
                                            as detailed below for it to be admitted as a Constituent Platform: the average daily volume
                                            the venue would have contributed during the observation window for the Reference Rate of
                                            the Relevant Pair exceeds 3% for two consecutive calendar quarters.
105
2.
The
                                            venue has policies to ensure fair and transparent market conditions at all times and has
                                            processes in place to identify and impede illegal, unfair or manipulative trading practices.
3.
The
                                            venue does not impose undue barriers to entry or restrictions on market participants, and
                                            utilizing the venue does not expose market participants to undue credit risk, operational
                                            risk, legal risk or other risks.
4.
The
                                            venue complies with applicable laws and regulations, including, but not limited to, capital
                                            markets regulations, money-transmission regulations, client money custody regulations, and
                                            KYC and AML regulations.
5.
The
                                            venue cooperates with inquiries and investigations of regulators and the Administrator upon
                                            request and must execute data-sharing agreements with CME Group. Once admitted, a Constituent
                                            Platform must demonstrate that it continues to fulfill criteria 2 to 5 inclusive. Should
                                            the average daily contribution of a Constituent Platform fall below 3% for any Reference
                                            Rate, then the continued inclusion of the venue as a Constituent Platform to the Relevant
                                            Pair shall be assessed by the CME CF Oversight Committee.
Additionally,
a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or the
Oversight Committee.
Bitcoin
Pricing Benchmark data and the description of the Bitcoin Pricing Benchmark are based on information made publicly available by the Benchmark
Provider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider's website is incorporated
by reference into this Prospectus.
The
six Constituent Platforms that contribute transaction data to the Bitcoin Pricing Benchmark with the aggregate volumes traded on their
respective BTC-USD markets over the preceding four calendar quarters are listed in the table below:
Aggregate Trading Volume of BTC-USD
    Markets of Bitcoin Pricing Benchmark
Constituent Platforms
Period
Bitstamp
Coinbase
Gemini
Kraken
LMAX Digital
itBit
2023 Q4
$
$
$
$
$
$
2024 Q1
$
$
$
$
$
$
2024 Q2
$
$
$
$
$
$
2024 Q3
$
$
$
$
$
$
The
market share for BTC-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below:
Bitcoin Constituent Platform Market Share of BTC-USD Trading
Period
Bitstamp
Coinbase
Gemini
Kraken
LMAX Digital
itBit
2023 Q4
%
%
%
%
%
%
2024 Q1
%
%
%
%
%
%
2024 Q2
%
%
%
%
%
%
2024 Q3
%
%
%
%
%
%
CF
BENCHMARKS LTD. DATA IS USED UNDER LICENSE AS A SOURCE OF INFORMATION FOR THE TRUST'S PRODUCTS. CF BENCHMARKS LTD., ITS AGENTS
AND LICENSORS HAVE NO OTHER CONNECTION TO THE TRUST'S PRODUCTS AND SERVICES AND DOES NOT SPONSOR, ENDORSE, RECOMMEND OR PROMOTE
ANY OF THE TRUST'S PRODUCTS OR SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS HAVE NO OBLIGATION OR LIABILITY IN CONNECTION
WITH THE TRUST'S PRODUCTS AND SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF ANY INDEX LICENSED TO THE TRUST AND SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
106
The
CME CF Ether – Dollar Reference Rate – New York Variant
The
Trust's ether holdings are valued on a daily basis with reference to the CME CF Ether – Dollar Reference Rate – New
York Variant, the Ether Pricing Benchmark, a standardized reference rate published by CF Benchmarks Ltd., the Benchmark Provider, that
is designed to reflect the performance of ether in U.S. dollars. The Ether Pricing Benchmark was created to facilitate financial products
based 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 3:00
p.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 substantially
the same methodology as the CME CF Ether Reference Rate, the ERR, including utilizing the same constituent ether exchanges, which is
the underlying rate to determine settlement of CME ether futures contracts, except that the Ether Pricing Benchmark is calculated as
of 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 February
28, 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.
The
Sponsor, in its sole discretion, may cause the Trust to price its portfolio based upon an index, benchmark or standard other than the
Ether Pricing Benchmark at any time, with prior notice to the Shareholders, if investment conditions change or the Sponsor believes that
another index, benchmark or standard better aligns 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 Ether Pricing Benchmark price of ether differs
materially from the global market price of ether and/or that third parties are able to purchase and sell ether on public or private markets
not included among the Constituent Platforms, and such transactions may take place at prices materially higher or lower than the Ether
Pricing Benchmark price. The Sponsor, however, is under no obligation whatsoever to make such changes in any circumstance. In the event
that the Sponsor intends to establish the Trust's NAV by reference to an index, benchmark or standard other than the Ether Pricing
Benchmark, it will provide Shareholders with notice in a prospectus supplement and/or through a current report on Form 8-K or in the
Trust's annual or quarterly reports.
Ether
Pricing Benchmark Methodology
The
Ether Pricing Benchmark is calculated based on the "Relevant Transactions" (as defined below) of all of its constituent ether
trading venues (the Constituent Platforms) as follows:
●
All
Relevant Transactions are added to a joint list, recording the time of execution, trade price and size for each transaction.
●
The
list is partitioned by timestamp into twelve (12) equally sized time intervals of five (5) minutes in length.
●
For
each partition separately, the volume-weighted median trade price is calculated from the trade prices and sizes of all Relevant Transactions,
i.e., across all Constituent Platforms. A volume-weighted median differs from a standard median in that a weighting factor, in this case
trade size, is factored into the calculation.
●
The
Ether Pricing Benchmark is then determined by the equally weighted average of the volume medians of all partitions.
As
of September 3, 2024, the Constituent Platforms included in the Ether Pricing Benchmark are Bitstamp, Coinbase, Gemini, itBit, Kraken,
and LMAX Digital.
●
Bitstamp
:
A U.K.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency business under the NYDFS BitLicense as well
as a money transmitter in various U.S. states. It is also regulated as a Payments Institution within the European Union and is registered
as a Crypto Asset business with the U.K. FCA.
●
Coinbase
:
A U.S.-based exchange registered as an MSB with FinCEN and licensed as a virtual currency business under the NYDFS BitLicense as well
as a money transmitter in various U.S. states. Subsidiaries operating internationally are further regulated as e-money providers (Republic
of Ireland, Central Bank of Ireland) and Major Payment Institutions (Singapore, Monetary Authority of Singapore).
107
●
Gemini
:
A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense. It is also registered with FinCEN as
an MSB and is licensed as a money transmitter in various U.S. states. It is also registered with the FCA as a Crypto Asset Business.
●
itBit
:
A U.S.-based exchange that is licensed as a virtual currency business under the NYDFS BitLicense. It is also registered FinCEN as an
MSB and is licensed as a money transmitter in various U.S. states.
●
Kraken
:
A U.S.-based exchange that is registered as an MSB with FinCEN in various U.S. states, Kraken is registered with the FCA as a Crypto
Asset Business and is authorized by the Central Bank of Ireland as a Virtual Asset Service Provider. Kraken also holds a variety of other
licenses and regulatory approvals, including from the Canadian Securities Administrators.
●
LMAX
Digital
: A Gibraltar-based exchange regulated by the Gibraltar Financial Services Commission as a DLT provider for execution and
custody services. LMAX Digital does not hold a BitLicense and is part of LMAX Group, a U.K.-based operator of an FCA-regulated Multilateral
Trading Facility and Broker-Dealer.
An
oversight function is implemented by the Benchmark Provider in seeking to ensure that the Ether Pricing Benchmark is administered through
the Benchmark Provider's codified policies for index integrity. The Ether Pricing Benchmark is administered through the Benchmark
Provider's codified policies for index integrity, including a conflicts-of-interest policy, a control framework, an accountability
framework, and an input data policy. It is also subject to the U.K. BMR regulations, compliance with which regulations has been subject
to a Limited Assurance Audit under the ISAE 3000 standard as of September 12, 2022, which is publicly available.
The
Ether Pricing Benchmark is subject to oversight by the CME CF Oversight Committee. The CME CF Oversight Committee shall be comprised
of at least five members, including at least: (i) two who are representatives of CME; (ii) one who is a representative of the Benchmark
Provider; and (iii) two who bring expertise and industry knowledge relating to benchmark determination, issuance and operations. The
CME CF Oversight Committee meets no less frequently than quarterly. The CME CF Oversight Committee's Founding Charter and quarterly
meeting minutes are publicly available.
In
the 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 the
Ether Pricing Benchmark that are set forth on the Benchmark Provider's website. Such rules dictate how the Benchmark Provider will
calculate the Ether Pricing Benchmark, depending upon the type of error or irregularity. For instance, in the event that no Relevant
Transaction occurs on a Constituent Platform on a given day, or one or more Relevant Transactions do occur on the Constituent Platform
but cannot be retrieved by the Benchmark Provider, the Constituent Platform is disregarded in the calculation of the Ether Pricing Benchmark
for that day. In addition, all Relevant Transactions are subject to automated screening for erroneous data. Relevant Transactions that
have been flagged as erroneous pursuant to the automated screening and the Contingency Calculation Rules are disregarded in the calculation
of the Ether Pricing Benchmark for a given day. If, for whatever reason, the Benchmark Provider is unable to calculate and publish the
Ether Pricing Benchmark by the stipulated dissemination time, it shall publish a notification on its website informing Ether Pricing
Benchmark users, including the Trust, the calculation and publication have been delayed.
Since
the 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 prospectus
supplement and a current report on Form 8-K or in its annual or quarterly reports.
A
trading venue is eligible as a "Constituent Platform" in any of the CME CF Cryptocurrency Pricing Products if it offers a
market that facilitates the spot trading of the relevant cryptocurrency base asset against the corresponding quote asset, including markets
where the quote asset is made fungible with Accepted Assets (the "Relevant Pair") and makes trade data and order data available
through an Automatic Programming Interface ("API") with sufficient reliability, detail and timeliness. The CME CF Oversight
Committee 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 of
the Ether Pricing Benchmark given the frequency of calculation; (ii) the data published is at the resolution required so that the benchmark
can be calculated, with the frequency and dissemination precision required; and (iii) the data is broadcast and available for retrieval
at the required frequency (and not negatively impacted by latency) to allow the methodologies to be applied as intended.
108
Furthermore,
it must, in the opinion of the CME CF Oversight Committee, fulfill the following criteria:
1.
The
                                            venue's Relevant Pair spot trading volume for an index must meet the minimum thresholds
                                            as detailed below for it to be admitted as a Constituent Platform: the average daily volume
                                            the venue would have contributed during the observation window for the Reference Rate of
                                            the Relevant Pair exceeds 3% for two consecutive calendar quarters.
2.
The
                                            venue has policies to ensure fair and transparent market conditions at all times and has
                                            processes in place to identify and impede illegal, unfair or manipulative trading practices.
3.
The
                                            venue does not impose undue barriers to entry or restrictions on market participants, and
                                            utilizing the venue does not expose market participants to undue credit risk, operational
                                            risk, legal risk or other risks.
4.
The
                                            venue complies with applicable laws and regulations, including, but not limited to, capital
                                            markets regulations, money-transmission regulations, client money custody regulations, and
                                            KYC and AML regulations.
5.
The
                                            venue cooperates with inquiries and investigations of regulators and the Administrator upon
                                            request and must execute data-sharing agreements with CME Group. Once admitted, a Constituent
                                            Platform must demonstrate that it continues to fulfill criteria 2 to 5 inclusive. Should
                                            the average daily contribution of a Constituent Platform fall below 3% for any Reference
                                            Rate, then the continued inclusion of the venue as a Constituent Platform to the Relevant
                                            Pair shall be assessed by the CME CF Oversight Committee.
Additionally,
a trading venue may be nominated for inclusion in the list of Constituent Platforms by any member of the public, any exchange or the
Oversight Committee.
Ether
Pricing Benchmark data and the description of the Ether Pricing Benchmark are based on information made publicly available by the Benchmark
Provider on its website at https://www.cfbenchmarks.com. None of the information on the Benchmark Provider's website is incorporated
by reference into this Prospectus.
The
six Constituent Platforms that contribute transaction data to the Ether Pricing Benchmark with the aggregate volumes traded on their
respective ETH-USD markets over the preceding four calendar quarters are listed in the table below:
Aggregate
    Trading Volume of ETH-USD Markets of Ether Pricing Benchmark Constituent Platforms
Period
Bitstamp
Coinbase
Gemini
Kraken
LMAX
    Digital
itBit
2023
    Q4
$
$
$
$
$
$
2024
    Q1
$
$
$
$
$
$
2024
    Q2
$
$
$
$
$
$
2024
    Q3
$
$
$
$
$
$
109
The
market share for ETH-USD trading of the six Constituent Platforms over the past four calendar quarters is shown in the table below:
Ether
    Constituent Platform Market Share of ETH-USD Trading
Period
Bitstamp
Coinbase
Gemini
Kraken
LMAX
    Digital
itBit
2023
    Q4
%
%
%
%
%
%
2024
    Q1
%
%
%
%
%
%
2024
    Q2
%
%
%
%
%
%
2024
    Q3
%
%
%
%
%
%
CF
BENCHMARKS LTD. DATA IS USED UNDER LICENSE AS A SOURCE OF INFORMATION FOR THE TRUST'S PRODUCTS. CF BENCHMARKS LTD., ITS AGENTS
AND LICENSORS HAVE NO OTHER CONNECTION TO THE TRUST'S PRODUCTS AND SERVICES AND DOES NOT SPONSOR, ENDORSE, RECOMMEND OR PROMOTE
ANY OF THE TRUST'S PRODUCTS OR SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS HAVE NO OBLIGATION OR LIABILITY IN CONNECTION
WITH THE TRUST'S PRODUCTS AND SERVICES. CF BENCHMARKS LTD., ITS AGENTS AND LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF ANY INDEX LICENSED TO THE TRUST AND SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
Trust
Structure
The
Trust is a statutory trust formed under the Delaware Statutory Trust Act, and the Trust Agreement constitutes the "governing instrument"
of the Trust under the laws of the State of Delaware relating to statutory trusts. The Trust holds ether and is expected from time to
time to issue Baskets in exchange for deposits of cash and to distribute cash in connection with redemptions of Baskets. The Trust's
investment objective is to seek to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust's
operations and other liabilities. In seeking to achieve its investment objective, the Trust will hold bitcoin and ether and establish
its NAV by reference to the Pricing Benchmarks.
The
Sponsor believes the Trust's is a straight-forward solution to seek its investment objective. Besides cash received in connection
with purchase orders of Baskets, the Trust's sole assets are expected to be bitcoin and ether held with the Bitcoin and Ether Custodian.
The
Sponsor believes that the Bitcoin Pricing Benchmark is a representative value for the price of bitcoin in U.S. dollars and that the Ether
Pricing Benchmark is a representative value for the price of ether in U.S. dollars, based on the methodology administered by the Benchmark
Provider.
The
Trust processes and pays its only ordinary expense (the Sponsor Fee) in bitcoin and ether. The Trust will only sell bitcoin and ether
(1) in connection with the redemption of Baskets for cash, (2) on an as-needed basis to pay Trust expenses not assumed by the Sponsor,
(3) in the event the Trust terminates and liquidates its assets, or (4) as otherwise required by law or regulation. This restriction
provides protection against potential attempts by bad actors to manipulate the operation of the Trust based on how the Trust calculates
its NAV.
Market
prices for the Shares are available from a variety of sources including brokerage firms, information websites and other information service
providers. The NAV of the Trust is published by the Sponsor at the Trust's website (_________.com) on each day that the Exchange
is open for regular trading and is posted on the Trust's website.
110
Calculation
of NAV
Under
normal circumstances, the Trust's only assets will be bitcoin and ether and, under limited circumstances, cash. The Trust's
bitcoin and ether are carried, for financial statement purposes, at fair value, as required by the U.S. generally accepted accounting
principles ("GAAP"). The Trust's NAV will be determined by the Administrator once each Exchange trading day at 4:00
p.m. ET, or as soon thereafter as practicable. The NAV for a normal trading day will be released after 4:00 p.m. ET. Trading during the
core trading session on the Exchange typically closes at 4:00 p.m. ET. However, the NAV is not officially struck until later in the day
(often by 5:30 p.m. and almost always by 8:00 p.m.). The pause between 4:00 p.m. and 5:30 p.m. (or later) provides an opportunity for
the Sponsor to algorithmically detect, flag, investigate, and correct unusual pricing should it occur.
The
Administrator will calculate the NAV of the Trust by (i) multiplying the number of bitcoin held by the Trust by the U.S. dollar price
of one bitcoin provided by the Bitcoin Pricing Benchmark on such day (the Trust Bitcoin Value); (ii) multiplying the number of ether
held by the Trust by the U.S. dollar price of one ether provided by the Ether Pricing Benchmark (the Trust Ether Value) on such day;
(iii) adding the Trust Bitcoin Value to the Trust Ether Value; (iv) adding any receivables; and (v) subtracting the accrued but unpaid
expenses and liabilities of the Trust. The Trust's NAV per Share is calculated by dividing the Trust's NAV by the number
of Shares then outstanding.
The
Administrator will determine the price of the Trust's bitcoin by reference to the Bitcoin Pricing Benchmark and the price of the
Trust's ether by reference to the Ether Pricing Benchmark, both of which are published between 4:00 p.m. and 4:30 p.m. ET on every
calendar day.
The
methodology used to calculate the Bitcoin Pricing Benchmark price to value bitcoin and the Ether Pricing Benchmark price to value ether
in determining the NAV of the Trust may not be deemed consistent with GAAP. To the extent the methodology used to calculate the Pricing
Benchmarks is deemed inconsistent with GAAP, the Trust will utilize an alternative GAAP-consistent pricing source for purposes of the
Trust's periodic financial statements.
The
Sponsor has the exclusive authority to determine the NAV of the Trust. The Sponsor has delegated to the Administrator the responsibility
to calculate the NAV of the Trust and the NAV per Share, based on a pricing source selected by the Sponsor (the Pricing Benchmarks).
The Administrator will determine the NAV of the Trust each business day. In determining the NAV of the Trust, the Administrator values
the bitcoin held by the Trust based on the Bitcoin Pricing Benchmark and the ether held by the Trust based on the Ether Pricing Benchmark,
unless otherwise determined by the Sponsor in its sole discretion. If either Pricing Benchmark is not available or the Sponsor in its
sole discretion determines that a Pricing Benchmark should not be used, the Trust's holdings may be fair valued in accordance with
the policy approved by the Sponsor. The Sponsor does not anticipate that the need to "fair value" bitcoin or ether will be
a common occurrence.
The
ITV will be calculated by using the prior day's closing NAV per Share of the Trust as a base and updating that value throughout
the trading day to reflect changes in the most recently reported price level of the CME Bitcoin Real Time Price and CME Ether Real Time
Price (the "Real Time Prices"). The ITV disseminated during the Exchange core trading session hours should not be viewed
as an actual real-time update of the NAV, because NAV per Share is calculated only once at the end of each trading day based upon the
relevant end-of-day values of the Trust's investments. The ITV will be disseminated on a per-Share basis every 15 seconds during
regular Exchange core trading session hours of 9:30 a.m. ET to 4:00 p.m. ET. The Exchange will disseminate the ITV value through the
facilities of CTA/CQ High Speed Lines that allow for high-speed data transmission. In addition, the ITV will be published on the Exchange's
website and will be available through online information services such as Bloomberg and Reuters. The ITV (which is based upon the Real
Time Prices) may differ from the NAV (which is based upon the Pricing Benchmarks) due to differences in how the Real Time Prices and
Pricing Benchmarks are calculated. While the Pricing Benchmarks are calculated as described in the section above entitled "THE
TRUST AND BITCOIN AND ETHER PRICES," the Real Time Prices are calculated once per second, in real time by utilizing the order books
of USD/BTC and USD/ETH trading pairs operated by all Constituent Platforms. An "order book" is a list of buy and sell orders
with associated limit prices and sizes that have not yet been matched, that is reported and disseminated by CF Benchmarks Ltd., as the
calculation agent for the Real Time Prices. The order books are aggregated into one consolidated order book for each Real Time Price
by the calculation agent and the bid-price volume curve, ask-price volume curve, mid-price volume curve and mid-spread volume curve are
calculated. The mid-price volume curve is the average of the bid-price volume curve (which maps transaction volume to the marginal price
per cryptocurrency unit a seller is required to accept in order to sell this volume to the consolidated order book) and the ask-price
volume curve (which maps a transaction volume to the marginal price per cryptocurrency unit a buyer is required to pay in order to purchase
this volume from the consolidated order book). The mid-price volume curve is weighted by the normalized probability density of the exponential
distribution up to the utilized depth (utilized depth being calculated as the maximum cumulative volume for which the mid-spread volume
curve does not exceed a certain percentage deviation from the mid price). Each Real Time Price is then given by the sum of the weighted
mid-price volume curve obtained in the previous step.
111
Dissemination
of the ITV provides additional information that is not otherwise available to the public and may be useful to investors and market professionals
in connection with the trading of the Shares on the Exchange. Investors and market professionals will be able throughout the trading
day to compare the market price of the Trust and the ITV. If the market price of the Shares diverges significantly from the ITV, market
professionals will have an incentive to execute arbitrage trades. For example, if the Trust appears to be trading at a discount compared
to the ITV, a market professional could buy the Shares on the Exchange and sell short futures contracts. Such arbitrage trades can tighten
the tracking between the market price of the Trust and the ITV and thus can be beneficial to all market participants.
The
Sponsor reserves the right to adjust the Share price of the Trust in the future to maintain convenient trading ranges for investors.
Any adjustments would be accomplished through stock splits or reverse stock splits. Such splits would decrease (in the case of a split)
or increase (in the case of a reverse split) the proportionate NAV per Share, but would have no effect on the net assets of the Trust
or the proportionate voting rights of Shareholders or the value of any Shareholder's investment.
The
Trust's periodic financial statements may not utilize the NAV of the Trust determined by reference to the Pricing Benchmarks to
the extent the methodology used to calculate the Pricing Benchmarks is deemed not to be consistent with GAAP. The Trust's periodic
financial statements will be prepared in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification Topic 820, "Fair Value Measurements and Disclosures" ("ASC Topic 820") and utilize an exchange-traded
price from the Trust's principal market for ether on the Trust's financial statement measurement date. The Sponsor will determine
in its sole discretion the valuation sources and policies used to prepare the Trust's financial statements in accordance with GAAP.
The Trust intends to engage a third-party vendor to obtain a price from a principal market for bitcoin or ether, which will be determined
and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight,
and the volume and frequency of trades. Under GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC
Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.
To
determine which market is the Trust's principal market (or in the absence of a principal market, the most advantageous market)
for purposes of calculating the Trust's financial statements, the Trust follows ASC 820-10, which outlines the application of fair
value accounting. ASC 820-10 determines fair value to be the price that would be received for bitcoin or ether in a current sale, which
assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume that bitcoin
or ether is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market.
Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable,
and willing and able to transact. The Trust may transact through Digital Asset Trading Counterparties, in multiple markets, and its application
of ASC 820-10 reflects this fact. The Trust anticipates that, while multiple venues and types of markets will be available to the Digital
Asset Trading Counterparties from whom the Sponsor acquires or disposes of the Trust's bitcoin or ether, the principal market in
each scenario is determined by looking at the market-based level of volume and bitcoin/ether trading activity. Digital Asset Trading
Counterparties may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined
in the FASB ASC Master Glossary. Based on information reasonably available to the Trust, Exchange Markets have the greatest volume and
level of activity for the asset. The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market
and Principal-to-Principal Markets to determine its principal market. As a result of the aforementioned analysis, an Exchange Market
has been selected as the Trust's principal market. The Trust determines its principal market (or in the absence of a principal
market the most advantageous market) on a quarterly basis to determine which market is its Principal Market for the purpose of calculating
fair value for the creation of quarterly and annual financial statements.
The
process that the Sponsor has developed for identifying a principal market, as prescribed in ASC 820-10, which outlines the application
of fair value accounting. The process begins by identifying publicly available, well established and reputable bitcoin and ether trading
venues (Exchange Markets, as defined in the FASB ASC Master Glossary), which are selected by the Sponsor and its affiliates in their
sole discretion. Those markets include Binance, Bitfinex, Bitflyer, Bitstamp, Coinbase Pro, Crypto.com, Gemini, HitBTC, Huobi, Kraken,
KuCoin, OKEx, Poloniex. The Sponsor then, through a service provider, calculates on each valuation period, the highest volume venue during
the 60-minute period prior to 4:00 ET for bitcoin and ether. The Sponsor then identifies that market as the principal market for bitcoin
and ether during that period, and uses the price for bitcoin and ether from that venue at 4:00 ET as the principal market price.
112
Additional
Information About The trust
The
Trust
The
Trust is a Delaware statutory trust, formed pursuant to the Delaware Statutory Trust Act. The Trust continuously issues common shares
representing units of undivided beneficial ownership of the Trust that may be purchased and sold on the Exchange. The Trust operates
pursuant to the First Amended and Restated Trust Agreement dated as of __________, 2025. Delaware Trust Company, a Delaware trust company,
is the Delaware trustee of the Trust. The Trust is managed and controlled by the Sponsor. The Sponsor is a limited liability company
formed in the State of Delaware on June 4, 2018.
The
Trust is passively managed and does not pursue active management investment strategies, and the Sponsor does not actively manage the
bitcoin or ether held by the Trust. The Trust's tax structure provides the Sponsor with very limited means to affirmatively alter
the Trust's allocation to bitcoin and ether. Nonetheless, the Sponsor believes that the Trust's allocation to bitcoin and
ether will generally approximate the relative market capitalization of bitcoin and ether to one another, although this cannot be guaranteed.
Additionally, the Sponsor does not sell bitcoin or ether at times when the price of bitcoin or ether is high, nor does it acquire bitcoin
or ether at low prices in the expectation of future price increases. The Sponsor does not make use of any of the hedging techniques available
to professional bitcoin and ether investors to attempt to reduce the risks of losses resulting from price decreases. The Trust will not
utilize leverage or any similar arrangements in seeking to meet its investment objective. Bitcoin and ether will be the only digital
assets held by the Trust.
The
Trust will only sell bitcoin and ether (1) in connection with the redemption of Baskets for cash, (2) on an as-needed basis to pay Trust
expenses not assumed by the Sponsor, (3) in the event the Trust terminates and liquidates its assets, or (4) as otherwise required
by law or regulation. The delivery or sale of bitcoin or ether to pay fees and expenses by the Trust is a taxable event to Shareholders.
See "
United States Federal Income Tax Consequences
."
The
Trust is not registered as an investment company under the Investment Company Act and the Sponsor believes the Trust is not required
to register under such act. The Trust does not hold or trade in commodity futures contracts, "commodity interests" or any
other instruments regulated by the Commodity Exchange Act, as administered by the CFTC or National Futures Association ("NFA").
The Sponsor believes that the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and that neither the Sponsor
nor the Trustee is subject to regulation as a commodity pool operator or a commodity trading adviser in connection with the operation
of the Trust.
The
number of outstanding Shares is expected to increase and decrease from time to time as a result of the purchase and redemption of Baskets.
The
Trust has no fixed termination date.
The
Trust's Fees and Expenses
The
Trust will pay the unitary Sponsor Fee of 0.__% per annum of the Trust's bitcoin and ether holdings. The Sponsor Fee is paid by
the Trust to the Sponsor as compensation for services performed under the Trust Agreement and Sponsor Agreement. Except during periods
in which all or a portion of the Sponsor Fee is being waived, the Sponsor Fee will accrue daily and will be payable in bitcoin and ether
monthly in arrears.
The
Administrator will calculate the Sponsor Fee on a daily basis by applying a 0.__% annualized rate to the Trust Bitcoin Value (by reference
to the Bitcoin Pricing Benchmark) and to the Trust Ether Value (by reference to the Ether Pricing Benchmark). The amount of bitcoin and
ether payable in respect of each such daily accrual shall also be determined by reference to the Bitcoin Pricing Benchmark and Ether
Pricing Benchmark, respectively. The NAV of the Trust is reduced each day by the amount of the Sponsor Fee calculated each day. On or
about the last day of each month, an amount of bitcoin and ether will be transferred from the Trust Bitcoin Account or Trust Ether Account,
as applicable, to the Sponsor Accounts equal to the sum of all daily Sponsor Fees accrued in bitcoin for the month in U.S. dollars divided
by the Bitcoin Pricing Benchmark on the last day of the month and the sum of all daily Sponsor Fees accrued in ether for the month in
U.S. dollars divided by the Ether Pricing Benchmark on the last day of the month. The Trust is not responsible for paying any fees or
costs associated with the transfer of bitcoin or ether to the Sponsor.
113
In
exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the
Trustee's monthly fee and out-of-pocket expenses, the fees of the Trust's regular service providers (Cash Custodian, Bitcoin
and Ether Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting
fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses.
The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The
Sponsor will also pay the costs of the Trust's organization.
The
Trust may incur certain extraordinary, non-recurring expenses that are not assumed by the Sponsor, including, but not limited to, taxes
and governmental charges, any applicable brokerage commissions, financing fees, Bitcoin network fees or Ethereum network fees and similar
transaction fees, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf
of the Trust to protect the Trust or the Shareholders (including, for example, in connection with any fork of the Bitcoin blockchain
or Ethereum blockchain, any Incidental Rights (as defined below) and any IR Asset (as defined below)), any indemnification of the Cash
Custodian, Bitcoin and Ether Custodian, Prime Execution Agent, Transfer Agent, Administrator or other agents, service providers or counterparties
of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation,
regulatory enforcement or investigation matters.
The
Sponsor, from time to time, may temporarily waive all or a portion of the Sponsor Fee in its sole discretion. To the extent not already
disclosed in the Prospectus, the Sponsor may notify Shareholders of its intent to commence, or cease, waiving the Sponsor Fee on the
Trust's website, in a prospectus supplement, through a current report on Form 8-K and/or in the Trust's annual or quarterly
reports.
The
Administrator and/or the Sponsor will direct the Bitcoin and Ether Custodian to transfer bitcoin from the Trust Bitcoin Account and ether
from the Trust Ether Account to the Sponsor Account to pay the Sponsor Fee and any other Trust expenses not assumed by the Sponsor. To
pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust's
bitcoin or ether as necessary to pay such expenses. The Sponsor will sell bitcoin and ether to pay such expenses on a pro rata basis
based upon the relative amount of bitcoin and ether held by the Trust.
The
Sponsor, on behalf of the Trust, will typically seek to buy and sell bitcoin and ether at a price as close to the applicable Pricing
Benchmark as practical. Such sales will be undertaken pursuant to the Trust-Directed Trade Model unless no Digital Asset Trading Counterparty
is willing or able to effectuate the trade. Transfers of bitcoin and ether from the Trust Digital Asset Accounts to the Sponsor Accounts,
and from the Sponsor 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-chain transfer of bitcoin or ether will be paid
by the Bitcoin and Ether Custodian. The cash proceeds of the sale will be sent to the Sponsor, which will use such proceeds to pay the
expenses. Any remaining cash will be distributed back to the Cash Custodian. To the extent that the Trust must utilize the Agent Execution
Model to undertake bitcoin or ether sales to pay for expenses not assumed by the Sponsor, the Prime Execution Agent, acting in an agency
capacity, would conduct the sale on behalf of the Trust with third parties through its Coinbase Prime service pursuant to the Prime Execution
Agreement. Transfers of bitcoin or ether from the Trust Digital Asset Accounts to the Trust's Trading Balance in connection with
such sales are "on-chain" transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Each
delivery or sale of bitcoin and ether by the Trust to pay the Sponsor Fee or other Trust expenses will be a taxable event to Shareholders.
See
"United States Federal Income Tax Consequences."
The
Trust does not engage in any activity designed to derive a profit from changes in the price of bitcoin or ether. Bitcoin and ether not
needed to redeem Baskets, or to cover the Sponsor Fee and Trust expenses not assumed by the Sponsor, is held by the Bitcoin and Ether
Custodian or Prime Execution Agent. As a result of the recurring deliveries of bitcoin and ether necessary to pay the Sponsor Fee and
potential sales of bitcoin or ether to pay in cash the Trust expenses not assumed by the Sponsor, the NAV of the Trust and, correspondingly,
the amount of bitcoin and ether represented by each Share will decrease proportionately over the life of the Trust. New deposits of bitcoin
and ether, purchased with the cash received in connection with purchases of Baskets, will not reverse this trend.
114
Distributions
Pursuant
to the terms of the Trust Agreement, the Trust may make distributions on the Shares in cash or potentially in kind.
If
the Trust is required to terminate and liquidate, or the Sponsor determines in accordance with the terms of the Trust Agreement that
it is appropriate to terminate and liquidate the Trust, the Sponsor will sell the Trust's bitcoin and ether and will distribute
to the Shareholders any amounts of the cash proceeds of the liquidation remaining after the satisfaction of all outstanding liabilities
of the Trust and the establishment of reserves for applicable taxes, other governmental charges and contingent or future liabilities
as the Sponsor will determine. Under no circumstances will the Trust distribute ether to Shareholders.
See
"ADDITIONAL INFORMATION ABOUT THE TRUST—Termination of the Trust." Shareholders of record on the record date fixed
by the Transfer Agent for a distribution will be entitled to receive their pro rata portions of any distribution.
Incidental
Rights and IR Assets
From
time to time, the Trust may come into possession of rights incident to its ownership of bitcoin or ether, which permit the Trust to acquire,
or otherwise establish dominion and control over, other digital assets. These rights are generally expected to be Forked Assets that
arise in connection with hard forks in the Ethereum blockchain, airdrops offered to holders of ether and digital assets arising from
other similar events without any action of the Trust or of the Sponsor or Trustee on behalf of the Trust. These rights are referred to
as "Incidental Rights" and any digital assets acquired through Incidental Rights are referred to as "IR Assets."
Pursuant to the Trust Agreement, the Trust has explicitly disclaimed all Incidental Rights and IR Assets. Such assets are not considered
assets of the Trust at any point in time and will not be taken into account for purposes of 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. At such time, the Incidental Right(s) and/or IR Asset(s) will be
the property of the Sponsor. Once acquired, the Sponsor, subject to a reasonable, good faith determination, may take any lawful action
necessary or desirable in connection with its acquisition of such assets. 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 in exchange for another digital asset which may subsequently be exchanged for cash. The Sponsor would then contribute
that cash back to the Trust, which in turn would distribute the cash to the Depository Trust Company ("DTC") to be distributed
to Shareholders in proportion 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 contribute such 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 such Incidental Right(s) and/or IR Asset(s). The Sponsor may choose to evaluate any such fork, airdrop
or similar occurrence on a case-by-case basis in consultation with its legal advisers, tax consultants and custodian. In determining
whether to attempt to acquire and/or retain any 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
availability of a safe and practical way to custody the Incidental Right or IR Asset;
●
the
cost or operational burden of taking possession and/or maintaining ownership of the Incidental Right or IR Asset and whether such cost
or burden exceed the benefits of owning such Incidental Rights or IR Asset or the proceeds that would be realized from a sale thereof;
●
whether
there are any legal or regulatory restrictions on or risks or consequences arising from, or tax implications with respect to, the acceptance,
retention, ownership, sale, transfer, abandonment, distribution or disposal or disposition of the Incidental Right or IR Asset, regardless
of whether there is a safe and practical way to custody and secure such Incidental Right or IR Asset;
●
the
existence of a suitable market into which the Incidental Right or IR Asset may be sold; and
●
whether
claiming, owning, selling, or otherwise taking any action in respect of Incidental Rights or IR Asset may create legal or regulatory
risks, liability, or burdens of any kind for the Sponsor (including, without limitation, if such Incidental Right or IR Asset is, or
may be, a security under federal securities laws or a commodity interest under the CEA).
115
The
Sponsor is under no obligation to 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 Trust claims any Incidental Right(s) and/or IR Asset(s) resulting from a fork or airdrop in the Bitcoin
blockchain or Ethereum blockchain (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 application
by the Exchange to amend its listing rules.
Termination
of the Trust
The
Sponsor will notify Shareholders at least 30 days before the date for termination of the Trust Agreement and the Trust if any of the
following occurs:
●
Shares
are delisted from the Exchange and are not approved for listing on another national securities exchange within five (5) business days
of their delisting;
●
One
hundred eighty days have elapsed since the Trustee notified the Sponsor of the Trustee's election to resign or since the Sponsor
removed the Trustee, and a successor trustee has not been appointed or accepted its appointment;
●
The
SEC determines that the Trust is an investment company under the Investment Company Act, and the Sponsor has made the determination that
termination of the Trust is advisable;
●
The
CFTC determines that the Trust is a commodity pool under the CEA, and the Sponsor has made the determination that termination of the
Trust is advisable;
●
The
Trust is determined to be a "money services business" under the regulations promulgated by FinCEN under the authority of
the Bank Secrecy Act of 1970 and is required to comply with certain FinCEN regulations thereunder or is determined to be a "money
transmitter" (or equivalent designation) under the laws of any state in which the Trust operates and is required to seek licensing
or otherwise comply with state licensing requirements, and the Sponsor has made the determination that termination of the Trust is advisable;
●
A
U.S. regulator requires the Trust to shut down or forces the Trust to liquidate its ether;
●
Any
ongoing event exists that prevents the Trust from making or makes impractical the Trust's reasonable efforts to make a fair determination
of the price of ether for purposes of determining the NAV of the Trust;
●
The
Sponsor determines that the aggregate net assets of the Trust in relation to the operating expenses of the Trust make it unreasonable
or imprudent to continue the business of the Trust;
●
The
Trust fails to qualify for treatment, or ceases to be treated, as a "grantor trust" under the Code or any comparable provision
of the laws of any state or other jurisdiction where that treatment is sought, and the Sponsor determines that, because of that tax treatment
or change in tax treatment, termination of the Trust is advisable;
●
Sixty
days have elapsed since DTC or another depository has ceased to act as depository with respect to the Shares, and the Sponsor has not
identified another depository that is willing to act in such capacity;
●
The
Trustee elects to terminate the Trust after the Sponsor is conclusively deemed to have resigned effective immediately as a result of
the Sponsor being adjudged bankrupt or insolvent, or a receiver of the Sponsor or of its property being appointed, or a trustee or liquidator
or any public officer taking charge or control of the Sponsor or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation and a successor sponsor has not been appointed; or
●
The
Sponsor elects to terminate the Trust after the Trustee, Administrator or Bitcoin and Ether Custodian (or any successor trustee, administrator
or custodian) resigns or otherwise ceases to be the trustee, administrator or custodian of the Trust, as applicable, and no replacement
trustee, administrator and/or custodian acceptable to the Sponsor is engaged.
116
In
addition, the Trust may be dissolved at any time for any reason by the Sponsor in its sole discretion. In respect of termination events
that rely on Sponsor determinations to terminate the Trust (e.g., if the SEC determines that the Trust is an investment company under
the Investment Company Act; the CFTC determines that the Trust is a commodity pool under the Commodity Exchange Act; the Trust is determined
to be a money transmitter under the regulations promulgated by FinCEN; the Trust fails to qualify for treatment, or ceases to be treated,
as a grantor trust for U.S. federal income tax purposes; or, following resignation by a trustee or custodian, the Sponsor determines
that no replacement is acceptable to it), the Sponsor may consider, without limitation, the profitability to the Sponsor and other service
providers of the operation of the Trust, any obstacles or costs relating to the operation or regulatory compliance of the Trust relating
to the determination's triggering event, and the ability to market the Trust to investors. To the extent that the Sponsor determines
to continue operation of the Trust following a determination's triggering event, the Trust will be required to alter its operations
to comply with the triggering event. In the instance of a determination that the Trust is an investment company, the Trust and Sponsor
would have to comply with the regulations and disclosure and reporting requirements applicable to investment companies and investment
advisers. In the instance of a determination that the Trust is a commodity pool, the Trust and the Sponsor would have to comply with
regulations and disclosure and reporting requirements applicable to commodity pools and commodity pool operators or commodity trading
advisers. In the event that the Trust is determined to be a money transmitter, the Trust and the Sponsor will have to comply with applicable
federal and state registration and regulatory requirements for money transmitters and/or money service businesses. In the event that
the Trust ceases to qualify for treatment as a grantor trust for U.S. federal tax purposes, the Trust will be required to alter its disclosure
and tax reporting procedures and may no longer be able to operate or to rely on pass-through tax treatment. In each such case and in
the case of the Sponsor's determination as to whether a potential successor trustee or custodian is acceptable to it, the Sponsor
will not be liable to anyone for its determination of whether to continue or to terminate the Trust.
Upon
the dissolution of the Trust, the Sponsor (or in the event there is no Sponsor, such person (the "Liquidating Trustee") as
the majority of the Shareholders may propose and approve and who agrees to serve hereunder) shall take full charge of the Trust Property.
Any Liquidating Trustee so appointed shall have and may exercise, without further authorization or approval of any of the parties hereto,
all of the powers conferred upon the Sponsor under the terms of this Trust Agreement, subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, and provided that the Liquidating Trustee shall not have general liability for the acts,
omissions, obligations and expenses of the Trust. Thereafter, in accordance with Section 3808(e) of the DSTA, the affairs of the Trust
shall be wound up and all bitcoin and ether owned by the Trust shall be liquidated as promptly as is consistent with obtaining the fair
value thereof and in such a manner so as to effectuate orderly sales and a minimal market impact. The Liquidating Trustee may thereafter
hold the net proceeds of any such sale, together with any other cash then held by it under this Trust Agreement, uninvested and without
liability for interest, for the pro rata benefit of Shareholders that had not theretofore been redeemed. The Liquidating Trustee shall
not be liable for or responsible in any way for depreciation or loss incurred by reason of any sale or sales made in accordance with
the provisions of this Section 8.01. The Liquidating Trustee may suspend its sales of bitcoin or ether upon the occurrence of unusual
or unforeseen circumstances, including, but not limited to, a suspension in trading of bitcoin or ether or similar market event. Upon
receipt of proceeds from the sale of the last bitcoin and ether held hereunder, all proceeds shall be applied and distributed in the
following order of priority:
1.
pay
                                            to Sponsor from the Trust an amount equal to the sum of (1) any compensation due it
                                            for extraordinary or other services, (2) any advances made but not yet repaid and (3) reimbursement
                                            of any other disbursements as provided herein;
2.
deduct
                                            from the Trust any amounts that the Liquidating Trustee, in its sole discretion, shall deem
                                            necessary or appropriate to pay on behalf of the Trust any applicable taxes or other governmental
                                            charges that may be payable by the Trust and any other contingent or future liabilities of
                                            the Trust; and
3.
distribute
                                            each Shareholder's interest in the remaining assets of the Trust. Such distribution
                                            shall consist of cash. Under no circumstances will the Trust distribute bitcoin or ether
                                            to Shareholders.
Following
the dissolution and windup of the Trust, including distribution of the assets of the Trust, the Trust shall terminate and the Sponsor
or the Liquidating Trustee, as the case may be, shall instruct the Trustee to execute and cause such certificate of cancellation of the
Certificate of Trust to be filed in accordance with the DSTA at the expense of the Sponsor or the Liquidating Trustee, as the case may
be. Notwithstanding anything to the contrary contained in this Trust Agreement, the existence of the Trust as a separate legal entity
shall continue until the filing of such certificate of cancellation. Upon the termination of the Trust, the Sponsor will be discharged
from all obligations under the Trust Agreement except for certain of its obligations that survive termination of the Trust Agreement.
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Amendments
The
Trust Agreement can be amended by the Sponsor in its sole discretion and without the Shareholders' consent by making an amendment,
a Trust Agreement supplemental thereto, or an amended and restated trust agreement. Any such restatement, amendment and/or supplement
to the Trust Agreement will be effective on such date as designated by the Sponsor in its sole discretion. However, any amendment to
the Trust Agreement that affects the duties, liabilities, rights or protections of the Trustee will require the Trustee's prior
written consent, which it may grant or withhold in its sole discretion. Every Shareholder, at the time any amendment so becomes effective,
will be deemed, by continuing to hold any Shares or an interest therein, to consent and agree to such amendment and to be bound by the
Trust Agreement as amended thereby. In no event will any amendment impair the right of Authorized Participants to surrender Baskets and
receive therefor the ether Baskets represented thereby (less fees in connection with the surrender of Shares and any applicable taxes
or other governmental charges), except in order to comply with mandatory provisions of applicable law.
The
Trust's Service Providers
The
Sponsor
Bitwise
Investment Advisers, LLC, as Sponsor, arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares
for their public offering in the United States and the listing of Shares on the Exchange. The Sponsor will not exercise day-to-day oversight
over the Trustee, the Custodian, the Administrator, the Transfer Agent or the Benchmark Provider. The Sponsor will develop a marketing
plan for the Trust, will prepare marketing materials regarding the Shares, and will exercise the marketing plan of the Trust on an ongoing
basis.
The
principal office of the Sponsor is 250 Montgomery Street, Suite 200, San Francisco, CA 94104.
Officers
of the Sponsor
The
following is a biographical summary of the business experience of each of the officers, directors and other key employees of the Sponsor:
Hunter
Horsley
is the Chief Executive Officer of Bitwise Asset Management, Inc., the parent of the Sponsor, and has served in such role
since October 2016. He serves as President and Treasurer of the Sponsor. Prior to Bitwise, Mr. Horsley was a product manager at Facebook
and Instagram leading efforts in monetization from 2015 to 2016. He graduated from the Wharton School at the University of Pennsylvania
with a Bachelor of Science in Economics in 2015. Mr. Horsley took two years off from school from 2011 to 2013 to be on the founding team
of a technology company called Lore (formerly known as CourseKit) to assist in the development of an online learning tool incorporating
social networking features. Lore raised over $6 million in equity, grew to 20 employees and was sold to Noodle Education, Inc., in 2013.
Paul
"Teddy" Fusaro
is the President of Bitwise Asset Management, Inc., and has served in such capacity since January 2021.
Prior to joining Bitwise in April 2018, Mr. Fusaro was Senior Vice President and Head of Portfolio Management and Capital Markets at
IndexIQ, the exchange-traded fund unit of New York Life Investment Management, a firm with over $550 billion in AUM. In this capacity
he oversaw portfolio management, trading, and operations for a suite of alternative strategy exchange-traded funds, mutual funds, and
separately managed accounts. Prior to that, from 2009 to 2013, Mr. Fusaro was Vice President of Portfolio Management and co-head of Trading
and Operations at Direxion Investments, a $13 billion alternative exchange-traded fund manager. Earlier in his career, Mr. Fusaro
spent time in both equity derivatives and credit derivatives at Goldman Sachs & Co. Mr. Fusaro is a graduate of Providence College.
Katherine
Dowling
is the General Counsel and Chief Compliance Officer of Bitwise Asset Management and has served in such capacity since March
2021. She serves as the General Counsel, CCO and Vice President of the Sponsor. Prior to Bitwise, Ms. Dowling was the General Counsel
and Chief Compliance Officer for True Capital Management from 2019 to 2021. Before that, Ms. Dowling was a General Partner, as well as
Chief Operating Officer and Chief Compliance Officer of Luminate Capital Partners, from 2015 to 2018. Prior to 2015, Ms. Dowling spent
over ten years as an Assistant U.S. Attorney, most recently in the Economic Crimes Unit of the U.S. Attorney's Office for the Northern
District of California. Ms. Dowling is an Echols Scholar graduate of the University of Virginia and a graduate of Harvard Law School.
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The
following is a biographical summary of the business experience of certain key officers of Bitwise Asset Management, the parent of the
Sponsor:
Matthew
"Matt" Hougan
is the Chief Investment Officer of Bitwise Asset Management and has served in such capacity since October
2020 after joining Bitwise in February 2018. Prior to Bitwise, Mr. Hougan was the Chief Executive Officer of Inside ETFs and Managing
Director of Global Finance at Informa PLC, an FTSE 100 company. Before that, he was Chief Executive Officer of ETF.com, a venture-backed
start-up that was sold in three separate transactions, with the data business sold to FactSet in 2015, the Events business sold to Informa
in 2015, and the Media business sold to BATS Global Markets in early 2016. Mr. Hougan was also the editor for nine years of the Journal
of Indexes. Mr. Hougan is a three-time member of Barron's ETF Roundtable and co-author of the CFA (Chartered Financial Analyst)
Institute's monograph on exchange-traded funds. Mr. Hougan is a graduate of Bowdoin College.
Hong
Kim
is the Chief Technology Officer of Bitwise Asset Management and has served in such capacity since Bitwise's inception.
Prior to Bitwise, Mr. Kim worked in cybersecurity for the South Korean Military. He later worked on Google's backend infrastructure
for Drive. Mr. Kim attended the University of Pennsylvania where he graduated with a Bachelor of Science in Computer Science.
The
Trustee
Delaware
Trust Company, a Delaware trust company, acts as the trustee of the Trust for the purpose of creating a Delaware statutory trust in accordance
with the Delaware Statutory Trust Act (the "DSTA"). The Trustee is appointed to serve as the trustee of the Trust in the
State of Delaware for the sole purpose of satisfying the requirement of Section 3807(a) of the DSTA that the Trust have at least one
trustee with a principal place of business in the State of Delaware.
The
principal address of Delaware Trust Company, as Trustee is 251 Little Falls Drive, Wilmington, DE 19808.
General
Duty of Care of Trustee
The
Trustee is a fiduciary under the Trust Agreement; provided, however, that the fiduciary duties and responsibilities and liabilities of
the Trustee are limited by, and are only those specifically set forth in, the Trust Agreement.
Resignation,
Discharge or Removal of Trustee; Successor Trustees
The
Trustee may resign at any time by giving at least 30 days' advance written notice to the Sponsor. The Sponsor may remove the Trustee
at any time by giving at least 30 days' advance written notice to the Trustee. Upon effective resignation or removal, the Trustee
will be discharged of its duties and obligations.
If
the Trustee resigns or is removed, the Sponsor, acting on behalf of the Shareholders, is required to use reasonable efforts to appoint
a successor trustee. Any successor Trustee must satisfy the requirements of Section 3807 of the DSTA. Any resignation or removal of the
Trustee and appointment of a successor Trustee cannot become effective until a written acceptance of appointment is delivered by the
successor Trustee to the outgoing Trustee and the Sponsor and any fees and expenses due to the outgoing Trustee are paid or waived by
the outgoing Trustee. Following compliance with the preceding sentence, the successor will become fully vested with the rights, powers,
duties and obligations of the outgoing Trustee under the Trust Agreement, with like effect as if originally named as Trustee, and the
outgoing Trustee shall be discharged of its duties and obligations herein. If no successor Trustee shall have been appointed and shall
have accepted such appointment within forty-five (45) days after the giving of such notice of resignation or removal, the Trustee may
petition any court of competent jurisdiction for the appointment of a successor Trustee.
If
the Trustee resigns and no successor trustee is appointed within 180 days after the date the Trustee issues its notice of resignation,
the Sponsor will terminate and liquidate the Trust and distribute its remaining assets.
The
Administrator
Under
the Trust Administration and Accounting Agreement, the Administrator provides necessary administrative, tax and accounting services and
financial reporting for the maintenance and operations of the Trust. In addition, the Administrator makes available the office space,
equipment, personnel and facilities to provide such services.
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The
principal address of BNY Mellon, as Administrator, Transfer Agent and Cash Custodian, is 240 Greenwich Street, New York, NY 10286.
The
Transfer Agent
The
Transfer Agent (1) issues and redeems Shares of the Trust; (2) responds to correspondence by Shareholders and others relating to its
duties; (3) maintains Shareholder accounts; and (4) makes periodic reports to the Trust.
The
Bitcoin and Ether Custodian
The
Bitcoin and Ether Custodian is responsible for safekeeping the bitcoin and ether owned by the Trust. The Bitcoin and Ether Custodian
was selected by the Sponsor. The Bitcoin and Ether Custodian has responsibility for opening the Trust Digital Asset Accounts and facilitating
the transfer of bitcoin and ether required for the operation of the Trust.
The
Sponsor may, in its sole discretion, add or terminate bitcoin or ether custodians at any time. The Sponsor may, in its sole discretion,
change the custodian of the Trust's bitcoin and/or ether holdings, but it will have no obligation whatsoever to do so or to seek
any particular terms for the Trust from other such custodians. However, the Sponsor will only enter into ether custody arrangements with
custodians that meet the Sponsor's criteria, including an agreement to maintain Trust assets in segregated accounts, to maintain
insurance and to store the Trust's private keys in cold storage or in such other manner as the Sponsor determines provides reasonable
protection for the Trust's assets from loss or theft.
The
Cash Custodian
The
Cash Custodian is the custodian of the Trust's cash holdings.
The
Marketing Agent
The
Marketing Agent is responsible for: (1) working with the Transfer Agent to review and approve, or reject, purchase and redemption orders
of Baskets placed by Authorized Participants with the Transfer Agent; and (2) reviewing and approving the marketing materials prepared
by the Trust for compliance with applicable SEC and FINRA advertising laws, rules, and regulations.
Custody
of the Trust's Assets
The
Trust has entered into an agreement with the Bitcoin and Ether Custodian, the Bitcoin and Ether Custody Agreement, pursuant to which
the Bitcoin and Ether Custodian will custody all of the Trust's bitcoin and ether in segregated accounts from time to time (the
Trust Digital Asset Accounts), other than the Trust's bitcoin and ether which is temporarily maintained in the Trading Balance
with the Prime Execution Agent as described below in
"
THE PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER—The Prime
Execution Agent." The Bitcoin and Ether Custodian will keep a substantial portion of the private keys associated with the Trust's
bitcoin and ether in "cold storage" or similarly secure technology (the "Cold Digital Asset Accounts"), with
any remainder of the Trust Digital Asset Accounts held as a "Hot Digital Asset Account." The Sponsor expects that all of
the Trust's assets and private keys will be held in cold storage of the Bitcoin and Ether Custodian on an ongoing basis.
Custody
of bitcoin and ether typically involves the generation, storage and utilization of private keys. These private keys are used to effect
transfer transactions (i.e., transfers of bitcoin and ether from an address associated with the private key to another address). Cold
storage of private keys may involve keeping such keys on a non-networked computer or electronic device or storing the private keys on
a storage device or printed medium and deleting the keys from all computers. Cold storage is a safeguarding method with multiple layers
of protections and protocols, by which the private key(s) corresponding to the Trust's bitcoin and ether is (are) generated and
stored in an offline manner. Private keys are generated in offline computers that are not connected to the internet so that they are
resistant to being hacked. By contrast, in hot storage, the private keys are held online, where they are more accessible, leading to
more efficient transfers, though they are potentially more vulnerable to being hacked. While the Bitcoin and Ether Custodian will generally
keep all of the Trust's bitcoin and ether in cold storage on an ongoing basis, it is possible that, from time to time, portions
of the Trust's bitcoin and ether will be held outside of cold storage temporarily as part of trade facilitation in connection with
creations and redemptions of Baskets and to sell bitcoin and ether to pay Trust expenses not assumed by the Sponsor, as necessary. The
Trust's bitcoin and ether held in the Cold Digital Asset Accounts by the Bitcoin and Ether Custodian are held in segregated wallets
and therefore are not commingled with the Bitcoin and Ether Custodian's or other customer assets. The private key materials are
stored within secure storage facilities within the United States and Europe. For security reasons exact locations are never disclosed.
A limited number of employees at the Bitcoin and Ether Custodian are involved in private key management operations, and the Bitcoin and
Ether Custodian has represented that no single individual has access to full private keys. The Bitcoin and Ether Custodian carefully
considers the design of the physical, operational and cryptographic systems for secure storage of the Trust's private keys in an
effort to lower the risk of loss or theft. No such system is perfectly secure and loss or theft due to operational or other failure is
always possible.
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The
Bitcoin and Ether Custodian's internal audit team performs periodic internal audits over custody operations, and the Bitcoin and
Ether Custodian has represented that Systems and Organizational Control attestations covering private key management controls are also
performed on the Bitcoin and Ether Custodian by an external provider.
Under
the terms of the Bitcoin and Ether Custody Agreement, the Sponsor maintains sole discretion in allocating bitcoin and ether between the
Hot Digital Asset Accounts and the Cold Digital Asset Accounts. Bitcoin and ether custodied by the Bitcoin and Ether Custodian are not
commingled with the assets of the Bitcoin and Ether Custodian or its affiliates or with the assets of other customers of the Bitcoin
and Ether Custodian. Neither the Trust, the Sponsor, nor any other entity is permitted to lend, pledge, hypothecate or rehypothecate
any of the Trust's bitcoin and ether. The Bitcoin and Ether Custodian has also agreed in the Bitcoin and Ether Custody Agreement
that it will not, directly or indirectly, lend, pledge, hypothecate or rehypothecate any of the Trust's bitcoin or ether, and that
the Trust's bitcoin or ether assets are not treated as general assets of the Bitcoin and Ether Custodian, but are instead considered
custodial assets that remain the Trust's property. Additionally, the Bitcoin and Ether Custodian has agreed to provide the Trust
or its authorized independent public accountant with confirmation of or access to information sufficient to confirm the bitcoin and ether
held by the Bitcoin and Ether Custodian for the Trust and that the Trust's bitcoin and ether is held in separate, segregated accounts
under the Trust's name. The Bitcoin and Ether Custody Agreement does not require that private key information with respect to the
Trust's bitcoin or ether be kept in a particular physical location.
The
Bitcoin and Ether Custodian may receive deposits of bitcoin or ether but may not send bitcoin or ether without use of the corresponding
private keys. In order to send ether when the private keys are kept in cold storage, unsigned transactions must be physically transferred
to the offline cold storage facility and signed using a software/hardware utility with the corresponding offline keys. At that point,
the Bitcoin and Ether Custodian can upload the fully signed transaction to an online network and transfer the ether. Because the Bitcoin
and Ether Custodian may need to retrieve private keys from offline storage prior to initiating transactions, the initiation or crediting
of withdrawals or other transactions may be delayed.
Under
the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian's liability is limited as follows, among others: (i) other
than with respect to claims and losses arising from spot trading of bitcoin or ether, or fraud or willful misconduct, among others, the
Bitcoin and Ether Custodian's aggregate liability under the Bitcoin and Ether Custody Agreement shall not exceed the 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 the 12 months
prior to the event giving rise to the Bitcoin and Ether Custodian's liability, and (B) the value of the affected bitcoin, ether
or cash giving rise to the Bitcoin and Ether Custodian's liability; (ii) in respect of the Bitcoin and Ether Custodian's
obligations 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 violation of any law, rule or regulation with respect to the provision of its
services, the Bitcoin and Ether Custodian's liability shall not exceed the greater of (A) $5 million and (B) the aggregate fees
paid by the Trust to the Ether Custodian in the 12 months prior to the event giving rise to the Ether Custodian's liability; and
(iii) in respect of any incidental, indirect, special, punitive, consequential or similar losses, the Bitcoin and Ether Custodian is
not liable, even if the Bitcoin and Ether Custodian has been advised of or knew or should have known of the possibility thereof. The
Bitcoin and Ether Custodian is not liable for delays, suspension of operations, failure in performance, or interruption of service to
the extent it is directly due to a cause or condition beyond the reasonable control of the Bitcoin and Ether Custodian. Under the Bitcoin
and Ether Custody Agreement, except in the case of its negligence, fraud, material violation of applicable law or willful misconduct,
the Bitcoin and Ether Custodian shall not have any liability, obligation, or responsibility for any damage or interruptions caused by
any computer viruses, spyware, scareware, Trojan horses, worms or other malware that may affect the Trust's computer or other equipment,
or any phishing, spoofing or other attack, unless the Bitcoin and Ether Custodian fails to have commercially reasonable policies, procedures
and technical controls in place to prevent such damages or interruptions.
121
Coinbase
Global maintains a commercial crime insurance policy, which is intended to cover the loss of client assets held by the Coinbase Insureds,
including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent
transfer. The insurance maintained by the Coinbase Insureds is shared among all of Coinbase's customers, is not specific to the
Trust or to customers holding bitcoin or ether with the Bitcoin and Ether Custodian or Prime Execution Agent and may not be available
or sufficient to protect the Trust from all possible losses or sources of losses.
The
Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing the applicable notice
to the Trust, or immediately for Cause (as defined in the Bitcoin and Ether Custody Agreement), including, among others, if the Trust
materially breaches the Prime Execution Agreement and such breach remains uncured, undergoes a bankruptcy event, or fails to repay Trade
Credits. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing 180 days'
notice to the Trust, or immediately for Cause (as defined below). The Bitcoin and Ether Custody Agreement forms a part of the Prime Execution
Agreement, and is subject to the termination provisions in the Prime Execution Agreement. These termination provisions are described
in more detail in
"
THE PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER—The Prime Execution Agent" below.
The
Transfer Agent will facilitate the settlement of Shares in response to the placement of creation orders and redemption orders from Authorized
Participants. The Trust has entered into the Cash Custody Agreement with BNY Mellon under which BNY Mellon acts as custodian of the Trust's
cash and cash equivalents.
The
Trust may engage third-party custodians or vendors besides the Bitcoin and Ether Custodian and the Cash Custodian to provide custody
and security services for all or a portion of its bitcoin, ether and/or cash, and the Sponsor will pay the custody fees and any other
expenses associated with any such third-party custodian or vendor. The Sponsor is responsible for overseeing the Bitcoin and Ether Custodian
and the Trust's other service providers. The Sponsor may, in its sole discretion, add or terminate bitcoin and/or ether custodians
at any time. The Sponsor may, in its sole discretion, change the custodian of the Trust's bitcoin or ether holdings, but it will
have no obligation whatsoever to do so or to seek any particular terms for the Trust from other such custodians. However, the Sponsor
will only enter into ether custody arrangements with custodians that meet the Sponsor's criteria, including an agreement to maintain
Trust assets in a segregated account, to maintain insurance and to store the Trust's private keys in cold storage or in such other
manner as the Sponsor determines provides reasonable protection for the Trust's assets from loss or theft.
THE
PRIME EXECUTION AGENT AND THE TRADE CREDIT LENDER
The
following section describe the role of the Prime Execution Agent and Trade Credit Lender. These parties will only be utilized during
the rare and limited circumstances when the Trust buys and sells ether using the Agent Execution Model. The Trust intends to utilize
the Trust-Directed Trade Model for all purchases and sales of ether and will only utilize the Agent Execution Model in the event that
no Ether Trading Counterparty is able or willing to effectuate the Trust's purchase or sale of ether.
The
Prime Execution Agent
Pursuant
to the Prime Execution Agreement, the Trust's bitcoin, ether and/or cash holdings, from time to time, may be temporarily held with
the Prime Execution Agent, an affiliate of the Bitcoin and Ether Custodian, in the Trading Balance, for certain limited purposes, including
in connection with creations and redemptions of Baskets and the sale of bitcoin and ether to pay other Trust expenses not assumed by
the Sponsor. The Sponsor may, in its sole discretion, add or terminate prime execution agents at any time. The Sponsor may, in its sole
discretion, change the prime execution agent for the Trust, but it will have no obligation whatsoever to do so or to seek any particular
terms for the Trust from other such prime execution agents.
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Within
the Trust's Trading Balance, the Prime Execution Agreement provides that the Trust does not have an identifiable claim to any particular
bitcoin or ether (or cash). Instead, the Trust's Trading Balance represents an entitlement to a pro rata share of the bitcoin and
ether (and cash) the Prime Execution Agent holds on behalf of customers who hold similar entitlements against the Prime Execution Agent.
In this way, the Trust's Trading Balance represents an omnibus claim on the Prime Execution Agent's bitcoin and ether (and
cash) held on behalf of the Prime Execution Agent's customers. The Prime Execution Agent holds the bitcoin and ether associated
with customer entitlements across a combination of omnibus cold wallets, omnibus "hot" wallets (meaning wallets whose private
keys are generated and stored online, in internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent's
name on a trading venue (including third-party venues and the Prime Execution Agent's own execution venue) where the Prime Execution
Agent executes orders to buy and sell ether on behalf of its clients.
Within
such omnibus hot and cold wallets and accounts, the Prime Execution Agent has represented to the Sponsor that it keeps the majority of
assets in cold wallets to promote security, while the balance of assets is kept in hot wallets to facilitate rapid withdrawals. However,
the Sponsor has no control over, and for security reasons the Prime Execution Agent does not disclose to the Sponsor, the percentage
of ether that the Prime Execution Agent holds for customers holding similar entitlements as the Trust, which are kept in omnibus cold
wallets, as compared to omnibus hot wallets or omnibus accounts in the Prime Execution Agent's name on a trading venue. The Prime
Execution Agent has represented to the Sponsor that the percentage of assets maintained in cold versus hot storage is determined by ongoing
risk analysis and market dynamics, in which the Prime Execution Agent attempts to balance anticipated liquidity needs for its customers
as a class against the anticipated greater security of cold storage.
The
Prime Execution Agent is not required by the Prime Execution Agreement to hold any of the bitcoin or ether in the Trust's Trading
Balance in cold storage or to hold any such ether in segregation, and neither the Trust nor the Sponsor can control the method by which
the Prime Execution Agent holds the bitcoin and ether credited to the Trust's Trading Balance.
The
Prime Execution Agent relies on bank accounts to provide its trading platform services and including temporarily holding any cash related
to a customer's purchase or sale of bitcoin or ether. In particular, the Prime Execution Agent has disclosed that customer cash
held by the Prime Execution Agent, including the cash associated with the Trust's Trading Balance, is held in one or more banks'
accounts for the benefit of the Prime Execution Agent's customers, or in Money Market Funds in compliance with Rule 2a-7 under
the Investment Company Act and rated "AAA" by S&P (or the equivalent from any eligible rating service), provided that
such investments are held in accounts in Coinbase's name for the benefit of customers and are permitted and held in accordance
with state money-transmitter laws. The Prime Execution Agent has represented to the Sponsor that it has implemented the following policy
with respect to the cash associated with the Trust's Trading Balance. First any cash related to the Trust's purchase or sale
of bitcoin or ether will be held in an FBO Account or in a Money Market Fund. The amount of Trust cash held at each FBO Account shall,
unless otherwise agreed by the Sponsor in writing, 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 in a Money Market Fund. The Prime Execution Agent has agreed to title the accounts in a manner designed to enable
receipt of FDIC deposit insurance where applicable on a pass-through basis. Second, to the extent the Trust's cash in the Trading
Balance in aggregate exceeds the amounts that can be maintained at the banks on the foregoing basis, the Prime Execution Agent has represented
that it currently conducts an overnight sweep of the excess into U.S. government Money Market Funds. The Sponsor has not independently
verified the Prime Execution Agent's representations.
To
the extent the Trust sells bitcoin ether through the Prime Execution Agent, the Trust's orders will be executed at the Connected
Trading Venues that have been approved in accordance with the Prime Execution Agent's due diligence and risk assessment process.
The Prime Execution Agent has represented that its due diligence on Connected Trading Venues includes reviews conducted by the legal,
compliance, security, privacy and finance and credit-risk teams, The Connected Trading Venues, which are subject to change from time
to time, currently include Bitstamp, LMAX, Kraken, the exchange operated by the Prime Execution Agent, as well as four additional non-bank
market makers ("NBMMs"). The Prime Execution Agent has represented to the Trust that it is unable to name the NBMMs due to
confidentiality restrictions.
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Pursuant
to the Prime Execution Agreement, the Trust may engage in sales of bitcoin or ether by placing orders with the Prime Execution Agent.
The Prime Execution Agent will route orders placed by the Sponsor through the prime execution agent execution platform (the "Trading
Platform") to a Connected Trading Venue where the order will be executed. Each order placed by the Sponsor will be sent, processed
and settled at each Connected Trading Venue to which it is routed. The Prime Execution Agreement provides that the Prime Execution Agent
is subject to certain conflicts of interest, including: (i) the Trust's orders may be routed to the Prime Execution Agent's
own execution venue where the Trust's orders may be executed against other customers of the Prime Execution Agent or with the Coinbase
acting as principal, (ii) the beneficial identity of the counterparty purchaser or seller with respect to the Trust's orders may
be unknown and therefore may inadvertently be another client of the Prime Execution Agent, (iii) the Prime Execution Agent does not engage
in front-running, but is aware of the Trust's orders or imminent orders and may execute a trade for its own inventory (or the account
of an affiliate) while in possession of that knowledge and (iv) the Prime Execution Agent may act in a principal capacity with respect
to certain orders. As a result of these and other conflicts, when acting as principal, the Prime Execution Agent may have an incentive
to favor its own interests and the interests of its affiliates over the Trust's interests.
Subject
to the foregoing, and to certain policies and procedures that the Prime Execution Agreement requires the Prime Execution Agent to have
in place to mitigate conflicts of interest when executing the Trust's orders, the Prime Execution Agreement provides that the Prime
Execution Agent shall have no liability, obligation, or responsibility whatsoever for the selection or performance of any Connected Trading
Venue, and that other Connected Trading Venues and/or trading venues not used by Coinbase may offer better prices and/or lower costs
than the Connected Trading Venue used to execute the Trust's orders.
Coinbase
Global maintains a commercial crime insurance policy, which is intended to cover the loss of client assets held by Coinbase Global and
all of its subsidiaries, including the Prime Execution Agent, including from employee collusion or fraud, physical loss including theft,
damage of key material, security breach or hack, and fraudulent transfer. The insurance maintained by the Coinbase Insureds is shared
among all of Coinbase's customers, is not specific to the Trust or to customers holding bitcoin or ether with the Bitcoin and Ether
Custodian or Prime Execution Agent and may not be available or sufficient to protect the Trust from all possible losses or sources of
losses.
Once
the Sponsor places an order to purchase or sell bitcoin or ether on the Trading Platform, the associated bitcoin, ether or cash used
to fund or fill the order, if any, will be placed on hold and will generally not be eligible for other use or withdrawal from the Trust's
Trading Balance. The Trust Digital Asset Accounts may be used directly to fund orders. With each Connected Trading Venue, the Prime Execution
Agent shall establish an account in the Prime Execution Agent's name, or in its name for the benefit of clients, to trade on behalf
of its clients, including the Trust, and the Trust will not, by virtue of the Trading Balance the Trust maintains with the Prime Execution
Agent, have a direct legal relationship, or account with, any Connected Trading Venue.
The
Prime Execution Agent is permitted to suspend or terminate the Prime Execution Agreement under certain circumstances. The Prime Execution
Agent, for itself or as agent for the Bitcoin and Ether Custodian and Trade Credit Lender, may not terminate the Prime Execution Agreement
(including the Bitcoin and Ether Custody Agreement) or suspend, restrict terminate or modify the Prime Execution Agent Services (as defined
below) on less than 180 days' notice, except in the event of (i) a Change in Law or (ii) a Cause event (as defined below).
The
Prime Execution Agreement defines a "Change in Law" as any change in or adoption of any applicable law, rule, or regulation
which, in the reasonable opinion of counsel to the Prime Execution Agent would prohibit or materially impede some or all of the arrangement
contemplated by the Prime Execution Agreement. Upon the occurrence of a Change in Law, the parties will negotiate to agree on modifications
to the Prime Execution Agreement or the Prime Execution Agent Services that would enable compliance with such Change in Law or, in the
case of a material impediment, reduce the impact to the parties of such Change in Law and the Coinbase Entities shall continue to provide
the Prime Execution Agent Services unless prohibited from doing so by the Change in Law. If the parties cannot agree on modifications
within thirty (30) days following notice from the Prime Execution Agent or if the Change in Law requires that Coinbase immediately ceases
providing any Prime Execution Agent Services, the Prime Execution Agent may, upon written notice, suspend, restrict or terminate the
Prime Execution Agent Services solely to the extent necessary to account for the Change in Law, provided that any such suspension, restriction,
termination or modification is narrowly tailored and, to the extent not prohibited by the Change in Law, the Coinbase Entities will continue
to provide, at a minimum, the Transition Services (as defined below) following any Change in Law.
124
Upon
the occurrence and continuation of a Cause event, and after giving effect to any notice requirement and cure period that may apply, the
Prime Execution Agent may in its reasonable discretion, terminate the Prime Execution Agreement and accelerate the Trust's obligations,
and/or take certain other actions. The Prime Execution Agreement defines "Cause" to mean (i) a material breach of the Prime
Execution Agreement (other than the Bitcoin and Ether Custody Agreement) which is uncured for ten (10) days; (ii) a material breach of
the Ether Custody Agreement which is uncured for 30 days; (iii) a Bankruptcy Event (as defined below); and (iv) the failure by the Trust
to repay Trade Credits by the applicable deadline specified in the Trade Financing Agreement which, in the event the failure results
solely from an error or omission of an administrative or operational nature, remains uncured for a period of one (1) business day.
Notwithstanding
any termination of the Prime Execution Agreement by the Prime Execution Agent for Cause, during any Transition Period (as defined below)
the Coinbase Entities (defined in the Prime Execution Agreement as the Prime Execution Agent, Ether Custodian, and Trade Credit Lender)
or their affiliates shall continue to provide the Transition Services (as defined below) and render such assistance as the Trust may
reasonably request to enable the continuation and orderly assumption of the Transition Services to be effected by the Trust, its affiliate
or any alternative service provider and shall continue to provide the Transition Services pursuant to the Prime Execution Agreement,
except to the extent any Transition Service is prohibited under applicable law (including, but not limited to, applicable sanctions programs)
or by a facially valid subpoena, court order, or binding order of a government authority; provided that (i) the Coinbase Entities will
continue to have the right to exercise their right of set-off under the Prime Execution Agreement with respect to any sale proceeds during
the Transition Period for any fees or other amounts owed by the Trust and (ii), notwithstanding any provision in the Prime Execution
Agreement to the contrary, in no event shall any Coinbase Entity, its affiliates, or their respective officers, directors, agents, employees
and representatives have any liability to the Trust or Sponsor for any claims or losses arising out of or relating to the Prime Execution
Agreement during (A) with respect to any Transition Services described in clause (i) of the definition of Transition Services, the 91st
day through the end of the Transition Period (as defined below) and (B) with respect to any Transition Services described in clause (ii)
of the definition of Transition Services, the 16th day through the end of the Transition Period, which do not result from its gross
negligence, fraud, material violation of applicable law or willful misconduct; provided that throughout the Transition Period the Coinbase
Entities shall act in good faith and in a commercially reasonable manner to provide the same level of service with respect to the Transition
Services as was provided prior to the start of the Transition Period. For the avoidance of doubt, during the Transition Period, the fees
set forth in the Prime Execution Agreement will continue to apply to the Transition Services.
"Transition
Period" is defined in the Prime Execution Agreement to mean a 180-day period (or such extended period as agreed in writing by the
Coinbase Entities and the Trust) commencing on the date the Trust is notified of any termination of the Prime Execution Agreement pursuant
to a Cause event.
"Transition
Services" means the Prime Execution Agent services consisting of (i) the custody of the Trust's ether on the Trust's
behalf, the processing of deposits and withdrawals and other custody transactions, and (ii) access to the Prime Execution Agent's
trading platform and the execution and settlement of all orders for the sale of ether submitted by the Trust. For the avoidance of doubt,
the Transition Services shall not include the extension of credit, and the obligation to execute and settle any Orders for the purchase
of Digital Assets.
"Bankruptcy
Event" is defined in the Prime Execution Agreement to mean the party is (i) dissolved (other than pursuant to a consolidation,
amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors;
(iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or
liquidation, and in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (I) results
in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation
or (II) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (v)
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation
or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially all its assets; (vii) has a secured party take possession of all
or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued
on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter; (viii) causes or is subject to any event with respect to it
which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (vii)
(inclusive); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.
125
The
Trust may terminate the Prime Execution Agreement, including the Bitcoin and Ether Custody Agreement, in whole or in part for any reason
upon thirty (30) days' notice to the Prime Execution Agent, for itself or as agent on behalf of the Bitcoin and Ether Custodian
or Trade Credit Lender, or upon a Coinbase Termination Event. The Prime Execution Agreement defines a "Coinbase Termination Event"
to mean the occurrence and continuance of (i) a Bankruptcy Event with respect to any Coinbase Entity, (ii) the failure of any Coinbase
Entity to sell or withdraw or transfer the Trust's bitcoin or ether in accordance with the Trust's instructions within the
time periods set forth in the Prime Execution Agreement and such failure is not cured within two (2) business days following the Trust
providing written notice to the relevant Coinbase Entity ("CB Return Cure"); provided, however, that (A) if, prior to the
expiration of the CB Return Cure, the Prime Execution Agent transfers cash to the Trust in an amount equal to the value of the bitcoin
or ether based on the Benchmark Valuation (defined as the applicable Pricing Benchmark) as of the time that the request to sell, transfer
or withdraw was originally made by the Trust (the "BTC/ETH Cash Value") or if the Prime Execution Agent delivers cash collateral
to an account designated by the Trust and in which the Trust has a perfected, first priority security interest and in an amount equal
to the BTC/ETH Cash Value until the relevant bitcoin and/or ether is sold, withdrawn or transferred or the Trust elects to receive such
amount in cash in lieu of the Prime Execution Agent's obligation to sell, withdraw or transfer the relevant bitcoin and/or ether,
in each cash, such failure will be deemed cured; provided, further that, the Trust shall have the right to choose whether to receive
the BTC/ETH Cash Value in lieu of the relevant bitcoin and/or ether or receive the BTC/ETH Cash Value as cash collateral, or (B) if such
failure is due to a technology or security issue where, in the commercially reasonable opinion of the Prime Execution Agent, returning
the relevant bitcoin and/or ether would result in material risk to the Trust or the Prime Execution Agent or may result in the relevant
bitcoin and/or ether being lost or otherwise not successfully returned and the Prime Execution Agent promptly notifies the Trust promptly
upon Client's notice of such failure, (1) the Trust may request that the Prime Execution Agent still sell, withdraw or transfer
the bitcoin and/or ether, but the Prime Execution Agent will have no liability with respect to any such sell, withdrawal or transfer
(unless the Prime Execution Agent or any of the Coinbase Entities act with negligence unrelated to such technology or security issue)
and any failure to withdraw or transfer shall not result in a Coinbase Termination Event if the Trust does not receive the withdrawn
or transferred bitcoin and/or ether or the proceeds of any such sale due to such technology or security issue, or (2) if the Trust does
not elect to have the Prime Execution Agent still make the sale, withdrawal or transfer, a Coinbase Termination Event shall not occur
while the relevant security or technology event is occurring and continuing, (iii) the failure of any Coinbase Entity to withdraw or
transfer cash to the Trust in accordance with the Trust's instructions within the time periods set forth in the Prime Execution
Agreement and such failure is not cured within one (1) business day following the Trust providing written notice to the relevant Coinbase
Entity, (iv) a Coinbase Entity intentionally or willfully, materially breaches any provision of the Prime Execution Agreement (other
than the provisions of the Bitcoin and Ether Custody Agreement) and such breach remains uncured for a period of ten (10) calendar days
after notice of such breach is provided by the Trust to the Prime Execution Agent; or (v) a Coinbase Entity intentionally or willfully,
materially breaches any provision of the Bitcoin and Ether Custody Agreement and such breach remains uncured for a period of 30 calendar
days after notice of such breach is provided by the Trust to the Prime Execution Agent.
The
Prime Execution Agent does not guarantee uninterrupted access to the Trading Platform or the services it provides to the Trust. Under
certain circumstances, the Prime Execution Agent is permitted to halt or suspend trading on the Trading Platform, or impose limits on
the amount or size of, or reject, the Trust's orders, including in the event of, among others, (a) delays, suspension of operations,
failure in performance, or interruption of service that are directly due to a cause or condition beyond the reasonable control of the
Prime Execution Agent, (b) the Trust has engaged in unlawful or abusive activities or fraud, or (c) a security or technology issue occurred
and is continuing that results in the Prime Execution Agent being unable to provide trading services or accept the Trust's order,
in each case, subject to certain protections for the Trust.
Neither
the Prime Execution Agent nor any other Coinbase entity is permitted to withdraw the Trust's bitcoin or ether from the Trust Digital
Asset Accounts, or loan, hypothecate, pledge or otherwise encumber the Trust's bitcoin or ether, without the consent of the Trust.
The Trading Balance is subject to the lien to secure outstanding Trade Credits in favor of the Trade Credit Lender discussed below.
126
Under
the Prime Execution Agreement, the Prime Execution Agent's liability is limited as follows, among others: (i) other than with respect
to claims and losses arising from spot trading of bitcoin or ether, or fraud or willful misconduct, among others, 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 Execution Agent's
liability, and (B) the value of the cash or affected bitcoin or ether giving rise to the Prime Execution Agent's liability; (ii)
in respect of the Prime Execution Agent's obligations 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 Prime Execution Agent's violation of any law, rule or regulation
with respect to the provision of its services, or the full amount of the Trust's assets lost due to the insolvency of or security
event at a Connected Trading Venue, the Prime Execution Agent's liability shall 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 months prior 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 advised of or knew or should have known of the possibility
thereof. The Prime Execution Agent is not liable for delays, suspension of operations, failure in performance, or interruption of service
to the extent it is directly due to a cause or condition beyond the reasonable control of the Prime Execution Agent. Both the Trust and
the Prime Execution Agent and its affiliates (including the Bitcoin and Ether Custodian) are required to indemnify each other under certain
circumstances. The Prime Execution Agreement is governed by New York law and provides that disputes arising under it are subject to arbitration.
The
Prime Execution Agreement provides that the Coinbase Entities may have actual or potential conflicts of interest in connection with providing
the Prime Execution Agent Services including that (i) orders to buy or sell bitcoin or ether may be routed to the Prime Execution Agent's
exchange platform ("Coinbase Exchange") where such orders may be executed against other Coinbase customers or with Coinbase
acting as principal, (ii) the beneficial identity of the purchaser or seller with respect to an order is unknown and therefore may inadvertently
be another Coinbase customer, (iii) the Prime Execution Agent does not engage in front-running, but is aware of orders or imminent orders
and may execute a trade for its own inventory (or the account of an affiliate) while in possession of that knowledge, and (iv) Coinbase
may act in a principal capacity with respect to certain orders (e.g., to fill residual order size when a portion of an order may be below
the minimum size accepted by the Connected Trading Venues). As a result of these and other conflicts, when acting as principal, the Coinbase
Entities may have an incentive to favor their own interests and the interests of their affiliates over the Trust's interests and
have in place certain policies and procedures that are designed to mitigate such conflicts. The Prime Execution Agent will maintain appropriate
and effective arrangements to eliminate or manage conflicts of interest, including segregation of duties, information barriers and training.
The Prime Execution Agent will notify the Trust of changes to its business that have a material adverse effect on the Prime Execution
Agent's ability to manage its conflicts of interest. The Coinbase Entities shall execute trades pursuant to such policies and procedures;
provided that the Coinbase Entities (a) shall execute in a commercially reasonable amount of time (i) any marketable orders appropriately
entered by the Trust and (ii) any other pending orders by the Trust received by the Coinbase Entities that become marketable, (b) for
any order that the Prime Execution Agent receives from the Trust, the Prime Execution Agent will make commercially reasonable efforts
to route orders for execution to the Connected Trading Venue offering the highest price for the Trust's bitcoin or ether sale orders,
including consideration of any gas fees or similar fees related to a particular blockchain at the time that such orders are routed for
execution, and (c) shall not knowingly enter into a transaction for the benefit of (x) the Coinbase Entities, or (y) any other client
received after the Trust's order, ahead of any order received from the Trust. For purposes of the foregoing, a marketable order
is a sell order equivalent to or better than the best bid price on any Connected Trading Venue (or any venue that a Coinbase Entity may
use) at a given moment. The Prime Execution Agent agrees to direct the Trust's orders in a manner that does not systematically
favor the Coinbase Exchange or Connected Trading Venues that provide financial incentives to the Prime Execution Agent; provided, however,
that under certain circumstances the Prime Execution Agent may choose to intentionally route to the Coinbase Exchange due to temporary
conditions affecting Connected Trading Venues (e.g., connectivity problems of the Connected Trading Venue or funding constraints).
127
The
Trade Credit Lender
To
avoid having to pre-fund purchases or sales of bitcoin or ether when using the Agent Execution Model, the Trust may borrow bitcoin, ether
or cash as Trade Credit from the Trade Credit Lender on a short-term basis. The Sponsor does not intend to fund the Trading Balance at
the Prime Execution Agent with sufficient bitcoin, ether or cash to pay fees and expenses and instead intends to utilize the Trade Financing
Agreement for such fees and expenses. This allows the Trust to buy or sell bitcoin or ether through the Prime Execution Agent in an amount
that exceeds the bitcoin, ether or cash credited to the Trust's Trading Balance at the Prime Execution Agent at the time such order
is submitted to the Prime Execution Agent, which is expected to facilitate the Trust's ability purchase and sell bitcoin or ether
in a timely manner, rather than waiting for the cash to be transferred by the Cash Custodian to the Prime Execution Agent prior to purchasing
the bitcoin or ether or for the bitcoin or ether held in the Trust Digital Asset Accounts to be transferred to the Trust's Trading
Balance prior to selling bitcoin or ether. The Trust is required by the terms of the Trade Financing Agreement, which is part of the
Prime Execution Agreement, to repay any extension of Trade Credit by the Trade Credit Lender by 6:00 p.m. ET on the business day following
the day that the Trade Credit was extended to the Trust. The Trade Credit Lender is only required to extend Trade Credits to the Trust
to the extent such bitcoin, ether or cash is actually available to the Trade Credit Lender. For example, if the Trade Credit Lender is
unable to borrow bitcoin or ether to lend to the Trust as a Trade Credit, or there is a material market disruption (as determined by
the Trade Credit Lender in good faith and in its sole discretion), the Trade Credit Lender is not obligated to extend Trade Credits to
the Trust. To secure the repayment of Trade Credits, the Trust has granted a first-priority lien to the Trade Credit Lender over the
assets in its Trading Balance and the Trust Digital Asset Accounts. If the Trust fails to repay a Trade Credit within the required deadline,
the Trade Credit Lender is permitted to take control of the bitcoin, ether or cash credited to the Trust's Trading Balance and
Trust Digital Asset Accounts (though it is required to exhaust the Trading Balance prior to taking control of assets in the Trust Digital
Asset Accounts) and liquidate them to repay the outstanding Trade Credit. Trade Credits bear interest. Pursuant to the Trade Financing
Agreement, there is a maximum "Authorized Amount" of Trade Credits that the Trade Credit Lender allows to be outstanding
at any one time, which is determined and may be changed by the Trade Credit Lender in its sole discretion. To the extent the Trade Credit
Lender changes the Authorized Amount, it will give the Trust advance notice if it is feasible to do so.
The
entirety of the Trust's bitcoin and ether holdings are expected to be maintained with the Bitcoin and Ether Custodian rather than
the Prime Execution Agent. Accordingly, when using the Agent Execution Model, the Trust does expect to utilize Trade Credits. When utilizing
Trade Credits in connection with Purchase Orders and Redemption Orders, any interest payable on Trade Credits will be the responsibility
of the Authorized Participants. In the very rare event that Trade Credits are utilized in connection with the payment of Trust expenses
not assumed by the Sponsor, any interest payable on the Trade Credits will be the responsibility of the Trust. Any such interest payments
borne by the Trust will have the effect of reducing the amount of bitcoin and/or ether represented by a Share and the NAV of the Trust.
In connection with a Redemption Order or to pay expenses not assumed by the Sponsor, the Trust will first borrow bitcoin or ether from
the Trade Credit Lender using the Trade Financing Agreement, and then sell this bitcoin or ether. In connection with a Purchase Order,
the Trust will first borrow cash from the Trade Credit Lender using the Trade Financing Agreement, and then purchase bitcoin or ether.
The purpose of borrowing the bitcoin, ether or cash from the Trade Credit Lender is to lock in the bitcoin or ether price on the trade
date or the payment date, as applicable, rather than waiting for the funds associated with the creation to be transferred by the Cash
Custodian to the Prime Execution Agent prior to purchasing the bitcoin or ether or for the bitcoin or ether held in the Trust Digital
Asset Accounts to be transferred to a Trading Balance prior to selling the bitcoin or ether (a process that may take up to twenty-four
hours, or longer if the Bitcoin blockchain or Ethereum blockchain is experiencing delays in transaction confirmation, or if there are
other delays). To the extent that the execution price of the bitcoin or ether acquired exceeds the amount of cash deposited by the Authorized
Participant, the Authorized Participant bears the responsibility for the difference.
In
the event Trade Credits are unavailable from the Trade Credit Lender or become exhausted, the Sponsor would require the Authorized Participant
to deliver cash on the trade date so that a purchase order can be settled in a timely manner. For a Redemption Order under the Agent
Execution Model, the Trust may use financing when the bitcoin or ether remains in the Trust Digital Asset Accounts at the point of intended
execution of a sale of bitcoin or ether. In the event Trade Credits are unavailable or become exhausted in this situation, the Sponsor
would instruct the Bitcoin and Ether Custodian to move bitcoin or ether out of the Trust Digital Asset Accounts into the Trading Balance
so that it could be sold directly in response to a redemption order or to pay fees and expenses. Under these circumstances, the Trust
may not be able to lock in the bitcoin or ether price on the trade date or the payment date, as applicable, and would instead have to
wait until the transfer from the Trust Digital Asset Accounts to the Trading Balance was completed before selling the bitcoin or ether.
128
Form
of Shares
Registered
Form
Shares
are issued in registered form in accordance with the Trust Agreement. The Transfer Agent has been appointed registrar and transfer agent
for the purpose of transferring Shares in certificated form. The Transfer Agent keeps a record of all Shareholders and holders of the
Shares in certified form in the registry ("Register"). The Sponsor recognizes transfers of Shares in certificated form only
if done in accordance with the Trust Agreement. The beneficial interests in such Shares are held in book-entry form through participants
and/or accountholders in DTC.
Book-Entry
Individual
certificates are not issued for the Shares. Instead, Shares are represented by one or more global certificates, which are deposited by
the Transfer Agent with DTC and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of
the Shares outstanding at any time. Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers and trust companies
("DTC Participants"), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant
("Indirect Participants"), and (3) those who hold interests in the Shares through DTC Participants or Indirect Participants,
in each case who satisfy the requirements for transfers of Shares. DTC Participants acting on behalf of investors holding Shares through
such participants' accounts in DTC will follow the delivery practice applicable to securities eligible for DTC's Same-Day
Funds Settlement System. Shares are credited to DTC Participants' securities accounts following confirmation of receipt of payment.
DTC
DTC
has advised the Sponsor as follows: It is a limited-purpose trust company organized under the laws of the State of New York and is a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities
for DTC Participants and facilitates the clearance and settlement of transactions between DTC Participants through electronic book-entry
changes in accounts of DTC Participants.
Transfer
of Shares
The
Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their Shares
through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through
which their Shares are held) to transfer the Shares. Transfers are made in accordance with standard securities industry practice.
Transfers
of interests in Shares with DTC are made in accordance with the usual rules and operating procedures of DTC and the nature of the transfer.
DTC has established procedures to facilitate transfers among the participants and/or accountholders of DTC. Because DTC can only act
on behalf of DTC Participants, who in turn act on behalf of Indirect Participants, the ability of a person or entity having an interest
in a global certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect
of such interest, may be affected by the lack of a certificate or other definitive document representing such interest.
DTC
has advised the Sponsor that it will take any action permitted to be taken by a Shareholder (including, without limitation, the presentation
of a global certificate for exchange) only at the direction of one or more DTC Participants in whose account with DTC interests in global
certificates are credited and only in respect of such portion of the aggregate principal amount of the global certificate as to which
such DTC Participant or Participants has or have given such direction.
129
SEED
CAPITAL INVESTOR
Bitwise
Asset Management, Inc., the parent of the Sponsor, served as seed capital investor to the Trust (the "Seed Capital Investor").
The Seed Capital Investor agreed to 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 sections entitled "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM"
and "STATEMENT OF FINANCIAL CONDITION."
The
Sponsor will not receive from the Trust or any of its affiliates any fee or other compensation in connection with the Seed Capital Investor's
purchase of the Seed Shares.
Plan
of Distribution
Buying
and Selling Shares
Most
investors buy and sell Shares in secondary market transactions through brokers. Shares trade on the Exchange under the ticker symbol
"_____." Shares are bought and sold throughout the trading day like other publicly traded securities. When buying or selling
Shares through a broker, most investors incur customary brokerage commissions and charges. Shareholders are encouraged to review the
terms of their brokerage account for details on applicable charges.
Bitwise
Investment Manager, LLC, an affiliate of the Sponsor, is expected to purchase the initial Baskets of Shares for $__________, at per-Share
price of $__ for these ______ Shares (the Seed Baskets). Such proceeds are expected to be used by the Trust to purchase bitcoin and ether
at or prior to the listing of Shares on the Exchange. Bitwise Investment Manager, LLC will act as a statutory underwriter in connection
with the initial purchase of the Seed Baskets.
Authorized
Participants
The
offering of the Shares is a best efforts offering. The Trust continuously offers Baskets consisting of 10,000 Shares to Authorized Participants.
Authorized Participants pay a transaction fee for each order they place to purchase or redeem one or more Baskets. The Sponsor believes
that the Basket size of 10,000 Shares will enable Authorized Participants to manage inventory and facilitate an effective arbitrage mechanism
for the Trust, however, the Sponsor may adjust the Baskets in order to improve the effectiveness of the activities of Authorized Participants
in the secondary market for the Shares if the Sponsor determines it to be necessary or advisable. Because new Shares can be created and
issued on an ongoing basis, at any point during the life of the Trust, a "distribution," as such term is used in the 1933
Act, will be occurring.
The
offering of Baskets is being made in compliance with Conduct Rule 2310 of FINRA. Accordingly, Authorized Participants will not make any
sales to any account over which they have discretionary authority without the prior written approval of a purchaser of Shares.
By
executing an Authorized Participant Agreement, an Authorized Participant becomes part of the group of parties eligible to purchase Baskets
from, and put Baskets for redemption to, the Trust. An Authorized Participant is under no obligation to purchase or redeem Baskets or
to offer to the public Shares of any Basket it does create. As of ____________, 2025, _________________, _________________ and _________________
have executed Authorized Participant Agreements with the Trust.
Because
new Shares can be created and issued on an ongoing basis, at any point during the life of the Trust, a "distribution," as
such term is used in the 1933 Act, will be occurring. Authorized Participants, other broker-dealers and other persons are cautioned that
some of their activities may result in their being deemed participants in a distribution in a manner that would render them statutory
underwriters and subject them to the prospectus-delivery and liability provisions of the 1933 Act. Any purchaser who purchases Shares
with a view toward distribution of such Shares may be deemed to be a statutory underwriter. In addition, an Authorized Participant, other
broker-dealer firm or its client will be deemed a statutory underwriter if it purchases a Basket from the Trust, breaks the Basket down
into the constituent Shares and sells the Shares to its customers; or if it chooses to couple the creation of a supply of new Shares
with an active selling effort involving solicitation of secondary market demand for the Shares. In contrast, Authorized Participants
may engage in secondary market or other transactions in Shares that would not be deemed "underwriting." For example, an Authorized
Participant may act in the capacity of a broker or dealer with respect to Shares that were previously distributed by other Authorized
Participants. A determination of whether a particular market participant is an underwriter must take into account all the facts and circumstances
pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that would lead to designation as an underwriter and subject them to the prospectus-delivery
and liability provisions of the 1933 Act.
130
Dealers
who are neither Authorized Participants nor "underwriters" but are nonetheless participating in a distribution (as contrasted
to ordinary secondary trading transactions), and thus dealing with Shares that are part of an "unsold allotment" within the
meaning of Section 4(3)(C) of the 1933 Act, would be unable to take advantage of the prospectus-delivery exemption provided by Section
4(3) of the 1933 Act.
While
the Authorized Participants may be indemnified by the Sponsor, they will not be entitled to receive a discount or commission from the
Trust or the Sponsor for their purchases of Baskets.
Selling
Shareholders
The
Sponsor or its affiliates, or a fund or unit investment trust for which the Sponsor or an affiliate of the Sponsor serves as sponsor
or investment advisor, may purchase Shares of the Trust through a broker-dealer or other investors, including in secondary market transactions,
and because the Sponsor and its affiliates may be deemed affiliates of the Trust, the Shares are being registered to permit the resale
of these Shares by affiliates of the Trust from time to time after any such purchase. The Trust will not receive any of the proceeds
from the resale of such Shares.
Selling
shareholders (each, a "Selling Shareholder"), including the Seed Capital Investor, may sell Shares owned by them directly
or through broker-dealers, in accordance with applicable law, on any national securities exchange on which the Shares may be listed or
quoted at the time of sale, through trading systems, in the OTC market or in transactions other than on these exchanges or systems at
fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated
prices. These sales may be effected through brokerage transactions, privately negotiated trades, block sales, entry into options or other
derivatives transactions or through any other means authorized by applicable law. Selling Shareholders may redeem Shares held in Basket
size through an Authorized Participant. See "Conflicts of Interest."
Creation
and Redemption of Shares
When
the Trust creates or redeems its Shares, it will do so only in Baskets (blocks of 10,000 Shares) based on the quantity of bitcoin and
ether attributable to each Share of the Trust as of the end of the prior business day (net of accrued but unpaid expenses and liabilities)
multiplied by the number of Shares comprising a Basket (10,000). This is called the "Basket Amount."
Authorized
Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered
broker-dealers or other securities market participants, such as banks and other financial institutions, that are not required to register
as broker-dealers to engage in securities transactions described below, and (2) DTC Participants. To become an Authorized Participant,
a person must enter into an Authorized Participant Agreement. The Authorized Participant Agreement provides the procedures for the creation
and redemption of Baskets and for the delivery of the cash or Shares required for such creation and redemptions. The Authorized Participant
Agreement and the related procedures attached thereto may be amended by the Trust, without the consent of any Shareholder or Authorized
Participant. Authorized Participants must pay the Transfer Agent a non-refundable fee for each order they place to create or redeem one
or more Baskets. The transaction fee may be waived, reduced, increased or otherwise changed by the Sponsor in its sole discretion. Authorized
Participants who make deposits with the Trust in exchange for Baskets receive no fees, commissions or other form of compensation or inducement
of any kind from either the Trust or the Sponsor, and no such person will have any obligation or responsibility to the Sponsor or the
Trust to effect any sale or resale of Shares.
Each
Authorized Participant will be required to be registered as a broker-dealer under the Exchange Act and a member in good standing with
FINRA, or exempt from being or otherwise not required to be licensed as a broker-dealer or a member of FINRA, and will be qualified to
act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants
may also be regulated under federal and state banking laws and regulations. Each Authorized Participant has its own set of rules and
procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime.
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Under
the Authorized Participant Agreement, the Sponsor, and the Trust under limited circumstances, have agreed to indemnify the Authorized
Participants against certain liabilities, including liabilities under the 1933 Act, and to contribute to the payments the Authorized
Participants may be required to make in respect of those liabilities.
The
following description of the procedures for the creation and redemption of Baskets is only a summary and an investor should refer to
the relevant provisions of the Trust Agreement and the form of Authorized Participant Agreement for more detail. The Trust Agreement
and form of Authorized Participant Agreement are filed as exhibits to the registration statement of which this Prospectus is a part.
Determination
of Basket Amount
The
Basket Amount required to create each Basket changes from day to day. On each day that the Exchange is open for regular trading, the
Administrator adjusts the quantity of bitcoin and ether constituting the Basket Amount as appropriate to reflect accrued expenses and
any loss of bitcoin and ether that may occur. The computation is made by the Administrator each business day prior to the commencement
of trading on the Exchange. The Administrator determines the bitcoin included in the Basket Amount for a given day by dividing the number
of bitcoin held by the Trust as of the close of business on the prior business day, adjusted for the amount of bitcoin constituting estimated
accrued but unpaid fees and expenses of the Trust as of the close of business on the prior business day, by the quotient of the number
of Shares outstanding at the opening of business, multiplied by 10,000. The same procedure (except substituting ether for bitcoin) would
be followed to determine the number of ether to include in the Basket Amount. Fractions of a bitcoin smaller than a satoshi (0.00000001
bitcoin) and fractions of ether smaller than 0.00000000001 are disregarded for purposes of the computation of the Basket Amount. The
Basket Amount so determined is communicated via electronic mail message to all Authorized Participants and made available on the Sponsor's
website for the Shares. The Exchange also publishes the Basket Amount determined by the Administrator as indicated above.
Creation
Procedures
On
any business day, an Authorized Participant may create Shares by placing an order to purchase one or more Baskets with the Transfer Agent
through the Marketing Agent in exchange for cash (a "Purchase Order"). Such orders are subject to approval by the Marketing
Agent and Transfer Agent. Such orders are subject to approval by the Marketing Agent and Transfer Agent. For purposes of processing creation
and redemption orders, a "business day" means any day other than a day when the Exchange is closed for regular trading. Purchase
Orders must be placed by 2:00 p.m., ET, or the close of regular trading on the Exchange, whichever is earlier (the "Order Cut-Off
Time"). The Order Cut-Off time may be modified by the Sponsor in its sole discretion. The day on which a Purchase Order is accepted
by the Transfer Agent is considered the "Purchase Order Date."
The
Sponsor may in its sole discretion limit the number of Shares created pursuant to Purchase Orders on any specified day without notice
to the Authorized Participants and may direct the Marketing Agent to reject any Purchase Orders in excess of such capped amount. The
Sponsor may choose to limit the number of Shares created pursuant to Purchase Orders when it deems so doing to be in the best interest
of Shareholders. It may choose to do so when it believes the market is too volatile to execute a bitcoin or ether transaction, when it
believes the price of bitcoin or ether is being inconsistently, irregularly, or discontinuously published from bitcoin/ether trading
venues and other data sources, or when it believes other similar circumstances may create a scenario in which accepting Purchase Orders
would not be in the best interests of the Shareholders. The Sponsor does not believe that the Trust's ability to arrive at such
a determination will have a significant impact on the Shares in the secondary market because it believes that the ability to create Shares
would be reinstated shortly after such determination is made, and any entity desiring to create Shares would be able to do so once the
ability to create Shares is reinstated. However, it is possible that such a determination would cause the Shares to trade at premiums
or discounts relative to the Trust's NAV on the secondary market if arbitrageurs believe that there is risk that the creation and
redemption process is not available, as this process is a component of keeping the price of the Shares on the secondary market closely
aligned to the Trust's NAV.
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The
manner by which creations are made is dictated by the terms of the Authorized Participant Agreement. By placing a Purchase Order, an
Authorized Participant agrees to deposit, or cause the deposit of, cash with the Trust in an equivalent amount of cash equal to the required
amount of bitcoin and ether as described in the "Determination of Required Deposits" sub-section above, multiplied by the
applicable Pricing Benchmark price, plus any additional cash required to account for the price at which the Trust agrees to purchase
the requisite amount of bitcoin and ether to the extent it is greater than the applicable Pricing Benchmark price on each Purchase Order
Date. On each Purchase Order Date, the Administrator will communicate to the Authorized Participant the full cash amount required to
settle the transaction. Authorized Participants may not withdraw a Purchase Order once placed. If an Authorized Participant fails to
consummate the foregoing, the Purchase Order will be cancelled. The Sponsor causes to be published each night the amount of bitcoin and
ether that will be acquired in exchange for each Purchase Order, from which can be computed the estimated amount of cash required to
create each Basket, prior to accounting for any additional cash required to acquire the requisite amount of bitcoin and ether if the
price paid by the Trust is in excess of the applicable Pricing Benchmark on each Purchase Order Date.
An
Authorized Participant who places a Purchase Order is responsible for facilitating the delivery of the required amount of cash to the
Cash Custodian by 3:00 p.m. ET, on the business day following the Purchase Order Date. Pursuant to the cash creation and redemption process,
the Trust is responsible for acquiring and selling ether, which it may do pursuant to two different models: (i) the "Trust-Directed
Trade Model," and the (ii) the "Agent Execution Model."
Under
the Trust-Directed Trade Model, the Sponsor, on behalf of the Trust, is responsible for acquiring bitcoin or ether from an approved Digital
Asset Trading Counterparty in an amount equal to the Basket Amount. When seeking to purchase bitcoin or ether on behalf of the Trust,
the Sponsor will seek to purchase bitcoin or ether at a price as close to the applicable Pricing Benchmark as practical. Once the trade
has been agreed upon with a Digital Asset Trading Counterparty, the transaction will generally occur on an "over-the-counter"
basis. Transfers of bitcoin and ether from the Digital Asset Trading Counterparty to the Trust Digital Asset Accounts are "on-chain"
transactions represented on the Bitcoin blockchain or Ethereum blockchain, as applicable. Upon receipt of the deposit amount of bitcoin
and ether in the Trust Digital Asset Accounts at the Bitcoin and Ether Custodian from the Digital Asset Trading Counterparty, the Bitcoin
and Ether Custodian will notify the Sponsor that the bitcoin and ether has been received. The Sponsor will then notify the Transfer Agent
that the bitcoin and ether has been received, and the Transfer Agent will direct DTC to credit the number of Shares ordered to the Authorized
Participant's DTC account and will wire the cash previously sent by the Authorized Participant to the Digital Asset Trading Counterparty
to complete settlement of the Purchase Order and the acquisition of the bitcoin and ether by the Trust. If the Digital Asset Trading
Counterparty fails to deliver the bitcoin and ether to the Bitcoin and Ether Custodian, no cash is sent from the Cash Custodian to the
Digital Asset Trading Counterparty, no Shares are transferred to the Authorized Participant's DTC account, the cash is returned
to the Authorized Participant, and the Purchase Order is cancelled.
Under
the Agent Execution Model, the Prime Execution Agent, acting in an agency capacity, conducts bitcoin and ether purchases on behalf of
the Trust with third parties through its Coinbase Prime service pursuant to the Prime Execution Agreement. On the evening of the Purchase
Order Date, the Trust enters into a transaction to buy bitcoin and ether through the Prime Execution Agent for cash. Because the Trust's
Trading Balance may not be funded with cash on the Purchase Order Date for the purchase of bitcoin or ether in connection with the Purchase
Order under the Agent Execution Model, the Trust may borrow Trade Credits in the form of cash from the Trade Credit Lender pursuant to
the Trade Financing Agreement or may require the Authorized Participant to deliver the required cash for the Purchase Order on the Purchase
Order Date. The extension of Trade Credits on the Purchase Order Date allows the Trust to purchase bitcoin or ether through the Prime
Execution Agent on the Purchase Order Date, with such bitcoin or ether being deposited in the Trust's Trading Balance. On the day
following the Purchase Order Date, the Purchase Order Settlement Date, the Trust delivers Shares to the Authorized Participant's
DTC account in exchange for cash received from the Authorized Participant. Where applicable, the Trust uses the cash to repay the Trade
Credits borrowed from the Trade Credit Lender. On the Purchase Order Settlement Date for a Purchase Order utilizing the Agent Execution
Model, the bitcoin or ether associated with the Purchase Order and purchased on the Purchase Order Date is swept from the Trust's
Trading Balance with the Prime Execution Agent to the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian pursuant to a
regular end-of-day sweep process. Transfers of bitcoin and ether into the Trust's Trading Balance are off-chain transactions and
transfers from the Trust's Trading Balance to the Trust Digital Asset Accounts are "on-chain" transactions represented
on the Bitcoin blockchain or Ethereum blockchain, as applicable. Any financing fee owed to the Trade Credit Lender is deemed part of
trade execution costs and embedded in the trade price for each transaction.
As
between the Trust and the Authorized Participant, the expense and risk of the difference between the value of bitcoin or ether calculated
by the Administrator for daily valuation using the applicable Pricing Benchmark and the price at which the Trust acquires the bitcoin
or ether will be borne solely by the Authorized Participant to the extent that the Trust pays more for bitcoin or ether than the price
used by the Trust for daily valuation. Any such additional cash amount will be included in the amount of cash calculated by the Administrator
on the Purchase Order Date, communicated to the Authorized Participant on the Purchase Order Date, and wired by the Authorized Participant
to the Cash Custodian on the Settlement Date.
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Rejection
of Purchase Orders
The
Sponsor or its designee has the absolute right, but does not have any obligation, to reject any purchase order if the Sponsor determines
that:
●
the
Purchase Order is not in proper form;
●
it
would not be in the best interest of the Shareholders;
●
the
acceptance of the Purchase Order would have adverse tax consequences to the Trust or its Shareholders;
●
the
acceptance or receipt of which would, in the opinion of counsel to the Sponsor, be unlawful; or
●
circumstances
outside the control of the Trust, the Sponsor, the Marketing Agent, the Transfer Agent, the Cash Custodian or the Bitcoin and Ether Custodian
make it, for all practical purposes, not feasible to process Baskets (including if the Sponsor determines that the investments available
to the Trust at that time will not enable it to meet its investment objective).
None
of the Sponsor, the Marketing Agent, the Cash Custodian or the Bitcoin and Ether Custodian will be liable for the rejection of any Purchase
Order.
Redemption
Procedures
On
any business day, an Authorized Participant may place an order with the Transfer Agent through the Marketing Agent to redeem one or more
Baskets (a "Redemption Order"). Redemption Orders must be placed by 2:00 p.m. ET (the "Redemption Order Cut-Off Time"),
which may be modified by the Sponsor in its sole discretion. A Redemption Order will be effective on the date it is accepted by the Transfer
Agent ("Redemption Order Date"). The redemption distribution from the Trust in exchange for a redemption of Shares consists
of a movement of cash representing the Basket Amount of bitcoin and ether, less any trading expenses incurred by the Trust in liquidating
the bitcoin and ether, to the redeeming Authorized Participant or its designee.
Under
the Trust-Directed Trade Model, the procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures
for the creation of Baskets under the Trust-Directed Trade Model with an additional safeguard on bitcoin and ether being removed from
the Trust Digital Asset Accounts, which will not occur until cash has been received by the Cash Custodian in an amount equal to the Basket
Amount of bitcoin and ether multiplied by the price at which the Trust agrees with the Digital Asset Trading Counterparty to sell the
bitcoin and ether on the Redemption Order Date. When seeking to sell bitcoin and ether on behalf of the Trust, the Sponsor will seek
to sell bitcoin and ether at a price as close to the applicable Pricing Benchmark as practical. Once the trade has been agreed upon with
a Digital Asset Trading Counterparty, the transaction will generally occur on an "over-the-counter" basis. Transfers of bitcoin
and ether 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. The Authorized Participant must deliver the Shares represented by the
Basket to be redeemed to the Trust's DTC account by end of day ET on the business day following the Redemption Order Date (the
"Redemption Order Settlement Date"). The Bitcoin and Ether Custodian will not send the Basket Amount of bitcoin and ether
from the Trust Digital Asset Accounts to the Digital Asset Trading Counterparty until the Cash Custodian has received the cash from the
Digital Asset Trading Counterparty and is instructed by the Sponsor to make such transfer. Once the Digital Asset Trading Counterparty
has sent the cash to the Cash Custodian in an agreed-upon amount to settle the agreed upon sale of the Basket Amount of bitcoin and ether,
the Transfer Agent will notify the Sponsor. The Sponsor will then notify the Bitcoin and Ether Custodian to transfer the bitcoin and
ether to the Digital Asset Trading Counterparty, and the Transfer Agent will facilitate the redemption of Shares in exchange for cash.
Once the Authorized Participant has delivered the Shares represented by the Basket to be redeemed to the Trust's DTC account, the
Cash Custodian will wire the requisite amount of cash to the Authorized Participant. Transfers of bitcoin and ether 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. In the event that by the end of the day on the Redemption Order Settlement Date, the Trust's
account at DTC shall not have been credited with the total number of Shares corresponding to the total number of Baskets to be redeemed
pursuant to such Redemption Order the Transfer Agent shall send to the Authorized Participant, the Sponsor and the Bitcoin and Ether
Custodian via fax or electronic mail message notice of such fact and the Authorized Participant shall have two (2) business days following
receipt of such notice to correct such failure. If such failure is not cured within such two (2) business day period, the Transfer Agent
(in consultation with the Sponsor) will cancel such Redemption Order and will send via fax or electronic mail message notice of such
cancellation to the Authorized Participant and the Bitcoin and Ether Custodian, and the Authorized Participant will be solely responsible
for all costs incurred by the Trust, the Transfer Agent, the Sponsor or the Bitcoin and Ether Custodian related to the cancelled Redemption
Order.
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For
a redemption of Baskets utilizing the Agent Execution Model, the Authorized Participant may be required to submit a Redemption Order
by an earlier than normal order cutoff time (the "Redemption Early Order Cutoff Time"). The Redemption Early Order Cutoff
Time may be as early as 5:00 p.m. ET on the business day prior to Redemption Order Date. Once a Redemption Order is received, the Sponsor
instructs the Bitcoin and Ether Custodian to prepare to transfer the bitcoin and ether associated with the Redemption Order from the
Trust Digital Asset Accounts with the Bitcoin and Ether Custodian to the Trust's Trading Balance with the Prime Execution Agent.
For a Redemption Order utilizing the Agent Execution Model, on the evening of the Redemption Order Date, the Prime Execution Agent, acting
in an agency capacity, conducts bitcoin and ether sales on behalf of the Trust with third parties through its Coinbase Prime service
in exchange for cash. The Trust's Trading Balance with the Prime Execution Agent may not be funded with bitcoin or ether on the
evening of the Redemption Order Date at the time of the intended execution of the sale of bitcoin or ether in connection with the Redemption
Order because such bitcoin or ether is still in the Trust Digital Asset Accounts at the Bitcoin and Ether Custodian. In those circumstances
the Trust may borrow Trade Credits in the form of bitcoin or ether from the Trade Credit Lender, which allows the Trust to sell bitcoin
or ether through the Prime Execution Agent on the evening Redemption Order Date, and the cash proceeds are deposited in the Trust's
Trading Balance with the Prime Execution Agent. Such cash is then transferred to the Cash Custodian. The Trust will subsequently transfer
the Basket Amount of bitcoin or ether from the Trust Digital Asset Accounts to the Trust's Trading Balance with the Prime Execution
Agent. Once the Authorized Participant has delivered the Shares represented by the Basket to be redeemed to the Trust's DTC account,
the Cash Custodian will then wire the requisite amount of cash to the Authorized Participant. In the event Trade Credits were used, the
Trust will use the bitcoin or ether that is moved from the Trust Digital Asset Accounts with the Bitcoin and Ether Custodian to the Trading
Balance with the Prime Execution Agent to repay the Trade Credits borrowed from the Trade Credit Lender. Transfers of bitcoin or ether
from the Trust Digital Asset Accounts to the Trust's Trading Balance are "on-chain" transactions represented on the
Bitcoin blockchain or Ethereum blockchain, as applicable.
Suspension
or Rejection of Redemption Orders
The
Sponsor may, in its discretion, suspend the right of purchase or redemption or may postpone the Redemption Order Settlement Date, for
(1) for any period during which 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 distribution is not reasonably practicable (for example, as a result of an interruption in services or availability
of the Prime Execution Agent, Bitcoin and 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, internet services, or network provider services, unavailability of Fedwire, SWIFT or banks' payment processes,
significant technical failure, bug, error, disruption or fork of the Bitcoin network or Ethereum network, hacking, cybersecurity breach,
or power, internet, or Bitcoin network or Ethereum network outage, or similar event), or (3) such other period as the Sponsor determines
to be necessary for the protection of the Shareholders of the Trust (for example, where acceptance of the U.S. dollars needed to create
each Basket would have certain adverse tax consequences to the Trust or its Shareholders). For example, the Sponsor may determine that
it is necessary to suspend redemptions to allow for the orderly liquidation of the Trust's assets. If the Sponsor has difficulty
liquidating the Trust's positions (e.g., because of a market disruption event), it may be appropriate to suspend redemptions until
such time as such circumstances are rectified. None of the Sponsor, the person authorized to take Redemption Orders in the manner provided
in the Authorized Participant Agreement, the Bitcoin and Ether Custodian or the Cash Custodian will be liable to any person or in any
way for any loss or damages that may result from any such suspension or postponement.
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Redemption
Orders must be made in whole Baskets. The Sponsor acting by itself or through the person authorized to take Redemption Orders in the
manner provided in the Authorized Participant Agreement may, in its sole discretion, reject any Redemption Order (1) the Sponsor determines
not to be in proper form, (2) the fulfillment of which its counsel advises may be illegal under applicable laws and regulations, or (3)
if circumstances outside the control of the Sponsor, the person authorized to take redemption orders in the manner provided in the Authorized
Participant Agreement or the Bitcoin and Ether Custodian make it for all practical purposes not feasible for the Shares to be delivered
under the Redemption Order. The Sponsor may also reject a Redemption Order if the number of Shares being redeemed would reduce the remaining
outstanding Shares to 100,000 Shares (
i.e.
, ten Baskets) or fewer.
Creation
and Redemption Transaction Fee
To
compensate the Transfer Agent for expenses incurred in connection with the creation and redemption of Baskets, an Authorized Participant
is required to pay a transaction fee to the Transfer Agent to create or redeem Baskets, which does not vary in accordance with the number
of Baskets in such order. The transaction fee may be reduced, increased or otherwise changed by the Sponsor.
Tax
Responsibility
Authorized
Participants are responsible for any transfer tax, sales or use tax, stamp tax, recording tax, value added tax or similar tax or governmental
charge applicable to the creation or redemption of Baskets, regardless of whether or not such tax or charge is imposed directly on the
Authorized Participant, and agree to indemnify the Sponsor and the Trust if they are required by law to pay any such tax, together with
any applicable penalties, additions to tax and interest thereon.
Secondary
Market Transactions
As
discussed above, Authorized Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants
must be registered broker-dealers or other securities market participants, such as banks and other financial institutions that are not
required to register as broker-dealers to engage in securities transactions. An Authorized Participant is under no obligation to create
or redeem Baskets, and an Authorized Participant is under no obligation to offer to the public Shares of any Basket it does create.
Authorized
Participants that do offer to the public Shares from the Basket they create will do so at per-Share offering prices that are expected
to reflect, among other factors, the trading price of the Shares on the Exchange, the NAV of the Trust at the time the Authorized Participant
purchased the Baskets, the NAV of the Shares at the time of the offer of the Shares to the public, the supply of and demand for Shares
at the time of sale, and the liquidity of bitcoin or ether or other portfolio investments. Baskets are generally expected to be redeemed
when the price per Share is at a discount to the NAV per Share. Shares initially comprising the same Basket but offered by Authorized
Participants to the public at different times may have different offering prices. An order for one or more Baskets may be placed by an
Authorized Participant on behalf of multiple clients. Authorized Participants who make deposits of cash with the Trust in exchange for
Baskets receive no fees, commissions or other forms of compensation or inducement of any kind from either the Trust or the Sponsor, and
no such person has any obligation or responsibility to the Sponsor or the Trust to effect any sale or resale of Shares.
Shares
are expected to trade in the secondary market on the Exchange. Shares may trade in the secondary market at prices that are lower or higher
relative to their NAV per Share. The amount of the discount or premium in the trading price relative to the NAV per Share may be influenced
by various factors, including the number of investors who seek to purchase or sell Shares in the secondary market and the liquidity of
ether.
136
Use
of Proceeds
Proceeds
received by the Trust from Purchase Orders of Baskets will be used to acquire bitcoin and ether. Such deposits of cash are held by the
Cash Custodian on behalf of the Trust until (i) used to acquire bitcoin or ether, (ii) accrued and distributed to pay fees due to the
Sponsor and Trust expenses and liabilities not assumed by the Sponsor, (iii) distributed to Authorized Participant in connection with
redemptions of Baskets, or (iv) disposed of in a liquidation of the Trust.
In
the event that the Trust is terminated and its assets are to be liquidated, all of the Trust's bitcoin and ether will be sold and
the cash proceeds will be distributed to Shareholders. Under no circumstances will the Trust distribute bitcoin or ether to Shareholders.
Ownership
oF Beneficial Interest in the Trust
The
beneficial interest in the Trust is divided into Shares. Each Share of the Trust represents an equal beneficial interest in the net assets
of the Trust, and each holder of Shares is entitled to receive such holder's pro rata share of distributions of income and capital
gains, if any.
All
Shares are fully paid and non-assessable. No Share will have any priority or preference over any other Share of the Trust. All distributions,
if any, will be made ratably among all Shareholders from the assets of the Trust according to the number of Shares held of record by
such Shareholders on the record date for any distribution or on the date of termination of the Trust, as the case may be. Except as otherwise
provided by the Sponsor, Shareholders will have no preemptive or other right to subscribe to any additional shares or other securities
issued by the Trust.
The
Sponsor will have full power and authority, in its sole discretion, without seeking the approval of the Trustee or the Shareholders (a)
to establish and designate and to change in any manner and to fix such preferences, voting powers, rights, duties and privileges of the
Trust as the Sponsor may from time to time determine, (b) to divide the beneficial interest in the Trust into an unlimited amount of
Shares, with or without par value, as the Sponsor will determine, (c) to issue Shares without limitation as to number (including fractional
Shares), to such persons and for such amount of consideration, subject to any restriction set forth in the By-Laws, if any, at such time
or times and on such terms as the Sponsor may deem appropriate, (d) to divide or combine the Shares into a greater or lesser number without
thereby materially changing the proportionate beneficial interest of the Shares in the assets held, and (e) to take such other action
with respect to the Shares as the Sponsor may deem desirable. The ownership of Shares will be recorded on the books of the Trust or a
transfer or similar agent for the Trust. No certificates certifying the ownership of Shares will be issued except as the Sponsor may
otherwise determine from time to time. The Sponsor may make such rules as it considers appropriate for the issuance of share certificates,
transfer of Shares and similar matters. The record books of the Trust as kept by the Trust, or any transfer or similar agent, as the
case may be, will be conclusive as to the identity of the Shareholders and as to the number of Shares held from time to time by each.
Conflicts
of Interest
There
are present and potential future conflicts of interest in the Trust's structure and operation you should consider before you purchase
Shares. The Sponsor will use this notice of conflicts as a defense against any claim or other proceeding made. If the Sponsor is not
able to resolve these conflicts of interest adequately, it may impact the Trust's ability to achieve its investment objectives.
The
officers, directors and employees of the Sponsor do not devote their time exclusively to the Trust. These persons are directors, officers
or employees of other entities, or otherwise work in respect of other clients, which may compete with the Trust for their services. They
could have a conflict between their responsibilities to the Trust and to those other entities.
The
Sponsor has adopted policies and procedures that identify the conflicts of interest associated with these companies and their principals,
officers, directors and employees when and if trading ether, ether futures and related contracts or other ether-linked derivatives. These
policies are intended to prevent conflicts of interest occurring where the Sponsor or their principals, officers, directors or employees
could give preferential treatment to their own accounts or trade their own accounts ahead of or against the Trust. Pursuant to these
policies, all principals, officers, directors and employees of the Sponsor, and their family members, must receive prior written clearance
from the Sponsor's chief compliance officer before entering into a transaction in bitcoin, ether, bitcoin futures contract, ether
futures contract or any other bitcoin-linked or ether-linked derivative equal if such transaction exceeds $4,999 in current market value.
To the extent any such transaction constitutes a purchase of bitcoin, ether, bitcoin futures contract, ether futures contract or any
other bitcoin-linked or ether-linked derivative exceeds $4,999 in current market value, the policies require that such bitcoin, ether,
bitcoin futures contract, ether futures contract or any other bitcoin-linked or ether-linked derivative must be held for 60 days before
it can be traded or sold.
137
The
Sponsor has sole current authority to manage the investments and operations of the Trust, and this may allow it to act in a way that
furthers its own interests, which may create a conflict with a Shareholder's best interests. Except as required under applicable
federal law or under the rules or regulations of the Exchange, Shareholders have no voting rights, which will limit their ability to
influence matters such as amendment of the Trust Agreement, a change in the Trust's basic investment policy, dissolution of the
Trust, or the sale or distribution of the Trust's assets.
The
Sponsor serves as the sponsor for the Trust. The Sponsor may have a conflict to the extent that its trading decisions for the Trust may
be influenced by the effect they would have on the other funds it manages, including, but not limited to, the Bitwise 10 Crypto Index
Fund, LLC; the Bitwise 10 Index Offshore Fund Ltd.; the Digital Asset Index Fund; the Bitwise Bitcoin Fund, LLC; the Bitwise Ethereum
Fund, LLC; the Bitwise DeFi Crypto Index Fund; the Bitwise Bitcoin ETF; and the Bitwise Ethereum ETF. In addition, the Sponsor may be
required to indemnify its officers, directors and key employees with respect to their activities on behalf of the other funds, if the
need for indemnification arises. This potential indemnification could cause the Sponsor's assets to decrease. If the Sponsor's
other sources of income are not sufficient to compensate for the indemnification, it could cease operations, which could in turn result
in Trust losses and/or termination of the Trust.
If
the Sponsor acquires knowledge of a potential transaction or arrangement that may be an opportunity for the Trust, it will have no duty
to offer such opportunity to the Trust. The Sponsor will not be liable to the Trust or the Shareholders for breach of any fiduciary or
other duty if the Sponsor pursues such opportunity or directs it to another person or does not communicate such opportunity to the Trust.
Neither the Trust nor any Shareholder has any rights or obligations by virtue of the Trust Agreement, the trust relationship created
thereby, or this Prospectus in such business ventures or the income or profits derived from such business ventures. The pursuit of such
business ventures, even if competitive with the activities of the Trust, will not be deemed wrongful or improper.
Resolution
of Conflicts Procedures
The
Trust Agreement provides that whenever a conflict of interest exists between the Sponsor or any of its affiliates, on the one hand, and
the Trust or any Shareholders or any other person, on the other hand, the Sponsor will resolve such conflict of interest considering
the relative interest of each party (including its own interest) and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable accepted accounting practices or principles.
Fiduciary
and Regulatory Duties AND OBLIGATIONS of the Sponsor
The
general fiduciary duties that would otherwise be imposed on the Sponsor (which would make its operation of the Trust as described herein
impracticable due to the strict prohibition imposed by such duties on, for example, conflicts of interest on behalf of a fiduciary in
its dealings with its beneficiaries) are defined and limited in scope by the terms of the Trust Agreement (to which terms all Shareholders,
by subscribing to the Shares, are deemed to consent).
Additionally,
under the Trust Agreement, the Sponsor has the following obligations as a sponsor of the Trust:
●
To
execute, file, record and/or publish all certificates, statements and other documents and do any and all other things as may be appropriate
for the formation, qualification and operation of the Trust and for the conduct of its business in all appropriate jurisdictions;
●
To
retain independent public accountants to audit the accounts of the Trust;
●
To
employ attorneys to represent the Trust;
●
To
select the Trust's Trustee, administrator, transfer agent, custodian(s), digital asset trading platform counterparties and OTC
market participant counterparties, Pricing Benchmark Provider, marketing agent(s), insurer(s) and any other service provider(s) and cause
the Trust to enter into contracts with such service provider(s);
●
To
negotiate and enter into insurance agreements to secure and maintain the insurance coverage to the extent described in this Prospectus;
●
To
develop a marketing plan for the Trust on an ongoing basis and prepare marketing materials regarding the Trust;
138
●
To
maintain the Trust's website;
●
To
acquire and sell bitcoin and ether, subject in each instance to the limitations imposed by the Trust Agreement, with a view to providing
Shareholders with exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust's operations, valuing
the Trust's net assets and the Shares daily with reference to the Pricing Benchmarks, or any other pricing methodology adopted
by the Sponsor in its discretion (for the avoidance of doubt, the Sponsor may select such subsequent pricing methodology without Shareholder
approval);
●
In
connection with a hard fork of the Bitcoin network to which the Sponsor has actual knowledge, to determine, in good faith, whether the
digital asset network running the modified or the extant Bitcoin network software is generally accepted to be the Bitcoin network and
should therefore be considered to be the Bitcoin network for the purposes of the Trust's ongoing operations;
●
In
connection with a hard fork of the Ethereum network to which the Sponsor has actual knowledge, to determine, in good faith, whether the
digital asset network running the modified or the extant Ethereum network software is generally accepted to be the Ethereum network and
should therefore be considered to be Ethereum network for the purposes of the Trust's ongoing operations;
●
To
enter into an Authorized Participant Agreement with each Authorized Participant and discharge the duties and responsibilities of the
Trust and the Sponsor thereunder;
●
To
receive directly or through its delegates from Authorized Participants and process or cause its delegates to process properly submitted
Purchase Orders, as described in the Trust Agreement and in the Authorized Participant Agreement;
●
In
connection with Purchase Orders, to receive from Authorized Participants directly or through its delegates the required amount of cash;
●
In
connection with Purchase Orders, after accepting a Purchase Order and receiving the required amount of cash, either directly or through
its delegates to direct the Transfer Agent to credit the Baskets to fill the Purchase Order within one (1) business day immediately following
the Purchase Order Date;
●
To
receive directly or through its delegates from Authorized Participants and process or cause its delegates to process properly submitted
Redemption Orders, as described in the Trust Agreement and in the Authorized Participant Agreement;
●
To
assist in the preparation and filing of reports and proxy statements (if any) to the Shareholders, the periodic updating of the Registration
Statement and this Prospectus and other reports and documents for the Trust required to be filed by the Trust with the SEC and other
governmental bodies;
●
To
use its best efforts to maintain the status of the Trust as a grantor trust for U.S. federal income tax purposes, including by making
such elections, filing such tax returns, and preparing, disseminating and filing such tax reports as it is advised by its counsel or
accountants are from time to time required by any statute, rule or regulation of the United States, any state or political subdivision
thereof, or other jurisdiction having taxing authority in respect of the Trust or its administration; the expense of accountants employed
to prepare such tax returns and tax reports will be an expense of the Trust;
●
To
monitor all fees charged to the Trust, and the services rendered by the service providers to the Trust, to determine whether the fees
paid by, and the services rendered to, the Trust are at competitive rates and are the best price and services available under the circumstances
and, if necessary, to renegotiate the fee structure to obtain such rates and services for the Trust;
●
To
perform such other services as the Sponsor believes the Trust may from time to time require; and
●
In
general, to carry out any other business in connection with or incidental to any of the foregoing powers; to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power herein set forth,
either alone or in association with others; and to do every other act or thing incidental or appurtenant or growing out of or connected
with the aforesaid business or purposes, objects or powers.
139
To
the extent that a law (common or statutory) or in equity, the Sponsor has duties (including fiduciary duties) and liabilities relating
thereto to the Trust, the Shareholders or any other person, the Sponsor will not be liable to the Trust, the Shareholders or to any other
person for its good faith reliance on the provisions of the Trust Agreement or this Prospectus unless such reliance constitutes gross
negligence, bad faith, or willful misconduct on the part of the Sponsor.
Liability
and Indemnification
Trustee
The
Trustee will not be liable for the acts or omissions of the Sponsor, nor will the Trustee be liable for supervising or monitoring the
performance and the duties and obligations of the Sponsor or the Trust under the Trust Agreement. The Trustee will not be personally
liable under any circumstances, except for its own willful misconduct, bad faith or gross negligence. In particular, but not by way of
limitation:
(a) the
Trustee will not be personally liable for any error of judgment made in good faith except to the extent such error of judgment constitutes
gross negligence on its part;
(b) no
provision of the Trust Agreement will require the Trustee to expend or risk its personal funds or otherwise incur any financial liability
in the performance of its rights or powers hereunder, if the Trustee shall have reasonable grounds for believing that the payment of
such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;
(c) under
no circumstances will the Trustee be personally liable for any representation, warranty, covenant, agreement, or indebtedness of the
Trust;
(d) the
Trustee will not be personally responsible for or in respect of the validity or sufficiency of the Trust Agreement or for the due execution
hereof by the Sponsor;
(e) the
Trustee will incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it to be genuine and reasonably believed by it to be signed by
the proper party or parties. The Trustee may accept a certified copy of a resolution of any governing body of any corporate party as
conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any
fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Trustee may for all purposes hereof rely
on a certificate, signed by an authorized officer of the Sponsor or any other corresponding directing party, as to such fact or matter,
and such certificate will constitute full protection to the Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon;
(f) in
the exercise or administration of the trust hereunder, the Trustee (i) may act directly or through agents or attorneys pursuant to agreements
entered into with any of them, and the Trustee will not be liable for the default or misconduct of such agents or attorneys if such agents
or attorneys will have been selected by the Trustee in good faith and with due care and (ii) may consult with counsel, accountants and
other skilled persons to be selected by it in good faith and with due care and employed by it, and it will not be liable for anything
done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled
persons;
(g) except
as expressly provided in Article III of the Trust Agreement, the Trustee acts solely as a trustee under the Trust Agreement and not in
its individual capacity, and all persons having any claim against the Trustee by reason of the transactions contemplated by the Trust
Agreement will look only to the Trust's property for payment or satisfaction thereof; and
(h) the
Trustee will not be liable for punitive, exemplary, consequential, special or other similar damages under any circumstances.
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The
Trustee or any officer, affiliate, director, employee, or agent of the Trustee (each, an "Indemnified Person") will be entitled
to indemnification from the Sponsor or the Trust, to the fullest extent permitted by law, from and against any and all losses, claims,
taxes, damages, reasonable expenses, and liabilities (including liabilities under state or federal securities laws) of any kind and nature
whatsoever (collectively, "Losses"), to the extent that such Losses arise out of or are imposed upon or asserted against
such Indemnified Persons with respect to the creation, operation or termination of the Trust, the execution, delivery or performance
of the Trust Agreement or the transactions contemplated in the Trust Agreement; provided, however, that the Sponsor and the Trust will
not be required to indemnify any Indemnified Person for any Losses that are a result of the willful misconduct, bad faith or gross negligence
of such Indemnified Person. The obligations of the Sponsor and the Trust to indemnify the Indemnified Persons will survive the termination
of the Trust Agreement.
Sponsor
The
Sponsor will not be under any liability to the Trust, the Trustee or any Shareholder for any action taken or for refraining from the
taking of any action in good faith pursuant to the Trust Agreement, or for errors in judgment or for depreciation or loss incurred by
reason of the sale of any ether or other assets held in trust hereunder; provided, however, that this provision will not protect the
Sponsor against any liability to which it would otherwise be subject by reason of its own gross negligence, bad faith, or willful misconduct.
The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment,
draft or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee's counsel
or any other Indemnified Person for any matters arising hereunder. The Sponsor will in no event be deemed to have assumed or incurred
any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for herein. The Trust will not
incur the cost of that portion of any insurance which insures any party against any liability, the indemnification of which is herein
prohibited.
In
addition, as described in the Trust Agreement, (i) whenever a conflict of interest exists or arises between the Sponsor or any of its
Affiliates, on the one hand, and the Trust, on the other hand; or (ii) whenever the Trust Agreement or any other agreement contemplated
herein or therein provides that the Sponsor will act in a manner that is, or provides terms that are, fair and reasonable to the Trust,
the Sponsor will resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating
to such interests, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Sponsor,
the resolution, action or terms so made, taken or provided by the Sponsor will not constitute a breach of the Trust Agreement or any
other agreement contemplated herein or of any duty or obligation of the Sponsor at law or in equity or otherwise.
The
Sponsor and its shareholders, members, directors, officers, employees, Affiliates and subsidiaries (each a "Sponsor Indemnified
Party") will be indemnified by the Trust and held harmless against any loss, liability or expense incurred hereunder without gross
negligence, bad faith, or willful misconduct on the part of such Sponsor Indemnified Party arising out of or in connection with the performance
of its obligations under the Trust Agreement or any actions taken in accordance with the provisions of the Trust Agreement. Any amounts
payable to a Sponsor Indemnified Party under Section 4.06 of the Trust Agreement may be payable in advance or will be secured by a lien
on the Trust. The Sponsor will not be under any obligation to appear in, prosecute or defend any legal action that in its opinion may
involve it in any expense or liability; provided, however, that the Sponsor may, in its discretion, undertake any action that it may
deem necessary or desirable in respect of the Trust Agreement and the rights and duties of the parties hereto and the interests of the
Shareholders and, in such event, the legal expenses and costs of any such action will be expenses and costs of the Trust and the Sponsor
will be entitled to be reimbursed therefor by the Trust. The obligations of the Trust to indemnify the Sponsor Indemnified Parties will
survive the termination of the Trust Agreement.
Provisions
of Law
According
to applicable law, indemnification of the Sponsor is payable only if the Sponsor determined, in good faith, that the act, omission or
conduct that gave rise to the claim for indemnification was in the best interest of the Trust and the act, omission or activity that
was the basis for such loss, liability, damage, cost or expense was not the result of negligence or misconduct and such liability or
loss was not the result of negligence or misconduct by the Sponsor, and such indemnification or agreement to hold harmless is recoverable
only out of the assets of the Trust.
141
Provisions
of Federal and State Securities Laws
This
offering is made pursuant to federal and state securities laws. The SEC and state securities agencies take the position that indemnification
of the Sponsor that arises out of an alleged violation of such laws is prohibited unless certain conditions are met.
These
conditions require that no indemnification of the Sponsor or any underwriter for the Trust may be made in respect of any losses, liabilities
or expenses arising from or out of an alleged violation of federal or state securities laws unless: (i) there has been a successful adjudication
on the merits of each count involving alleged securities law violations as to the party seeking indemnification and the court approves
the indemnification; (ii) such claim has been dismissed with prejudice on the merits by a court of competent jurisdiction as to the party
seeking indemnification; or (iii) a court of competent jurisdiction approves a settlement of the claims against the party seeking indemnification
and finds that indemnification of the settlement and related costs should be made, provided that, before seeking such approval, the Sponsor
or other indemnitee must apprise the court of the position held by regulatory agencies against such indemnification. These agencies are
the SEC and the securities administrator of the state or states in which the plaintiffs claim they were offered or sold interests.
Provisions
of the 1933 Act and NASAA Guidelines
Insofar
as indemnification for liabilities arising under the 1933 Act may be permitted to the Sponsor or its directors, officers, or persons
controlling the Trust, the Trust has been informed that the SEC and the various state administrators believe that such indemnification
is against public policy as expressed in the 1933 Act and the North American Securities Administrators Association, Inc. ("NASAA")
commodity pool guidelines and is therefore unenforceable.
Management;
Voting by Shareholders
Except
as required under applicable federal law or under the rules or regulations of the Exchange, Shareholders shall have no voting rights
hereunder (including with respect to mergers, consolidations or conversions of the Trust or transfers to or domestication in any jurisdiction
by the Trust or any other matters that under the Delaware Act default voting rights are provided to holders of beneficial interests).
The Shareholders shall have the right to vote on other matters only as the Sponsor may consider desirable and so authorize in its sole
discretion. To the extent that federal or Delaware law is amended, modified or interpreted by rule, regulation, order, or no-action letter
to (on a mandatory basis) expand, eliminate or limit Shareholders' right to vote on any specific matter, the Shareholders'
right to vote shall be deemed to be amended, modified or interpreted in accordance therewith without further approval by the Sponsor
or the Shareholders.
Meetings
Meetings
of the Trust's Shareholders may be called by the Sponsor for such purposes as may be prescribed by law or the Trust Agreement.
All notices of meetings will be sent or otherwise given to each Shareholder of record not less than seven nor more than one hundred twenty
days before the date of the meeting in the manner determined by the Sponsor. The notice will specify: (a) the place, date and hour of
the meeting; and (b) the general nature of the business to be transacted. Shareholders may vote in person, by proxy, or in any manner
determined by the Sponsor at any such meeting. Except when a larger quorum is required by applicable law or by the Trust Agreement, the
presence (in person or by ballot) of thirty-three and one-third percent (33 1/3%) of the Shares entitled to vote will constitute a quorum
at a Shareholders' meeting. Any action taken by Shareholders may be taken without a meeting so long as Shareholders holding a majority
of Shares entitled to vote on the matter (or such larger proportion thereof as will be required by any express provision of this Trust
Agreement or federal law) or holding a majority (or such larger proportion as aforesaid) of the Shares entitled to vote separately on
the matter consent to the action in writing or by other electronic means. Such consent will be treated for all purposes as a vote taken
at a meeting of Shareholders.
Books
and Records
The
Trust keeps its books of record and account at the office of the Sponsor located at 250 Montgomery Street, Suite 200, San Francisco,
CA 94104, or at the offices of the Administrator, or at such office, including of an administrative agent, as it may subsequently designate
upon notice. The books and records are open to inspection by any person who establishes to the Trust's satisfaction that such person
is a Shareholder upon reasonable advance notice at all reasonable times during usual business hours of the Trust.
The
Trust keeps a copy of the Trust Agreement on file in the Sponsor's office which will be available for inspection by any Shareholder
at all times during the Trust's usual business hours upon reasonable advance notice.
142
Statements,
Filings, and Reports to Shareholders
After
the end of each fiscal year, the Sponsor will cause to be prepared an annual report for the Trust containing audited financial statements.
The annual report will be in such form and contain such information as will be required by applicable laws, rules and regulations and
may contain such additional information that the Sponsor determines shall be included. The annual report will be filed with the SEC and
the Exchange and will be distributed to such persons and in such manner as is required by applicable laws, rules and regulations.
The
Sponsor is responsible for the registration and qualification of the Shares under federal securities laws. The Sponsor will also prepare,
or cause to be prepared, and file any periodic reports or updates required under the Exchange Act. The Administrator will assist and
support the Sponsor in the preparation of such reports.
The
Administrator will make such elections, file such tax returns, and prepare, disseminate and file such tax reports as it is advised to
by its counsel or accountants or as required from time to time by any applicable statute, rule or regulation.
Fiscal
Year
The
fiscal year of the Trust is the calendar year. The Sponsor may select an alternate fiscal year.
Governing
Law; Consent to Delaware Jurisdiction
The
rights of the Sponsor, the Trust, DTC (as registered owner of the Trust's global certificate for Shares) and the Shareholders are
governed by the laws of the State of Delaware. The Sponsor, the Trust and DTC and, by accepting Shares, each DTC Participant and each
Shareholder consent to the exclusive jurisdiction of the courts of the State of Delaware and any federal courts located in Delaware.
Such consent is not required for any person to assert a claim of Delaware jurisdiction over the Sponsor or the Trust. However, pursuant
to the Trust Agreement, this shall not apply to causes of action for violations of U.S. federal or state securities laws. Section 22
of the 1933 Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the 1933 Act or the rules and regulations thereunder. Investors cannot waive compliance with federal securities laws and the
rules and regulations thereunder.
Legal
Matters
Litigation
and Claims
Within
the past five years of the date of this Prospectus, there have been no material administrative, civil or criminal actions against the
Sponsor, the Trust or any principal or affiliate of any of them. This includes any actions pending, on appeal, concluded, threatened,
or otherwise known to them.
Legal
Opinion
Chapman
and Cutler LLP has advised the Sponsor in connection with the Shares being offered. Chapman and Cutler LLP also advises the Sponsor with
respect to its responsibilities as sponsor of, and with respect to matters relating to, the Trust. Certain opinions of counsel have been
filed with the SEC as exhibits to the Registration Statement of which this Prospectus is a part.
Experts
_______________,
_______________, _______________, _______________, an independent registered public accounting firm, is hereby named as an expert in
auditing and accounting.
143
Material
Contracts
Fund
Administration and Accounting Agreement
Pursuant
to the Fund Administration and Accounting Agreement, the Administrator is generally responsible for the day-to-day administration of
the Trust. The responsibilities of the Administrator include (i) establishing appropriate expense accruals and computing expense ratios,
maintaining expense files and coordinating the payment of Trust-approved invoices; (ii) calculating Trust-approved income and per Share
amounts required for periodic distributions to be made by the Trust; (iii) calculating total return information; (iv) coordinating the
Trust's annual audit; (v) supplying various normal and customary portfolio and Trust statistical data as requested on an ongoing
basis; and (vi) preparing financial statements for the Trust.
The
responsibilities of the Administrator also include providing various valuation and computation accounting services for the Trust, including
(i) maintaining certain financial books and records for the Trust, including creation and redemptions books and records, and Trust accounting
records; (ii) computing the Trust's NAV; (iii) obtaining quotes from pricing services as directed and approved by the Sponsor
or, if such quotes are unavailable, then obtaining such prices from the Sponsor and, in either case, calculating the market value of
the Trust's assets in accordance with the Trust's valuation policies or guidelines; and (iv) transmitting or making available
a copy of the daily portfolio valuation to the Sponsor.
The
Trust will indemnify the Administrator and any affiliate of the Administrator ("Indemnitees"), and the Indemnitees will incur
no liability for their reliance upon (i) any law, act, regulation or interpretation of the same even though the same may thereafter have
been altered, changed, amended or repealed, (ii) the Trust's offering materials or documents (excluding information provided by
the Administrator), (iii) any instructions, or (iv) any written opinion of legal counsel for the Trust or the Administrator, or arising
out of transactions or other activities of the Trust that occurred prior to the commencement of the Fund Administration and Accounting
Agreement; provided, however, that the Trust shall not indemnify any Indemnitee for any losses arising out of such Indemnitees'
own bad faith, gross negligence or willful misconduct in the performance of the Fund Administration and Accounting Agreement.
The
Fund Administration and Accounting Agreement shall be effective commencing upon regulatory approval by the SEC permitting shares of the
Trust to be offered for sale and, unless terminated pursuant to its terms, shall continue until 11:59 p.m. on the date which is the third
anniversary of such date (the "Initial Term"), at which time such Agreement shall terminate, unless renewed in accordance
with the terms hereof. The Fund Administration and Accounting Agreement shall automatically renew for successive terms of one (1) year
each (each, a "Renewal Term"), unless the Trust or the Administrator gives written notice to the other party of its intent
not to renew and such notice is received by the other party not less than ninety (90) days prior to the expiration of the Initial Term
or the then-current Renewal Term (a "Non-Renewal Notice"). In the event a party provides a Non-Renewal Notice, the Fund Administration
and Accounting Agreement shall terminate at 11:59 p.m. on the last day of the Initial Term or Renewal Term, as applicable.
Transfer
Agency and Service Agreement
Pursuant
to the Transfer Agency and Service Agreement, the Transfer Agent is generally responsible for the day-to-day administration of the Trust.
The responsibilities of the Transfer Agent include: (i) performing and facilitating the performance of purchases and redemption of Baskets;
(ii) preparing and transmitting by means of DTC's book-entry system payments for dividends and distributions on or with respect
to the Shares, if any, declared by the Trust; (iii) maintaining the record of the name and address of the Shareholder and the number
of Shares issued by the Trust and held by the Shareholder; and (iv) recording the issuance of Shares of the Trust and maintain a record
of the total number of Shares of the Trust which are outstanding and authorized, based upon data provided to it by the Trust.
The
Transfer Agency and Service Agreement will have a one-year initial term and will automatically be renewed for successive one-year periods,
unless terminated by either party pursuant to the terms of the agreement.
Bitcoin
and Ether Custody Agreement
Pursuant
to the Bitcoin and Ether Custody Agreement, the Bitcoin and Ether Custodian is responsible for providing the Trust with segregated cold
wallet digital asset custody. The Trust's assets with the Bitcoin and Ether Custodian are held in segregated wallets and are therefore
not commingled with corporate or other customer assets. The Bitcoin and Ether Custodian also segregates each of the accounts (comprising
multiple wallets in some cases) that a client (such as the Trust) may hold with the Bitcoin and Ether Custodian, and each such account's
balance represents the account's on-chain balance, which can be independently verified by the client or third-party auditors as
needed. This approach applies to each asset supported by the Bitcoin and Ether Custodian.
144
Private
key materials are generated and subsequently stored in a form whereby no private key is stored in a decrypted format. The private key
materials are stored within the Bitcoin and Ether Custodian's secure storage facilities within the United States and Europe. For
security reasons, these exact locations are never disclosed.
Personnel
supporting key operations are very limited and the Bitcoin and Ether Custodian requires a background check prior to onboarding, and where
required, annually thereafter. No single individual associated with the Bitcoin and Ether Custodian has access to full private keys.
Private key decryption and subsequent transaction signing instead require access to multiple systems and human operators in order to
reconstitute a key and perform an on-chain transaction. For security purposes, the Bitcoin and Ether Custodian does not disclose specifics
about the roles and numbers of individuals involved in these processes.
The
Bitcoin and Ether Custodian's parent, 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 Coinbase Global and all of its subsidiaries, including the Coinbase Insureds,
including from employee collusion or fraud, physical loss including theft, damage of key material, security breach or hack, and fraudulent
transfer.
The
Bitcoin and Ether Custodian maintains an Internal Audit team that performs periodic internal audits of custody operations. SOC attestations
are also performed on the Ether Custodian's services. The SOC 1 Type 2 and SOC 2 Type 2 reports produced cover private key management
controls. A SOC 1 Type 2 report addresses the controls at a service organization that are likely to be relevant to user entities'
internal control over financial reporting. A SOC 2 Type 2 report addresses controls at a service organization relevant to security, availability,
processing integrity, confidentiality, or privacy in order to support users' evaluations of their own systems of internal control.
The
Bitcoin and Ether Custodian will not be liable for any amount greater than the value of the supported digital assets on deposit in the
Trust's custodial account(s) at the time of the event giving rise to the liability.
The
Bitcoin and Ether Custody Agreement, which is a part of the Prime Execution Agreement, was effective as of the Prime Execution Agreement's
execution on ____________, and will remain in effect until terminated by either the Trust, the Bitcoin and Ether Custodian or the Prime
Execution Agent. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any reason upon providing
the applicable notice to the Trust, or immediately for "Cause" (as defined in the Bitcoin and Ether Custody Agreement), including,
among others, if the Trust materially breaches the Prime Execution Agreement and such breach remains uncured, undergoes a bankruptcy
event, or fails to repay Trade Credits. The Bitcoin and Ether Custodian may terminate the Bitcoin and Ether Custody Agreement for any
reason upon providing 180 days' notice to the Trust, or immediately for "Cause." The Bitcoin and Ether Custody Agreement
forms a part of the Prime Execution Agreement, and is subject to the termination provisions in the Prime Execution Agreement.
Neither
the Sponsor nor the Trust has given any instructions to the Bitcoin and Ether Custodian as it relates to Incidental Rights and/or IR
Assets.
Prime
Execution Agreement
Pursuant
to the Prime Execution Agreement, the Trust's bitcoin, ether and cash holdings from time to time may be temporarily held with the
Prime Execution Agent, an affiliate of the Bitcoin and Ether Custodian, in the Trading Balance, for certain limited purposes, including
in connection with creations and redemptions of Baskets and the sale of bitcoin and ether to pay Trust expenses not assumed by the Sponsor.
The Sponsor may, in its sole discretion, add or terminate prime execution agents at any time. The Sponsor may, in its sole discretion,
change the prime execution agent for the Trust, but it will have no obligation whatsoever to do so or to seek any particular terms for
the Trust from other such prime execution agents.
Within
the Trust's Trading Balance, the Prime Execution Agreement provides that the Trust does not have an identifiable claim to any particular
bitcoin or ether (or cash). Instead, the Trust's Trading Balance represents an entitlement to a pro rata share of the bitcoin and
ether (and cash) the Prime Execution Agent holds on behalf of customers who hold similar entitlements against the Prime Execution Agent.
In this way, the Trust's Trading Balance represents an omnibus claim on the Prime Execution Agent's bitcoin and ether (and
cash) held on behalf of the Prime Execution Agent's customers. The Prime Execution Agent holds the bitcoin and ether associated
with customer entitlements across a combination of omnibus cold wallets, omnibus "hot" wallets (meaning wallets whose private
keys are generated and stored online, in Internet-connected computers or devices) or in omnibus accounts in the Prime Execution Agent's
name on a trading venue (including third-party venues and the Prime Execution Agent's own execution venue) where the Prime Execution
Agent executes orders to buy and sell bitcoin and ether on behalf of its clients.
145
Pursuant
to the Prime Execution Agreement, the Trust may engage in sales of bitcoin and ether by placing orders with the Prime Execution Agent.
The Prime Execution Agent will route orders placed by the Sponsor through the prime execution agent execution platform (the "Trading
Platform") to a Connected Trading Venue where the order will be executed. Each order placed by the Sponsor will be sent, processed
and settled at each Connected Trading Venue to which it is routed. The Prime Execution Agreement provides that the Prime Execution Agent
is subject to certain conflicts of interest, including: (i) the Trust's orders may be routed to the Prime Execution Agent's
own execution venue where the Trust's orders may be executed against other customers of the Prime Execution Agent or with the Coinbase
acting as principal, (ii) the beneficial identity of the counterparty purchaser or seller with respect to the Trust's orders may
be unknown and therefore may inadvertently be another client of the Prime Execution Agent, (iii) the Prime Execution Agent does
not engage in front-running, but is aware of the Trust's orders or imminent orders and may execute a trade for its own inventory
(or the account of an affiliate) while in possession of that knowledge and (iv) the Prime Execution Agent may act in a principal capacity
with respect to certain orders. As a result of these and other conflicts, when acting as principal, the Prime Execution Agent may have
an incentive to favor its own interests and the interests of its affiliates over the Trust's interests.
The
Prime Execution Agent is permitted to suspend or terminate the Prime Execution Agreement under certain circumstances. The Prime Execution
Agent, for itself or as agent for the Ether Custodian and Trade Credit Lender, may not terminate the Prime Execution Agreement (including
the Bitcoin and Ether Custody Agreement) or suspend, restrict terminate or modify the Prime Execution Agent Services (as such term is
defined in the Agreement) on less than 180 days' notice, except in the event of (i) a Change in Law or (ii) a "Cause"
event (as such term is defined in the Agreement). The Prime Execution Agreement defines "Prime Execution Agent Services"
as (i) the custody of the Trust's bitcoin and ether in the Trust Digital Asset Accounts, the processing of deposits and withdrawals
and other custody transactions, (ii) access to the Prime Execution Agent's trading platform and the execution and settlement of
all orders for the sale of bitcoin and ether submitted by the Trust, and (iii) the extension of credit to the Trust by the Trade Credit
Lender pursuant to the Trade Financing Agreement.
The
Prime Execution Agreement, including the Ether Custody Agreement, was effective as of its execution on ___________, and will remain in
effect until terminated by either the Trust or the Prime Execution Agent. The Prime Execution Agreement defines a "Coinbase Termination
Event" to mean the occurrence and continuance of (i) a Bankruptcy Event with respect to any Coinbase Entity, (ii) the failure of
any Coinbase Entity to sell or withdraw or transfer the Trust's bitcoin or ether in accordance with the Trust's instructions
within the time periods set forth in the Prime Execution Agreement and such failure is not cured within two (2) business days following
the Trust providing written notice to the relevant Coinbase Entity ("CB Return Cure"); provided, however, that (A) if, prior
to the expiration of the CB Return Cure, the Prime Execution Agent transfers cash to the Trust in an amount equal to the value of the
bitcoin or ether based on the Benchmark Valuation (defined as the applicable Pricing Benchmark) as of the time that the request to sell,
transfer or withdraw was originally made by the Trust (the "BTC/ETH Cash Value") or if the Prime Execution Agent delivers
cash collateral to an account designated by the Trust and in which the Trust has a perfected, first priority security interest and in
an amount equal to the BTC/ETH Cash Value until the relevant bitcoin and/or ether is sold, withdrawn or transferred or the Trust elects
to receive such amount in cash in lieu of the Prime Execution Agent's obligation to sell, withdraw or transfer the relevant bitcoin
and/or ether, in each cash, such failure will be deemed cured; provided, further that, the Trust shall have the right to choose whether
to receive the BTC/ETH Cash Value in lieu of the relevant bitcoin and/or ether or receive the BTC/ETH Cash Value as cash collateral,
or (B) if such failure is due to a technology or security issue where, in the commercially reasonable opinion of the Prime Execution
Agent, returning the relevant bitcoin and/or ether would result in material risk to the Trust or the Prime Execution Agent or may result
in the relevant bitcoin and/or ether being lost or otherwise not successfully returned and the Prime Execution Agent promptly notifies
the Trust promptly upon Client's notice of such failure, (1) the Trust may request that the Prime Execution Agent still sell,
withdraw or transfer the bitcoin and/or ether, but the Prime Execution Agent will have no liability with respect to any such sell, withdrawal
or transfer (unless the Prime Execution Agent or any of the Coinbase Entities act with negligence unrelated to such technology or security
issue) and any failure to withdraw or transfer shall not result in a Coinbase Termination Event if the Trust does not receive the withdrawn
or transferred bitcoin and/or ether or the proceeds of any such sale due to such technology or security issue, or (2) if the Trust does
not elect to have the Prime Execution Agent still make the sale, withdrawal or transfer, a Coinbase Termination Event shall not occur
while the relevant security or technology event is occurring and continuing, (iii) the failure of any Coinbase Entity to withdraw or
transfer cash to the Trust in accordance with the Trust's instructions within the time periods set forth in the Prime Execution
Agreement and such failure is not cured within one (1) business day following the Trust providing written notice to the relevant Coinbase
Entity, (iv) a Coinbase Entity intentionally or willfully, materially breaches any provision of the Prime Execution Agreement (other
than the provisions of the Bitcoin and Ether Custody Agreement) and such breach remains uncured for a period of ten (10) calendar days
after notice of such breach is provided by the Trust to the Prime Execution Agent; or (v) a Coinbase Entity intentionally or willfully,
materially breaches any provision of the Bitcoin and Ether Custody Agreement and such breach remains uncured for a period of 30 calendar
days after notice of such breach is provided by the Trust to the Prime Execution Agent.
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Trade
Financing Agreement
The
Trade Financing Agreement was entered into between the Trust (as the "Borrower"), Coinbase Credit (the "Lender"),
Coinbase, Inc. (the "Agent" or "Coinbase"), and Coinbase Custody as agent with respect to the Trust's balance
of bitcoin and ether held in the Trust Digital Asset Accounts pursuant to the Bitcoin and Ether Custody Agreement to govern the extension
of credit from Coinbase Credit to the Trust for use in connection with trading bitcoin and ether on Coinbase Inc.'s Trading Platform.
Pursuant
to the terms of the Trade Financing Agreement, the Lender agrees to lend to the Trust a specific quantity of bitcoin, ether and cash
(Trade Credits) in connection with the purchase or sale of bitcoin or ether via Coinbase Inc.'s Trading Platform for use on the
Trading Platform up to the Authorized Amount. The "Authorized Amount" shall mean the aggregate U.S. dollar notional amount
of Trade Credits that the Lender has agreed to extend to the Trust during any Defined Interval. "Defined Interval" means
a twenty-four (24) hour period starting at 6:00 a.m. ET (or such other time as may be notified by the Lender to the Trust from time to
time) on any day that the Lender has extended Trade Credit to the Trust.
The
Trust and the Lender agree that the Trust may use the Trade Credits exclusively for the purpose of the execution of trades on the Trading
Platform. The Lender is under no obligation to continue to provide Trade Credits and may in its sole discretion impose black-out periods
during which Trade Credits for any or all fiat currencies and/or digital assets (including U.S. dollars, bitcoin and ether) may be unavailable;
provided, however, that the Lender will provide the Trust with advance notice of such black-out periods if feasible to do so.
The
Lender will establish in the name of the Trust a ledger entry for purposes of tracking Trade Credits extended by the Lender ("Trade
Finance Debit Account"). The Trade Finance Debit Account shall reflect the cumulative Trade Credits that the Lender has extended
during each Defined Interval, both in terms of the aggregate notional value of the Trade Credits and the Trade Credits denominated in
specific digital assets (such as bitcoin and ether). The Trade Finance Debit Account shall be conclusive, absent manifest error, of the
amount of Trade Credits extended by the Lender to the Trust. "Defined Interval" shall mean a twenty-four-hour period starting
at 6:00 a.m. ET (or such other time as may be notified by the Lender to the Trust from time to time) on any day that the Lender has extended
Trade Credit to the Trust. For the avoidance of doubt, in the event that the Lender extends Trade Credit to the Trust prior to 6:00 a.m.
ET on any given day, such notional amount of Trade Credit shall be included in the aggregation of the Authorized Amount for the immediately
prior day. The Lender or the Agent may revise the Defined Interval time period referenced above upon five (5) business days' prior
notice to the Trust.
Under
the Trade Financing Agreement, the Lender and the Trust agreed that any digital assets (including bitcoin and ether) and any item of
property (whether investment property, financial asset, security, general intangible or instrument (each as defined in the UCC) or cash)
and all proceeds of the foregoing, credited to the Trust's Trading Balance and Trust Digital Asset Accounts, shall be treated as
a "financial asset" within the meaning of NY UCC §8-102(a)(9). The Trust granted to the Lender and the Agent a continuing
first priority security interest in, lien on and right of set-off against all of the Trust's right, title and interest, whether
now owned or existing or hereafter acquired or arising, in the Trust's Trading Balance and Trust Digital Asset Accounts together
with proceeds thereof, in order to secure (i) repayment of Trade Credits to the Lender, (ii) payment of all fees and other amounts
owed by the Trust to the Lender or the Agent hereunder, and (iii) all other obligations of the Trust to the Lender and the Agent arising
hereunder from time to time. In addition, the Trust shall execute such documents and take such other actions as the Lender or the Agent
shall reasonably request in order to perfect and maintain the priority of the Lender's and the Agent's security interest
with respect to Trust's Trading Balance and the Trust Digital Asset Accounts. For purposes of perfecting the Lender's security
interest in the Trading Balance, the Agent holds the Trust's Trading Balance for itself and also as agent for the Lender, and has
control over the Trust's Trading Balance for its own benefit and for the benefit and on behalf of the Lender. The Agent agrees
to follow entitlement orders of the Lender as secured party with respect to the Trading Balance without further consent of the Trust.
147
The
Trust agrees to fully repay to the Lender the Trade Credits extended during a Defined Interval by the Settlement Deadline for that Defined
Interval. The "Settlement Deadline" shall mean 6:00 p.m. ET on the calendar day immediately following the start of a Defined
Interval. The Trust is permitted to repay the Trade Credits at any time during the Defined Interval. Failure of the Trust to fully repay
the Trade Credits by the Settlement Deadline may result in an Event of Default (as such term is defined in the agreement). The Trust
must repay the Lender with the same type of asset that the Lender provided in extending the applicable Trade Credit. The Trust's
repayment obligation shall be satisfied only when the Lender receives good funds for cash Trade Credits or bitcoin/ether for bitcoin/ether
Trade Credits. All cash repayments must be made to the Lender in good funds by the Settlement Deadline, regardless of whether the Federal
Reserve wire transfer system is open for business.
Upon
the occurrence of an Event of Default: (a) any outstanding extension of Trade Credit shall be immediately due and payable; (b) in addition
to all rights under the Coinbase Prime Broker Agreement, the Lender or the Agent may exercise any rights of a secured creditor with respect
to its interests in the Trust's assets, and may exercise all other rights under agreements between the Trust and the Lender, the
Agent or Coinbase Custody, including the Lender's, the Agent's or the Coinbase Custody's rights under the Coinbase
Prime Broker Agreement. The Lender and the Agent agree that they will exercise their secured creditor rights with respect to the Trading
Balance before exercising their secured creditor rights with respect to the Trust Ether Account; (c) the Trust authorizes the Agent,
as securities intermediary with respect to the Trading Balance, to comply with all instructions and entitlement orders from the Lender,
as secured party, with respect to the disposition of assets in the Trust's Trading Balance as contemplated herein without further
consent or direction from the Trust or any other party; the Trust also authorizes Coinbase Custody, as securities intermediary with respect
to the Trust Digital Asset Accounts, to comply with all instructions and entitlement orders from the Lender or the Agent, as secured
party, with respect to the disposition of assets in the Trust Digital Asset Accounts; Coinbase Custody agrees to follow such instructions
and entitlement orders; (d) without prior notice to the Trust, the Lender shall have the right to instruct the Agent (and the Agent
agrees to comply with such instruction) to: (i) transfer the Trust's Client Assets from the Trust's Trading Balance to the
Lender to repay the unpaid Trade Credits, and/or (ii) liquidate or cancel outstanding orders (including Orders that have been submitted
or are in the process of being fulfilled); and (e) without prior notice to the Trust, the Lender may suspend or terminate the Trust's
ability to receive extensions of Trade Credits, regardless of whether the Trust has cured the Event of Default.
If
the above actions are not sufficient to satisfy all obligations of the Trust to the Lender and the Agent, the Lender or the Agent shall
have the right to liquidate any and all of the Trust's assets and positions held with the Lender or the Agent, including the Trading
Balance and the Trust Digital Asset Accounts, to cover any losses incurred by the Trust's failure to repay the Trade Credits. In
connection with liquidating such assets, the Trust authorizes the Lender or the Agent, on the Lender's behalf, in the Lender's
sole discretion, to liquidate any of the Trust's bitcoin and ether in a commercially reasonable sale at the market price. The Trust
understands that the value of bitcoin or ether may rise or fall quickly, and neither the Lender nor the Agent has any obligation to liquidate
the Trust's bitcoin or ether at a time that provides the best price.
The
parties to the Trade Financing Agreement may terminate the agreement immediately upon giving the other party written notice. Upon notice
of termination, all outstanding extensions of Trade Credits shall become due and payable immediately. All obligations of the Trust with
respect to outstanding Trade Credits and other amounts due hereunder, and rights of the Lender and the Agent in connection therewith
shall survive the termination of the Trade Financing Agreement, including the Lender's and the Agent's security interest
in the Trust Trading Balance and Trust Digital Asset Accounts and the Lender, the Agent's and Coinbase Custody's right of
set-off under the Prime Execution Agreement.
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Cash
Custody Agreement
The
Trust has entered into the Cash Custody Agreement with The Bank of New York Mellon under which The Bank of New York Mellon acts as custodian
of the Trust's cash and cash equivalents (in such capacity, the "Cash Custodian"). The Cash Custodian has agreed to
provide its services under the Cash Custody Agreement until terminated in accordance with the provisions of the Cash Custody Agreement.
Either the Cash Custodian or the Trust may terminate the Cash Custody Agreement by giving written notice to the counterparty as set forth
in the Cash Custody Agreement.
The
fees of the Cash Custodian are paid by the Trust. In addition, the Trust shall reimburse the Cash Custodian for any out-of-pocket and
incidental expenses incurred by the Cash Custodian in connection with the Cash Custody Agreement.
The
Cash Custodian shall exercise the standard of care and diligence that a professional custodian would observe in these affairs taking
into account the prevailing rules, practices, procedures and circumstances in the relevant market ("Standard of Care"). Except
as otherwise expressly provided in the Cash Custody Agreement, the Cash Custodian's liability arising out of or relating to the
Cash Custody Agreement shall be limited solely to those direct damages that are caused by the Cash Custodian's failure to perform
its obligations under the Cash Custody Agreement in accordance with the Standard of Care. The Trust agrees to indemnify the Cash Custodian
and hold the Cash Custodian harmless from and against all losses, costs, expenses, damages and liabilities (including reasonable counsel
fees and expenses) incurred by the Cash Custodian arising out of or relating to the Cash Custodian's performance under the Cash
Custody Agreement, except to the extent resulting from the Cash Custodian's failure to perform its obligations under the Cash Custody
Agreement in accordance with the Standard of Care. The Cash Custody Agreement is governed by the substantive laws of the State of New
York.
Marketing
Agent Agreement
Pursuant
to the Marketing Agent Agreement, the Marketing Agent is generally responsible for the day-to-day administration of the Trust. The responsibilities
of the Marketing Agent include (i) at the request of the Trust, assisting the Trust with facilitating Authorized Participant Agreements
between and among Authorized Participants, the Trust, and the applicable Transfer Agent, for the creation and redemption of Baskets of
the Trust; (ii) maintaining copies of confirmations of Basket creation and redemption order acceptances and producing such copies
upon reasonable request from the Trust or Sponsor; (iii) making available copies of this Prospectus to Authorized Participants who have
purchased Baskets in accordance with the Authorized Participant Agreements; (iv) maintaining telephonic, facsimile and/or access to direct
computer communications links with the Transfer Agent; (v) reviewing and approving, prior to use, certain Trust marketing materials submitted
by the Trust for review ("Marketing Materials") for compliance with applicable SEC and FINRA advertising rules, and filing
all such Marketing Materials required to be filed with FINRA; (vi) ensuring that all direct requests by Authorized Participants for copies
of this Prospectus are fulfilled; and (vii) working with the Transfer Agent to review and approve orders placed by Authorized Participants
and transmitted to the Transfer Agent.
The
Trust shall indemnify, defend and hold the Marketing Agent, its affiliates and each of their respective members, managers, directors,
officers, employees, representatives and any person who controls or previously controlled the Marketing Agent within the meaning of Section
15 of the 1933 Act (collectively, the "Marketing Agent Indemnitees"), free and harmless from and against any and all losses,
claims, demands, liabilities, damages and expenses (including the costs of investigating or defending any alleged losses, claims, demands,
liabilities, damages or expenses and any reasonable counsel fees incurred in connection therewith) (collectively, "Losses")
that any Marketing Agent Indemnitee may incur arising out of or relating to (i) the Trust's breach of any of its obligations, representations,
warranties or covenants contained in the Marketing Agent Agreement; (ii) the Trust's failure to comply in all material respects
with any applicable laws, rules or regulations; or (iii) any claim that this Prospectus, sales literature and advertising materials or
other information filed or made public by the Trust (as from time to time amended) includes or included an untrue statement of a material
fact or omits or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein
not misleading provided, however, that the Trust's obligation to indemnify any of the Marketing Agent Indemnitees shall not be
deemed to cover any Losses arising out of any untrue statement or alleged untrue statement or omission or alleged omission made in this
Prospectus or any such advertising materials or sales literature or other information filed or made public by the Trust in reliance upon
and in conformity with information provided by the Marketing Agent to the Trust, in writing, for use in this Prospectus or any such advertising
materials or sales literature.
The
Marketing Agreement shall continue in effect for two years. Thereafter, if not terminated, the Marketing Agreement shall continue automatically
in effect for successive one-year periods.
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United
States Federal Income Tax Consequences
The
following discussion of the material U.S. federal income tax consequences that generally will apply to the purchase, ownership and disposition
of Shares by a U.S. Shareholder (as defined below), and certain U.S. federal income consequences that may apply to an investment in Shares
by a Non-U.S. Shareholder (as defined below), represents, insofar as it describes conclusions as to U.S. federal income tax law and subject
to the limitations and qualifications described therein, the opinion of Chapman and Cutler LLP, special U.S. federal income tax counsel
to the Sponsor. The discussion below is based on the Internal Revenue Code of 1986 (the "Code"), Treasury Regulations promulgated
thereunder and judicial and administrative interpretations of the Code, all as in effect on the date of this Prospectus and all of which
are subject to change either prospectively or retroactively. The tax treatment of Shareholders may vary depending upon their own particular
circumstances. Certain Shareholders (including, but not limited to, banks, financial institutions, insurance companies, regulated investment
companies, real estate investment trusts, tax-exempt organizations, tax-exempt or tax-advantaged retirement plans or accounts, brokers
or dealers, traders, partnerships for U.S. federal income tax purposes, persons holding Shares as a position in a "hedging,"
"straddle," "conversion," "constructive sale" or other integrated transaction for U.S. federal income
tax purposes, persons whose "functional currency" is not the U.S. dollar, persons with "applicable financial statements"
within the meaning of Section 451(b) of the Code, or other investors with special circumstances) may be subject to special rules not
discussed below. In addition, the following discussion applies only to investors who will hold Shares as "capital assets"
within the meaning of Section 1221 of the Code. Moreover, the discussion below does not address the effect of any state, local or foreign
tax law consequences that may apply to an investment in Shares. Purchasers of Shares are urged to consult their own tax advisers with
respect to all federal, state, local and foreign tax law considerations potentially applicable to their investment in Shares.
For
purposes of this discussion, a "U.S. Shareholder" is a Shareholder that is:
●
an
individual who is treated as a citizen or resident of the United States for U.S. federal income tax purposes;
●
a
corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
●
an
estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
●
a
trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under applicable
Treasury Regulations to be treated as a domestic trust.
A
Shareholder that is not a U.S. Shareholder as defined above is considered a "Non-U.S. Shareholder" for purposes of this discussion.
If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Shares, the tax treatment
of a partner generally depends upon the status of the partner and the activities of the partnership. If you are a partner of a partnership
holding Shares, the discussion below may not be applicable and we urge you to consult your own tax adviser for the U.S. federal income
tax implications of the purchase, ownership and disposition of such Shares.
Taxation
of the Trust
The
Sponsor and the Trustee will treat the Trust as a "grantor trust" for U.S. federal income tax purposes. In the opinion of
Chapman and Cutler LLP, although not free from doubt due to the lack of directly governing authority, the Trust should be classified
as a "grantor trust" for U.S. federal income tax purposes (and the following discussion assumes such classification). As
a result, the Trust itself should not be subject to U.S. federal income tax. Instead, the Trust's income and expenses should "flow
through" to the Shareholders, and the Trustee will report the Trust's income, gains, losses and deductions to the Internal
Revenue Service (the "IRS") on that basis.
150
The
opinion of Chapman and Cutler LLP represents only its best legal judgment and is not binding on the IRS or any court. Accordingly, there
can be no assurance that the IRS will agree with the conclusions of counsel's opinion and it is possible that the IRS or another
tax authority could assert a position contrary to one or all of those conclusions and that a court could sustain that contrary position.
Neither the Sponsor nor the Trustee will request a ruling from the IRS with respect to the classification of the Trust for U.S. federal
income tax purposes or with respect to any other matter. Because of the evolving nature of digital assets, it is not possible to predict
potential future developments that may arise with respect to digital assets, including forks, airdrops and other similar occurrences.
Assuming that the Trust is currently a grantor trust for U.S. federal income tax purposes, certain future developments could render it
impossible, or impracticable, for the Trust to continue to be treated as a grantor trust for such purposes. If the IRS were to assert
successfully that the Trust is not classified as a "grantor trust," the Trust would likely be classified as a partnership
for U.S. federal income tax purposes, which may affect the timing and other tax consequences to the Shareholders, and might be classified
as a publicly traded partnership that would be taxable as a corporation for U.S. federal income tax purposes, in which case the Trust
would be taxed in the same manner as a regular corporation on its taxable income and distributions to Shareholders out of the earnings
and profits of the Trust would be taxed to Shareholders as ordinary dividend income.
Uncertainty
Regarding the U.S. Federal Income Tax Treatment of Digital Assets
Each
beneficial owner of Shares will be treated for U.S. federal income tax purposes as the owner of an undivided interest in the ether held
in the Trust. Due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital
assets, many significant aspects of the U.S. federal income tax treatment of digital assets are uncertain.
In
2014, the IRS released a notice (the "Notice") discussing certain aspects of the treatment of "convertible virtual
currency" (including, without limitation, ether) for U.S. federal income tax purposes. In the Notice, the IRS stated that, for
U.S. federal income tax purposes, such digital assets (i) are property, (ii) are not "currency" for purposes of the provisions
of the Code relating to foreign currency gain or loss and (iii) may be held as a capital asset. Later, the IRS released a revenue ruling
and a set of "Frequently Asked Questions" (the "2019 Ruling & FAQs") that provide some additional guidance,
including guidance to the effect that, under certain circumstances, hard forks of digital assets are taxable events giving rise to ordinary
income and guidance with respect to the determination of the tax basis of digital assets. Recently, the IRS released additional guidance
confirming that staking income paid in digital assets is included in gross income (the "2023 Ruling & FAQs"; the 2019
Ruling & FAQs and the 2023 Ruling & FAQs together, the "Rulings & FAQs"). However, the Notice and the Rulings
& FAQs do not address other significant aspects of the U.S. federal income tax treatment of digital assets. Moreover, although the
Rulings & FAQs address the treatment of hard forks, there continues to be significant uncertainty with respect to the timing and
amount of the income inclusions. While the Rulings & FAQs do not address most situations in which airdrops occur, it is clear from
the reasoning of the Rulings & FAQs that the IRS generally would treat an airdrop as a taxable event giving rise to ordinary income.
There
can be no assurance that the IRS will not alter its position with respect to digital assets in the future or that a court would uphold
the treatment set forth in the Notice and the Rulings & FAQs. It is also unclear what additional guidance on the treatment of digital
assets for U.S. federal income tax purposes may be issued in the future. Any such alteration of the current IRS positions or additional
guidance could result in adverse tax consequences for Shareholders and could have an adverse effect on the prices of digital currencies,
including the price of ether, and therefore could have an adverse effect on the value of Shares. Future developments that may arise with
respect to digital assets may increase the uncertainty with respect to the treatment of digital assets for U.S. federal income tax purposes.
For
example, El Salvador has recently announced that it is making bitcoin legal tender in El Salvador. If the IRS recognizes bitcoin as a
"foreign currency," the tax consequences of an investment in the Trust will change. Gains or losses in respect of foreign
currencies are generally ordinary gains or losses. In general, entering or acquiring forward contracts, futures contracts, options or
similar financial instruments is treated as a foreign currency contract that produces ordinary gain or loss. However, ordinary gain or
loss treatment does not apply (unless elected) to contracts that require delivery of, or the settlement of which depends on the value
of, a foreign currency in respect of which positions are traded through regulated futures contracts. Instead, such contracts are treated
as having 60% long-term capital gain or loss and 40% short-term capital gain or loss. Such contracts are also required to be marked to
market at the end of each year.
151
The
remainder of this discussion assumes that ether, and any Incidental Rights or IR Assets that the Trust may hold, is properly treated
for U.S. federal income tax purposes as property that may be held as a capital asset and that is not currency for purposes of the provisions
of the Code relating to foreign currency gain and loss.
Shareholders
are urged to consult their tax advisers regarding the tax consequences of an investment in the Trust and in digital currencies in general,
including, in the case of Shareholders that are generally exempt from U.S. federal income taxation, whether such Shareholders may recognize
"unrelated business taxable income" ("UBTI") as a consequence of a fork, airdrop or similar occurrence.
Incidental
Rights and IR Assets
From
time to time, the Trust may come into possession of rights incident to its ownership of ether, which permit the Trust to acquire, or
otherwise establish dominion and control over, other digital assets. These rights are generally expected to be Forked Assets that arise
in connection with hard forks in the Ethereum blockchain, airdrops offered to holders of ether and digital assets arising from other
similar events without any action of the Trust or of the Sponsor or Trustee on behalf of the Trust. These rights are referred to as "Incidental
Rights" and any digital assets acquired through Incidental Rights are referred to as "IR Assets." Pursuant to the Trust
Agreement, the Trust has explicitly disclaimed all Incidental Rights and IR Assets. Such assets are not considered assets of the Trust
at any point in time and will not be taken into account for purposes of determining the Trust's NAV and the NAV per Share.
Pursuant
to the Trust Agreement, to the extent that the Trust receives such assets in a Trust wallet, it will, as soon as practicable, and, if
possible, immediately, distribute such assets to the Sponsor. At such time, the Incidental Right(s) and/or IR Asset(s) will be the property
of the Sponsor. Once acquired, the Sponsor, subject to a reasonable, good faith determination, may take any lawful action necessary or
desirable in connection with its acquisition of such assets. 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 in exchange for another digital asset that may subsequently be exchanged for cash. The Sponsor would then contribute that cash
back to the Trust, which in turn would distribute the cash to DTC to be distributed to Shareholders in proportion to the number of Shares
owned. Such distribution would generally be a taxable event giving rise to ordinary income for a U.S. Holder.
Taxation
of U.S. Shareholders
Shareholders
will be treated for U.S. federal income tax purposes as if they directly owned a pro rata share of the underlying assets held in the
Trust. Shareholders also will be treated as if they directly received their respective pro rata shares of the Trust's income, if
any, and as if they directly incurred their respective pro rata shares of the Trust's expenses. In the case of a Shareholder that
acquires its Shares as part of the creation of a Basket, the delivery of bitcoin and ether to the Trust in exchange for a pro rata share
of the underlying bitcoin and ether represented by the Shares will not be a taxable event to the Shareholder, and the Shareholder's
tax basis and holding period for the Shareholder's pro rata share of the bitcoin and ether held in the Trust will be the same as
its tax basis and holding period for the bitcoin and ether delivered in exchange therefor. For purposes of this discussion, and unless
stated otherwise, it is assumed that all of a Shareholder's Shares are acquired on the same date and at the same price per Share.
Shareholders that hold multiple lots of Shares, or that are contemplating acquiring multiple lots of Shares, should consult their own
tax advisers as to the determination of the tax basis and holding period for the underlying ether related to such Shares.
Bitcoin
and ether may be used to pay certain expenses of the Trust, which under current IRS guidance will be treated as a sale of such bitcoin
and ether. If the Trust sells bitcoin and ether (for example to generate cash to pay fees or expenses) or is treated as selling bitcoin
and ether (for example by using ether to pay fees or expenses), a Shareholder will recognize gain or loss in an amount equal to the difference
between (a) the Shareholder's pro rata share of the amount realized by the Trust upon the sale and (b) the Shareholder's
tax basis for its pro rata share of the bitcoin and ether that was sold. A Shareholder's tax basis for its share of any bitcoin
and ether sold by the Trust should generally be determined by multiplying the Shareholder's total basis for its share of all of
the bitcoin and ether held in the Trust immediately prior to the sale, by a fraction the numerator of which is the amount of bitcoin
and ether sold, and the denominator of which is the total amount of the bitcoin and ether held in the Trust immediately prior to the
sale. After any such sale, a Shareholder's tax basis for its pro rata share of the ether remaining in the Trust should be equal
to its tax basis for its share of the total amount of the bitcoin and ether held in the Trust immediately prior to the sale, less the
portion of such basis allocable to its share of the bitcoin and ether that was sold.
152
Shareholders'
pro rata shares of the expenses incurred by the Trust will be treated as "miscellaneous itemized deductions" for U.S. federal
income tax purposes. As a result, for taxable years beginning after December 31, 2017 and before January 1, 2026, a non-corporate U.S.
Shareholder's share of these expenses will not be deductible for U.S. federal income tax purposes. For taxable years beginning
on or after January 1, 2026, a non-corporate U.S. Shareholder's share of these expenses will be deductible for regular U.S. federal
income tax purposes only to the extent that the U.S. Shareholder's share of the expenses, when combined with other "miscellaneous
itemized deductions," exceeds 2% of the U.S. Shareholder's adjusted gross income for the particular year, will not be deductible
for U.S. federal alternative minimum tax purposes and will be subject to certain other limitations on deductibility.
Upon
a Shareholder's sale of some or all of its Shares, the Shareholder will be treated as having sold the portion or all, respectively,
of its pro rata share of the ether held in the Trust at the time of the sale that is attributable to the Shares sold. Accordingly, the
Shareholder generally will recognize gain or loss on the sale in an amount equal to the difference between (a) the amount realized pursuant
to the sale of the Shares, and (b) the Shareholder's tax basis for the portion of its pro rata share of the bitcoin and ether held
in the Trust at the time of sale that is attributable to the Shares sold, as determined in the manner described in the preceding paragraph.
Based on current IRS guidance, such gain or loss (as well as any gain or loss realized by a Shareholder on account of the Trust selling
bitcoin and ether) will generally be long-term or short-term capital gain or loss, depending upon whether the Shareholder has a holding
period in its pro rata share of the bitcoin and ether that was sold of more than one (1) year.
The
current maximum tax rate for individuals applicable to capital gains is 20% (subject to an additional tax of 3.8% on net investment income).
However, gain from collectibles is subject to a 28% maximum (also subject to the 3.8% additional tax), and currency gain is subject to
tax at ordinary income rates. Current guidance indicates that digital assets are treated neither as collectibles nor as currencies, but
the IRS has the authority to change its position on the treatment of digital assets.
A
redemption of some or all of a Shareholder's Shares in exchange for the underlying bitcoin and ether represented by the Shares
redeemed generally will not be a taxable event to the Shareholder. The Shareholder's tax basis for the bitcoin and ether received
in the redemption generally will be the same as the Shareholder's tax basis for the portion of its pro rata share of the bitcoin
and ether held in the Trust immediately prior to the redemption that is attributable to the Shares redeemed. The Shareholder's
holding period with respect to the bitcoin and ether received should include the period during which the Shareholder held the Shares
redeemed. A subsequent sale of the bitcoin and ether received by the Shareholder will be a taxable event, unless a nonrecognition provision
of the Code applies to such sale.
After
any sale or redemption of less than all of a Shareholder's Shares, the Shareholder's tax basis for its pro rata share of
the bitcoin and ether held in the Trust immediately after such sale or redemption generally will be equal to its tax basis for its share
of the total amount of the bitcoin and ether held in the Trust immediately prior to the sale or redemption, less the portion of such
basis that is taken into account in determining the amount of gain or loss recognized by the Shareholder upon such sale or, in the case
of a redemption, that is treated as the basis of the bitcoin and ether received by the Shareholder in the redemption.
If
a fork were to occur in the Bitcoin blockchain or Ethereum blockchain, the Trust would hold both the original bitcoin or ether (as applicable)
and the alternative new asset. However, such Forked Asset would not constitute an asset of the Trust as, pursuant to the Trust Agreement,
the Trust has disclaimed all Incidental Rights and IR Assets, including Forked Assets. The Trust Agreement requires that, if such a transaction
occurs, the Trust will, as soon as possible, distribute the Forked Asset to the Sponsor. The Sponsor may then sell the Forked Asset,
at which point it would contribute the proceeds of that sale back to the Trust, which would distribute the cash to Shareholders. Such
distribution would cause Shareholders to incur a federal income tax liability.
Although
the Trust has explicitly disclaimed all Incidental Rights and IR Assets, it is possible that the IRS may not recognize such a disclaimer.
Under such circumstances, the receipt, distribution and/or sale of the Forked Asset may cause Shareholders to incur a federal income
tax liability. The IRS has taken the position in the Rulings & FAQs that, under certain circumstances, a fork constitutes a taxable
event giving rise to ordinary income, and it is clear from the reasoning of the Rulings & FAQs that the IRS generally would treat
an airdrop as a taxable event giving rise to ordinary income. Under the Rulings & FAQs, a U.S. Shareholder will have a basis in any
IR Asset received in a fork or airdrop equal to the amount of income the U.S. Shareholder recognizes as a result of such fork or airdrop
and the U.S. Shareholder's holding period for such IR Asset will begin as of the time it recognizes such income. In the absence
of guidance to the contrary, it is possible that any income recognized by a U.S. tax-exempt Shareholder as a consequence of a hard fork,
airdrop or similar occurrence would constitute UBTI. A tax-exempt Shareholder should consult its tax adviser regarding whether such Shareholder
may recognize some UBTI as a consequence of an investment in Shares.
153
3.8%
Tax on Net Investment Income
Certain
U.S. Shareholders who are individuals are required to pay a 3.8% tax on the lesser of the excess of their modified adjusted gross income
over a threshold amount ($210,000 for married persons filing jointly and $200,000 for single taxpayers) or their "net investment
income," which generally includes capital gains from the disposition of property. This tax is in addition to any capital gains
taxes due on such investment income. A similar tax applies to estates and trusts. U.S. Shareholders should consult their own tax advisers
regarding the effect, if any, this tax may have on their investment in the Shares.
Brokerage
Fees and Trust Expenses
Any
brokerage or other transaction fee incurred by a Shareholder in purchasing Shares will be treated as part of the Shareholder's
tax basis in the underlying assets of the Trust. Similarly, any brokerage fee incurred by a Shareholder in selling Shares will reduce
the amount realized by the Shareholder with respect to the sale.
Shareholders
will be required to recognize the full amount of gain or loss upon a sale or deemed sale of bitcoin and ether by the Trust (as discussed
above), even though some or all of the proceeds of such sale are used by the Sponsor to pay Trust expenses. Shareholders may deduct their
respective pro rata shares of each expense incurred by the Trust to the same extent as if they directly incurred the expense. Shareholders
who are individuals, estates or trusts, however, may be required to treat some or all of the expenses of the Trust as miscellaneous itemized
deductions. An individual may not deduct miscellaneous itemized deductions for tax years beginning after December 31, 2017 and before
January 1, 2026. For tax years beginning after December 31, 2025, individuals may deduct certain miscellaneous itemized deductions only
to the extent they exceed in the aggregate 2% of the individual's adjusted gross income. Similar rules apply to certain miscellaneous
itemized deductions of estates and trusts. In addition, such deductions may be subject to phase-outs and other limitations under applicable
provisions of the Code.
Investment
by Certain Retirement Plans
Individual
retirement accounts ("IRAs") and participant-directed accounts under tax-qualified retirement plans are limited in the types
of investments they may make under the Code. Potential purchasers of Shares that are IRAs or participant-directed accounts under a Code
section 401(a) plan should consult with their own tax advisers as to the tax consequences of a purchase of Shares.
Taxation
of Non-U.S. Shareholders
A
Non-U.S. Shareholder generally should not be subject to U.S. federal income tax with respect to gain recognized upon the sale or other
disposition of Shares, or upon the sale or disposition of ether by the Trust, unless (1) the Non-U.S. Shareholder is an individual and
is present in the United States for 183 days or more during the taxable year of the sale or other disposition, and the gain is treated
as being from U.S. sources; or (2) the gain is effectively connected with the conduct by the Non-U.S. Shareholder of a trade or business
in the United States and certain other conditions are met. A Non-U.S. Shareholder also will generally not be subject to U.S. federal
income or withholding tax with respect to any distribution received from the Trust, whether in cash or in-kind.
Provided
that it does not constitute income that is treated as "effectively connected" with the conduct of a trade or business in
the United States, U.S.-source "fixed or determinable annual or periodical" ("FDAP") income received, or treated
as received, by a Non-U.S. Shareholder will generally be subject to U.S. withholding tax at the rate of 30% (subject to possible reduction
or elimination pursuant to an applicable tax treaty and to statutory exemptions such as the portfolio interest exemption). Although there
is no guidance on point, it is likely that any ordinary income recognized by a Non-U.S. Shareholder as a result of a fork, airdrop or
similar occurrence would constitute FDAP income. It is unclear, however, whether any such FDAP income would be properly treated as U.S.-source
or foreign-source FDAP income. A non-U.S. Shareholder in the Trust should assume that, in the absence of guidance, a withholding agent
(including the Sponsor) is likely to withhold 30% from a Non-U.S. Shareholder's pro rata share of any such income, 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 Incidental Rights, IR Assets or proceeds from the disposition of Incidental Rights or IR Assets by the Sponsor. A Non-U.S.
Shareholder that is a resident of a country that maintains an income tax treaty with the United States may be eligible to claim the benefits
of that treaty to reduce or eliminate, or to obtain a partial or full refund of, the 30% U.S. withholding tax on its share of any such
income, but only if the Non-U.S. Shareholder's home country treats the Trust as "fiscally transparent," as defined
in applicable Treasury Regulations.
154
Although
the nature of the Incidental Rights and IR Assets that the Trust may hold in the future is uncertain and the Trust has sought to disclaim
such assets, it is unlikely that any such asset would give rise to income that is treated as "effectively connected" with
the conduct of a trade or business in the United States or that any income derived by a Non-U.S. Shareholder from any such asset would
otherwise be subject to U.S. income or withholding tax, except as discussed above in connection with the fork, airdrop or similar occurrence
giving rise to Incidental Rights or IR Assets. There can, however, be no complete assurance in this regard.
U.S.
Information Reporting and Backup Withholding
The
Trustee will file certain information returns with the IRS and provide certain tax-related information to Shareholders in connection
with the Trust. To the extent required by applicable regulations, each Shareholder will be provided with information regarding its allocable
portion of the Trust's annual income, expenses, gains and losses (if any). A U.S. Shareholder may be subject to U.S. backup withholding
tax, at a rate of 24%, in certain circumstances unless it provides its taxpayer identification number and complies with certain certification
procedures. Non-U.S. Shareholders may have to comply with certification procedures to establish that they are not a U.S. person, and
some Non-U.S. Shareholders may be required to meet certain information reporting or certification requirements imposed by the Foreign
Account Tax Compliance Act, in order to avoid certain information reporting and withholding tax requirements.
The
amount of any backup withholding will be allowed as a credit against a Shareholder's U.S. federal income tax liability and may
entitle the Shareholder to a refund, provided that the required information is furnished to the IRS in a timely manner.
Taxation
in Jurisdictions Other Than the United States
Prospective
purchasers of Shares that are based in or acting out of a jurisdiction other than the United States are advised to consult their own
tax advisers as to the tax consequences under the laws of such jurisdiction (or any other jurisdiction other than the United States to
which they are subject) of their purchase, holding, sale and redemption of or any other dealing in Shares and, in particular, as to whether
any value added tax, other consumption tax or any transfer tax is payable in relation to such purchase, holding, sale, redemption or
other dealing.
PROSPECTIVE
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE DECIDING WHETHER TO INVEST IN THE SHARES OF THE TRUST.
Purchases
By Employee Benefit Plans
Although
there can be no assurance that an investment in the Trust will achieve the investment objectives of an employee benefit plan in making
such investment, the Trust has certain features that may be of interest to such a plan. For example, because they are not taxpaying entities,
employee benefit plans are not subject to paying annual tax on profits (if any) of the Trust.
General
The
following section sets forth certain consequences under the Employee Retirement Income Security Act of 1974 ("ERISA") and
the Code, which a fiduciary of an "employee benefit plan" as defined in, and subject to the fiduciary responsibility provisions
of, ERISA or of a "plan" as defined in and subject to Section 4975 of the Code who has investment discretion should
consider before deciding to invest the plan's assets in the Trust (such "employee benefit plans" and "plans"
being referred to herein as "Plans," and such fiduciaries with investment discretion being referred to herein as "Plan
Fiduciaries"). The following summary is intended not to be complete, but only to address certain questions under ERISA and the
Code that are likely to be raised by the Plan Fiduciary's own counsel.
155
In
general, the terms "employee benefit plan" as defined in ERISA and "plan" as defined in Section 4975 of
the Code together refer to any plan or account of various types that provide retirement benefits or welfare benefits to an individual
or to an employer's employees and their beneficiaries. Such plans and accounts include, but are not limited to, corporate pension
and profit sharing plans, "simplified employee pension plans," Keogh plans for self-employed individuals (including partners),
individual retirement accounts described in Section 408 of the Code and medical benefit plans.
Each
Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Trust, including
the role that such an investment in the Trust would play in the Plan's overall investment portfolio. Each Plan Fiduciary, before
deciding to invest in the Trust, must be satisfied that such investment in the Trust is a prudent investment for the Plan, that the investments
of the Plan, including the investment in the Trust, are diversified so as to minimize the risk of large losses and that an investment
in the Trust complies with the documents of the Plan and related trust.
EACH
PLAN FIDUCIARY CONSIDERING ACQUIRING SHARES MUST CONSULT WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN INVESTMENT IN THE TRUST
IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THE TRUST IS NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM.
Plan
Assets
ERISA
and a regulation issued thereunder (the "Plan Asset Rules") contain rules for determining when an investment by a Plan in
an entity will result in the underlying assets of such entity being assets of the Plan for purposes of ERISA and Section 4975 of
the Code (i.e., "plan assets"). Those rules provide that assets of an entity will not be plan assets of a Plan that purchases
an interest therein if certain exceptions apply, including (i) an exception applicable if the equity interest purchased is a "publicly-offered
security" (the "Publicly-Offered Security Exception") and (ii) an exception applicable if the investment by all
"benefit plan investors" is not "significant" or certain other exceptions apply (the "Insignificant Participation
Exception").
The
Publicly-Offered Security Exception applies if the equity interest is a security that is (1) "freely transferable,"
(2) part of a class of securities that is "widely held," and (3) either (a) part of a class of securities
registered under Section 12(b) or 12(g) of the Exchange Act, or (b) sold to the Plan as part of a public offering pursuant to an
effective registration statement under the 1933 Act and the class of which such security is a part is registered under the Exchange Act
within 120 days (or such later time as may be allowed by the SEC) after the end of the fiscal year of the issuer in which the offering
of such security occurred. The Plan Asset Rules state that the determination of whether a security is "freely transferable"
is to be made based on all relevant facts and circumstances. Under the Plan Asset Rules, a class of securities is "widely held"
only if it is of a class of securities owned by 100 or more shareholders independent of the issuer and of each other.
The
Shares of the Trust should be considered to be publicly offered securities. First, the Shares will be sold as part of a public offering
pursuant to an effective registration statement under the 1933 Act, and the Shares will be timely registered under the Exchange Act.
Second, it appears that the Shares will be freely transferable because the Shares of the Trust will be freely tradable on the Exchange
like any other exchange-listed security. Finally, it is anticipated that the Shares will be owned by at least 100 Shareholders independent
of the Trust. Therefore, the underlying assets of the Trust should not be considered to constitute assets of any Plan that purchases
Shares.
Ineligible
Purchasers
In
general, Shares may not be purchased with the assets of a Plan if the Sponsor, the Administrator, the Trustee, the Transfer Agent, the
Bitcoin and Ether Custodian, the Marketing Agent, the Exchange, or any of their respective affiliates or any of their respective employees
either: (a) has investment discretion with respect to the investment of such plan assets; (b) has authority or responsibility
to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding
that such advice will serve as a primary basis for investment decisions with respect to such plan assets and that such advice will be
based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to such Plan. A party that
is described in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and
any such purchase might result in a "prohibited transaction" under ERISA and the Code.
156
Except
as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in the Trust are
based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder.
No assurance can be given that administrative, judicial or legislative changes will not occur that will not make the foregoing statements
incorrect or incomplete.
ALLOWING
AN INVESTMENT IN THE TRUST IS NOT TO BE CONSTRUED AS A REPRESENTATION BY THE SPONSOR OR ANY OF ITS AFFILIATES, AGENTS OR EMPLOYEES THAT
THIS INVESTMENT MEETS SOME OR ALL OF THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS
INVESTMENT IS APPROPRIATE FOR ANY SUCH PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH THE PLAN'S ATTORNEY
AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN THE TRUST IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN, CURRENT
TAX LAW AND ERISA.
Information
You Should Know
This
Prospectus contains information investors should consider when making an investment decision about the Shares. Investors should rely
only on the information contained in this Prospectus or any applicable prospectus supplement. None of the Trust or the Sponsor has authorized
any person to provide investors with different information and, if anyone provides investors with different or inconsistent information,
investors should not rely on it. This Prospectus is not an offer to sell the Shares in any jurisdiction where the offer or sale of the
Shares is not permitted.
The
information contained in this Prospectus was obtained from the Sponsor and other sources the Sponsor believed to be reliable.
Investors
should disregard anything we said in an earlier document that is inconsistent with what is included in this Prospectus or any applicable
prospectus supplement. Where the context requires, when the Sponsor refers to this "Prospectus," it is referring to this
Prospectus and (if applicable) the relevant prospectus supplement.
Investors
should not assume that the information in this Prospectus or any applicable prospectus supplement is current as of any date other than
the date on the front page of this Prospectus or the date on the front page of any applicable prospectus supplement.
Cross
references in this Prospectus to captions in these materials indicate where an investor can find further related discussions. The table
of contents assists in locating these captions.
Summary
of Promotional and Sales Material
The
Trust expects to use the following sales material it has prepared:
●
the
Trust's website, _________.com; and
●
the
Trust Fact Sheet found on the Trust's website.
The
materials described above are not a part of this Prospectus or the registration statement of which this Prospectus is a part.
Intellectual
Property
The
Sponsor owns trademark registrations for the Trust. The Sponsor relies upon these trademarks through which it markets its services and
strives to build and maintain brand recognition in the market and among current and potential investors. So long as the Sponsor continues
to use these trademarks to identify its services, without challenge from any third party, and properly maintains and renews the trademark
registrations under applicable laws, rules and regulations, it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.
The
Sponsor also owns trademark registrations for the Sponsor. The Sponsor relies upon these trademarks through which it markets its services
and strives to build and maintain brand recognition in the market and among current and potential investors. So long as the Sponsor continues
to use these trademarks to identify its services, without challenge from any third party, and properly maintains and renews the trademark
registrations under applicable laws, rules and regulations; it will continue to have indefinite protection for these trademarks under
current laws, rules and regulations.
157
Where
You Can Find More Information
The
Trust has filed a registration statement on Form S-1 with the SEC under the 1933 Act. This Prospectus does not contain all of the information
set forth in the registration statement (including the exhibits to the registration statement), parts of which have been omitted in accordance
with the rules and regulations of the SEC. For further information about the Trust or the Shares, please refer to the registration statement,
which is available online at www.sec.gov.
Information
about the Trust and the Shares can also be obtained from the Trust's website, which is _______.com. The Trust's website address
is only provided here as a convenience and the information contained on or connected to the website is not part of this Prospectus or
the registration statement of which this Prospectus is part. The Trust is subject to the informational requirements of the Exchange Act
and will file certain reports and other information with the SEC under the Exchange Act. The Sponsor will file an updated Prospectus
annually on behalf of the Trust pursuant to the requirements of the 1933 Act.
The
reports and other information are available online at
www.sec.gov
.
Privacy
Policy
The
Trust and the Sponsor may collect or have access to certain nonpublic personal information about current and former investors. Nonpublic
personal information may include information received from investors, such as an investor's name, social security number and address,
as well as information received from brokerage firms about investor holdings and transactions in Shares.
The
Trust and the Sponsor do not disclose nonpublic personal information except as required by law or as described in their Privacy Policy.
In general, the Trust and the Sponsor restrict access to the nonpublic personal information they collect about investors to those of
their and their affiliates' employees and service providers who need access to such information to provide products and services
to investors.
The
Trust and the Sponsor maintain safeguards that comply with federal law to protect investors' nonpublic personal information. These
safeguards are reasonably designed to (1) ensure the security and confidentiality of investors' records and information, (2) protect
against any anticipated threats or hazards to the security or integrity of investors' records and information, and (3) protect
against unauthorized access to or use of investors' records or information that could result in substantial harm or inconvenience
to any investor.
Third-party
service providers with whom the Trust and the Sponsor share nonpublic personal information about investors must agree to follow appropriate
standards of security and confidentiality, which includes safeguarding such nonpublic personal information physically, electronically
and procedurally.
A
copy of the Sponsor's current Privacy Policy, which is applicable to the Trust, is provided to investors annually and is also available
at _______.com.
158
Report
of independent registered public accounting firm
[to
be provided in a subsequent amendment]
F-
1
Statement
of financial condition
[to
be provided in a subsequent amendment]
F-
2
NOTES
TO FINANCIAL STATEMENT
[to
be provided in a subsequent amendment]
F-
3
Bitwise
Bitcoin & Ethereum ETF
shares
prospectus
__________,
2025
Until
_________, 2025 (25 calendar days after the date of this Prospectus) all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
Trust shall not bear any expenses incurred in connection with the issuance and distribution of the securities being registered. These
expenses shall be paid by Bitwise Investment Advisers, LLC, the sponsor of the Trust. Except for the Securities and Exchange Commission
Registration Fee and Exchange Listing Fee, all such expenses are estimated:
SEC registration fee (actual)
$
0
*
Listing fee (actual)
$
Auditor's fees and expenses
$
Legal fees and expenses
$
Printing expenses
$
Miscellaneous expenses
$
Total
$
*
An
indeterminate number of the securities is being registered as may from time to time be sold at indeterminate prices. In accordance with
Rules 456(d) and 457(u), the Trust is deferring payment of all of the additional registration fee and will pay the additional registration
fee subsequently on an annual basis.
Item
14. Indemnification of Directors and Officers.
The
Trust Agreement provides that the Sponsor and its shareholders, members, directors, officers, employees, Affiliates and subsidiaries
(each a "Sponsor Indemnified Party") will be indemnified by the Trust and held harmless against any loss, liability or expense
incurred under the Trust Agreement without gross negligence, bad faith, or willful misconduct on the part of such Sponsor Indemnified
Party arising out of or in connection with the performance of its obligations hereunder or any actions taken in accordance with the provisions
of the Trust Agreement. Any amounts payable to a Sponsor Indemnified Party under Section 4.06 of the Trust Agreement may be payable in
advance or will be secured by a lien on the Trust. The Sponsor will not be under any obligation to appear in, prosecute or defend any
legal action that in its opinion may involve it in any expense or liability; provided, however, that the Sponsor may, in its discretion,
undertake any action that it may deem necessary or desirable in respect of the Trust Agreement and the rights and duties of the parties
hereto and the interests of the Shareholders and, in such event, the legal expenses and costs of any such action will be expenses and
costs of the Trust and the Sponsor will be entitled to be reimbursed therefor by the Trust. The obligations of the Trust to indemnify
the Sponsor Indemnified Parties will survive the termination of the Trust Agreement.
Item
15. Recent Sales of Unregistered Securities.
None.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibit.
The
exhibits to this registration statement are listed in the Exhibit Index to this registration statement, which is incorporated herein
by reference.
(b)
Financial
Statement Schedules. Not applicable.
II-
1
Item
17. Undertakings.
The
undersigned registrant hereby undertakes:
(1)
To
                                            file, during any period in which offers or sales are being made, a post-effective amendment
                                            to this registration statement:
(i)
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided,
however, that: (1)(i), (ii), and (iii) of this section do not apply if the registration statement is on Form S-1, Form S-3, Form SF-3
or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed
with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement, or, as to a registration statement on Form S-3, Form SF-3 or Form F-3,
is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2)
That,
                                            for the purpose of determining any liability under the Securities Act of 1933, each such
                                            post-effective amendment shall be deemed to be a new registration statement relating to the
                                            securities offered therein, and the offering of such securities at that time shall be deemed
                                            to be the initial bona fide offering thereof.
(3)
To
                                            remove from registration by means of a post-effective amendment any of the securities being
                                            registered that remain unsold at the termination of the offering.
(4)
That,
                                            for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i)
If
                                            the registrant is relying on Rule 430B:
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier
of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the
offering described in the Prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date
an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such effective date; or
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(ii)
If
                                            the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as
                                            part of a registration statement relating to an offering, other than registration statements
                                            relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
                                            deemed to be part of and included in the registration statement as of the date it is first
                                            used after effectiveness; provided, however, that no statement made in a registration statement
                                            or prospectus that is part of the registration statement or made in a document incorporated
                                            or deemed incorporated by reference into the registration statement or prospectus that is
                                            part of the registration statement will, as to a purchaser with a time of contract of sale
                                            prior to such first use, supersede or modify any statement that was made in the registration
                                            statement or prospectus that was part of the registration statement or made in any such document
                                            immediately prior to such date of first use.
(5)
That,
                                            for the purpose of determining the liability of the registrant under the Securities Act of
                                            1933 to any purchaser in the initial distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold
to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6)
Insofar
                                            as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
                                            to directors, officers and controlling persons of the registrant pursuant to the foregoing
                                            provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
                                            and Exchange Commission such indemnification is against public policy as expressed in the
                                            Act and is, therefore, unenforceable. In the event that a claim for indemnification against
                                            such liabilities (other than the payment by the registrant of expenses incurred or paid by
                                            a director, officer or controlling person of the registrant in the successful defense of
                                            any action, suit or proceeding) is asserted by such director, officer or controlling person
                                            in connection with the securities being registered, the registrant will, unless in the opinion
                                            of its counsel the matter has been settled by controlling precedent, submit to a court of
                                            appropriate jurisdiction the question whether such indemnification by it is against public
                                            policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of San Francisco, State of California, on November 26, 2024.
Bitwise Investment Advisers, LLC
Sponsor of the Bitwise Bitcoin & Ethereum
    ETF
By:
/s/
    Hunter Horsley
Name:
Hunter Horsley
Title:
President and Treasurer
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities*
and on the dates indicated.
Signature
Title
Date
/s/
    Hunter Horsley
President
November
    26, 2024
Hunter Horsley
(Principal Executive Officer)*
/s/
    Paul ("Teddy") Fusaro
Chief Operating Officer
November
    26, 2024
Paul ("Teddy")
    Fusaro
(Principal Financial Officer
    and Principal Accounting Officer)*
*
The
registrant is a trust and the persons are signing in their capacities as officers of Bitwise Investment Advisers, LLC, the Sponsor of
the registrant.
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EXHIBIT
INDEX
Exhibit
    No.
Exhibit Description
3.1
Declaration of Trust and Trust Agreement
(1)
3.2
Certificate of Trust
(1)
3.3
First Amended and Restated Declaration of Trust and
    Trust Agreement
(2)
5.1
Opinion of Chapman and Cutler LLP as to legality
(2)
8.1
Opinion of Chapman and Cutler LLP as to tax matters
(2)
10.1
Sponsor Agreement
(2)
10.2
Form of Authorized Participant Agreement
(2)
10.3
Marketing Agreement
(2)
10.4
Prime Execution Agreement (with Bitcoin and Ether Custody
    Agreement and Trade Financing Agreement included as exhibits thereto)
(2)
10.5
Cash Custody Agreement
(2)
10.6
Fund Administration and Accounting Agreement
(2)
10.7
Transfer Agency and Service Agreement
(2)
10.8
Form of Master Purchase and Sale Agreement for Digital
    Assets
(2)
23.1
Consent of Independent Registered Public Accounting
    Firm
(2)
23.2
Chapman and Cutler LLP (included in Exhibits 5.1 and
    8.1)
(2)
107
Filing Fee Table
(1)
(1)
Filed
herewith.
(2)
To
be filed by amendment.
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