Grayscale CoinDesk Crypto 5 ETF
For the period ended Jun 30, 2026. Filed Sep 3, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Sep 3, 2026
GDLC$34.05-0.6%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2025-06-30; filed 2025-09-05.
0001729997-25-000006
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2026-06-30; filed 2026-09-03.
0001193125-26-381861
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 353 previous paragraphs and 268 current paragraphs.
86 unchanged; 105 reworded; 73 added; 147 removed; 15 previous and 4 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (73)
Current report
The value of the Shares is directly related to the value of the Fund Components held by the Fund, and the prices of the Fund Components have fluctuated significantly. The following factors may affect the prices of the Fund Components and the value of the Shares:
Current report
The limited history and early stage of development of Digital Asset Networks and related protocols, which may not function as intended or achieve widespread use;
Current report
Global supply of the Fund Components, including sales by miners, validators and large holders;
Current report
Fragmentation, consolidation, liquidity and trading volume in Digital Asset Markets, and fiat currency deposit and withdrawal policies of Digital Asset Trading Platforms;
Current report
Interruptions, theft, loss, compromise, insolvency or failure involving Digital Asset Trading Platforms, custodians or other digital asset service providers;
Current report
Dependence on the internet, a disruption of which could hinder transfers of the Fund Components and reduce their value;
Current report
Governance of Digital Asset Networks, including through voluntary consensus and open competition, which could result in a lack of consensus or clarity and difficulty addressing long-term problems;
Current report
The maintenance and development of the open-source software protocols of the Digital Asset Networks, including whether developers and other contributors have sufficient incentives and resources to maintain and develop the networks;
Current report
Competition from other digital assets or alternative means of payment;
Current report
Global or regional political, economic or financial events and conditions;
Current report
Actual or perceived fraudulent or manipulative trading and a lack of transparency in Digital Asset Markets;
Current report
Fees and settlement times associated with transactions in the Fund Components; and
Current report
Source-code or cryptographic flaws, advances in quantum computing or a failure to implement quantum-resistant protections in a timely manner, any of which could compromise a Digital Asset Network or result in the theft of the Fund’s digital assets. Similar events affecting other digital assets could reduce confidence in Digital Asset Networks and demand for the Fund Components.
Current report
Because the Fund Components and their Digital Asset Networks have a limited history and continue to develop, additional risks may arise that are difficult to predict. The Fund Components may not maintain their value or achieve or sustain broader acceptance. A decline in the prices of the Fund Components would reduce the Fund’s NAV per Share and may adversely affect the trading price of the Shares.
Current report
Layer 2 solutions and smart contract functionality developed for use with certain Digital Asset Networks underlying the Fund Components may introduce additional technical and security risks that could adversely affect the value of the relevant Fund Components and the Shares.
Current report
Layer 2 solutions have been developed for use with certain Digital Asset Networks underlying the Fund Components to increase transaction capacity or efficiency or expand network functionality. These solutions may not function as intended or achieve widespread use. Smart contracts are typically immutable once deployed. Vulnerabilities in their coding, such as logic errors or security flaws, can lead to significant financial losses if exploited.
Current report
Layer 2 solutions and smart contracts may not be interoperable with one another, which could fragment activity and liquidity among applications, limit their use or reduce transaction efficiency. Layer 2 solutions and sidechains may also depend on the continued operation and security of the underlying Digital Asset Network. A disruption of that network could impair the relevant Layer 2 solution or sidechain. These solutions may also introduce centralized control risks, such as admin key holders who may possess the ability to modify key functions or extract funds. Even decentralized governance of these solutions can concentrate power in the hands of a few core participants, allowing changes to smart contracts that could harm users and the value of associated digital assets. Any major breach, failure or loss of confidence in smart contracts, Layer 2 solutions or sidechains associated with a Digital Asset Network underlying a Fund Component could adversely affect the value of the relevant Fund Component and the value of the Shares.
Current report
To increase the volume of transactions that can be processed on the Digital Asset Networks underlying the Fund Components, various features have been introduced to increase speed and throughput. These and other mechanisms for increasing the scale of settlement or throughput of Digital Asset Network transactions may not be effective, may not achieve wide-scale use or may not achieve their intended results in a timely manner. If corresponding increases in throughput lag behind growth in the use of digital asset networks, average transaction fees and settlement times may increase considerably, which could preclude certain uses for the Fund Components and reduce demand for, and the prices of, the Fund Components, which could adversely impact the value of the Shares.
Current report
For certain Fund Components, the largest wallets are believed to hold, in aggregate, a significant percentage of the applicable Fund Component in circulation. Moreover, it is possible that one or more persons or entities control multiple wallets that collectively hold a significant amount of a Fund Component, even if those wallets individually hold only small amounts. As a result of this concentration of ownership, large sales or distributions by one or more holders could have an adverse effect on the market price of the applicable Fund Component and, consequently, the value of the Shares.
Current report
If the profit margins of mining or validating operations on a Digital Asset Network are not sufficiently high, miners or validators may sell the relevant Fund Component earned through mining or validating, resulting in an increase in its liquid supply, which could reduce its market price.
Current report
During block production, validators may select, order or exclude transactions in a manner that increases their profits, a practice known as “Maximal Extractable Value” (“MEV”). MEV-related activity may increase transaction costs, disadvantage network users or reduce confidence in the relevant Digital Asset Network, which could adversely affect the value of the relevant Fund Component and the value of the Shares.
Current report
Disruptions or other problems in the supply chain for digital asset mining hardware could cause harm to Digital Asset Networks that rely on mining and adversely affect the value of the Shares.
Current report
The supply of digital asset mining hardware is concentrated among a limited number of suppliers and geographic regions. Mining hardware manufacturers may be unable to manufacture or supply sufficient mining hardware, whether due to shortages of components or resources, changes in laws or trade restrictions, insolvency or non-performance of their contracts. Such factors may reduce the availability of mining hardware or components necessary for its manufacture or repair.
Current report
If miners are unable to source mining hardware at commercially reasonable prices, or at all, and replacement or substitute sources of mining hardware prove to be unavailable, mining on the Digital Asset Networks underlying the Fund Components that rely on proof-of-work consensus mechanisms could be negatively affected. These supply chain disruptions could make it more difficult for transactions on such networks to be confirmed, increase transaction costs, or affect such networks' security, any of which could negatively affect the value of the applicable Fund Components and consequently the value of the Shares.
Current report
“>33% attack” where, if a malicious actor, validator, botnet or group of validators acting in concert were to gain control of more than 33% of the total staked Ether on the Ethereum network, a malicious actor could temporarily impede or delay block confirmation or even cause a temporary fork in the blockchain. Even without 33% control, a malicious actor or botnet could create a flood of transactions in order to slow down the Ethereum network.
Current report
The Fund could incur liability or operational disruption if Fund Components received by the Fund are associated with sanctioned persons or illicit activity.
Current report
The Fund receives Fund Components in connection with Share creations. The Fund, the Manager, the Custodial Entities, an Authorized Participant or a Liquidity Provider may be unable to identify all Fund Components associated with sanctioned persons or illicit activity. If the Fund or its service providers transact with a sanctioned person or receive Fund Components associated with illicit activity, assets could be rejected, blocked or frozen, and the Fund or its service providers could face investigations, liability, fines, penalties or service disruptions, any of which could adversely affect the Fund and the value of the Shares.
Current report
Thereafter, in November 2022, FTX, the third largest Digital Asset Trading Platform by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency. Shortly thereafter, FTX’s CEO resigned and FTX and several affiliates of FTX filed for bankruptcy. The U.S. Department of Justice subsequently brought criminal charges, including charges of fraud, violations of federal securities laws, money laundering, and campaign finance offenses, against FTX’s former CEO and others. In November 2023, FTX’s former CEO was convicted of fraud and money laundering. Similar charges related to violations of anti-money laundering laws were brought in November 2023 against Binance and its former CEO. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis Capital”), a subsidiary of Genesis Global Holdco, LLC (“Genesis Holdco”). The SEC also brought charges against Genesis Capital and Gemini Trust Company, LLC (“Gemini”) in January 2023 for their alleged unregistered offer and sale of securities to retail investors. In October 2023, the New York Attorney General (“NYAG”) brought charges against Gemini, Genesis Capital, Genesis Asia Pacific PTE. LTD. (“Genesis Asia Pacific”), Genesis Holdco (together with Genesis Capital and Genesis Asia Pacific, the “Genesis Entities”), Genesis Capital’s former CEO, DCG, and DCG’s CEO alleging violations of law. In February 2024, the Genesis Entities entered into a settlement agreement with the NYAG to resolve the NYAG’s allegations, which settlement was subsequently approved by the Bankruptcy Court of the Southern District of New York.
Current report
Many Digital Asset Trading Platforms are unlicensed or subject to limited regulatory oversight. Digital Asset Trading Platforms may also fail to comply with applicable regulation or may provide limited information regarding their operations, cybersecurity practices and regulatory compliance. These risks may be heightened for Digital Asset Trading Platforms located outside of the United States. As a result, trading activity on or reported by these Digital Asset Trading Platforms may reflect behavior that would be prohibited in regulated U.S. trading venues. Actual or perceived fraudulent or manipulative trading could reduce confidence in Digital Asset Trading Platforms, adversely affect the value or market perception of the Fund Components and, in turn, adversely affect the value of the Shares.
Current report
Tools to detect and deter fraudulent or manipulative trading activities may not be available to or employed by Digital Asset Trading Platforms, and such platforms may also lack safeguards used by more traditional exchanges to enhance the stability of trading. As a result, the prices of the Fund Components on Digital Asset Markets may be subject to larger or more frequent sudden declines than the prices of assets traded on more traditional exchanges. In the past, Digital Asset Trading Platforms have been closed or temporarily shut down due to fraud, business failure, security breaches or operational problems. Such events have in the past, and may in the future, reduce confidence in Digital Asset Markets, increase volatility in the prices of the Fund Components and adversely affect the value of the Shares.
Current report
Digital Asset Trading Platforms may be exposed to wash-trading and front-running.
Current report
Digital Asset Trading Platforms may be susceptible to wash-trading and front-running. Wash-trading occurs when offsetting trades are entered into for other than bona fide reasons, such as the desire to inflate reported trading volumes. Front-running occurs when a party uses technology or market advantage to get and use prior knowledge of upcoming transaction for their own benefit. Any actual or perceived false trading on Digital Asset Trading Platforms could adversely affect the value of the Fund Components and/or negatively affect the market perception of the Fund Components. Wash-trading and front-running also may place more legitimate Digital Asset Trading Platforms at a relative competitive disadvantage.
Current report
Exchange-traded products that invest in one or more of the Fund Components may reduce demand for the Shares and adversely affect their liquidity and trading price.
Current report
Exchange-traded products that invest in one or more of the Fund Components, including single-asset exchange-traded products focused on Bitcoin, Ether, Solana, XRP or other digital assets held by the Fund, are listed on national securities exchanges, and additional competing products may be listed in the future. Such products may offer investors greater liquidity, lower fees or an arbitrage mechanism designed to keep their trading prices closer to net asset value. Investors may prefer such products to the Shares, which could reduce demand for and liquidity of the Shares, increase any discount to NAV per Share and adversely affect the trading price of the Shares.
Current report
Competition from central bank digital currencies could adversely affect the value of the Fund Components and other digital assets.
Current report
Central banks in various countries have introduced or are developing digital forms of legal tender (“CBDCs”). Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could compete with, or replace, the Fund Components and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental entities have also announced cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments and settlement activities. As CBDCs and similar technologies gain traction, the demand for the Fund Components may decline, leading to a potential decrease in their value, which could adversely affect an investment in the Shares.
Current report
Digital asset treasury companies may increase volatility and competitive pressures in the digital asset market, which could adversely affect the value of the Shares.
Current report
In recent times, a number of companies engaged in businesses outside the digital assets industry have begun to hold their corporate treasuries in digital assets instead of fiat currency (“digital asset treasury companies”). In some cases, these companies have raised funds through financing or securities offerings and applied the proceeds to purchase digital assets, including the Fund Components or digital assets that compete with the Fund Components.
Current report
Digital asset treasury companies are a relatively new phenomenon and it is impossible to predict all of the risks they could pose to the Fund. Digital asset treasury companies may increase procyclical dynamics in the market because they may purchase digital assets when prices are rising and sell such assets when prices are decreasing, potentially making the Fund Components more expensive in a rising market and causing downward pressure on Fund Component prices in a falling market. Digital asset treasury companies could also cause greater volatility in digital asset markets, including markets for the Fund Components. Additionally, digital asset treasury companies may compete with the Fund as a perceived alternative means of achieving exposure to the prices of digital assets through investing in securities. Any of the foregoing could adversely affect the value of the Shares.
Current report
With respect to any fork, airdrop or similar event, the Manager will cause the Fund to irrevocably abandon the Forked Assets associated with such event. As such, shareholders will not receive the benefits of any forks, and the Fund is not able to participate in any airdrop.
Showing the first 40 of 73 passages. Open the source sections for the rest.
Removed paragraphs (147)
Previous report
The SEC has taken, and may in the future take, the view that some of the digital assets held by the Fund are securities, which has adversely affected, and could adversely affect the value of such digital assets and the price of the Shares and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Fund;
Previous report
Extreme volatility of trading prices that many digital assets, including the Fund Components, have experienced in recent periods and may continue to experience, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value;
Previous report
The value of the Shares relates directly to the value of the digital assets then held by the Fund, the value of which may be highly volatile and subject to fluctuations;
Previous report
Because of the holding period under Rule 144, the lack of an ongoing redemption program, and the Fund’s ability to halt creations from time to time, there is no arbitrage mechanism to keep the value of the Shares closely linked to the Index
Previous report
Prices (or Digital Asset Reference Rates, prior to July 1, 2025), and the Shares have historically traded at a substantial premium over, or a substantial discount to, the NAV per Share;
Previous report
Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies may affect the value of the Shares or restrict the use of one or more digital assets, mining or validating activity or the operation of their networks or the Digital Asset Markets in a manner that adversely affects the value of the Shares;
Previous report
The Fund’s shareholders having different rights than those of shareholders governed by the laws of U.S. jurisdictions due to the Fund being a Cayman Islands limited liability company;
Previous report
The Manager’s services may be discontinued, which could be detrimental to the Fund; and
Previous report
The trading prices of many digital assets, including those held by the Fund, have experienced extreme volatility throughout their existence, including in recent periods, and may continue to do so. For instance, following significant increases throughout the majority of 2020, digital asset prices experienced significant volatility throughout 2021 and 2022. This volatility became extreme in November 2022, when FTX, then a major Digital Asset Trading Platform, halted customer withdrawals. See “—Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.” Digital asset prices have continued to fluctuate widely throughout 2023 and through the date of this Annual Report.
Previous report
Furthermore, changes in U.S. political leadership and economic policies may create uncertainty that materially affects the price of digital assets and the Fund’s Shares. For example, on March 6, 2025, President Trump signed an Executive Order to establish a Strategic Bitcoin Reserve and a United States Digital Asset Stockpile. Pursuant to this Executive Order, the Strategic Bitcoin Reserve will be capitalized with Bitcoin owned by the Department of Treasury that was forfeited as part of criminal or civil asset forfeiture proceedings, and the Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies impose no incremental costs on American taxpayers. Conversely, the Digital Asset Stockpile will consist of all digital assets other than Bitcoin owned by the Department of Treasury that were forfeited in criminal or civil asset forfeiture proceedings, but the U.S. government will not acquire additional assets for the U.S. Digital Asset Stockpile beyond those obtained through such proceedings. The anticipation of a U.S. government-funded strategic cryptocurrency reserve had motivated large-scale purchases of certain digital assets in the expectation of the U.S. government acquiring XRP to fund such reserve, and the market price of such digital assets decreased significantly as a result of the ultimate content of the Executive Order. Any similar action or omission by the U.S. federal administration or other government authorities with respect to XRP or other digital assets may negatively and significantly impact the price of digital assets and the Fund’s Shares.
Previous report
The loss of access to a private key required to access a digital asset may be irreversible. If a private key is lost and no backup of the private key is accessible, or if the private key is otherwise compromised, the owner would be unable to access the digital assets held in the Digital Asset Account corresponding to that private key.
Previous report
For Fund Components that operate on a PoW consensus model, digital asset mining operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for mining operations. Additionally, miners may be forced to cease operations during an electricity shortage or power outage, or otherwise when the cost of electricity used in mining as compared to relevant digital asset prices makes mining that digital asset uneconomical.
Previous report
Digital Asset Networks and related protocols are dependent upon the internet. A disruption of the internet or a Digital Asset Network or related protocol, would affect the ability to transfer digital assets, and, consequently, their value.
Previous report
The acceptance of software patches or upgrades to a Digital Asset Network by a significant, but not overwhelming, percentage of the users, validators or miners in a Digital Asset Network, as applicable, could result in a “fork” in such Digital Asset Network’s blockchain, resulting in the operation of multiple separate blockchain networks.
Previous report
Upgrades and other changes to a Digital Asset Network or related protocol may not be successful. For example, the Ethereum network has implemented and is in the process of implementing a series of software upgrades and other changes to its source code, including to material portions of the source code. These upgrades have and will result in new iterations of the Ethereum network. Although some upgrades to the Ethereum network and other Digital Asset Networks and related protocols have been successfully implemented, previously successful upgrades do not guarantee that future upgrades will be successful or be implemented as currently contemplated, and any failure to successfully implement future changes, or implement them as currently intended, could have a material adverse effect on the value of Ether and other current or future Fund Components, as applicable, and therefore have a material adverse effect on the value of the Shares.
Previous report
Developers and other users of Digital Asset Networks and related protocols are in the process of developing and making significant decisions that will affect the supply, issuance and rights of such network’s or protocol’s digital assets, and in some cases other protocols that use or rely on that Digital Asset Network. For example, certain DeFi protocols built on Digital Asset Networks depend on a process known as “liquidity mining” to operate. Users who engage in liquidity mining contribute tokens to a DeFi protocol’s digital asset pools, or otherwise interact with the DeFi protocol, and receive tokens in proportion to their transaction activity. Decisions regarding liquidity mining in a DeFi protocol or among DeFi protocols, including decisions regarding liquidity mining reward amounts and distribution decisions, could lead to a decline in the support and price of such digital asset as well as the digital asset native to the underlying Digital Asset Network on which the DeFi protocol operates.
Previous report
Moreover, in the past, flaws in the source code for Digital Asset Networks and related protocols have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. The cryptography underlying the Digital Asset Networks and related protocols on which the Fund Components exist and rely could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. In any of these circumstances, a malicious actor may be able to take a Fund Component, which would adversely affect the value of the Shares. Moreover, functionality of the Digital Asset Network or protocol underlying a Fund Component may be negatively affected by such an exploit such that it is no longer attractive to users, thereby dampening demand for the relevant Fund Component. In addition, any reduction in confidence in the source code or cryptography underlying Digital Asset Networks and related protocols generally could negatively affect the demand for digital assets, including the Fund Components, and therefore adversely affect the value of the Shares.
Previous report
The open-source structure of many Digital Asset Networks and related protocols, such as the Ethereum network, means that developers and other contributors are generally not directly compensated for their contributions in maintaining and developing such Digital Asset Networks or protocols. As a result, the developers of and other contributors to a particular Digital Asset Network or protocol may lack a financial incentive to maintain or develop the Digital Asset Network or protocol, or may lack the resources to adequately address emerging issues. Alternatively, some developers may be funded by companies whose interests are at odds with other participants in a particular Digital Asset Network or protocol. If a Digital Asset Network or protocol does not have attractive policies on supply and issuance of its related digital asset, there may not be sufficient support for such Digital Asset Network or protocol, which could lead to a decline in the support and price of such digital asset.
Previous report
Moreover, because digital assets have existed for a short period of time and are continuing to be developed, there may be additional risks to Digital Asset Networks and related protocols, and therefore to digital assets that are Fund Components, that are impossible to predict as of the date of this Annual Report.
Previous report
Smart contracts are a new technology and ongoing development may magnify initial problems, cause volatility on the networks that use smart contracts and reduce interest in them, which could have an adverse impact on the value of digital assets that rely on smart contracts.
Previous report
Certain of the Fund Components rely on the use of smart contracts. Smart contracts are computer programs that run on a Digital Asset Network or related protocol that execute automatically when certain conditions are met. Because smart contract functions typically cannot be stopped or reversed, vulnerabilities in or unforeseen consequences of their programming can have damaging effects for the underlying Digital Asset Network or protocol and the value of digital assets that use or interact with such smart contracts. For example, in June 2016, a vulnerability in the smart contracts underlying a protocol that was deployed on the Ethereum network, The DAO, a distributed autonomous organization for venture capital funding, allowed an attack by a hacker to syphon approximately $60 million worth of Ether from The DAO into a separate account. In the aftermath of the theft, certain developers of and core contributors to the Ethereum network pursued a “hard fork” of the Ethereum network in order to erase any record of the theft. Despite these efforts, the price of Ether dropped approximately 35% in the aftermath of the attack and subsequent hard fork. In addition, in July 2017, a vulnerability in a smart contract for a multi-signature wallet software developed by Parity led to a $30 million theft of Ether, and in November 2017, a new vulnerability in Parity’s wallet software led to roughly $160 million worth of Ether being indefinitely frozen in an account. More recently, in 2022, a digital asset trader took advantage of an unintended vulnerability in the smart contracts of a DeFi protocol, Mango Markets, which led to roughly $110 million in various digital assets being withdrawn from the protocol.
Previous report
Other smart contracts, such as bridges between separate Digital Asset Networks have also been manipulated, exploited or used in ways that were not intended or envisioned by their creators, such that attackers syphoned over $3.8 billion worth of digital assets from 219 smart contract exploits in 2022, and $1.7 billion worth of digital assets from 231 exploits of smart contracts in 2023. Initial problems and continued problems with the development, design and deployment of smart contracts may have an adverse effect on the value of networks built on smart contract platforms or other digital assets that rely on smart contract technology, including digital assets held by the Fund, which could have a negative impact on the value of the Shares.
Previous report
Layer 2 solutions underlying certain of the Fund Components were only recently conceived and may not function on their underlying, base-layer smart contract platforms as intended which could have an adverse impact on the value of the Fund Components and an investment in the Shares.
Previous report
So-called “Layer 2” solutions are protocols built on top of an underlying smart contract platform blockchain, and intended to provide scalability to the underlying blockchain by increasing transaction efficiency. For example, Polygon is a smart contract platform protocol built on top of the Ethereum blockchain; it is intended to provide scalability to Ethereum by allowing users to transact on a variety of blockchains deployed on the Ethereum network. Under this model, Ethereum functions as the base layer, or “Layer 1” blockchain. As an example, the Polygon protocol offers developers sidechain, roll-ups and other Layer 2 solutions which can be tailored to an individual developer’s intended use case. Such solutions are intended to improve upon the transaction speed, cost and efficiency of transactions on their respective Layer 1. However, Layer 2 solutions have only been recently developed and may not function as intended.
Previous report
For example, smart contracts deployed on one Layer 2 solution may not be interoperable with smart contracts deployed on other Layer 2 solutions. In particular, the advent of Layer 2 solutions presents the possibility of fracturing liquidity of DeFi DApps on a smart contract platform’s mainchain by splitting such liquidity among multiple, non-interoperable Layer 2 solutions, which could limit their use case or reduce efficiency. Layer 2 solutions also rely, to various degrees, on the functionality of the underlying Layer 1 blockchain. It is possible that a disruption on the Ethereum blockchain, for example, could have a material adverse effect on the functioning of the Polygon network and the value of the Fund Components and an investment in the shares.
Previous report
Layer 2 solutions also present the possibility of fracturing liquidity of DeFi protocols that certain Fund Components rely on by splitting such liquidity among multiple, non-interoperable Layer 2 solutions, which could limit the DeFi application’s use case or reduce efficiency. Layer 2 solutions also rely, to various degrees, on the functionality of the underlying Layer 1 blockchain. It is possible that a disruption on the Ethereum blockchain, for example, could have a material adverse effect on the functioning of the Polygon network or the value of current or future Fund Components and an investment in the Shares.
Previous report
ERC-20 tokens rely on the ERC-20 standard and the Ethereum blockchain to function and any adverse impact on the ERC-20 standard and/or the Ethereum blockchain could have an adverse impact on the value of certain digital assets that may be held by the Fund and the value of the Shares.
Previous report
Certain recent Fund Components were created using Ethereum Request for Comment 20 (“ERC-20”), a type of smart contract protocol standard on the Ethereum blockchain that allows users to create new digital assets. ERC-20 tokens are distinct from Ethereum because they can have their own unique set of features. However, because ERC-20 tokens are created on the Ethereum blockchain, they rely on the Ethereum blockchain for key functionalities such as storage, transfer and usage. As a result, vulnerabilities or attacks on the ERC-20 standard and/or the Ethereum blockchain more generally can cause vulnerabilities or attacks on ERC-20 tokens. For example, in February 2018, a vulnerability in the transfer of ERC-20 tokens was discovered that led to the loss of certain ERC-20 tokens, such as EOS, QTUM and Golem. In addition, in April 2018, many digital asset trading platforms halted trading of all ERC-20 tokens because of newly discovered vulnerabilities in the ERC-20 standard. Any future similar adverse impacts on the ERC-20 standard and/or the Ethereum blockchain could have an adverse impact on the value of ERC-20 tokens and/or the digital assets held by the Fund, which could in turn have an adverse impact on the value of an investment in the Shares.
Previous report
Because the governance of these Digital Asset Networks and protocols, including those underlying certain of the Fund Components, is ultimately managed by the voluntary consensus and open competition, even Digital Asset Networks and protocols with a more centralized development team may be unable to successfully or efficiently implement beneficial updates to the network or protocol’s source code because a dispersed group of individuals, rather than a single, centralized actor, may be able to control network governance decisions.
Previous report
On the other hand, to the extent that a significant majority of users, validators and/or miners do adopt amendments to a Digital Asset Network or protocol, such Digital Asset Network or protocol will be subject to new source code that may adversely affect the value of the digital asset. If a significant majority of users, miners, or validators were to adopt amendments to a Digital Asset Network or protocol, whatever the source, such network will be subject to new protocols that may adversely affect the utility or operations of the Digital Asset Network or protocol, and thus the value of the relevant digital asset.
Previous report
As corresponding increases in throughput lag behind growth in the use of Digital Asset Networks, average transaction fees and settlement times may increase considerably. For example, the Bitcoin network has been, at times, at capacity, which has led to increased transaction fees. Since January 1, 2022, Bitcoin average daily transaction fees have ranged from $0.38 per transaction on September 8, 2024, to as high as $124.17 per transaction on April 20, 2024. As of June 30, 2025, Bitcoin average daily transaction fees stood at $1.36 per Bitcoin transaction. Increased transaction fees and decreased settlement speeds could preclude certain uses for digital assets (e.g., micropayments), and could reduce demand for, and the price of, digital assets, which could adversely impact the value of the Shares.
Previous report
Moreover, the smart contract platform protocols underlying some of the Fund Components were only recently conceived and the technologies underlying the protocols may not function as intended, which could have an adverse impact on the value of the Fund Components and an investment in the Shares. In particular, Digital Asset Networks designed to utilize smart contracts rely on innovative scaling solutions designed to increase the efficiency of processing and throughput of smart contract transactions. For example, the Solana protocol, first conceived by Anatoly Yakovenko in a 2017 whitepaper, introduced PoH transaction ordering, which is intended to improve upon the more widely used PoS consensus mechanism utilized by many other smart contract-based Digital Asset Networks. PoH is intended to provide a transaction processing speed and capacity advantage over other PoS networks, like the Ethereum network, which rely on sequential production of blocks and can lead to delays caused by validator confirmations.
Previous report
Like other public, permissionless Digital Asset Networks, PoH-based Digital Asset Networks and similar scaling solutions are new technologies that are not widely used, may not function as intended, and are subject to many of the same, or even more limitations as the Digital Asset Networks and protocols they seek to improve upon. For example, each may require more specialized equipment to operate or interact with and therefore fail to attract a significant number of users. In addition, there may be flaws in the cryptography underlying these scaling solutions including flaws that affect their functionality and make them even more vulnerable to attack than the Digital Asset Networks they seek to improve upon. For example, the Solana network has suffered a significant number of service disruptions. For example, on February 6, 2024, the Solana network experienced a significant disruption, later attributed to a bug in the core software which prevented validators from processing blocks, and was offline for over five hours.
Previous report
The development of scaling solutions, including certain Digital Asset Networks that underly certain of the Fund Components is ongoing and any further disruption could have a material adverse effect on the value of the relevant Fund Components and an investment in the Shares. There is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement or throughput of Digital Asset Network transactions will be effective, or how long these mechanisms will take to become effective, which could adversely impact the value of the Shares.
Previous report
Digital Asset Networks and related protocols are often developed by a diverse set of contributors, but are also often developed by identifiable and high-profile contributors. The perception that certain high-profile contributors may no longer contribute to the applicable Digital Asset Network or protocol may have an adverse effect on the market price of any related digital assets. For example, in June 2017, an unfounded rumor circulated that Ethereum protocol developer Vitalik Buterin had died. Following the rumor, the price of Ether decreased approximately 20% before recovering after Buterin himself dispelled the rumor. Some have speculated that the rumor led to the decrease in the price of Ether. In the event a high-profile contributor to a Digital Asset Network or related protocol is perceived as no longer contributing to such Digital Asset Network or protocol due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is valid, it could negatively affect the price of such Fund Component, which could adversely impact the value of the Shares.
Previous report
Digital assets may have concentrated ownership and large sales or distributions by holders of any one digital asset, or any ability to participate in or otherwise influence any one digital asset’s underlying network, could have an adverse effect on the market price of such digital asset.
Previous report
Many digital assets have concentrated ownership. For example, as of June 30, 2025 the largest 100 Bitcoin wallets held approximately 15% of the Bitcoin in circulation, the largest 100 Ether wallets held approximately 21% of the Ether in circulation, the largest 100 SOL wallets held approximately 29% of the SOL in circulation, the largest 100 XRP wallets held approximately 86% of the XRP in circulation, and the largest 100 ADA wallets held approximately 29% of the ADA in circulation. Moreover, it is possible that other persons or entities control multiple wallets that collectively hold a significant amount of digital assets, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the same person or entity. As a result of this concentration of ownership, large sales or distributions by such holders could have an adverse effect on the market price of certain digital assets with highly concentrated ownership.
Previous report
Over the past several years, digital asset mining and validating operations have evolved from individual users mining with computer processors, graphics processing units and first generation application specific integrated circuit machines to “professionalized” mining and validating operations using proprietary hardware or sophisticated machines. If the profit margins of digital asset mining or validating operations are not sufficiently high, including due to an increase in electricity costs or a decrease in transaction fees, digital asset miners and validators are more likely to immediately sell digital assets earned by mining or validating, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price.
Showing the first 40 of 147 passages. Open the source sections for the rest.
Reworded paragraphs (105)
Previous wording
Below is a summary of the principal factors that make an investment in the Shares speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be read in conjunction with the other information included in this Annual Report on Form 10-K, including the Fund’s financial statements and related notes thereto, and our other filings with the SEC, before making an investment decision regarding the Shares. See “Glossary of Defined Terms” for the definition of certain capitalized terms used in this Annual Report. All other capitalized terms used, but not defined, herein have the meanings given to them in the LLC Agreement.
Current wording
The risk factors below should be read in conjunction with the other information included in this Annual Report on Form 10-K, including the Fund’s financial statements and related notes thereto, and our other filings with the SEC.
Previous wording
The trading prices of many digital assets, including the Fund Components, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including declines in the trading prices of digital assets, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
Current wording
The trading prices of many digital assets, including the Fund Components, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including declines in the trading prices of Fund Components, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
Previous wording
Extreme volatility in the future, including declines in the trading prices of the Fund Components, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value. Furthermore, negative perception, a lack of stability and standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatility in the prices of the Fund Components and other digital assets, including a depreciation in value. The Fund is not actively managed and will not take any actions to take advantage, or mitigate the impacts, of volatility in the prices of the Fund Components. For additional information that quantifies the volatility of the Fund Component prices and the value of the Shares, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Historical Fund Component Prices.”
Current wording
Negative perceptions, instability and the absence of standardized regulation in the digital asset economy may reduce confidence in digital assets and result in greater volatility in, or declines in, the prices of the Fund Components. Changes in U.S. political leadership or economic policies, or actions or omissions by U.S. government authorities with respect to the Fund Components or other digital assets, may also create uncertainty and materially affect the prices of the Fund Components and the value of the Shares. The Fund is not actively managed and will not take any actions to take advantage of or mitigate the impacts of volatility in the prices of the Fund Components. Accordingly, any of these factors could increase volatility in or cause a decline in the prices of the Fund Components and materially adversely affect the value of the Shares.
Previous wording
Digital assets were only introduced within the past two decades, and some of the Fund Components were developed even more recently, and the medium-to-long term value of the Shares is subject to a number of factors relating to the capabilities and development of blockchain technologies, such as the recency of their development, their dependence on the internet and other technologies, their dependence on the role played by users, developers and miners, or validators, and the potential for malicious activity. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:
Current wording
Digital assets have a limited history and the value of the Shares is subject to a number of factors relating to the capabilities and development of blockchain technologies, including the dependence of Digital Asset Networks on the internet and other technologies, the role of users, developers, miners and validators and the potential for malicious activity.
Previous wording
investors’ expectations with respect to interest rates, the rates of inflation of fiat currencies or such digital asset, and digital asset exchange rates;
Current wording
Investors’ expectations with respect to inflation, interest rates, currency exchange rates and changes in the value of the Fund Components;
Previous wording
investment and trading activities of large investors that invest directly or indirectly in such digital asset;
Current wording
Investment and trading activities of large investors and activity in derivatives markets for the Fund Components or digital assets generally;
Previous wording
monetary policies of governments, trade restrictions, currency devaluations and revaluations and regulatory measures or enforcement actions, if any, that restrict the use of such digital asset as a form of payment or the purchase of such digital asset in the Digital Asset Markets;
Current wording
Monetary policies, trade restrictions, currency devaluations and revaluations and regulatory measures that restrict the use of the Fund Components or their Digital Asset Networks;
Previous wording
a “short squeeze” resulting from speculation on the price of digital assets, if aggregate short exposure exceeds the number of Shares available for purchase;
Current wording
A “short squeeze” resulting from speculation on the price of the Fund Components, if aggregate short exposure exceeds the number of Shares available for purchase; and
Previous wording
the Fund’s own acquisitions or dispositions of such digital asset, since there is no limit on the amount of tokens of any particular digital asset held by the Fund that it may acquire.
Current wording
The Fund’s own acquisitions or dispositions of Fund Components, since there is no limit on the amount of Fund Components that the Fund may acquire.
Previous wording
The value of the Shares is dependent on the acceptance of digital assets, which represent a new and rapidly evolving industry;
Current wording
Digital assets represent a relatively new and rapidly evolving industry, and the value of the Shares depends on the acceptance of digital assets.
Previous wording
The first digital asset, Bitcoin, was launched in 2009. Ether launched in 2015 and, along with Bitcoin, was one of the first cryptographic digital assets to gain global adoption and critical mass. Other Fund Components were developed even more recently. In general, Digital Asset Networks and related protocols represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:
Current wording
Digital Asset Networks, including the networks of the Fund Components and related protocols, represent a relatively new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. The realization of one or more of the following risks could materially adversely affect the value of the Shares:
Previous wording
Only a limited number of digital assets are selectively accepted by retail and commercial outlets, and use of digital assets by consumers remains limited. While the use of some digital assets to purchase goods and services from commercial or service businesses is developing, most digital assets have not yet been accepted in the use of commerce due to their infancy, price volatility, technological issues and/or because they may not be intended to be used for that purpose. Banks and other established financial institutions, whether voluntarily or in response to regulatory feedback, may refuse to process funds for digital asset transactions; process wire transfers to or from Digital Asset Trading Platforms, digital asset related companies or service providers; or maintain accounts for persons or entities transacting in digital assets.
Current wording
Only a limited number of digital assets are selectively accepted by retail and commercial outlets, and use of digital assets by consumers remains limited. Banks and other established financial institutions may refuse to process funds for digital asset transactions or maintain accounts for persons or entities transacting in digital assets.
Previous wording
Similarly, banks may not provide banking services, or may cut off banking services, to businesses that provide digital asset-related services or that accept digital assets as payment, which could dampen liquidity in the market and damage the public perception of digital assets generally or any one digital asset in particular and their or its utility as a payment system, which could decrease the price of digital assets generally or individually.
Current wording
Banks may not provide banking services, or may cut off banking services, to businesses that provide digital asset-related services or that accept digital assets as payment, which could dampen liquidity and acceptance of digital assets and adversely affect the price of digital assets generally or individually.
Previous wording
The prices of digital assets may be determined on a relatively small number of Digital Asset Trading Platforms by a relatively small number of market participants, many of whom are speculators or those intimately involved with the issuance of such digital assets, such as miners, validators or developers, which could contribute to price volatility that makes retailers less likely to accept digital assets in the future.
Current wording
The prices of digital assets may be determined on a relatively small number of Digital Asset Trading Platforms by a relatively small number of market participants, many of whom are speculators or those intimately involved with the issuance of such digital assets, such as miners, validators or developers, which could contribute to price volatility.
Previous wording
Certain privacy-preserving features have been or are expected to be introduced to a number of Digital Asset Networks and related protocols. If there is a concern that any such privacy-preserving features introduced to the Digital Asset Networks or related protocols of the Fund Components interfere with the performance of anti-money laundering duties and economic sanctions checks, trading platforms or businesses that facilitate transactions in digital assets on these networks may be at an increased risk of criminal or civil lawsuits, or of having banking services cut off if there is a concern that these features interfere with the performance of anti-money laundering duties and economic sanctions checks.
Current wording
Certain privacy-preserving features have been or are expected to be introduced to a number of Digital Asset Networks. If any such features are introduced to the Digital Asset Networks or related protocols of the Fund Components and if there is a concern that such privacy-preserving features interfere with the performance of anti-money laundering duties and economic sanctions checks, trading platforms or businesses that facilitate transactions in digital assets on these networks may be at an increased risk of criminal or civil lawsuits, or of having banking services cut off.
Previous wording
The governance of some Digital Asset Networks and protocols, such as the Bitcoin and Ethereum networks, is generally by voluntary consensus and open competition. For such networks and protocols, there may be a lack of consensus or clarity on that network’s or protocol’s governance, which may stymie such network’s or protocol’s utility, adaptability and ability to grow and face challenges.
Current wording
The governance of some Digital Asset Networks and protocols underlying the Fund Components is generally by voluntary consensus and open competition. For such networks and protocols, there may be a lack of consensus or clarity on that network’s or protocol’s governance, which may stymie such network’s or protocol’s utility, adaptability and ability to grow and face challenges.
Previous wording
The foregoing notwithstanding, the underlying software for some Digital Asset Networks and protocols, such as the Bitcoin network, is informally or formally managed or developed by a group of core developers that propose amendments to the relevant network’s or protocol’s source code. Core developers’ roles may evolve over time, generally based on self-determined participation.
Current wording
The foregoing notwithstanding, the underlying software for some Digital Asset Networks and protocols, is informally or formally managed or developed by a group of core developers that propose amendments to the relevant network’s or protocol’s source code. If a significant majority of users, miners, and/or validators were to adopt amendments to a decentralized network based on the proposals of such core developers, such network would be subject to new source code that may adversely affect the value of the relevant Fund Component and, consequently, the value of the Shares.
Previous wording
Some Digital Asset Networks and protocols, including several of the Fund Components’ underlying Digital Asset Networks and protocols, are supported by foundations and/or founding teams that may influence the development of the Digital Asset Networks or protocols and could adversely affect the value of the Fund Component.
Current wording
Foundations or founding teams may disproportionately influence the development or governance of certain Digital Asset Networks and protocols, which could adversely affect the value of the relevant Fund Component and, consequently, the value of the Shares.
Previous wording
Many Digital Asset Networks and protocols, including certain of the Fund Components’ Digital Asset Networks and protocols, are supported by foundations and/or founding teams. In contrast to Digital Asset Networks and protocols where governance decisions are largely made by a decentralized group of individuals, the development of such Digital Asset Network or protocol may be disproportionately influenced by these foundations and/or founding teams. For example, Solana Labs, Inc. (“Solana Labs”) and the Solana Foundation support the Solana project and intend to advance the overall growth and development of the ecosystem. Therefore, Solana Labs and the Solana Foundation will generally be in control of proposing amendments to, and the development of the Solana network’s source code. To the extent Solana Labs and/or the Solana Foundation propose any amendments to the Solana network’s source code that are adopted by users of the Solana network, the Solana network will be subject to new source code that may adversely affect the value of SOL. In addition to SOL, certain of the other Fund Components also have Foundations and/or founding teams that support the development of the Fund Components’ Digital Asset Networks or protocols and may have interests that are different than a shareholder’s and the decisions made by such foundations and/or founding teams could have an adverse effect on the value of the Fund Component.
Current wording
Certain Digital Asset Networks and protocols, including certain of the Fund Components’ Digital Asset Networks and protocols, underlying the Fund Components are supported by foundations and/or founding teams. In contrast to Digital Asset Networks and protocols where governance decisions are largely made by a decentralized group of individuals, the development of such Digital Asset Network or protocol may be disproportionately influenced by these foundations and/or founding teams. To the extent foundations and/or founding teams propose any amendments to the network’s source code that are adopted by users of the Solana network, the Solana network will be subject to new source code that may adversely affect the value of the relevant digital asset. In addition to SOL, certain of the other Fund Components also have Foundations and/or founding teams that support the development of the Fund Components’ Digital Asset Networks or protocols and may have interests that are different than a shareholder’s and the decisions made by such foundations and/or founding teams could have an adverse effect on the value of the Fund Component whose influence over development or governance may be disproportionate to that of other network participants. If users, miners or validators adopt such changes, or if the actions or inaction of a foundation or founding team reduce confidence in or the utility of a Digital Asset Network or protocol, the value of the relevant Fund Component and, consequently, the value of the Shares could be adversely affected.
Previous wording
Many Digital Asset Networks face significant scaling challenges due to the fact that public, permissionless blockchains generally face a tradeoff between security and scalability. One means through which Digital Asset Networks that utilize public, permissionless blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. For example, a greater degree of decentralization of a public, permissionless blockchain generally means a given Digital Asset Network is less susceptible to manipulation or capture. In practice, this typically means that every single node on a given Digital Asset Network is responsible for securing the system by processing every transaction and maintaining a copy of the entire state of the network. As a result, a Digital Asset Network that utilizes a public, permissionless blockchain may be limited in the number of transactions it can process by the computing capabilities of each single fully participating node. Many developers are actively researching and testing scalability solutions for public blockchains that do not necessarily result in lower levels of security or decentralization, such as off-chain payment channels and sharding. Off-chain payment channels would allow parties to transact without requiring the full processing power of a blockchain. Sharding can increase the scalability of a database, such as a blockchain, by splitting the data processing responsibility among many nodes, allowing for parallel processing and validating of transactions.
Current wording
Many Digital Asset Networks face significant scaling challenges due to the fact that public, permissionless blockchains generally face a tradeoff between security and scalability. One means through which Digital Asset Networks that utilize public, permissionless blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. For example, a greater degree of decentralization of a public permissionless blockchain generally means a given Digital Asset Network is less susceptible to manipulation or capture. In practice, this typically means that every single node on a given Digital Asset Network is responsible for securing the system by processing every transaction and maintaining a copy of the entire state of the network. As a result, a digital asset network that utilizes a public permissionless blockchain may be limited in the number of transactions it can process by the computing capabilities of each single fully participating node. Many developers are actively researching and testing scalability solutions for public blockchains such as off-chain payment channels and Layer 2 networks.
Previous wording
Digital assets may have concentrated ownership and large sales or distributions by holders of any one digital asset, or any ability to participate in or otherwise influence any one digital asset’s underlying network, could have an adverse effect on the market price of such digital asset;
Current wording
Digital assets may have concentrated ownership, and large sales or distributions by holders of a Fund Component could adversely affect the market price of the applicable Fund Component and the value of the Shares.
Previous wording
If the digital asset awards or transaction fees for recording transactions on the Digital Asset Network underlying a Fund Component are not sufficiently high to incentivize miners or validators, or if certain jurisdictions continue to limit or otherwise regulate mining or validating activities, miners and validators may cease expanding processing power or demand high transaction fees, which could negatively impact the value of the Fund Components and the value of the Shares.
Current wording
If the digital asset reward for mining or validating blocks and transaction fees for recording transactions on the Digital Asset Network underlying a Fund Component are not sufficiently high to incentivize miners or validators, or if certain jurisdictions continue to limit or otherwise regulate mining or validating activities, miners or validators may reduce or cease mining or validating activity or demand high transaction fees, which could negatively impact the value of the relevant Fund Component and the value of the Shares.
Previous wording
If the digital asset awards or the transaction fees for recording transactions on the Digital Asset Network of a Fund Component are not sufficiently high to incentivize miners or validators, as applicable, or if certain jurisdictions continue to limit or otherwise regulate mining or validating activities, miners and validators may cease expending processing power to mine blocks and confirmations of transactions on the digital asset’s underlying Digital Asset Network could be slowed. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:
Current wording
If the digital asset rewards for mining or validating blocks or the transaction fees for recording transactions on the Digital Asset Network underlying a Fund Component are not sufficiently high to incentivize miners or validators, as applicable, or if certain jurisdictions limit or otherwise regulate mining or validating activities, miners or validators may reduce or cease mining or validating activity and confirmations of transactions on the relevant Digital Asset Network could be slowed. The realization of one or more of the following risks could materially adversely affect the value of the Shares:
Previous wording
A reduction in the processing power expended by miners, or a reduction in staked digital assets by validators, could increase the likelihood of a malicious actor or botnet obtaining control on a Digital Asset Network. See “—If a malicious actor or botnet obtains control of more than 50% of the processing power on a Digital Asset Network, or otherwise obtains control over a Digital Asset Network through its influence over core developers or otherwise, such actor or botnet could manipulate the blockchain of such digital asset to adversely affect the value of the Shares or the ability of the Fund to operate.”
Current wording
A reduction in the processing power expended by miners, or a reduction in staked digital assets by validators, could increase the likelihood of a malicious actor or botnet obtaining control of the relevant Digital Asset Network.
Previous wording
Miners and validators could also collude in an anti-competitive manner to reject low transaction fees on a Digital Asset Network and force users to pay higher fees, thus reducing the attractiveness of the Digital Asset Network. Higher transaction fees resulting from collusion or otherwise may adversely affect the attractiveness of a Digital Asset Network, the value of the Fund Component and the value of the Shares.
Current wording
If miners or validators demand higher transaction fees for recording transactions on a Digital Asset Network, the cost of using the relevant Fund Component may increase and the marketplace may be reluctant to accept it as a means of payment. Alternatively, miners or validators could collude in an anti-competitive manner to reject low transaction fees on a Digital Asset Network and force users to pay higher fees, thus reducing the attractiveness of the Digital Asset Network. Higher transaction fees resulting through collusion or otherwise may adversely affect the attractiveness of the relevant Digital Asset Network, the value of the relevant Fund Component and the value of the Shares.
Previous wording
To the extent that any miners or validators cease to record transactions that do not include the payment of a transaction fee in mined or validated blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Digital Asset Network of a digital asset until a block is mined by a miner, or validated by a validator, who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays in the recording of transactions could result in a loss of confidence in a Digital Asset Network.
Current wording
To the extent that any miners or validators cease to record transactions that do not include the payment of a transaction fee in mined or validated blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the relevant Digital Asset Network until a block is mined or validated by a miner or validator who is willing to accept a lower fee. Any widespread delays or disruptions in the recording of transactions could result in a loss of confidence in the relevant Digital Asset Network and could impair the Fund’s ability to complete transactions associated with creations, redemptions or portfolio rebalancing.
Previous wording
If a malicious actor or botnet obtains control of more than certain thresholds of the processing power on a Digital Asset Network, or otherwise obtains control over the Digital Asset Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely affect the value of the Shares or the ability of the Fund to operate.
Current wording
If a malicious actor or botnet obtains control of more than an applicable threshold of the processing or validating power on a Digital Asset Network, or otherwise obtains control over the Digital Asset Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Blockchain to adversely affect the value of the Shares or the ability of the Fund to operate.
Current wording
If a malicious actor or botnet obtains a majority of the processing power on a proof-of-work Digital Asset Network, it may be able to alter the Blockchain on which transactions in the applicable Fund Component rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could also control, exclude or modify the ordering of transactions, or “double-spend” its own digital assets (i.e., spend the same tokens in more than one transaction). To the extent that such malicious actor or botnet did not yield its control of the processing power on the relevant Digital Asset Network or the relevant network community did not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible.
Previous wording
“>50% attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) or group of validators acting in concert were to gain control of more than 50% of the total staked Ether on the Ethereum network, a malicious actor would be able to gain full control of the Ethereum network and the ability to manipulate future transactions on the blockchain, including censoring transactions, double-spending and fraudulent block propagation, potentially for an extended period or even permanently. In theory, the minority non-attackers might reach social consensus to reject blocks proposed by the malicious majority attacker, reducing the attacker’s ability to engage in malicious activity, but there can be no assurance this would happen or that non-attackers would be able to coordinate effectively. Although the malicious actor or botnet would not be able to generate new tokens or transactions using such control, it could “double-spend” its own tokens (i.e., spend the same tokens in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control (over 50%). To the extent that such malicious actor or botnet did not yield its control of the validating power on the Ethereum network or the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum Blockchain may not be possible.
Current wording
“>50% attack” where, if a malicious actor, validator, botnet or group of validators acting in concert were to gain control of more than 50% of the total staked Ether on the Ethereum network, a malicious actor would be able to manipulate future transactions on the blockchain, including censoring transactions, double-spending and fraudulent block propagation, potentially for an extended period. Although the malicious actor or botnet would not be able to generate new tokens or transactions using such control, it could “double-spend” its own tokens (i.e., spend the same tokens in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the validating power on the Ethereum network or the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum Blockchain may not be possible.
Previous wording
“>66% attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) or group of validators acting in concert were to gain control of more than 66% of the total staked Ether on the Ethereum network, a malicious actor could permanently and irreversibly manipulate the blockchain, including censorship, double-spending and fraudulent block propagation. The attacker could finalize their preferred chain without any consideration for the votes of other stakers and could also revert finalized blocks.
Current wording
“>66% attack” where, if a malicious actor, validator, botnet or group of validators acting in concert were to gain control of more than 66% of the total staked Ether on the Ethereum network, a malicious actor could permanently and irreversibly manipulate the blockchain, including censorship, double-spending and fraudulent block propagation. The attacker could finalize their preferred chain without any consideration for the votes of other stakers and could also revert finalized blocks.
Previous wording
If groups of coordinating or connected processing power that together have more than any control thresholds applicable to a Digital Asset Network, they could exert authority over the processing of an affected Fund Component transactions. This risk is heightened if the processing power on the network within the jurisdiction of a single governmental authority exceeds those thresholds. If network participants, including the core developers and the administrators of processing power, do not act to ensure greater decentralization of the network, the feasibility of a malicious actor obtaining control of the Digital Asset Network will increase, which may adversely affect the value of the Shares.
Current wording
If miners, mining pools, validators or other network participants acting in concert were to obtain more than an applicable threshold of the processing or validating power on a Digital Asset Network, they could exert authority over the validation of transactions in an affected Fund Component. This risk is heightened if more than an applicable threshold of the processing or validating power on the network falls within the jurisdiction of a single governmental authority. If network participants, including the core developers and the administrators of mining or validating pools, do not act to ensure greater decentralization of the processing or validating power on the network, the feasibility of a malicious actor obtaining control of the Digital Asset Network will increase, which may adversely affect the value of the Shares.
Previous wording
A malicious actor may also obtain control over a Digital Asset Network through its influence over core developers by gaining direct control over a core developer or an otherwise influential programmer. The less that a Digital Asset Network ecosystem grows, the greater the possibility that a malicious actor may be able to maliciously influence the Digital Asset Network in this manner. Moreover, it is possible that an individual or group controlling processing power exceeding the requisite thresholds to manipulate the Digital Asset Network are in fact part of the initial or current core developer group, or are otherwise influential members of the Digital Asset Network’s community. To the extent that the initial or current core developer groups also control more the requisite amount of processing power, the risk of this particular group of users causing the Digital Asset Network to adopt updates to the core protocol that this particular group wants to be implemented will be even greater, and should this materialize, it may adversely affect the value of the Shares.
Current wording
A malicious actor may also obtain control over a Digital Asset Network through its influence over core developers by gaining direct control over a core developer or an otherwise influential programmer. The less that a Digital Asset Network ecosystem grows, the greater the possibility that a malicious actor may be able to maliciously influence the Digital Asset Network in this manner, which may adversely affect the value of the applicable Fund Component and the value of the Shares.
Previous wording
Furthermore, a hard fork can lead to new security concerns. For example, when the Ethereum and Ethereum Classic networks split in July 2016, replay attacks, in which transactions from one network were rebroadcast to nefarious effect on the other network, plagued Ethereum trading platforms through at least October 2016. An Ethereum trading platform announced in July 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks. Similar replay attack concerns occurred in connection with the Bitcoin Cash and Bitcoin Satoshi’s Vision networks split in November 2018. Another possible result of a hard fork is an inherent decrease in the level of security due to significant amounts of validating or mining power remaining on one network or migrating instead to the new forked network. After a hard fork, it may become easier for an individual validator or miner, or validating or mining pools’ validating or hashing power to exceed 50% of the validating or processing power of a Digital Asset Network that retained or attracted less validating or mining power, thereby making Digital Asset Networks that rely on PoS, or PoW, more susceptible to attack.
Current wording
Forks can introduce new security concerns, such as “replay attacks” and an inherent decrease in the level of security due to significant amounts of validating or mining power remaining on one network or migrating to the new forked network. After a hard fork, it may become easier for an individual validator or miner, or a validating or mining pool, to exceed an applicable threshold of validating or processing power on a Digital Asset Network that retained or attracted less validating or mining power, thereby making that Digital Asset Network more susceptible to attack. Digital Asset Networks and related protocols may also be cloned, resulting in a competing network with characteristics substantially similar to the network it was based on. A hard fork may adversely affect the price of a Fund Component at the time of announcement or adoption. A clone may also adversely affect the price of a Fund Component at the time of announcement or adoption. A future fork in or clone of the Digital Asset Network of a Fund Component could adversely affect the value of the Shares or the ability of the Fund to operate.
Previous wording
In the event of a hard fork of the Digital Asset Network of a Fund Component, the Manager will, as permitted by the terms of the LLC Agreement, use its discretion to determine, in good faith, which Digital Asset Network, among a group of incompatible forks of such Digital Asset Network, is generally accepted as the Digital Asset Network for such digital asset and should therefore be considered the appropriate Digital Asset Network for the Fund’s purposes. The Manager will base its determination on a variety of then relevant factors, including, but not limited to, the Manager’s beliefs regarding expectations of the core developers of such Digital Asset Network, users, services, businesses, validators or miners and other constituencies, as well as the actual continued acceptance of, validating or mining power on, and community engagement with, such Digital Asset Network. There is no guarantee that the Manager will choose the Digital Asset Network or digital asset that is ultimately the most valuable fork, and the Manager’s decision may adversely affect the value of the Shares as a result. The Manager may also disagree with shareholders, security vendors and the Index Provider on what is generally accepted as such Digital Asset Network and digital asset going forward and should therefore be considered the Digital Asset Network and digital asset going forward for the Fund’s purposes, which may also adversely affect the value of the Shares as a result.
Current wording
In the event of a hard fork of the Digital Asset Network of a Fund Component, the Manager will, as permitted by the terms of the LLC Agreement, use its discretion to determine, in good faith, which Digital Asset Network, among a group of incompatible forks of such Digital Asset Network, is generally accepted as the Digital Asset Network for such digital asset and should therefore be considered the appropriate Digital Asset Network for the Fund’s purposes. There is no guarantee that the Manager will choose the Digital Asset Network or digital asset that is ultimately the most valuable fork, and the Manager’s decision may adversely affect the value of the Shares as a result. The Manager may also disagree with shareholders, security vendors and the Index Provider on which Digital Asset Network and digital asset are generally accepted and should therefore be considered the appropriate Digital Asset Network and Fund Component for the Fund’s purposes, which may also adversely affect the value of the Shares as a result.
Previous wording
If the Digital Asset Networks of the digital assets held by the Fund are used to facilitate illicit activities, businesses that facilitate transactions in the Fund Components could be at increased risk of criminal or civil lawsuits, or of having services cut off, which could negatively affect the price of the relevant Fund Components and the value of the Shares.
Current wording
If the Digital Asset Networks underlying the Fund Components are used to facilitate illicit activities, businesses that facilitate transactions in the Fund Components may be at increased risk of criminal or civil lawsuits, or of having services cut off, which could negatively affect the prices of the relevant Fund Components and the value of the Shares.
Previous wording
Digital Asset Networks have in the past been, and may continue to be, used to facilitate illicit activities. If a Digital Asset Network of a digital asset held by the Fund is used to facilitate illicit activities, businesses that facilitate transactions in such Fund Component could be at increased risk of potential criminal or civil lawsuits, or of having banking or other services cut off, and such Fund Component could be removed from Digital Asset Trading Platforms. Moreover, law enforcement agencies and other market participants have often relied on the transparency of blockchains to facilitate investigations and comply with laws, such as anti-money laundering and economic sanctions laws. If any of the Fund Components contain privacy-enhancing features, law enforcement agencies and other market participants may have less visibility into transaction-level data, which may encourage bad actors to misuse such Fund Component's network for such illicit purposes. Businesses that facilitate transactions in those Fund Components may be at increased risk of potential criminal or civil lawsuits, or of having banking services cut off if there is a concern that these features interfere with the performance of anti-money laundering duties and economic sanctions checks. In August 2019, for example, Coinbase UK delisted another privacy-oriented digital asset, Zcash, and in January 2021 Bittrex delisted Zcash as well as Monero and Dash, two other privacy-focused digital assets. Although neither trading platform disclosed the reasons for such delisting, and both trading platforms subsequently relisted Zcash, it is believed that they were the result of the privacy-enhancing features of the digital assets and there is a risk that digital asset trading platforms could remove any Fund Components containing privacy-enhancing features in the future. Any of the aforementioned occurrences could adversely affect the price of the relevant Fund Component, the attractiveness of the respective Digital Asset Network and an investment in the Shares of the Fund.
Current wording
Digital Asset Networks have in the past been, and may continue to be, used to facilitate illicit activities. If a Digital Asset Network underlying a Fund Component is used to facilitate illicit activities, businesses that facilitate transactions in such Fund Component may be at increased risk of potential criminal or civil lawsuits, or of having banking or other services cut off, and such Fund Component could be removed from Digital Asset Trading Platforms. Other service providers of such businesses may also cut off services if there is a concern that the applicable Digital Asset Network is being used to facilitate crime. Any of the aforementioned occurrences could increase regulatory scrutiny of the applicable Digital Asset Network and/or adversely affect the price of the relevant Fund Component, the attractiveness of the applicable Digital Asset Network and an investment in the Shares.
Previous wording
Digital asset markets have also been negatively impacted by the failure of entities perceived to be integral to the digital asset ecosystem. For example, in March 2023, state banking regulators placed Silicon Valley Bank and Signature Bank into FDIC receiverships. Also, in March 2023, Silvergate Bank announced plans to wind down and liquidate its operations. Because these banks were perceived to be the banks most open to providing services for the digital asset ecosystem in the United States, their failures may impact the willingness of banks (based on regulatory pressure or otherwise) to provide banking services to digital asset market participants. In addition, because these banks were perceived to be the banks most open to providing services for the digital asset ecosystem, their failure has caused a number of companies that provide digital asset-related services to be unable to find banks that are willing to provide them with such banking services. The inability to access banking services could negatively impact digital asset market participants and therefore the value of digital assets, including the Fund Components, and thus the Shares. In addition, although these events did not have an impact directly on the Fund or the Manager when these bank failures occurred, it is possible that a future closing of a bank with which the Fund or the Manager has a financial relationship could subject the Fund or the Manager to adverse conditions and pose challenges in finding an alternative suitable bank to provide the Fund or the Manager with bank accounts and banking services.
Current wording
Digital asset markets have also been negatively impacted by the failure of entities perceived to be integral to the digital asset ecosystem. For example, in March 2023, state banking regulators placed Silicon Valley Bank and Signature Bank into FDIC receivership, and Silvergate Bank announced plans to wind down and liquidate its operations. Because these banks were perceived to be most open to providing services for the digital asset ecosystem, their failures may impact the willingness of other banks to provide banking services to digital asset market participants.
Previous wording
Continued disruption and instability in the digital asset markets as these events develop, including further declines in the trading prices and liquidity of the Fund Components, or the failure of service providers to the Fund, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
Current wording
Adverse developments affecting the digital asset ecosystem may be difficult to predict and may adversely affect the Manager, the Fund, their affiliates or the digital asset industry as a whole. Continued disruption and instability in the digital asset markets, including declines in the trading prices and liquidity of the Fund Components, could have a material adverse effect on the value of the Shares.
Previous wording
Due to the largely unregulated nature and lack of transparency surrounding the operations of Digital Asset Trading Platforms, they may experience fraud, market manipulation, business failures, security failures or operational problems, which may adversely affect the value of digital assets and, consequently, the value of the Shares.
Current wording
Many Digital Asset Trading Platforms operate with limited regulatory oversight or transparency and may experience fraud, market manipulation, business failures, security failures or operational problems, which may adversely affect the value of the Fund Components and the value of the Shares.
Previous wording
Negative perception, a lack of stability and standardized regulation in the Digital Asset Markets and/or the closure or temporary shutdown of Digital Asset Trading Platforms due to fraud, business failure, security breaches or government mandated regulation, and associated losses by customers may reduce confidence in Digital Asset Networks and result in greater volatility in the prices of digital assets. Furthermore, the closure or temporary shutdown of a Digital Asset Trading Platform used in calculating any of the Index Prices may result in a loss of confidence in the Fund’s ability to determine its NAV on a daily basis. These potential consequences of such a Digital Asset Trading Platform’s failure could adversely affect the value of the Shares.
Current wording
Furthermore, the closure or temporary shutdown of a Digital Asset Trading Platform used in calculating any of the Index Prices may result in a loss of confidence in the Fund’s ability to determine its NAV on a daily basis.
Showing the first 40 of 105 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Many Digital Asset Networks operate using open-source protocols, meaning that any user can download the software, modify it and then propose that the users, validators and miners of the digital asset adopt the modification. If less than a substantial majority of users, validators and miners consent to a proposed modification, the consequence would be a “hard fork” of the applicable Digital Asset Network, with one group running the pre-modified software and the other running the modified software, resulting in two versions of the applicable Digital Asset Network and digital asset running in parallel, yet lacking interchangeability.
Current report — wording carried from elsewhere
Moreover, the legal rights of customers with respect to digital assets held on their behalf by a third-party custodian, such as the Custodial Entities, in insolvency proceedings are currently uncertain. The Prime Broker Agreement contains an agreement by the parties to treat the digital assets credited to the Fund’s Vault Balance and Settlement Balance as financial assets under Article 8, in addition to stating that the Custodian will serve as fiduciary and custodian on the Fund’s behalf with respect to the Fund’s digital assets held in the Vault Balance, and that any digital assets credited to the Settlement Balance will be treated as custodial assets.
Current report — wording carried from elsewhere
There are no predefined criteria to make a good faith assessment in these scenarios and such decisions will be made by the Manager in its sole discretion. The Manager may calculate such Index Price in a manner that ultimately inaccurately reflects the price for such Fund Component. To the extent that the NAV, NAV per Share or the Index Prices are incorrectly calculated, the Manager may not be liable for any error and such misreporting of valuation data could adversely affect the value of the Shares and investors could suffer a substantial loss on their investment in the Fund. Moreover, the terms of the LLC Agreement do not prohibit the Manager from changing the Index Price used to calculate the NAV and NAV per Share of the Fund. Any such change in the Index Price could affect the value of the Shares and investors could suffer a substantial loss on their investment in the Fund.
Current report — wording carried from elsewhere
DCG, indirect parent company of the Manager, holds a minority interest of less than 1.0% in Kraken. The Fund values its digital assets by reference to the Index Price for each Fund Component. The Index Price is the price in U.S. dollars of a Fund Component as determined by reference to a volume-weighted average price in U.S. dollars for a Fund Component for the immediately preceding
Rearranged previous paragraphs (15)
Previous report — wording carried elsewhere
Regulatory changes or other events in foreign jurisdictions may affect the value of the Shares or restrict the use of one or more digital assets, mining or validating activity or the operation of their networks or the Digital Asset Trading Platform Market in a manner that adversely affects the value of the Shares;
Previous report — wording carried elsewhere
An Authorized Participant, the Fund or the Manager could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Authorized Participant, the Fund or the Manager and also result in decreased liquidity for the Shares;
Previous report — wording carried elsewhere
Conflicts of interest may arise among the Manager or its affiliates and the Fund;
Previous report — wording carried elsewhere
If the Custodian resigns or is removed by the Manager, or otherwise, without replacement, it could trigger early termination of the Fund.
Previous report — wording carried elsewhere
A future fork in or clone of the Digital Asset Network of a Fund Component could adversely affect the value of the Shares or the ability of the Fund to operate.
Previous report — wording carried elsewhere
In addition to forks, a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promoters of a new digital asset announce to some group of users, such as the group that are holders of another digital asset, that such group will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they are part of that group.
Previous report — wording carried elsewhere
Shares at a comparative disadvantage relative to an investment in digital assets directly or through a vehicle that is not subject to such a prohibition, which could negatively affect the value of the Shares.
Previous report — wording carried elsewhere
The Shares may trade at a price that is at, above or below the Fund’s NAV per Share as a result of the non-current trading hours between OTCQX and the Digital Asset Trading Platform Market.
Previous report — wording carried elsewhere
Shareholders may suffer a loss on their investment if the Shares trade above or below the Fund’s NAV per Share.
Previous report — wording carried elsewhere
Historically, the Shares have traded at both premiums and discounts to the NAV per Share, which at times have been substantial. If the Shares trade at a premium, investors who purchase Shares on OTCQX will pay more for their Shares than investors who purchase Shares directly from Authorized Participants. In contrast, if the Shares trade on OTCQX at a discount, investors who purchase Shares directly from Authorized Participants will pay more for their Shares than investors who purchase Shares on OTCQX. The premium or discount at which the Shares have traded has fluctuated over time.
Previous report — wording carried elsewhere
Moreover, the terms of the LLC Agreement do not prohibit the Manager from changing the Index Price used to calculate the NAV and NAV per Share of the Fund or from changing the fund construction criteria pursuant to which the Fund Components are determined. Any such change in the Index Price of a Fund Component or in the fund construction criteria could affect the value of the Shares and investors could suffer a substantial loss on their investment in the Fund.
Previous report — wording carried elsewhere
Regulation (“MiCA”) in April 2023, establishing a regulatory framework for digital asset services across the European Union. Certain parts of MiCA became effective as of June 2024 and the remainder applied as of December 2024. MiCA is intended to serve as a comprehensive regulation of digital asset markets and imposes various obligations on digital asset issuers and service providers. The main aims of MiCA are industry regulation, consumer protection, prevention of market abuse and upholding the integrity of digital asset markets. See “Item 1. Business—Government Oversight.”
Previous report — wording carried elsewhere
Regulatory changes or interpretations could obligate the Fund or the Manager to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Fund.
Previous report — wording carried elsewhere
The Fund may be required to disclose information, including information relating to investors, to regulators.
Previous report — wording carried elsewhere
DCG is (i) the sole equity holder and indirect parent company of the Manager; (ii) the indirect parent company of Grayscale Securities, the only acting Authorized Participant as of the date of this Annual Report; and (iii) a minority interest holder in