Bitcoin Commodity Trust S-1/AIPO registration (amended)

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The Sponsor believes that the Trust is not required to register under the Investment Company Act and the Trust is not registered as an investment company under the Investment Company Act.  As a result, Shareholders do not have the regulatory protections provided to investors in investment companies.  The Investment Company Act is designed to protect investors by preventing insiders from managing investment companies to their benefit and to the detriment of public investors, and includes various restrictions and prohibitions such as: prohibiting the issuance of securities having inequitable or discriminatory provisions, preventing persons with certain types of civil or criminal histories from managing investment companies, preventing the use of unsound or misleading methods of computing earnings and asset value, prohibiting fundamental changes in the character of investment companies without the consent of investors and restrictions to prevent investment companies from engaging in excessive leveraging. To its purposes, the Investment Company Act among other things requires the safekeeping and proper valuation of fund assets, heavily restricts transactions with affiliates, limits leveraging and imposes independent governance requirements.

The Sponsor does not believe that the Trust is a commodity pool for purposes of the CEA.  The Trust will not hold or trade in commodity futures contracts regulated by the CEA, as administered by the CFTC.  Further, the Sponsor does not believe that the Sponsor or the Trustee is subject to regulation by the CFTC as a commodity pool operator or a commodity trading advisor in connection with the operation of the Trust. The Trust will not provide Shareholders with the regulatory protections provided to investors in CEA-regulated instruments or commodity pools. If the Sponsor were subject to requirements under the CEA for commodity pool operators, it would be subject to CFTC and NFA oversight, have to comply with certain marketing and advertising rules and be required to provide standardized periodic reporting and disclosure documents to the Trust’s investors.

Although many regulators have provided initial guidance, regulation of digital assets based on or incorporating Blockchain, such as bitcoin, and digital asset exchanges remains undeveloped and will continue to evolve. Further, regulation varies significantly among international, federal, state and local jurisdictions. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, guidance, or other actions, which may severely impact the development and growth of the Bitcoin Network and the utility of bitcoin. Failure by the Bitcoin Network, the Trust or the Sponsor to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences to the Trust, including potential civil penalties and fines.

As Blockchain networks and Blockchain assets have grown in popularity and in market size, federal and state agencies have begun to take interest in, and in some cases regulate, their use and operation. Treatment of virtual currencies continues to evolve under federal and state law. Many U.S. regulators, including the SEC, FinCEN, the CFTC, the IRS, and state regulators including the NYDFS, have made official pronouncements or issued guidance or rules regarding the treatment of bitcoin and other digital currencies. The IRS released guidance treating virtual currency as property that is not currency for U.S. federal income tax purposes. Both federal and state agencies have instituted enforcement actions against those violating their interpretation of existing laws.  Other U.S. and many state agencies have offered little official guidance and issued no definitive rules regarding the treatment of bitcoin.

The CFTC has publicly taken the position that certain virtual currencies, which term it has not defined but which includes cryptocurrencies such as bitcoin, are commodities.   To the extent that bitcoin is deemed to fall within the definition of a “commodity interest” under the CEA, the Trust and the Sponsor may be subject to additional regulation under the CEA and CFTC regulations. This means that the Sponsor may be required to register as a commodity pool operator or commodity trading advisor with the CFTC and become a member of the National Futures Association and may be subject to additional regulatory requirements with respect to the Trust, including disclosure and reporting requirements.

Blockchain networks also face an uncertain or contradictory regulatory landscape in many foreign jurisdictions such as the European Union, China and Russia. Various foreign jurisdictions may, in the future, adopt laws, regulations or directives that affect the Trust. Such laws, regulations or directives may conflict with those of the United States or may directly and negatively impact the Trust. The effect of any future regulatory change is impossible to predict, but such change could be substantial and materially adverse to the Trust.

New or changing laws and regulations or interpretations of existing laws and regulations, in the United States and other jurisdictions, may materially and adversely impact the value of bitcoin, the liquidity and market price of bitcoin, the ability to access marketplaces or exchanges on which to trade bitcoin, and the structure, rights and transferability of bitcoin. On-going 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. While it is impossible to predict the substance and nature of such future or changing laws, regulations or interpretations, the following risk factors discuss new or changing laws and regulations or interpretations that could affect the Trust:

In the case of virtual currencies, state regulators such as the New York State Department of Financial Services (“NYSDFS”) have created new regulatory frameworks.  NYSDFS has implemented a regulatory framework for licensing participants in “virtual currency business activity” known as the “BitLicense,” which is intended to focus on consumer protection. The “BitLicense” regulates the conduct of businesses that are involved in “virtual currencies” in New York or with New York customers and prohibits any person or entity involved in such activity from conducting such activities without a license.

Other states, such as Texas, have published guidance on how their existing regulatory regimes apply to virtual currencies.  Some states, such as New Hampshire, North Carolina and Washington, have amended their state's statutes to include virtual currencies into existing licensing regimes. It is likely that, as Blockchain technologies and the use of virtual currencies continues to grow, additional states will take steps to monitor the developing industry.  Other states are contemplating the creation of licensing regimes; for instance, in June 2022, a bill was introduced in the California legislator titled “Digital Financial Assets Law,” which as currently drafted would require companies “engaging in digital financial asset business activity,” including investing, lending or trading cryptocurrencies, to register with the state’s Department of Financial Protection and Innovation.  Legislatures in Connecticut and Hawaii have introduced similar laws, and legislatures in a total of 37 states have introduced bills that would affect cryptocurrencies in some form. It is currently impossible to determine which of these bills will pass and, if passed, what the exact substance of such laws and any resulting regulations would be, but it is possible that some of those laws or regulations will result in requirements that affect the Trust or Sponsor and ultimately the value of the Shares.

In the future, the operation of the Trust or the issuance of Shares may require the Trust to the Sponsor to obtain state licenses or registration with a state. The effect of any future regulatory action on the Trust, bitcoin, or the Shares is impossible to predict, but such change could be substantial and could adversely affect the value of the Shares.

Although currently cryptocurrencies and certain other digital assets are not regulated or are lightly regulated in many countries, some countries have taken, and may take in the future, regulatory actions that severely restrict the right to acquire, own, hold, sell or use such cryptocurrencies or digital assets or to exchange cryptocurrencies or digital assets for fiat currency. Such regulatory actions or restrictions could adversely affect the value of the Shares or 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.

It is expected that the Trust or Sponsor may be subject to a number of regulatory and licensing requirements that may adversely affect the Trust.  As discussed in the risk factor above titled “States may require licenses that apply to Blockchain technologies and digital assets, such as bitcoin and tokens, and token offerings. The Trust or Sponsor may be unable to comply with state licensing requirements or policies, which may materially adversely affect the value of the Shares”, 37 states have introduced legislation affecting cryptocurrencies and digitals in some form, and the 118^th Congress has introduced more than 50 bills relating to cryptocurrencies and digital assets.  It is currently impossible to determine which of these bills will pass and, if passed, what the exact substance of such laws and any resulting regulations would be, but it is possible that some of those laws or regulations will result in requirements that affect the Trust or Sponsor and ultimately the value of the Shares. Failure to satisfy those requirements may mean that the Sponsor will be unable to manage the Trust as planned, that the Trust or the Sponsor may not be able to operate in certain jurisdictions or potentially operate at all, which would have severe, adverse consequences on the value of the Shares.

The Trust's or Sponsor's activities may require the registration of the Trust or Sponsor as a money services business under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act. If regulatory changes or interpretations of the Trust's or Sponsor's activities require the licensing or other registration as a money transmitter or business engaged in digital currency activity (e.g., under the New York BitLicense framework) (or equivalent designation) under state law in any state in which the Trust or Sponsor operate, the Trust or Sponsor may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include, among other things, the implementation of anti-money laundering programs, cyber security, consumer protection, financial and reporting requirements and maintenance of certain records and other operational requirements. In the event of any such requirement, to the extent that the Sponsor decides to continue the Trust, the required registrations, licensure and regulatory compliance steps may result in extraordinary, nonrecurring expenses to the Trust. Rather than incur these expenses or comply with licensing requirements, the Sponsor may decide to terminate the Trust. Any termination of the Trust in response to the changed regulatory circumstances may be at a time that is disadvantageous to Shareholders.

Furthermore, the process of obtaining the necessary licenses could take an extensive period of time. There is also a risk that necessary state or federal licenses will not be granted and therefore, the Sponsor may have to act to dissolve and liquidate the Trust. Any such termination could result in the liquidation of the Trust's bitcoin at a time that is disadvantageous to Shareholders.

In addition, to the extent the Trust or Sponsor are found to have operated without appropriate state or federal licenses, the Trust or Sponsor may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm the reputation of the Trust or Sponsor and affect the value of the Shares.

The Trust is an emerging growth company, as defined in the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Trust cannot predict if investors will find the Shares less attractive because of the Trust's reliance on these exemptions. If some investors find the Trust's Shares less attractive as a result, there may be a less active trading market for the Shares and the price of Shares may be more volatile.

In addition, under the JOBS Act, the Trust's independent registered public accounting firm will not be required to attest to the effectiveness of its internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 for so long as it is an emerging growth company.

For as long as the Trust takes advantage of the reduced reporting obligations, the information that the Trust provides its Shareholders may be different from information provided by other public companies.

The Sponsor was formed to be the Sponsor of the Trust and certain members of the Sponsor have limited history of past performance in managing investment vehicles like the Trust.  The past performances of the Sponsor's members in other investment vehicles, including their experiences in the financial industry, are no indication of their ability to manage an investment vehicle such as this particular Trust. The Trust's success will depend, in part, on the Sponsor's ability to manage the Trust. If the experience of the Sponsor and its members is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust may be adversely affected. The Trust can make no assurances that it will be successful in addressing these issues.

The Sponsor intends to apply to have the Shares approved for quotation on OTCQX, but there is no assurance that such application will be approved.  Even if the application is approved, obtaining the approval may take much longer than anticipated.  If the application to have the Shares quoted on OTCQX is not approved, trading in the Shares may be difficult and no active market may develop or such market may not develop at all.  Even if the application is approved, a significant delay in such approval may have adverse consequences on the value of the Shares and Shareholders' ability to trade their Shares.

Furthermore, a broker, dealer, or qualified interdealer quotation system, such as the ATS operated by OTC Link, LLC, must file with FINRA and/or OTC Markets Group a Form 211 on behalf of the Trust to certify that the applicable requirements of Rule 15c2-11 under the Exchange Act and the filing and information requirements of FINRA Rule 6432 have been satisfied. There is no guaranty that the Sponsor will obtain a market maker to sponsor the Shares in accordance with the OTCQX filing requirements or that the Trust will receive approval from FINRA to quote the Shares on OTCQX.

There is no established trading market for the Shares in the United States.  Although several proposed rule changes submitted by national securities exchanges in respect of spot bitcoin funds have been submitted to the SEC, as of the date of this Prospectus, spot bitcoin products have not been approved for listing on a national securities exchange as a result of the SEC’s determination that the exchanges have not met their burden under the Exchange Act and the SEC’s Rules of Practice to demonstrate that the listing of such products is consistent with the requirements of Section 6(b)(5) of the Exchange Act, in particular the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest” (see e.g. Order Disapproving a Proposed Rule Change, as Modified by Amendment No. 1, to Amend NYSE Arca Rule 8.201-E (Commodity Based Trust Shares) and to List and Trade Shares of the United States Bitcoin and Treasury Investment Trust, Securities Exchange Act Release No. 34-88284 (Feb. 26, 2020), 85 FR 12595 (Mar. 03, 2020) (SR-NYSEArca-2019-39)).  While the Shares will not be listed on a national securities exchange, the Sponsor intends to apply to have its Shares quoted on OTCQX, but there is no guarantee that such application will be approved or, even if it is approved, that an active trading market will develop. Shareholders therefore have limited access to information about prior market history on which to base their investment decision. Even if the Trust application to be quoted on OTCQX is approved, if an active trading market for the Shares does not develop, the price of the Shares may be more volatile and it may be more difficult and time consuming to complete a transaction in the Shares.  There is no guarantee that the liquidity of the Shares ever achieves the same or better liquidity as bitcoin.  The absence of an active and liquid market for the Shares may result in the price of Shares increasing above the Bitcoin Holdings (i.e., at a premium) or decreasing below the Bitcoin Holdings (i.e., at a discount).

Even if an active trading market for the Shares develops, the market value for the Shares may be highly volatile and could be subject to wide fluctuations after this offering, and therefore, it is difficult to predict the price at which the Shares will trade.

The Shares may trade at, above, or below the Bitcoin Holdings per Share. The Bitcoin Holdings per Share will fluctuate with changes in the market value of bitcoin owned by the Trust. The Share price will fluctuate with changes in the Bitcoin Holdings per Share as well as market supply and demand.  Imbalances in supply or demand for Shares may result in Shares being bought or sold at premiums or discounts to the Bitcoin Holdings.  If the supply of Shares exceeds demand, Shares may tend to trade at a discount to the Bitcoin Holdings.  If the demand for Shares exceeds supply, Shares may tend to trade at a premium to the Bitcoin Holdings.  Unlike an exchange traded fund, the Trust does not perform daily creations and redemptions of Shares, which provides an arbitrage mechanism to reduce tracking errors.  However, to address situations where demand for Shares exceeds supply, the Trust can offer additional Shares in the future.  Similarly, the Trust’s redemption feature can help to address situations where the supply of Shares exceeds demand.  The Trust’s ability to implement these measures, however, is limited and less effective at preventing tracking errors than an exchange traded fund, as additional offerings require time to prepare and execute and involve additional expenses, and the Trust only redeems Shares once per month.  Accordingly, while the Trust’s issuance and redemption features may not be as efficient as a daily create/redeem feature, it is still an arbitrage mechanism that seeks to reduce premiums and discounts of the Shares to the Bitcoin Holdings.

In addition, unlike a national securities exchange, OTCQX does not offer intra-day calculations of the Bitcoin Holdings per share.  As a result, Share quotations on the OTCQX may vary significantly from the actual Bitcoin Holdings per Share during the OTCQX trading day, which could result in trades above or below the Bitcoin Holdings per Share.  If a premium or discount to the Bitcoin Holdings develops, holders of Shares would have to rely on sources external to OTCQX to estimate intraday Bitcoin Holdings per Share for comparison to the Shares trading price. One possible external source could be the CME CF Bitcoin Realtime Index (BRTI), which is calculated by the CF Benchmarks and utilizes a similar methodology as CME CF BRR but adapted for intraday valuations.

When Shares are trading at a premium to the Bitcoin Holdings, an investor will pay more to purchase Shares compared to the value of the Trust's underlying assets.  When Shares are trading at a discount to the Bitcoin Holdings, an investor will pay less to purchase Shares compared to the value of the Trust's underlying assets.  Depending on the price at which an investor purchased their Shares, whether the Shares trade at a discount or a premium to the Bitcoin Holdings may affect the investor's gain or loss on their investment in the Trust when Shares are sold.  If, for example, a Shareholder purchased Shares at a slight premium to the Bitcoin Holdings and sold Shares while they were trading at a discount to the Bitcoin Holdings, the Shareholder will realize a loss on the investment, assuming no change in the Bitcoin Holdings and no bid/ask spread impact on the price of the purchase or sale.  See “Risk Factors–Risk Factors Related to the Trust and the Shares–Deviations between the Trust’s Bitcoin Holdings and Bitcoin Holdings per Share versus the Trust’s GAAP NAV and GAAP NAV per Share.”

The Trust's Bitcoin Holdings may not reflect the price of bitcoin represented by the Bitcoin Reference Rate because the Trust has its own expenses and liabilities.  Deviations between the price of bitcoin represented by the Bitcoin Reference Rate and the Trust’s Bitcoin Holdings may also result from disruptions in the bitcoin markets or other extraordinary circumstances.  The Trust’s Bitcoin Holdings is also affected by transaction costs, and potential “slippage.”  Slippage equals the extent to which the price at which a trade is intended to be executed differs from the price at which the trade is actually executed (e.g. the dollar slippage during a redemption on the Redemption Date is the difference between the price of bitcoin sold minus the CME CF BRR price on such Redemption Date multiplied by the number of bitcoin sold). Slippage can be minimized when the price at which a trade is intended to be executed at is determined or calculated to closely correspond to what can be reasonably expected as the actual trade price when taking into account market conditions and trade impact. One of the reasons that the Trust chose the CME CF BRR as the Bitcoin Reference Rate is because of its high replicability through trading. In other words, it is designed so that the calculated price can be closely achieved through trading. Common practices to minimize slippage include splitting a trade over time and across pools of liquidity. In comparison to a single trade, this often reduces market impact and minimizes the potential difference between the average execution price versus the target price. The CME CF BRR’s calculation methodology (see “Valuation of Bitcoin and Determination of the Bitcoin Holdings and GAAP NAV —The Bitcoin Price and the Bitcoin Reference Rate.”) incorporates such strategies as its calculation averages prices over a one-hour timeframe and across several trading platforms. Accordingly, it is not expected that slippage would be a material percentage when the Trust is buying or selling bitcoin.

The Trust uses the CME CF BRR as the Bitcoin Price for daily bitcoin valuations, including valuations in connection with issuances and redemptions of Shares, due to the robustness and replicability of the CME CF BRR. See “Valuation of Bitcoin and Determination of the Bitcoin Holdings and GAAP NAV —The Bitcoin Price and the Bitcoin Reference Rate.” However, for financial statement purposes, the Trust’s bitcoin is carried at fair value as required by GAAP. The Trust calculates a separate GAAP NAV and GAAP NAV per Share following the guidelines within FASB ASC 820-10. See “Valuation of Bitcoin and Determination of the Bitcoin Holdings and GAAP NAV —The Trust’s GAAP NAV.” The Trust expects the daily Bitcoin Holdings and daily GAAP NAV to correspond closely to each other as the Trust has determined the principal market as the platform with the highest trading volume within the Constituent Platforms comprising the CME CF BRR. However, deviations can occur between the prices from the principal market chosen by the GAAP NAV methodology and the prices from the other markets within the CME CF BRR. To the extent that the Shares price deviates from the Trust’s Bitcoin Holdings per Share, it will also likely deviate from the Trust’s GAAP NAV per Share.

The CME CF BRR, which is utilized by the Administrator to calculate the Trust’s Bitcoin Holdings, is published between 4:00 p.m. and 4:30 p.m. London time. However, the Trust’s Bitcoin Holdings is determined on each Business Day by the Administrator at 4:00 p.m. New York time or as soon thereafter as practicable.  Accordingly, the Trust’s daily Bitcoin Holdings is based on the Bitcoin Price from earlier in the day as opposed to the Bitcoin Price at or around 4:00 p.m. New York time when the U.S. equity market closes. As a result, the closing price of the Shares could differ significantly from the Trust’s Bitcoin Holdings per Share.

The mechanisms and procedures governing the offering and redemption of the Shares and storage of the bitcoin have been developed specifically for this product, and custody of bitcoin for a vehicle like this is still fairly novel.  It is possible that unanticipated issues may arise with respect to the Trust's operations and the trading of the Shares. Such unforeseen problems could have an adverse effect on an investment in the Shares.  Further, while the Trust is passively managed and not actively “managed” by traditional methods, the Sponsor's past experience and qualifications may not be suitable for solving unforeseen issues that may arise pertaining to operations or trading.

The Bitcoin Custody Account has been designed specifically to provide security for the Trust's assets. From time to time, the Bitcoin Custody Account may require updates, expansions or alterations and these events may result in the internal movement of bitcoin by the Bitcoin Custodian or temporary unavailability of service. Efforts to modify the security system are likely to be complex and may result in unforeseen delays, costs, operational inefficiencies or an increased vulnerability to security breaches. Further, the Trust and the Bitcoin Custodian may face issues relating to the Security Procedures, such as passwords, encryption, Internet connectivity, two-factor authentication process, proprietary verification protocols, interdepartmental measures, geographic redundancy of key hardware components, multi-signature wallets or telephone call-backs that could result in an adverse impact on the Trust.

The Bitcoin Custodian's Security Procedures are technical and complex. The Trust depends on the Security Procedures to protect the storage, acceptance and distribution of data relating to bitcoin and the Bitcoin Custody Account into which the Trust deposits its bitcoin. The Security Procedures may be ineffective against all errors, software flaws (i.e., bugs) or vulnerabilities. Failure in the Security Procedures could be undetectable until after a fraud or breach occurs.

The financial statements included with this Registration Statement have been prepared on a going concern basis. In respect of such financial statements, our auditors have issued a going concern opinion, which means that there is substantial doubt that the Trust can continue as an ongoing business for the next twelve months absent the Trust’s completion of the offering of the Shares contemplated by this Registration Statement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In order to secure and safeguard client accounts, bitcoin exchanges, funds and other large holders of bitcoin must adapt to rapidly developing changes in technology. As technological change occurs, the security threats to the Trust's bitcoin will adapt and emerge as well. While the Sponsor believes the Security Procedures in place have been reasonably designed to safeguard the Trust's bitcoin from theft, loss, destruction or other issues relating to hackers, phishing, internal corruption, force majeure, pandemic, riots, and technological attack, such assessment is based upon known technology and threats. The Sponsor can make no assurance that the Security Procedures will be effective against unknown threats. As the size of the Trust grows, the Trust may become more attractive to hackers or other bad actors. Security threats are likely to increase as the size of the Trust's assets increases. To the extent that the Trust or the Bitcoin Custodian is unable to identify and mitigate or stop new security threats, the Trust's bitcoin may be subject to theft, loss, destruction or other attack, which could have a negative impact on the performance of the Shares or result in loss of the Trust's assets.

Since the launch of the Bitcoin Network, security concerns have remained prevalent in bitcoin markets. The Trust's business operations or the Trust's assets may be harmed in the event that a security breach occurs. Such a breach may be caused by, among other things, hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses. Any breach of the Trust's infrastructure could result in damage to the Trust's reputation and reduce demand for the Shares, resulting in a reduction in the price of the Shares. Furthermore, the Sponsor believes that, as the Trust's assets grow, it may become a more appealing target for security threats such as hackers and malware. There can be no assurances that the Trust will be fully secure.

The Sponsor believes that the Security Procedures that the Sponsor and the Bitcoin Custodian 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 from theft, loss, destruction or other issues relating to hackers and technological attack. Despite the number of Security Procedures that the Sponsor and Bitcoin Custodian 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, absent gross negligence, willful misconduct or bad faith on the part of the Sponsor, the Bitcoin Custodian or their agents.

Furthermore, it is possible that actions of outside parties, error or malfeasance of an employee of the Sponsor or Bitcoin Custodian, or otherwise, may cause a breach in the operational infrastructure or the Security Procedures, resulting in an unauthorized access to the Bitcoin Custody Account, private keys, data or bitcoin. Additionally, outside parties may attempt to fraudulently induce employees of the Bitcoin Custodian or the Sponsor to disclose sensitive information in order to gain access to the Trust's infrastructure. The techniques used to employ such malicious attacks change frequently.  The Sponsor may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of the Bitcoin Custody Account occurs, the market perception of the effectiveness of the Trust could be harmed, which could result in a reduction in the price of the Shares.

In the event of a security breach of the Bitcoin Custody Account, the Trust may cease operations, suspend redemptions or suffer a reduction in assets, the occurrence of which could result in a reduction in the price of the Shares.

It is possible that the Security Procedures in place may not prevent the improper access to, or damage or theft of the Trust's bitcoin. The Trust cannot provide assurance that its Security Procedures will be effective against cyber-attacks. A security breach could harm the Trust's reputation or result in the loss of some or all of the Trust's bitcoin. A resulting perception that the Security Procedures do not adequately protect the Trust's bitcoin could result in a loss of current or potential Shareholders, reducing demand for, and price of, the Shares. A loss of confidence or breach in the Bitcoin Network's security and technology policies may adversely affect bitcoin and the value of the Shares.

Hackers or malware distributors may target the Trust in an effort to destroy, damage or steal the Trust's bitcoin. There is a risk that some or all of the Trust's bitcoin could be lost, stolen or destroyed. Although the Custodian will utilize numerous Security Procedures to protect the Trust's assets, neither the Custodian nor the Sponsor can guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally, by an act of God, pandemic or riot. Access to the Trust's bitcoin could also be restricted by natural events (such as an earthquake or flood) or human actions (such as a terrorist attack). Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.

The Bitcoin Wallet created and serviced by the Bitcoin Custodian on behalf of the Trust is not unique to the Trust and therefore the Trust’s bitcoin will not be stored in a segregated, dedicated wallet. Instead, the Bitcoin Custodian uses an omnibus treatment of bitcoin and bitcoin may be moved from time to time at the discretion of the Bitcoin Custodian. The Bitcoin Custodian may interact with the Bitcoin Wallet to fund the withdrawal of bitcoin for other clients, for protocol upgrades, and operational management. The specific bitcoin deposited into the Bitcoin Wallet are known via blockchain data but will not ultimately be the same bitcoin that are sold in subsequent transactions.

Occasionally, the Trust may be entitled to assets as a result of a hard fork or an airdrop.  The Bitcoin Custodian has the discretion of whether to support new digital assets created as a result of a hard fork or an airdrop and may decide to allocate such digital assets to the Trust on a delayed basis, if at all.  If a hard fork or an airdrop occurs and the Bitcoin Custodian has elected to support the new digital asset, then the Trust would hold both the original bitcoin and the new digital asset. As a result, the Trust would need to decide whether to continue to hold, sell or otherwise dispose of the new digital asset. The Trust currently intends to sell such assets to the extent possible in a commercially reasonable manner, with the proceeds to be held as cash and used to purchase bitcoin as soon as commercially practicable. The Trust's decision to continue to hold the new digital asset would be based on factors such as the market value and liquidity of the original bitcoin versus the new digital asset, the computer processing power devoted by miners to the original network versus the alternative new network, safety and security of the alternative new network and the establishment of a technical and commercial ecosystem for the alternative new network. In the event that the Bitcoin Custodian decides not to support a digital asset issued as a result of a fork or an airdrop, the Trust may have to find alternative arrangements to receive and sell such digital asset.  As a result, the Trust may not receive such digital assets, may receive them on a delayed basis, or may be forced to sell at a disadvantageous price, resulting in a material adverse effect on the value of the Shares.

In the event that the Bitcoin Custodian files for bankruptcy, bitcoin held by the Bitcoin Custodian may be considered to be the property of a bankruptcy estate rather than property of customers such as the Trust.  In such an event, the Trust may only be entitled to share pro rata with other similarly situated creditors in certain of the Bitcoin Custodian’s assets through the bankruptcy process.  If such assets, including bitcoin, are worth less than the aggregate claims of all similarly situated creditors, the recovery of the Trust in respect of any bitcoin then held by the Bitcoin Custodian for the benefit of the Trust may be limited.

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now been spread globally. This outbreak has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, layoffs, defaults and other significant economic impacts, as well as general concern and uncertainty. The impact of this outbreak has adversely affected the economies of many nations and the entire global economy and may impact individual issuers and capital markets in ways that cannot necessarily be foreseen. Other infectious illness outbreaks that may arise in the future could have similar impacts. Public health crises caused by the outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally.

The COVID-19 outbreak will have serious negative effects on social, economic and financial systems, including significant uncertainty and volatility in the financial markets. Secondary market spreads could widen and compromise the Trust’s ability to purchase and sell bitcoin to support the creation and redemption process. Any inability of the Trust to issue or redeem Shares, purchase or sell bitcoin or the Bitcoin Custodian or any bitcoin trading counterparty to receive or deliver bitcoin as a result of the outbreak will negatively affect the Trust's operations.

The duration of the outbreak and its effects cannot be determined with certainty. A prolonged outbreak could adversely affect the correlation between the price of the Shares and the Bitcoin Holdings of the Trust or could result in an increase of the costs of the Trust or less liquidity in the market for bitcoin, each of which could adversely affect the value of Shares. In addition, the outbreak could also impair the information technology and other operational systems relied on by the Trust’s service providers, including the Sponsor, the Trustee, the Administrator, and the Bitcoin Custodian, and could otherwise disrupt the ability of employees of the Trust’s service providers to perform essential tasks on behalf of the Trust. Governmental and quasi-governmental authorities and regulators throughout the world have in the past responded to major economic disruptions with a variety of fiscal and monetary policy changes, including, but not limited to, direct capital infusions into companies, new monetary programs and lower interest rates. An unexpected or quick reversal of these policies, or the ineffectiveness of these policies, is likely to increase volatility in the market for bitcoin, which could adversely affect the price of the Shares.

Further, the outbreak could interfere with or prevent the operation of the Constituent Platforms used to determine the CME CF BRR, which the Administrator uses to value the bitcoin and calculate the Bitcoin Holdings of the Trust. The outbreak could also cause the closure of bitcoin exchanges, increasing trading costs of Shares and resulting in a sustained premium or discount in the Shares. Each of these outcomes would negatively impact the Trust and the value of the Shares.

The Trust may be terminated and liquidated at a time which is disadvantageous to Shareholders, such as when the Bitcoin Price is lower than at the time when Shareholders purchased their Shares.  In such a case, when the Trust's bitcoin are sold as part of the Trust's liquidation, the resulting proceeds distributed to Shareholders will be less than if their prices were higher at the time of sale and Investors may experience a loss in their investments.  The Sponsor, in its sole discretion, may dissolve the Trust for any reason without the consent of Shareholders.  It is possible that the Sponsor may decide to terminate the Trust at a time that is not advantageous for the Shareholders, which may result in losses. A Shareholder therefore has limited rights with respect to the termination of the Trust or other aspects of the Trust’s administration, which may adversely affect its investment.

Once a Redemption Order has been received by the Trust, it can no longer be revoked by the Shareholder under any circumstances, though it may be rejected by the Administrator if it does not comply with the redemption requirements.

The price of bitcoin may fluctuate significantly between the date a Redemption Order is received and the Redemption Date. Shareholders redeeming Shares will be entitled to receive the cash value of their applicable redemption amount, which is the Bitcoin Holdings of the Shares submitted for redemption, determined as of the Redemption Date, less a $250 redemption fee charged by the Administrator. In the event that the price of bitcoin increases between the date a Redemption Order is received and the Redemption Date, then the Bitcoin Holdings of the Shares submitted for redemption will increase and therefore the cash received by the redeeming Shareholder in respect of its redeemed Shares will be greater than the cash it would have otherwise received as of the date that the Redemption Order was received.  Conversely, in the event that the price of bitcoin decreases between the date a Redemption Order is received and the Redemption Date, then the Bitcoin Holdings of the Shares submitted for redemption will decrease and therefore the cash received by the redeeming Shareholder in respect of its redeemed Shares will be less than the cash it would have otherwise received as of the date that the Redemption Order was received.  Redemption Orders are irrevocable and Shareholders cannot withdraw their Redemption Order during the period between submission of such Redemption Order and the Redemption Date regardless of whether the price of bitcoin increases or decreases significantly during such time. This means that the redeeming Shareholder bears the risk of fluctuations in the price of bitcoin between the date the Redemption Order is submitted and the Redemption Date.

Pursuant to the Trust Agreement, the Trust may suspend the Shareholders rights to redeem Shares or the payment of redemption proceeds if a Suspension Event occurs.  Suspension Events include (a) when a redemption would, in the opinion of counsel, result in a violation of the securities laws of the United States (including but not limited to Regulation M, Rule 13e-3 of the Exchange Act and Rule 13e-4 of the Exchange Act) or any other applicable laws or the rules of any national securities exchange, self-regulatory organization or regulatory agency applicable to the Trust, the Sponsor or its respective affiliates; (b) if any exchange, dealer market, quotation system or other market on which a significant portion of the Trust's assets are regularly traded or quoted is closed (otherwise than for weekends or holidays) or trading thereon is generally suspended or limited; (c) the Bitcoin Network experiences delays or is suspended in a manner that affects the ability of the Trust to buy, sell or deliver bitcoin to a third party; (d) the Sponsor has determined in good faith that the disposition of any asset of the Trust, or other transaction involving the sale, transfer or delivery of the Trust's assets is not reasonably practicable without being detrimental to the Trust or the interest of the remaining Shareholders; (e) any breakdown in the means of communication or publication normally employed in determining the Trust's Bitcoin Holdings or the Bitcoin Holdings per Share has occurred and is continuing, or the prices or values of the Trust's assets cannot reasonably be promptly and accurately ascertained for any reason; (f) the occurrence of an event that may cause the dissolution of the Trust; (g) the Sponsor has otherwise determined, in good faith, with respect to the Trust or the Shares of the redeeming or remaining Shareholders, respectively, that the redemption by any Shareholder of its Shares (whether in whole or in part) would have a material adverse effect on the Trust or the Shares of the redeeming or remaining Shareholders, respectively, including, without limitation, the risk of potential re-classification of the Trust for U.S. federal income tax purposes; or (h) any event constituting force majeure (including without limitation pandemic or riot) which, in the good faith determination of the Sponsor, makes determination of the Bitcoin Holdings or redemption impossible or impracticable; provided that any determination of the Bitcoin Holdings or redemption so suspended shall be reinstated or processed as soon the force majeure event has resolved.  For example, in connection with its review of this Registration Statement, the SEC has communicated to the Trust that (i) its decision to not issue additional comments should not be interpreted to mean that it agrees or disagrees with the Trust’s reasoning regarding the manner in which the Trust will effectuate redemption purchases or the Trust’s conclusions in respect of practices it may engage in with respect to Regulation M, Rules 10b-9 and 15c2-4, and (ii) it does not agree with the Trust’s interpretation of the term “redemption” as used within the scope of the exceptions in Rules 13e-3(g)(4) and 13e-4(h)(1) when redeeming Shares. If the Trust were to suspend the Shareholders rights to redeem Shares or the payment of redemption proceeds, such suspension could adversely affect the value of the Shares and the ability of a Shareholder to achieve liquidity if a secondary market for the Shares does not develop.

In the event that the number of Shares to be redeemed by a Shareholder as stated in a Redemption Order does not match the number of Shares delivered by its DTC Participant on the Delivery Date, none of the Shares delivered by such DTC Participant will be redeemed on such Redemption Date and such Shares shall remain outstanding. In such case, a new Redemption Order will need to be submitted to the Administrator by the Shareholder’s DTC Participant for processing on the following Redemption Date.

If there is a loss due to theft, loss, damage, destruction or fraud or otherwise with respect to the Trust's assets held by one of the Trust's custodians and such loss is found to be the fault of such custodian, the Trust may not be able to recover more than the market value of the assets at the time the loss is discovered.  If the market value of assets increases between the time the loss is discovered and the time the Trust receives payment for its loss and purchases assets to replace the losses, less assets will be acquired by the Trust and the value of the net assets of the Trust will be negatively affected.

Shareholders cannot be assured that the Bitcoin Custodian, the Cash Custodian, the Administrator, the Auditor, the Partnership Representative, the Transfer Agent or the Trustee (collectively, the “Service Providers”) will maintain any insurance with respect to the Trust's assets held or the services that such parties provide to the Trust and, if they maintain insurance, that such insurance is sufficient to satisfy any losses incurred by them in respect of their relationship with the Trust.  In addition, none of the Trust's Service Providers are required to include the Trust as a named beneficiary of any such insurance policies that are purchased.  Accordingly, the Trust will have to rely on the efforts of the Service Provider to recover from their insurer compensation for any losses incurred by the Trust in connection with such arrangements.

The Trust is not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation (“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. In addition, bitcoin is not currently eligible for insurance by the FDIC or SIPC and neither the Trust nor the Sponsor directly insures the Trust’s bitcoin or U.S. dollars. While the Bitcoin Custodian has indicated to the Sponsor that it has insurance coverage in excess of $100 million that covers losses of the bitcoin it custodies on behalf of its clients, including the Trust’s bitcoin, resulting from theft, Shareholders cannot be assured that the Bitcoin Custodian will maintain adequate insurance or that such coverage will cover losses with respect to the Trust’s bitcoin.  Further, the Bitcoin Custodian custodies digital assets that have a value materially in excess of $100 million and therefore Shareholders cannot be assured that, while the Bitcoin Custodian could maintain insurance at higher amounts, the $100 million threshold level of insurance indicated by the Bitcoin Custodian will be sufficient to cover, either partially or in full, losses related to theft of any material portion of digital assets custodied by the Bitcoin Custodian, including the Trust’s bitcoin. In addition, certain exclusions apply to the Bitcoin Custodian’s insurance coverage.

Furthermore, under the Bitcoin Custodian Agreement, the Bitcoin Custodian’s liability with respect to the Trust will not exceed the lesser of (a) the replacement cost of the bitcoin and U.S. Dollars held by it for the benefit of the Trust, and (b) the market value (as determined by the Custodian) of the bitcoin and U.S. Dollars held by it for the benefit of the Trust to which such loss or damage relates at the time the Trust reasonably should have been aware of the Bitcoin Custodian’s gross negligence, willful misconduct or fraud.

U.S. dollars held in the Cash Account will be insured by the FDIC subject to applicable FDIC insurance limits.

The Shareholders’ recourse against the Sponsor, the Bitcoin Custodian and the Cash Custodian for the services they provide to the Trust, including those relating to the provision of instructions relating to the movement of bitcoin or U.S. dollars, is limited. Consequently, a loss may be suffered with respect to the Trust’s bitcoin or U.S. dollars that is not covered by insurance and for which no person is liable in damages. As a result, the recourse of the Trust or the Shareholders may be limited.

If there is a loss of assets of the Trust through theft, destruction, fraud or otherwise, the Trust and Shareholders will be reliant on the adequacy of above-referenced insurance, if any, to cover losses.  A loss with respect to the Trust's assets that is not covered by insurance and for which compensatory damages cannot be recovered would have a negative impact on the Bitcoin Holdings and would adversely affect the value of the Shares.  In addition, any event of loss may adversely affect the operations of the Trust and, consequently, the value of the Shares.

The Trust may conduct further offerings or sales of Shares from time to time, provided that any distribution relating to such future offering will comply with all applicable laws and regulations, including but not limited to Regulation M.  Shares, including fractional shares, sold in a Share Placement after the Trust’s initial offering will be issued at a price determined so that the net proceeds received by the Trust are at least equal to the most recently calculated the Bitcoin Holdings per Share immediately prior to, or upon, the determination of the pricing of such issuance pursuant to the applicable agreement between the Trust and the underwriter, placement agent or distributor, as applicable.  If the Shares of the Trust trade at a price above the Bitcoin Holdings on such issuance date, the issuance of such additional Shares at the Bitcoin Holdings may have the effect of lowering the trading price of Shares immediately after the pricing of such issuance.  In addition, if and as long as the trading price of the Shares is below the Bitcoin Holdings, it is unlikely that the Trust will issue further Shares, because such Shares would have to be offered at a price above the trading price of Shares.

Under the Trust Agreement, Shareholders have limited voting rights and the Trust will not have regular Shareholder meetings. Shareholders take no part in the management or control of the Trust. Accordingly, Shareholders do not have the right to authorize actions, appoint service providers or take other actions as may be taken by Shareholders of other trusts or companies where shares carry such rights. The Shareholders’ limited voting rights give almost all control under the Trust Agreement to the Sponsor and the Trustee. The Sponsor may take actions in the operation of the Trust that may be adverse to the interests of Shareholders and may adversely affect the value of the Shares.

Moreover, pursuant to the terms of the Trust Agreement, Shareholders’ statutory right under Delaware law to bring a derivative action (i.e., to initiate a lawsuit in the name of the Trust in order to assert a claim belonging to the Trust against a fiduciary of the Trust or against a third-party when the Trust’s management has refused to do so) is restricted. Under Delaware law, a shareholder may bring a derivative action if the shareholder is a shareholder at the time the action is brought and either (i) was a shareholder at the time of the transaction at issue or (ii) acquired the status of shareholder by operation of law or the Trust’s governing instrument from a person who was a shareholder at the time of the transaction at issue. Additionally, Section 3816(e) of the Delaware Statutory Trust Act specifically provides that a “beneficial owner’s right to bring a derivative action may be subject to such additional standards and restrictions, if any, as are set forth in the governing instrument of the statutory trust, including, without limitation, the requirement that beneficial owners owning a specified beneficial interest in the statutory trust join in the bringing of the derivative action.” In addition to the requirements of applicable law and in accordance with Section 3816(e), the Trust Agreement provides that no Shareholder will have the right, power or authority to bring or maintain a derivative action, suit or other proceeding on behalf of the Trust unless two or more Shareholders who (i) are not affiliates of one another and (ii) collectively hold at least ten percent (10.0%) of the outstanding Shares join in the bringing or maintaining of such action, suit or other proceeding. This provision applies to any derivative actions brought in the name of the Trust other than claims under the federal securities laws and the rules and regulations thereunder.

Due to this additional requirement, a Shareholder attempting to bring or maintain a derivative action in the name of the Trust will be required to locate other Shareholders with which it is not affiliated and that have sufficient Shares to meet the ten percent (10.0%) threshold based on the number of Shares outstanding on the date the claim is brought and thereafter throughout the duration of the action, suit or proceeding. This may be difficult and may result in increased costs to a Shareholder attempting to seek redress in the name of the Trust in court. Moreover, if Shareholders bringing a derivative action, suit or proceeding pursuant to this provision of the Trust Agreement do not hold 10.0% of the outstanding Shares on the date such an action, suit or proceeding is brought, or such Shareholders are unable to maintain Share ownership meeting the ten percent (10.0%) threshold throughout the duration of the action, suit or proceeding, such Shareholders’ derivative action may be subject to dismissal. As a result, the Trust Agreement limits the likelihood that a Shareholder will be able to successfully assert a derivative action in the name of the Trust, even if such Shareholder believes that he or she has a valid derivative action, suit or other proceeding to bring on behalf of the Trust.

The Administrator will determine the Trust's Bitcoin Holdings and the Trust’s GAAP NAV at 4:00 p.m. (New York time) or as soon thereafter as practicable, on each Business Day. The Administrator's determination is made utilizing data from the Bitcoin Custodian and Cash Custodian's operations and the Bitcoin Price. To the extent that the Trust's Bitcoin Holdings or the Trust’s GAAP NAV are incorrectly calculated, the Administrator may not be liable for any error and such misreporting of valuation data could adversely affect an investment in the Shares.

The Trust may suspend or restrict the determination of the Bitcoin Holdings if (1) any exchange, dealer market, quotation system or other market on which a significant portion of the Trust's assets are regularly traded or quoted is closed (otherwise than for weekends or holidays) or trading thereon is generally suspended or limited, (2) the Bitcoin Network experiences delays or is suspended in a manner that affects the ability of the Trust to buy, sell or deliver bitcoin to a third party, (3) the Sponsor has determined in good faith that the disposition of any asset of the Trust, or other transaction involving the sale, transfer or delivery of the Trust's assets is not reasonably practicable without being detrimental to the Trust or the interest of the remaining Shareholder, (4) any breakdown in the means of communication or publication normally employed in determining the Trust's Bitcoin Holdings or the Bitcoin Holdings per Share has occurred and is continuing, or the prices or values of the Trust's assets cannot reasonably be promptly and accurately ascertained for any reason, (5) any event has occurred and is continuing which may cause the dissolution of the Trust or (6) an event constituting force majeure which, in the good faith determination of the Sponsor, makes determination of the Bitcoin Holdings impossible or administratively unfeasible; provided that any suspension of the determination of the Bitcoin Holdings shall be reinstated as soon as the force majeure event has resolved. Any such suspension or restriction could adversely affect the Shares. The Trust disclaims any liability for any loss or damage that may result from any such suspension or restriction.

The Trust is dependent upon the various Service Providers that are not controlled by the Sponsor or the Trustee. Because the Trust is reliant on the Service Providers to conduct its business and operations, the error or misconduct by, or failure of (such as bankruptcy, receivership or liquidation) a Service Provider could have a material adverse effect on the Trust and the Shareholders' investments therein. In addition, the Trust may be subject to operational and settlement risks, legal risks, credit risk, non-payment, non-deliverability, government intervention, complex regulatory risk, non-performance risk, bankruptcy risk, insolvency risk, receivership, and fraud risk with respect to the Service Providers.

The Sponsor has contractually assumed the Sponsor-paid Expenses, which are certain operational and periodic expenses of the Trust. See “The Trust—Trust Expenses.” Additional Trust Expenses of the Trust (for example, expenses relating to litigation) are not assumed by the Sponsor and are instead borne by the Trust and paid from the cash on deposit in the Trust's Cash Account, which may adversely affect an investment in the Shares. In addition, the Sponsor may, in its sole discretion, increase the Sponsor's Fee or decrease the Sponsor-paid Expenses, which may adversely affect an investment in the Shares. Such an increase in the Sponsor's Fee or decrease in the Sponsor-paid Expenses could occur if the expenses of the Trust materially increase. Alternatively, the Sponsor could choose to decrease the Sponsor's Fee in response to competitive pressures from other digital currency financial vehicles similar to the Trust. The Sponsor will balance such competitive pressures and the costs that it incurs in acting as Sponsor for the Trust when determining the Sponsor's Fee.  A Shareholder may never achieve profits, significant or otherwise, by investing in the Trust.

Under the documents related to and governing the Trust (the “Trust Documents”), each of the Sponsor, the Trustee, the Transfer Agent, the Administrator, the Bitcoin Custodian and the Cash Custodian has a right to be indemnified by the Trust for certain liabilities or expenses that it incurs without gross negligence, bad faith or willful misconduct on its part. Therefore, the Sponsor, Trustee, Transfer Agent, the Administrator, the Bitcoin Custodian and the Cash Custodian may require that the assets of the Trust be sold in order to cover losses or liabilities suffered by it. Any sale of that kind would reduce the Trust's Bitcoin Holdings and the Bitcoin Holdings per Share.

Third parties may assert intellectual property rights claims that have an adverse effect on the Trust. The Sponsor is not currently aware of any such claims that may prevent the Trust from operating and holding bitcoin. These claims may pertain to the operation of the Trust and the mechanics instituted for the investment in, holding of and transfer of bitcoin. An intellectual property or other legal action, regardless of its merit, may result in expenses for legal fees to defend or payments to settle such claims. These expenses would be Additional Trust Expenses and be borne by the Trust through the sale of the Trust's bitcoin. Further, a meritorious intellectual property rights claim may prevent Trust operations and force the Sponsor to terminate the Trust and liquidate the Trust's bitcoin. As a result, an intellectual property rights claim against the Trust could adversely affect an investment in the Shares.

Shareholders could be required, as a matter of bankruptcy law, to return to the estate of the Trust any distribution they received at a time when the Trust was in fact insolvent or in violation of its Trust Agreement.

The Trust, Sponsor and Service Providers will rely on the use of technology, including third-party software and data, to run many aspects of its respective businesses.  The Trust employs controls reasonably designed to assure that its technology systems are sound and the systems suppliers it relies on are reputable and competent.  As a result, each of the Trust, the Sponsor and the Service Providers may encounter systems flaws, and some data used by such parties may be inaccurate.  Furthermore, technology is subject to damage or interruption from a variety of sources, including, without limitation:

These issues may go undetected for long periods of time or avoid detection altogether.  As a result, these issues could materially adversely affect the value of the Shares.

Digital asset transactions 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 aggregate bandwidth of the Bitcoin Network. Once a transaction has been verified and recorded in a block that is added to the Bitcoin Blockchain, an incorrect transfer of cryptocurrency, such as bitcoin, or a theft of bitcoin generally will not be reversible and the Trust may not be capable of seeking compensation for any such transfer or theft.  To the extent that the Trust is unable to seek a corrective transaction or is incapable of identifying the third party which has received bitcoin through error or theft, the Trust will be unable to revert or otherwise recover incorrectly transferred bitcoin.  To the extent that the Trust is unable to seek redress for such error or theft, such loss could adversely affect an investment in the Shares.

The use of digital currencies such as bitcoin to, among other things, buy and sell goods and services, is part of an evolving industry. This rapidly developing digital marketplace employs digital assets based upon a designated computer-generated mathematical and/or cryptographic protocol.  The growth of this industry is subject to a high degree of uncertainty.  Factors affecting the further development of this industry include, but are not limited to:

The Trust is passively managed, not actively managed, and will not have any strategy relating to the development of the Bitcoin Network. Furthermore, the Sponsor cannot be certain as to the impact of the expansion of its bitcoin holdings on the digital asset industry and the Bitcoin Network. A decline in the popularity or acceptance of the Bitcoin Network would harm the price of the Shares.

The Bitcoin Network relies on the Internet. A significant disruption of Internet connectivity (i.e., one that affects large numbers of users or geographic regions) could disrupt the Bitcoin Network's functionality and operations until the disruption in the Internet is resolved. A disruption in the Internet could adversely affect an investment in the Shares or the ability of the Trust to operate.

The Bitcoin Network uses a cryptographic protocol to govern the interactions within the Bitcoin Network.  A development team known as the “Core Developers” which evolves over time, manages the code that sets forth the protocol. The members of the Core Developers evolve over time, largely based on self-determined participation in the resource section dedicated to bitcoin on Github.com.  The Core Developers can propose amendments to the Bitcoin Network's source code that could alter the protocols and software of the Bitcoin Network and the properties of bitcoin. 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.  The Bitcoin Network could be subject to new protocols and software that may adversely affect an investment in the Shares, to the extent that a significant majority of the users and validators on the Bitcoin Network install such software upgrades.

There is no official developer or group of developers that formally controls the Bitcoin Network. Any individual can download the Bitcoin Network software and make any desired modifications, which are proposed to users and validators on the Bitcoin Network through software downloads and upgrades, typically posted to the bitcoin development forum on GitHub.com. A substantial majority of validators and bitcoin users must consent to such software modifications by downloading the altered software or upgrade; otherwise, the modifications do not become a part of the Bitcoin Network. Since the Bitcoin Network's inception, modifications to the Bitcoin Network have been accepted by the vast majority of users and validators, ensuring that the Bitcoin Network remains a coherent economic system.

If a proposed modification is not accepted by a vast majority of validators and users but is nonetheless accepted by a substantial population of participants in the Bitcoin Network, a “fork” in the Bitcoin Blockchain could develop. This would result in two separate Bitcoin Networks. Such a fork in the Bitcoin Blockchain typically would be addressed by community-led efforts to merge the forked Bitcoin Blockchains, and several prior forks have been so merged.

The Bitcoin Network operates based on an open-source protocol maintained by the Core Developers and other contributors, largely on the GitHub resource section dedicated to bitcoin development.  As the Bitcoin Network protocol is not sold 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. 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 Shares may be adversely affected.

Digital assets are based on developing technologies that are characterized by rapid change and innovation.  The Bitcoin Network and bitcoin may become obsolete as significant technological changes or innovations continue to occur in this market.  If the Bitcoin Network is not able to adapt to such changes or innovations, it may not be able to generate interest in the Bitcoin Network or bitcoin, which may have a material adverse effect on an investment in Shares.

Bitcoin mining activities are inherently energy-intensive and electricity costs account for a significant portion of the overall mining costs. The availability and cost of electricity will restrict the geographic locations of mining activities.  In addition, the significant consumption of electricity may have a negative environmental impact, including contribution to climate change, which may give rise to public opinion against allowing the use of electricity for bitcoin mining activities or government measures restricting or prohibiting the use of electricity for bitcoin mining activities. Any such developments could lower the demand for bitcoin and have a material and adverse effect on the price of bitcoin.

Bitcoin has a relatively limited history of existence and operations compared to traditional non-digital assets.  Currently, it is unclear whether, and to what extent, bitcoin will be adopted as a form of payment or utilized as a store of value. Bitcoin has gained limited commercial acceptance only within the past decade and, as a result, there is little data on its long-term investment potential or adoption in the marketplace. In the event that bitcoin is not widely adopted as a form of payment or utilized as a store of value, then demand for bitcoin will likely decrease, which in turn may have a material and adverse effect on the price of bitcoin. Conversely, in the event bitcoin is widely adopted as a form of payment or utilized as a store of value, then it is possible that additional and more stringent regulations addressing bitcoin will be implemented, which may have a material and adverse effect on the price of bitcoin.

The bitcoin market may be subject to a higher risk of fraud, manipulation and other malfeasance, such as the mishandling of customer assets by FTX. At a high level, bitcoin balances are maintained as public addresses on the relevant distributed ledger network, which generally constitutes a public record of all transactions in bitcoin. However, no distributed ledger network reflects any information about the identity of any specific owner. Consequently, bitcoin transactions generally are pseudonymous. Notwithstanding applicable U.S. and foreign laws, many participants in the bitcoin spot market have taken advantage of this characteristic, engaging in transactions without appropriate customer identification and anti-money laundering policies and procedures. While regulators have begun to take action in this area, these issues persist and give rise to an increased risk of manipulation and fraud in the bitcoin space, including the potential for Ponzi schemes, bucket shops and pump and dump schemes, as well as contribute to the real or perceived risk that bitcoin the preferred choice of illicit actors. The foregoing could adversely affect the appeal of bitcoin to investors and the growth and development of bitcoin generally, which, in turn, could adversely affect the price of bitcoin.

A principal risk in investing and trading bitcoin is substantial price volatility. The price of bitcoin may be influenced generally by a wide variety of complex and difficult to predict factors affecting bitcoin or digital assets in general. The price of bitcoin may be affected, in part, on the prices of other digital assets including both directional movements and / or price volatility, which could be the result of certain market events. For example, in May 2022, the digital asset TerraUSD (UST) lost its $1 peg. As UST “de-pegged,” the custodian of UST’s bitcoin reserves, the Luna Foundation Guard, sold bitcoin to buy UST in an ultimately unsuccessful effort to re-peg the price of UST to its $1 peg. It is believed that the foregoing action by the Luna Foundation Guard exacerbated a bitcoin sell-off that adversely affected the price of bitcoin. Similar future occurrences may significantly impact the value and trading of bitcoin.

If the majority of the processing power dedicated to mining on the Bitcoin Network is controlled by a bad actor (often referred to as a “51% attack”), it may be able to alter the Bitcoin Blockchain on which the Bitcoin Network and most bitcoin transactions rely. This could occur if the bad actor were to construct fraudulent blocks or prevent certain transactions from completing in a timely manner, or at all. It could be possible for the malicious actor to control, exclude or modify the ordering of transactions, though it could not generate new bitcoin or transactions. Further, a bad actor could “double-spend” its own bitcoin (i.e., spend the same bitcoin in more than one transaction) and prevent the confirmation of other users' transactions for so long as it maintained control. If the bitcoin community did not reject the fraudulent blocks as malicious or to the extent that such bad actor did not yield its control of processing power, reversing any changes made to the Bitcoin Blockchain may be impossible. The possible crossing of this threshold indicates a greater risk that a single mining pool could exert authority over the validation of bitcoin transactions. If the feasibility of a bad actor gaining control of the processing power on the Bitcoin Network increases, there may be an effect on an investment in the Shares.

Blockchain technologies are premised on theoretical conjectures as to the impossibility, in practice, of solving certain mathematical problems quickly. Those conjectures remain unproven, however, and mathematical or technological advances could conceivably prove them to be incorrect. Blockchain technology companies may also be negatively affected by cryptography or other technological advances, such as the development of quantum computers with significantly more power than computers presently available, that undermine or vitiate the cryptographic consensus mechanism underpinning Blockchain and distributed ledger protocols. If either of these events were to happen, the Trust and marketplaces that rely on Blockchain technologies could quickly collapse.

Validators 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 Bitcoin Blockchain until the next scheduled adjustment in difficulty for block solutions). If a reduction in processing power occurs, the Bitcoin Network may be more vulnerable to a malicious actor obtaining control in excess of fifty percent (50%) of the processing power on the Bitcoin Network. As a result, it may be possible for a bad actor to manipulate the Bitcoin Blockchain and hinder transactions. Any reduction in confidence in the confirmation process or processing power of the Bitcoin Network may adversely affect an investment in the Shares.

Bitcoin miners, functioning in their transaction confirmation capacity, 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. 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. 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 the attractiveness of the Bitcoin Network and may adversely impact an investment in the Shares or the ability of the Trust to operate.

As the number of bitcoin awarded for solving a block in the Bitcoin Blockchain decreases, the incentive for validators to contribute processing power to the Bitcoin Network will transition to transaction fees. To incentivize validators to continue their operations, the Bitcoin Network may transition from a set reward to transaction fees earned upon solving for a block. If validators demand higher transaction fees for recording their transactions or a software upgrade automatically charges fees for all transactions, the cost of using bitcoin may increase. If the cost of bitcoin transactions increases, the marketplace may be reluctant to accept bitcoin as a means of payment. Increased costs may motivate market participants to switch from bitcoin to another digital asset or back to fiat currency. Decreased use and demand for bitcoin may adversely affect their value and result in a reduction in the Bitcoin Price and the price of the Shares.

Due to the increasing demand for digital asset mining hardware, validators may be unable to acquire the proper mining equipment or suitable amount 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, validators 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 digital asset market by concentrating mining power, which would make it unprofitable for other validators to mine.  The expense of purchasing or upgrading new equipment may be substantial and diminish returns to validators dramatically. A decline in validators may result in a decrease in the value of bitcoin and the value of the Trust.

To the extent that any validators cease to record transactions in solved blocks, such transactions will not be recorded on the Bitcoin Blockchain until a block is solved by a validator who does not require the payment of transaction fees. Validators currently do not have incentives to elect to exclude the recording of such transactions.  In the event that incentives to exclude the recording of transactions on the Bitcoin Blockchain arise (for example, a collective movement among validators or one or more mining pools forcing bitcoin users to pay transaction fees as a substitute for, or in addition to, the award of new bitcoin upon the solving of a block), it could result in greater exposure to double-spending transactions and a loss of confidence in the Bitcoin Network, which could adversely affect an investment in the Shares.

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 Trust's ability to buy or sell bitcoin at an advantageous price or may create the opportunity for a bad actor to double spend bitcoin, resulting in decreased confidence in the Bitcoin Network.  As a result, the Bitcoin Network and the value of the Shares would be adversely affected.

Bitcoin was invented in 2009.  The asset, bitcoin, and its trading history thus have existed for a relatively short time, which limits a potential Shareholder's ability to evaluate an investment in the Trust.

There is no registry showing which individuals or entities own bitcoin or the quantity of bitcoin owned by any particular person or entity. It is possible, and in fact, reasonably likely, that a small group of early bitcoin adopters hold a significant proportion of the bitcoin that has thus far been created. There are no regulations in place that would prevent a large holder of bitcoin from selling their bitcoin. Such bitcoin sales may adversely affect the price of bitcoin and an investment in the Shares.

Market risk refers to the risk that the market price of bitcoin held by the Trust will rise or fall, sometimes rapidly or unpredictably. An investment in the Trust's Shares is subject to market risk.

When valuing the bitcoin held by the Trust, the Trust intends to utilize the Bitcoin Price, which, with respect to the Bitcoin Holdings, is based on the Bitcoin Reference Rate. The value of the Shares in part relates directly to the value of the bitcoin held by the Trust, and the price of bitcoin has been subject to dramatic fluctuations and is highly volatile. Several factors may influence the Bitcoin Price, including, but not limited to:

If the Bitcoin Price continues to be subject to significant fluctuations, you may experience losses if you need to sell your Shares at a time when the Bitcoin Price is lower than it was when you made your prior investment. Your Shares may never generate a profit, even if you are able to hold the Shares for the long-term, since bitcoin markets have historically been extremely volatile.

Investors should also be aware that there is no assurance that bitcoin will maintain its long-term value in terms of future purchasing power or that the acceptance of bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow. In the event that the Bitcoin Price declines, the Sponsor expects the value of an investment in the Shares to decline proportionately.

The Trust's purchase of bitcoin in connection with the issuance of shares may cause the price of bitcoin to increase, which will result in higher prices for the Shares. Increases in the bitcoin prices may also occur as a result of bitcoin purchases by other market participants who attempt to benefit from an increase in the market price of bitcoin when Shares are issued. The market price of bitcoin may therefore decline immediately after Shares are issued. Decreases in bitcoin prices may occur as a result of selling activity by other market participants. In addition to the effect that purchases and sales of bitcoin by the Trust may have on the price of bitcoin, other products with similar investment objectives as the Trust could represent a substantial portion of demand for bitcoin at any given time and the sales and purchases by such investment vehicles may impact the price of bitcoin. If the price of bitcoin declines, the trading price of the Shares will generally also decline.

The Trust may not always be able to liquidate its bitcoin at a desired price. It may become difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in the marketplace, including on bitcoin exchanges and with OTC bitcoin participants.

A market disruption, such as a foreign government taking political actions that disrupt the market in its currency, its commodity production or exports, or in another major export, can also make it difficult to liquidate a position. In the event of a fork of the Bitcoin Network, certain bitcoin exchanges and/or OTC counterparties may halt deposits and withdrawals of bitcoin for a set period of time thus reducing liquidity in the markets. Unexpected market illiquidity may cause major losses to shareholders at any time. The large amount of bitcoin the Trust may acquire increases the risk of illiquidity by both making its bitcoin more difficult to liquidate and increasing the losses incurred while trying to do so.

The Bitcoin Price, the Trust's Bitcoin Holdings and the price of the Shares could be negatively affected to the extent digital currency financial vehicles other than the Trust tracking the price of bitcoin are formed and represent a significant proportion of the demand for bitcoin.

Digital assets such as bitcoin are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services. These assets are not backed by central governments and provide an alternative to typical fiat currencies. The level of impact that geopolitical events may have on the supply and demand of digital assets is unclear. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of bitcoin either globally or locally. Large-scale sales of bitcoin would result in a reduction in the Bitcoin Price and could adversely affect an investment in the Shares.

The Bitcoin Network and bitcoin, as an asset, hold a “first-to-market” advantage over other digital assets although many other digital assets have features such as privacy or the ability to run decentralized application and in other words do not attempt to compete with Bitcoin on a functional basis. This first-to-market advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in use to secure the Bitcoin Blockchain and transaction verification system. It is important to realize, however, that the hashpower for the Bitcoin Blockchain is not transferrable to other blockchain networks due to specialized algorithms. A large mining network provides users with confidence in the security and long-term stability of a digital asset's network and Bitcoin Blockchain.  More users and validators provide the advantage of making a digital asset more secure. A secure network and the perception of a secure network attract new users and validators. Furthermore, many digital assets popularly trade against their value in bitcoin as opposed to national currencies, further strengthening the function and recognition of bitcoin as being central to the wider digital asset ecosystem.

It is possible that other blockchain networks could become materially popular, despite the marked first-mover advantage of the Bitcoin Network over other digital assets. This may be due to either a perceived or exposed shortcoming of the Bitcoin Network protocol that is not immediately addressed by the Core Developers or a perceived advantage of a separate network that includes features not incorporated into bitcoin. In the event that a separate network obtains significant market share (either in market capitalization, mining power or use as a payment technology), bitcoin's market share may experience a reduction.  The demand for and price of bitcoin may experience adverse effects in the event of this occurrence.

If the Bitcoin Reference Rate cannot be calculated for a given day for any reason or circumstance that prevents the orderly calculation of the Bitcoin Reference Rate for that day, a calculation failure occurs.  In the event of a calculation failure, the Bitcoin Reference Rate published on the previous day is disseminated as the Bitcoin Reference Rate for the calculation failure day.

The CME CF BRR has historically experienced price volatility which reflects the volatility of bitcoin. Such volatility in the past has been associated with increased interest in bitcoin and its use as a means of payment, speculative trading and other factors, and may be similar to the type of volatility experienced by other new types of investments.

Although the CME CF BRR is designed to accurately capture the market price of bitcoin, third parties may be able to purchase and sell bitcoin on public or private markets not included among the Constituent Platforms of the CME CF BRR, and such transactions may take place at prices materially higher or lower than the Bitcoin Price. To the extent such prices differ materially from the Bitcoin Price, investors may lose confidence in the Shares’ ability to track the market price of bitcoin, which could adversely affect the value of the Shares.

If a permanent fork were to occur with respect to bitcoin, the Trust could hold amounts of the original and the new bitcoin as a result. See also the section titled “The Bitcoin Custodian may or may not support digital assets in the event of a hard fork or airdrop.” In that event, and subject to the requirement that the Trust continue to be treated as a partnership for U.S. federal income tax purposes, the Sponsor expects that it would, (i) select a Bitcoin Network (and therefore a single version of bitcoin) and (ii) simultaneously isolate the bitcoin on the Bitcoin Network that it did not select in order to segregate it from the bitcoin the Trust would continue to hold (the “Rejected Fork Assets”). In that case, the Trust will attempt to sell the Rejected Fork Assets to the extent possible in a commercially reasonable manner and, if it is able to do so, use the cash proceeds from such sale to purchase bitcoin issued by the Bitcoin Network that the Sponsor selected as soon as practicable. It is uncertain whether such a fork would have a positive or negative effect on the Bitcoin Network (either the Bitcoin Network selected by the Sponsor or the Bitcoin Network issuing the Rejected Fork Assets), and, if such a fork would have a negative effect on the value of the bitcoin issued by the Bitcoin Network selected by the Sponsor, whether the proceeds from the sale of the Rejected Fork Assets would be sufficient to offset such negative effect.  Consequently, a permanent fork could materially and adversely affect the value of the Shares.

The Sponsor intends to take the position that the Trust will be treated as a partnership for U.S. federal income tax purposes. The Trust will not be subject to U.S. federal income tax, assuming that the Trust is a partnership. Rather, each Shareholder will be required to take into account on his or its own U.S. federal income tax return his or its distributive share of the Trust's items of income, gain, losses and deductions for each taxable year.

Many significant aspects of the U.S. federal income tax treatment of bitcoin are uncertain, and the Sponsor does not intend to request a ruling from the IRS on these issues. The IRS released Notice 2014-21 (the “Notice”), which discusses certain aspects of the treatment of virtual currencies, such as bitcoin, that are readily convertible into fiat currency for U.S. federal income tax purposes. In the Notice, the IRS stated that, for U.S. federal income tax purposes, inter alia, (i) bitcoin is treated as “property” and not currency and (ii) bitcoin may be held as a capital asset. It is possible that the IRS may alter its position in the future with respect to the U.S. federal income tax treatment of virtual currencies, such as bitcoin, or that a court could reject the treatment set forth in the Notice. It is unclear how cryptocurrencies should be treated for various provisions of the Code.

The Notice does not address other significant aspects of the U.S. federal income tax treatment of bitcoin, including: (i) whether bitcoin (or progeny cryptocurrencies of bitcoin pursuant to a hard fork) are properly treated as a “commodity” for U.S. federal income tax purposes; (ii) whether bitcoin may be properly treated as a “collectible” for U.S. federal income tax purposes; (iii) the proper method of determining a holder's holding period and tax basis for bitcoin acquired at different times or at varying prices; and (iv) whether and how a holder of bitcoin acquired at different times or at varying prices may designate, for U.S. federal income tax purposes, which of the bitcoin is transferred in a subsequent sale, exchange or other disposition. The Sponsor intends, in consultation with appropriate professional advisors, to cause the Trust to take positions for U.S. federal income tax purposes that are reasonable under then-current interpretation of U.S. federal income tax law.  It should be noted that the IRS may assert an alternative treatment of transactions in cryptocurrencies, and a court may ultimately agree with the IRS as opposed to the Trust.

Prospective investors are urged to consult their tax advisers regarding tax consequences of owning and disposing of Shares and digital currencies in general.  Shareholders that are exempt from U.S. federal income taxation under Code section 501(a) should consult their own tax advisers regarding an investment in the Shares.

The taxing authorities of certain states, including New York, (i) have announced that they will follow the Notice with respect to the treatment of digital currencies for state income tax purposes and/or (ii) have issued guidance exempting the purchase and/or sale of digital currencies for fiat currency from state sales tax. However, it is unclear what further guidance on the treatment of digital currencies for state tax purposes may be issued in the future.

The treatment of digital currencies for tax purposes by non-U.S. jurisdictions may differ from the treatment of digital currencies for U.S. federal, state or local tax purposes. It is possible, for example, that a non-U.S. jurisdiction would impose sales tax or value-added tax on purchases and sales of digital currencies for fiat currency. If a foreign jurisdiction with a significant share of the market of Bitcoin users imposes onerous tax burdens on digital currency users, or imposes sales or value-added tax on purchases and sales of digital currency for fiat currency, such actions could result in decreased demand for Bitcoin in such jurisdiction.

Any future guidance on the treatment of digital currencies for state, local or non-U.S. tax purposes could increase the expenses of the Trust and could have an adverse effect on the prices of digital currencies, including on the price of Bitcoin in the Bitcoin Markets. As a result, any such future guidance could have an adverse effect on the value of the Shares.

In the event of a hard fork, the receipt, ownership or disposition of the progeny cryptocurrency (i.e., the new cryptocurrency distributed to the Trust in respect of its holding bitcoin at the time of the hard fork provided that the Bitcoin Custodian agrees to support such digital asset (see also “The Bitcoin Custodian may or may not support cryptocurrencies in the event of a hard fork or airdrop”)) may cause adverse U.S. federal income tax consequences for the Trust or the Shareholders.  It is not clear whether income from holding or selling the progeny cryptocurrency received pursuant to the hard fork would cause the Trust to recognize income that is not qualifying income for purposes of the publicly-traded partnership rules.  If income from holding or disposing of the progeny cryptocurrency is not qualifying income for purposes of the publicly-traded partnership rules, the Trust may be taxable as a corporation if such income exceeds ten percent (10%) of the Trust's total income.  It is also not clear whether income from holding or selling the progeny cryptocurrency received pursuant to the hard fork would cause Shareholders that are not United States persons to recognize income that is effectively connected with the conduct of a U.S. trade or business. If acquiring, holding or disposing of progeny cryptocurrency does not qualify for the trading safe harbors described in Code section 864, non-United States persons may be required to recognize income that effectively connected with a U.S. trade or business and be subject to U.S. federal income taxation on such effectively connected income.  The publicly-traded partnership rules and the Code section 864 safe harbors are discussed in greater detail below, under “U.S. Federal Income Tax Considerations.”

The Financial Accounting Standards Board has released Accounting Standards Codification Topic 740 (“ASC 740”) (formerly known as “FIN 48”), to provide consistent guidance on the recognition of uncertain tax positions.  ASC 740 prescribes, among other things, the minimum recognition threshold that a tax position is required to meet before being recognized in an entity's financial statements.  A prospective Shareholder should be aware that, among other things, ASC 740 could have a material adverse effect on the periodic calculations of the net asset value of the Trust, including reducing the net asset value of the Trust to reflect reserves for income taxes that may be payable in respect of prior periods by the Trust.  This could adversely affect certain Shareholders, depending upon the timing of their purchase and withdrawal of Shares.

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:

By investing in the Shares, investors agree and consent to the provisions set forth in the Trust Agreement. See “Description of the Trust Documents—Description of the Trust Agreement.”

For a further discussion of the conflicts of interest among the Sponsor, Custodians, Trust and others, see “The Sponsor - Conflicts of Interest.”

Affiliates of the Sponsor may have direct investments in bitcoin, bitcoin derivatives or other bitcoin related investments. To the extent that any substantial investment in bitcoin is initiated or materially changed, such investment may affect the Bitcoin Price. Such change in a substantial investment in bitcoin may result in changes in the Bitcoin Price.  As of the date of this Prospectus, no affiliate of the Sponsor has a substantial investment in bitcoin.

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 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 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.

Counsel, accountants and other advisers have been consulted by the Sponsor regarding the formation and operation of the Trust. 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.

Shareholders have limited voting rights under the Trust Agreement and will take no part in the management or control of the Trust. 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, as may be taken by shareholders of other trusts. Shareholders have limited voting rights as set forth in the Trust Agreement. Operation of the Trust by the Sponsor could have an adverse effect on an investment in the Shares.

Seward & Kissel LLP represents the Sponsor.  The Trust does not have counsel separate and independent from counsel to the Sponsor.  Seward & Kissel LLP does not represent Shareholders, and no independent counsel has been retained to represent Shareholders.  Seward & Kissel LLP is not responsible for any acts or omissions of the Sponsor, the Administrator, the Trustee, the Bitcoin Custodian, the Cash Custodian, the Partnership Representative 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/prime brokers 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 Custodian, the Cash Custodian, the Transfer Agent, the Partnership Representative 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 Seward & Kissel LLP has not independently verified such information.

The Transfer Agent Services Agreement is governed by the laws of the State of New York.

In this prospectus, each of the following quoted terms has the meanings set forth after such term:

“Additional Trust Expenses”—Fees and expenses incurred by the Trust, other than the Sponsor’s Fee, that are not Sponsor-Paid Expenses, including but not limited to: (i) fees in connection with the purchase and sale of the Trust’s bitcoin (including any commission and exchange fees), (ii) expenses incurred in connection with an offering of Shares of the Trust, including but not limited to fees to the Placement Agent and fees of the Escrow Agent, (iii) license fees, taxes and governmental charges, (iv) the Trust's regulatory fees and expenses (including any filings, applications or licenses and any registration fees or FINRA filing fees), (v) the Trust's audit fees (including any fees and expenses associated with tax preparation), (vi) marketing and advertising expenses, (vii) printing and mailing costs, (viii) costs of maintaining the Trust's website, (ix) fees and expenses related to the listing, quotation or trading of the Shares on any Secondary Market (including legal and audit fees and expenses) to the extent exceeding $100,000 in any given fiscal year, (x) expenses and costs of any extraordinary services performed by the Sponsor (or any other Service Provider) on behalf of the Trust, (xi) indemnification obligations of the Trust to the Sponsor, any Service Provider or any counterparties of the Trust, (xii) the Sponsor’s legal fees in connection with the establishment of the Trust and the offering of the Shares and (xiii) the Trust’s legal fees to the extent they exceed $100,000 in any given fiscal year (collectively, “Additional Trust Expenses”).  The Sponsor may, in its sole discretion and without obligation, pay certain Additional Trust Expenses on behalf of the Trust.

“Administrator” —UMB Fund Services, Inc. together with its permitted successors and assigns.

“Administrator Fee”—The fee payable to the Administrator for services it provides to the Trust, which the Sponsor shall pay the Administrator as a Sponsor-paid Expense.

“Auditor”—Citrin Cooperman & Company, LLP, together with its permitted successors and assigns.

“bitcoin”—A digital asset based on the cryptographic protocols used by the decentralized, peer-to-peer bitcoin computer network.

“Bitcoin Custody Account”—A custody account maintained by the Bitcoin Custodian in which the Trust's bitcoin will be held.

“Bitcoin Blockchain”—A public transaction ledger where bitcoin transfers are recorded.

“Bitcoin Custodian”— Fidelity Digital Asset Services, LLC together with its permitted successors and assigns.

“Bitcoin Custodian Agreement”—The Custodial Services Agreement between the Trust and the Bitcoin Custodian which sets forth the obligations and responsibilities of the Bitcoin Custodian in respect of the safekeeping of the Trust's bitcoin, as the same may be amended from time to time.

“Bitcoin Custodian Fee”—Fee payable to the Bitcoin Custodian for services it provides to the Trust, which the Sponsor shall pay to the Bitcoin Custodian as a Sponsor-paid Expense.

“Bitcoin Exchange Market”—The global bitcoin exchange market for the trading of bitcoin, which consists of transactions on electronic bitcoin exchanges.

“Bitcoin Holdings”—The value of bitcoin, as determined by reference to the Bitcoin Reference Rate, and cash held by the Trust less the Trust’s expenses and other liabilities.

“Bitcoin Holdings per Share”—The Trust's Bitcoin Holdings divided by the number of outstanding Shares.

“Bitcoin Network”—The online, end-user-to-end-user network hosting the public transaction ledger, known as the Blockchain, and the source code comprising the basis for the cryptographic and algorithmic protocols governing the Bitcoin Network.

“Bitcoin Price”—Means (i) with respect to the determination of Bitcoin Holdings, the price of bitcoin that is based on the Bitcoin Reference Rate, and (ii) with respect to the determination of GAAP NAV, the price of bitcoin that is based on the Trust’s principal market.

“Bitcoin Reference Rate”—The CME CF BRR or, if the CME CF BRR ceases to be published, the rate determined in accordance with the cascading rules set forth in “Valuation of Bitcoin and Determination of the Bitcoin Holdings and GAAP NAV —The Bitcoin Price and the Bitcoin Reference Rate.”

“Bitcoin Wallet”— An omnibus wallet created and secured by the Bitcoin Custodian, that holds the Trust’s bitcoin along with the bitcoin of other customers of the Bitcoin Custodian.

“Blockchain”—The public transaction ledger of the Bitcoin Network on which miners or mining pools solve algorithmic equations allowing them to add records of recent transactions (called “blocks”) to the chain of transactions in exchange for an award of bitcoin from the Bitcoin Network and the payment of transaction fees, if any, from users whose transactions are recorded in the block being added.

“Book Entry System”—The Federal Reserve Treasury Book Entry System for U.S. and federal agency securities.

“BTC Cash Account”—A cash account maintained by the Trust at a third party broker or dealer for the purpose of buying and selling bitcoin.

“Business Day”— Any day other than a Saturday or a Sunday on which the New York Stock Exchange is scheduled to be open for business, and, in respect of any action to be taken by the Trustee, on which the Trustee is scheduled to be open for business.

“Cash Account”—The cash account maintained by the Trust at the Cash Custodian pursuant to the Cash Custodian Agreement.

“Cash Custodian”—UMB Bank, N.A. together with its permitted successors and assigns.

“Cash Custodian Agreement”—The Custody Agreement between the Trust and the Cash Custodian which sets forth the obligations and responsibilities of the Cash Custodian in respect of the safekeeping of the Trust's cash, as the same may be amended from time to time.

“Cash Custodian Fee”—Fee payable to the Cash Custodian for services it provides to the Trust, which the Sponsor shall pay to the Cash Custodian as a Sponsor-paid Expense.

“CEA”—Commodity Exchange Act of 1936, as amended.

“CFPB”—The U.S. Consumer Financial Protection Bureau.

“CFTC”—The U.S. Commodity Futures Trading Commission, an independent agency with the mandate to regulate commodity futures and option markets in the United States.

“Clearing Trust Agency”—Any clearing agency or similar system other than the Book Entry System or DTC.

“CME CF BRR”—The Chicago Mercantile Exchange Bitcoin Reference Rate.

“Constituent Platforms”—Bitstamp, Coinbase Pro, itBit, Kraken, Gemini and LMAX Digital.

“Core Developers”—A group of engineers who have actively developed the Bitcoin Network.

“CPUs”—central processing units.

“DAO Report”—The SEC report issued on July 25, 2017 titled “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO.”

“DSTA”—The Delaware Statutory Trust Act, as amended.

“DTC”—The Depository Trust Company. DTC is a limited purpose trust company organized under New York law, a member of the U.S. Federal Reserve System and a clearing agency registered with the SEC. DTC will act as the securities depository for the Shares.

“DTC Participant”—A direct participant in DTC, such as a bank, broker, dealer or trust company.

“ERISA”—Employee Retirement Income Security Act of 1974, as amended.

“Evaluation Time”—Each Business Day at 4:00 p.m., New York time, or as soon thereafter as practicable.

“Exchange Act”—The Securities Exchange Act of 1934, as amended.

“FDIC”—The Federal Deposit Insurance Corporation.

“FinCEN”—The Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury.

“FINRA”—The Financial Industry Regulatory Authority, Inc., which is the primary regulator in the United States for broker-dealers.

“Foreign Shareholders”—Shareholders that are not United States persons and that do not hold their Shares in connection with the conduct of a trade or business within the United States.

“GAAP”—The U.S. generally accepted accounting principles.

“GAAP NAV” —The value of bitcoin, as determined by reference to the Trust’s primary market in accordance with GAAP, and cash held by the Trust less the Trust’s expenses and other liabilities.

“GAAP NAV per Share” —The Trust's GAAP NAV divided by the number of outstanding Shares.

“GPUs”—Graphic processing units.

“HIRE Act”—The Hiring Incentives to Restore Employment Act.

“Indirect Participants”—Those banks, brokers, dealers, trust companies and others who maintain, either directly or indirectly, a custodial relationship with a DTC Participant.

“Internal Revenue Code”—Internal Revenue Code of 1986, as amended.

“Investment Advisers Act”—Investment Advisers Act of 1940, as amended.

“Investment Company Act”—Investment Company Act of 1940, as amended.

“IRA”—An individual retirement account provided for under Section 408(m) of the Code.

“IRS”—The U.S. Internal Revenue Service, a bureau of the U.S. Department of the Treasury.

“JOBS Act”—The Jumpstart our Business Startups Act of 2012.

“Maximum Amount” —[      ] Shares.

“Minimum Amount” —400,000 Shares.

“Notice”—Notice 2014-21 released by the IRS on March 35, 2014 discussing certain aspects of the treatment of virtual currencies, such as bitcoin, for U.S. federal income tax purposes.

“NYDFS”—New York Department of Financial Services.

“OFAC”— Office of Foreign Assets Control of the U.S. Department of Justice.

“Off-Blockchain transactions”—Transactions that involve the transfer of control or ownership of a specific digital wallet holding bitcoin, or of the reallocation of ownership of certain bitcoin in a pooled-ownership digital wallet.

“Partnership Representative Fee”—Fee payable to the Partnership Representative for services it provides to the Trust, which the Sponsor shall pay to the Partnership Representative as a Sponsor-paid Expense.

“PCAOB”—the Public Company Accounting Oversight Board.

“Redemption Date” means the last Business Day of each month.

“Sarbanes-Oxley Act”—The Sarbanes-Oxley Act of 2002.

“SEC”—The U.S. Securities and Exchange Commission.

“Secondary Market”—Any marketplace or other alternative trading system, as determined by the Sponsor, on which the Shares may then be listed, quoted or traded, including but not limited to, the OTCQX.

“Securities Act”—The Securities Act of 1933, as amended.

“Security Procedures”—Certain security procedures such as passwords, encryption of private keys, multi-factor authentication process, multi-signature wallets and telephone call-backs used in the administration and operation of the Trust and the safekeeping of its bitcoin and private keys.

“Service Providers”—Collectively, the Administrator, the Auditor, the Bitcoin Custodian, the Cash Custodian, the Partnership Representative, the Transfer Agent and the Trustee.

“Shareholder”—The person in whose name a Share is registered on the books and records of the Trust by the Transfer Agent, which in the case of any Share which is held through DTC, shall be DTC or its nominee, as applicable.

“Shares”—Common units of fractional undivided beneficial interest in, and ownership of, the Trust.

“SIPC”—The Securities Investor Protection Corporation.

“Sponsor”—Wilshire Phoenix Funds LLC.

“Sponsor-paid Expense(s)”— The Administrator Fee, the Bitcoin Custodian Fee, the Cash Custodian Fee, the Transfer Agent Fee, the Trustee Fee and the Partnership Representative Fee. 

“Sponsor's Fee”—The Sponsor's Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement.

“Transfer Agent”— Broadridge Corporate Issuer Solutions, Inc., together with its permitted successors and assigns.

“Transfer Agent Fee”—Fee payable to the Transfer Agent for services it provides to the Trust, which the Sponsor shall pay to the Transfer Agent as a Sponsor-paid Expense.

“Transfer Agent Services Agreement”—The Agreement between the Transfer Agent and the Trust governing the Transfer Agent's duties and obligations, as the same may be amended from time to time.

“Trust”— wShares Bitcoin Fund, a Delaware statutory trust that was formed on April 29, 2020 under the DSTA pursuant to the Trust Agreement.

“Trust Administration and Accounting Agreement”—The Administration and Trust Accounting Agreement between the Trust and the Administrator which sets forth the obligations and responsibilities of the Administrator in respect of the administration and accounting of the Trust, as the same may be amended from time to time.

“Trust Agreement”—The Amended and Restated Declaration of Trust and Trust Agreement between the Trustee and the Sponsor establishing and governing the operations of the Trust, as the same may be amended from time to time.

“Trustee”—Delaware Trust Company, together with its permitted successors and assigns.

“Trustee Fee”—Fee payable to the Trustee for services it provides to the Trust, which the Sponsor shall pay to the Trustee as a Sponsor-paid Expense.

“U.S. dollar” or “$”—United States dollar or dollars.