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Therefore, Shareholders bitcoinwisdom be assured that the Custodian will maintain adequate insurance or any insurance with respect to the charter held by the Custodian on behalf of the Trust. As one block is added to the Blockchain approximately every six to btc minutes, a Bitcoin transaction will be, on average, confirmed beyond a reasonable charter in approximately one hour. Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in bitcoins. Consequently, an Authorized Participant may be able to create or redeem a Basket of Shares at a discount or a premium to the public trading price per Share. Because a substitute sponsor may have no experience managing a DMBA ETP, a bitcoinwisdom sponsor xpm not have the experience, btc or expertise required to ensure that xpm Trust will operate successfully or to continue to operate at all.
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The value of the Shares relates directly to the value of the bitcoins held by the Trust and fluctuations in the price of bitcoins could adversely affect an investment in the Shares. Last post by theunbeatable in Re: The Trust will not be a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. If the Trust is required to terminate and liquidate, such termination and liquidation could occur at a time that is disadvantageous to Shareholders, such as when the Winkdex spot price is lower than it was at the time when Shareholders purchased their Shares. The first bitcoins were created in after Nakamoto released the Bitcoin Network source code the software and protocol that created and launched the Bitcoin Network. As of the date of this prospectus, discovery of flaws in or exploitations of the source code that allow malicious actors to take or create money in contravention of known Bitcoin Network rules have been exceedingly rare. Such an action may also result in the restriction of ownership, holding or trading in the Shares.
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Bitcoinwisdom Sponsor may take actions in the operation xpm the Trust that may be adverse to the interests of Shareholders. Loyalty of the parti The Index Provider maintains a monitoring charter that tests charter these criteria on an ongoing bitcoinwisdom. In a Bitcoin transaction between two parties, the following btc must be xpm place: The Trust is not actively managed and will not have btc strategy relating to the development of the Bitcoin Network.
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Xpm btc bitcoinwisdom charter
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule under the Securities Act of , check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule b under the Securities Act of , check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule c under the Securities Act of , check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule d under the Securities Act of , check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Calculation of Registration Fee. Title of each class of. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8 a of the Securities Act of or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8 a , may determine.
Table of Contents The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Preliminary Prospectus dated December 30, The Winklevoss Bitcoin Trust Trust will issue Winklevoss Bitcoin Shares Shares , which represent units of fractional undivided beneficial interest in and ownership of the Trust.
The Trust intends to issue additional Shares on a continuous basis. The Shares may be purchased from the Trust only in one or more blocks of [50,] Shares a block of [50,] Shares is called a Basket. The Trust will not issue fractions of a Basket. Prior to this offering, there has been no public market for the Shares. Investing in the Shares involves significant risks. Neither the Securities and Exchange Commission SEC nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense. The Shares are neither interests in nor obligations of the Sponsor or the Trustee. It is expected that the Shares will be sold to the public at varying prices to be determined by reference to, among other considerations, the price of the bitcoins represented by each Share and the trading price of the Shares on the NASDAQ at the time of each sale. The Trust received all proceeds from the offering of the initial Baskets in set amounts of bitcoins in an amount equal to the full price for the initial Baskets.
The number of bitcoins representing a Share in the initial Baskets was [0. Purchasers of Shares may be subject to customary brokerage charges. Investors should review the terms of their brokerage accounts for details on applicable charges.
Public offering price for the initial Baskets. Statement Regarding Forward-Looking Statements. Business of the Trust. Description of the Trust. The Trust Agency Service Provider. Description of the Shares. Description of Creation and Redemption of Shares. Expenses; Sales of Bitcoins.
Description of the Trust Documents. Glossary of Defined Terms. Statement of Financial Condition. This prospectus contains information investors should consider when making an investment decision about the Shares. Investors may rely on the information contained in this prospectus.
The Trust and the Sponsor have not authorized any person to provide you with different information and, if anyone provides an investor with different or inconsistent information, that investor should not rely on it. This prospectus is not an offer to sell the Shares in any jurisdiction where the offer or sale of the Shares is not permitted. The Shares are not registered for public sale in any jurisdiction other than the United States. These statements are only predictions.
Actual events or results may differ materially. These statements are based upon certain assumptions and analyses the Sponsor made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances. Investors are therefore cautioned against placing undue reliance on forward-looking statements. The Trust holds bitcoins, which are a digital commodity that is not issued by any government, bank or central organization.
The Bitcoin software source code includes the math-based protocols that govern the creation of bitcoins and the cryptography system that secures and verifies transactions in bitcoins. Bitcoins themselves have no physical existence beyond the record of transactions on the Blockchain. The Trust is expected from time to time to issue Baskets in exchange for deposits of bitcoins and to distribute bitcoins in connection with redemptions of Baskets.
The Sponsor believes that, for many investors, the Shares will represent a cost-effective and convenient means to access exposure to bitcoins. Under the Delaware Limited Liability Company Act and the governing documents of the Sponsor, Winklevoss Capital Management LLC, the sole member of the Sponsor, is not responsible for the debts, obligations and liabilities of the Sponsor solely by reason of being the sole member of the Sponsor.
Winklevoss IP LLC is the owner of and is licensing to the Sponsor such intellectual property for use by the Trust and its service providers in the operation of the Trust. The Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: The Trustee is appointed to serve as the trustee of the Trust in the State of Delaware for the sole purpose of satisfying the requirement of Section a of the Delaware Statutory Trust Act that the Trust have at least one trustee with a principal place of business in the State of Delaware.
The duties of the Trustee will be limited to i accepting legal process served on the Trust in the State of Delaware and ii the execution of any certificates required to be filed with the Delaware Secretary of State which the Delaware Trustee is required to execute under the Delaware Statutory Trust Act.
To the extent that, at law or in equity, the Trustee has duties including fiduciary duties and liabilities relating thereto to the Trust or the Shareholders, such duties and liabilities will be replaced by the duties and liabilities of the Trustee expressly set forth in the Trust Agreement.
The Trustee will have no obligation to supervise, nor will it be liable for, the acts or omissions of the Sponsor, Administrator, Trust Agency Service Provider, Custodian or any other Person.
The Trust Agency Service Provider, among other things, provides transfer agent services with respect to the creation and redemption of Baskets by Authorized Participants. Access to those digital wallets, and the bitcoins they hold, is restricted through the public-private key pair relating to each digital wallet.
It will provide public addresses of the Trust to the Administrator. The Shares are designed for investors seeking a cost-effective and convenient means to gain exposure to bitcoins with minimal credit risk. The Bitcoin Network is a recent technological innovation, and the bitcoins that are created, transferred, used and stored by entities and individuals have certain features associated with several types of assets, most notably commodities and currencies.
The Sponsor believes that, on balance, the important features of bitcoins and other Digital Math-Based Assets are those that are characteristics of commodities and therefore has referred to and discussed these assets as such.
It is not known whether all US or foreign regulators will share this view, adopt a single, different view or espouse a variety of differing views. Since December , regulators in jurisdictions including the United States, the United Kingdom and Switzerland have provided greater regulatory clarity, while Chinese, Russian and Vietnamese government officials have taken steps to limit the participation of their respective financial services sectors from directly interacting with the Bitcoin ecosystem, creating additional regulatory uncertainty in those countries.
In May , the Central Bank of Bolivia banned the use as currency of digital assets including bitcoins, while the government of Ecuador took steps to limit the use of Bitcoin in advance of the issuance of a proposed state-backed Digital Math-Based Asset.
The regulatory uncertainty surrounding the treatment of bitcoin creates risks for the Trust and its Shares. Table of Contents Investing in the Shares does not insulate the investor from certain risks, including price volatility.
Emerging Growth Company Status. Presently, the Sponsor does not intend to waive any of its fees. The Sponsor is not required to assume extraordinary, non-recurring expenses except certain indemnifications amounts that may become owed to the Trustee under the Trust Agreement , therefore the Trust may incur certain extraordinary, non-recurring expenses e. Under such circumstances, the sale or conversion to fiat currency of bitcoin will occur after such bitcoins have been delivered from the Trust to the Trust Expense Account.
In order to ensure the processing of bitcoin transfers to and from the Trust Custody Account, or among digital wallets in the Trust Custody Account or the Trust Expense Account, the Custodian may determine that the payment of a transaction fee to Bitcoin miners is prudent. It is anticipated that the reimbursement of transaction fees paid to miners shall be more than accounted for by the payment of creation and redemption.
Summary of Financial Condition. You should consider carefully the risks described below before making an investment decision. The loss or destruction of a private key required to access a bitcoin may be irreversible. Bitcoins are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet in which the bitcoins are held.
The Trust is required by the operation of the Bitcoin Network to publish the public key relating to a digital wallet in use by the Trust when it first verifies a spending transaction from that digital wallet and disseminates such information into the Bitcoin Network. To the extent a private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, the Trust will be unable to access the bitcoins held in the related digital wallet and the private key will not be capable of being restored by the Bitcoin Network.
The further development and acceptance of the Bitcoin Network and other Digital Math-Based Asset systems, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.
The slowing or stopping of the development or acceptance of the Bitcoin Network may adversely affect an investment in the Shares. Digital Math-Based Assets such as bitcoins may be used, among other things, to buy and sell goods and services are a new and rapidly evolving industry of which the Bitcoin Network is a prominent, but not unique, part. The growth of the Digital Math-Based Assets industry in general, and the Bitcoin Network in particular, is subject to a high degree of uncertainty.
The factors affecting the further development of the Digital Math-Based Assets industry, as well as the Bitcoin Network, include: The Trust is not actively managed and will not have any strategy relating to the development of the Bitcoin Network. Furthermore, the Sponsor cannot be certain as to the impact of the listing of the Trust and the expansion of its bitcoin holdings on the Digital Math-Based Assets industry and the Bitcoin Network.
A decline in the popularity or acceptance of the Bitcoin Network would harm the price of the Shares. Currently, there is relatively small use of bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in the Shares. As relatively new products and technologies, bitcoins and the Bitcoin Network have only recently become widely accepted as a means of payment for goods and services by many major retail and commercial outlets, and.
Table of Contents use of bitcoins by consumers to pay such retail and commercial outlets remains limited. A lack of expansion by bitcoins into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the Winkdex spot price, either of which could adversely impact an investment in the Shares.
The Bitcoin Network is based on a math-based protocol that governs the peer-to-peer interactions between computers connected to the Bitcoin Network. The members of the Core Developers evolve over time, largely based on self-determined participation in the resource section dedicated to Bitcoin on Github. Proposals for upgrades and discussions relating thereto take place on online forums including GitHub. To the extent that a significant majority of the users and miners on the Bitcoin Network install such software upgrade s , the Bitcoin Network would be subject to new protocols and software that may adversely affect an investment in the Shares.
The open-source structure of the Bitcoin Network protocol means that the Core Developers and other contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. A failure to properly monitor and upgrade the protocol could damage the Bitcoin Network and an investment in the Shares. The Bitcoin Network operates based on an open-source protocol maintained by the Core Developers and other contributors, largely on the GitHub resource section dedicated to Bitcoin development.
As the Bitcoin Network protocol is not sold and its use does not generate revenues for its development team, the Core Developers are generally not compensated for maintaining and updating the Bitcoin Network protocol. Mike Hearn, a former member of the Core Developers, has criticized the lack of financial incentive for developers to maintain or develop the Bitcoin Network and indicated that the Core Developers may lack the resources to adequately address emerging issues with the Bitcoin Network protocol.
In November , the Bitcoin Foundation announced it would redirect its efforts principally toward assisting in the direction and funding of Core Development of the Bitcoin protocol, rather than political advocacy and educational efforts that were largely focused in North America and Europe.
To the extent that material issues arise with the Bitcoin Network protocol, and the Core Developers and open-source contributor community are unable to address the issues adequately or in a timely manner, the Bitcoin Network and an investment in the Shares may be adversely affected.
If a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on the Bitcoin Network, it is possible that such actor or botnet could manipulate the Blockchain in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate. If a malicious actor or botnet a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers obtains a majority of the processing power dedicated to.
Table of Contents mining on the Bitcoin Network, it may be able to alter the Blockchain on which the Bitcoin Network and all Bitcoin transactions rely by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the Bitcoin Network can add valid blocks.
In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new bitcoins or transactions using such control. To the extent that such malicious actor or botnet does not yield its majority control of the processing power on the Bitcoin Network or the Bitcoin community does not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchain may not be possible.
Such changes could adversely affect an investment in the Shares or the ability of the Trust to operate. In late May and early June , a mining pool known as GHash. To the extent that GHash. Furthermore, the processing power in the mining pool appears to have been redirected to other pools on a voluntary basis by participants in the GHash. The approach to and possible crossing of the 50 percent threshold indicate a greater risk that a single mining pool could exert authority over the validation of Bitcoin transactions.
To the extent that the Bitcoin ecosystem, including the Core Developers and the administrators of mining pools, do not act to ensure greater decentralization of Bitcoin mining processing power, the feasibility of a malicious actor obtaining in excess of 50 percent of the processing power on the Bitcoin Network e.
If the award of bitcoins for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may cease expending processing power to solve blocks and confirmations of transactions on the Blockchain could be slowed temporarily. A reduction in the processing power expended by miners on the Bitcoin Network could increase the likelihood of a malicious actor or botnet obtaining control in excess of 50 percent of the processing power active on the Bitcoin Network or the Blockchain, potentially permitting such actor or botnet to manipulate the Blockchain in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate.
If the award of new bitcoins for solving blocks declines and transaction fees are not sufficiently high, miners may not have an adequate incentive to continue mining and may cease their mining operations. Miners ceasing operations would reduce the collective processing power on the Bitcoin Network, which would adversely affect the confirmation process for transactions i.
On December 2 and December 17, , the Bitcoin Network difficulty for block solutions was adjusted down by 0. During the month of December , confirmation time for block solutions was marginally impacted, with average block solution times based on a seven-day moving average of block solution times climbing from approximately 7. More significant reductions in processing power on the Bitcoin Network could result in material, though temporary, delays in block solution confirmation time.
Any reduction in confidence in the confirmation process or processing power of the Bitcoin Network may adversely impact an investment in the Shares. As the number of bitcoins awarded for solving a block in the Blockchain decreases, the incentive for miners to continue to contribute processing power to the Bitcoin Network will transition from a set reward to transaction fees.
Either the requirement from miners of higher transaction fees in exchange for recording transactions in the Blockchain or a software upgrade that automatically charges fees for all. Table of Contents transactions may decrease demand for bitcoins and prevent the expansion of the Bitcoin Network to retail merchants and commercial businesses, resulting in a reduction in the price of bitcoins that could adversely impact an investment in the Shares.
In order to incentivize miners to continue to contribute processing power to the Bitcoin Network, the Bitcoin Network may either formally or informally transition from a set reward to transaction fees earned upon solving for a block. This transition could be accomplished either by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee or by the Bitcoin Network adopting software upgrades that require the payment of a minimum transaction fee for all transactions.
If transaction fees paid for Bitcoin transactions become too high, the marketplace may be reluctant to accept bitcoins as a means of payment and existing users may be motivated to switch from bitcoins to another Digital Math-Based Asset or back to fiat currency.
Decreased use and demand for bitcoins may adversely affect their value and result in a reduction in the Winkdex spot price and the price of the Shares. To the extent that the profit margins of Bitcoin mining operations are not high, operators of Bitcoin mining operations are more likely to immediately sell bitcoins earned by mining in the Bitcoin Exchange Market, resulting in a reduction in the price of bitcoins that could adversely impact an investment in the Shares.
Over the past two years, Bitcoin Network mining operations have evolved from individual users mining with computer processors, graphics processing units and first generation ASIC application-specific integrated circuit machines. They require the investment of significant capital for the acquisition of this hardware, the leasing of operating space often in data centers or warehousing facilities , incurring of electricity costs and the employment of technicians to operate the mining farms.
As a result, professionalized mining operations are of a greater scale than prior Bitcoin Network miners and have more defined, regular expenses and liabilities.
These regular expenses and liabilities require professionalized mining operations to more immediately sell bitcoins earned from mining operations on the Bitcoin Exchange Market, whereas it is believed that individual miners in past years were more likely to hold newly mined bitcoins for more extended periods. The immediate selling of newly mined bitcoins greatly increases the supply of bitcoins on the Bitcoin Exchange Market, creating downward pressure on the price of bitcoins.
The extent to which the value of bitcoins mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation. In a low profit margin environment, a higher percentage of the 3, to 4, new bitcoins mined each day will be sold into the Bitcoin Exchange Market more rapidly, thereby reducing bitcoin prices. Lower bitcoin prices will result in further tightening of profit margins, particularly for professionalized mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of bitcoins until mining operations with higher operating costs become unprofitable and remove mining power from the Bitcoin Network.
The network effect of reduced profit margins resulting in greater sales of newly mined bitcoins could result in a reduction in the price of bitcoins that could adversely impact an investment in the Shares. To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the Blockchain until a block is solved by a miner who does not require the payment of transaction fees.
Any widespread delays in the recording of transactions could result in a loss of confidence in the Bitcoin Network, which could adversely impact an investment in the Shares. To the extent that any miners cease to record transaction in solved blocks, such transactions will not be recorded on the Blockchain. Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise e.
Table of Contents among miners or one or more mining pools forcing Bitcoin users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block , actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the Blockchain. Any systemic delays in the recording and confirmation of transactions on the Blockchain could result in greater exposure to double-spending transactions and a loss of confidence in the Bitcoin Network, which could adversely impact an investment in the Shares.
The temporary or permanent existence of forked Blockchains could adversely impact an investment in the Shares. Bitcoin is an open source project and, although there is an influential group of leaders in the Bitcoin Network community including the Core Developers, there is no official developer or group of developers that formally controls the Bitcoin Network. Any individual can download the Bitcoin Network software and make any desired modifications, which are proposed to users and miners on the Bitcoin Network through software downloads and upgrades, typically posted to the Bitcoin development forum on GitHub.
A substantial majority of miners and Bitcoin users must consent to those software modifications by downloading the altered software or upgrade that implements the changes; otherwise, the changes do not become a part of the Bitcoin Network.
Such a fork in the Blockchain typically would be addressed by community-led efforts to merge the forked Blockchains, and several prior forks have been so merged.
Intellectual property rights claims may adversely affect the operation of the Bitcoin Network. Third parties may assert intellectual property claims relating to the holding and transfer of Digital Math-Based Assets and their source code. As a result, an intellectual property claim against the Trust or other large Bitcoin Network participants could adversely affect an investment in the Shares. The value of the Shares relates directly to the value of the bitcoins held by the Trust and fluctuations in the price of bitcoins could adversely affect an investment in the Shares.
The Shares are designed to mirror as closely as possible the performance of the price of bitcoins, as measured by Winkdex, and the value of the Shares relates directly to the value of the bitcoins held by the Trust,. Winkdex uses US Dollar-denominated trading data from qualified Bitcoin Exchanges with the highest trading volume in bitcoins. The price of bitcoins has fluctuated widely over the past three years. Several factors may affect the Winkdex spot price, including, but not limited to: Currency exchange rates, including the rates at which bitcoins may be exchanged for fiat currencies;.
Fiat currency withdrawal and deposit policies of Bitcoin Exchanges and liquidity on such Bitcoin Exchanges;. Interruptions in service from or failures of major Bitcoin Exchanges;. Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in bitcoins;.
Monetary policies of governments, trade restrictions, currency devaluations and revaluations;. Regulatory measures, if any, that restrict the use of bitcoins as a form of payment or the purchase of bitcoins on the Bitcoin Market;. The maintenance and development of the open-source software protocol of the Bitcoin Network;. Global or regional political, economic or financial events and situations; and.
Expectations among Bitcoin economy participants that the value of bitcoins will soon change. In addition, investors should be aware that there is no assurance that bitcoins will maintain their long-term value in terms of purchasing power in the future or that the acceptance of bitcoin payments by mainstream retail merchants and commercial businesses will continue to grow.
In the event that the price of bitcoins declines, the Sponsor expects the value of an investment in the Shares to decline proportionately. The Winkdex spot price may be subject to momentum pricing whereby the current value of a bitcoin as represented by Winkdex may account for speculation regarding future appreciation in the Winkdex spot price.
Momentum pricing of bitcoins may subject the Winkdex spot price to greater volatility and adversely affect an investment in the Shares. Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. The Sponsor believes that momentum pricing of bitcoins has resulted, and may continue to result, in speculation regarding future appreciation in the value of bitcoins, inflating and making more volatile the value of a bitcoin as represented by Winkdex.
As a result, bitcoins may be more likely to fluctuate in value due to changing investor confidence in future appreciation in the Winkdex spot price, which could adversely affect an investment in the Shares. Table of Contents Winkdex is an exponential moving average calculated using volume weighted trading price data from various Bitcoin Exchanges chosen by the Index Provider.
Pricing on any Bitcoin Exchange in the Bitcoin Exchange Market can be volatile and can adversely affect an investment in the Shares. Winkdex has a limited history and is an exponential moving average index that is based on volume weighted trading price data from various Bitcoin Exchanges chosen by the Index Provider.
The data inputs are drawn from the application programming interface of various Bitcoin Exchanges and includes trade time, price and volume. The Index Provider selects which Bitcoin Exchanges to include in Winkdex based on currency-denomination, trading volume and such other factors as the Index Provider may deem material e.
The Index Provider will review the eligibility of Bitcoin Exchanges periodically, and not less frequently than monthly. Winkdex will be calculated on an ongoing basis and published at Winkdex. The calculation of Winkdex as of 4: The price of bitcoins on public Bitcoin Exchanges has a limited, four year history. During such history, bitcoin prices on the Bitcoin Exchange Market as a whole, and on Bitcoin Exchanges individually, have been volatile and subject to influence by many factors including the levels of liquidity on Bitcoin Exchanges.
Even the largest Bitcoin Exchanges have been subject to operational interruption e. Winkdex is designed to have limited exposure to Bitcoin Exchange interruption by utilizing transaction data from the top three eligible Bitcoin Exchanges, measured by volume over the prior hour period. The collected data is blended in a two-hour, volume weighted moving average that gives greater weight to more recent transactions than older ones.
Winkdex is also designed to limit exposure to trading or price distortion on Bitcoin Exchanges experiencing periods of unusual activity or limited liquidity by selecting as constituent Bitcoin Exchanges only the eligible Bitcoin Exchanges with the three highest levels of trading volume over the prior hour period.
The Sponsor believes the Winkdex calculation methodology provides a more accurate picture of bitcoin price movements than a simple average of Bitcoin Exchange prices, and that the inclusion of only the top three Bitcoin Exchanges during the calculation period, by volume, limits the chance of included data being influenced by temporary price dislocations that may result from technical problems or limited liquidity on otherwise eligible exchanges.
The Winkdex calculation methodology calls for the review and periodic updating of the constituent Bitcoin Exchanges based on changes in volume levels among the eligible Bitcoin Exchanges. The price of bitcoins on public Bitcoin Exchanges may also be impacted by policies on or interruptions in the deposit or withdrawal of fiat currency into or out of larger Bitcoin Exchanges.
On large Bitcoin Exchanges, users may buy or sell bitcoins for fiat currency or transfer bitcoins to other wallets. Operational limits including regulatory, exchange policy or technical or operational limits on the size or settlement speed of fiat currency deposits by users into Bitcoin Exchanges may reduce demand on such Bitcoin Exchanges, resulting in a reduction in the bitcoin price on such Bitcoin Exchange.
Operational limits including regulatory, exchange policy or technical or operational limits on the size or settlement speed of fiat currency withdrawals by users into Bitcoin Exchanges may reduce supply on such Bitcoin Exchanges, resulting in an increase in the bitcoin price on such Bitcoin Exchange.
For example, a delay in US Dollar withdrawals on one site may temporarily increase the price on such site by reducing supply i. To the extent that users are able or. Table of Contents willing to utilize or arbitrage prices between more than one Bitcoin Exchange, exchange shopping may mitigate the short term impact on and volatility of bitcoin prices due to operational limits on the deposit or withdrawal of fiat currency into or out of larger Bitcoin Exchanges.
Despite efforts to ensure accurate pricing on a volume weighted basis using an exponential moving average, the Winkdex spot price, and the price of bitcoins generally, remains subject to volatility experienced by the Bitcoin Exchanges. Such volatility can adversely affect an investment in the Shares. The Bitcoin Exchanges on which bitcoins trade are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for other products.
The Bitcoin Exchanges on which the bitcoins trade are new and, in most cases, largely unregulated. Furthermore, many Bitcoin Exchanges including several of the most prominent US Dollar denominated Bitcoin Exchanges do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance.
As a result, the marketplace may lose confidence in, or may experience problems relating to, Bitcoin Exchanges, including prominent exchanges handling a significant portion of the volume of bitcoin trading.
The Winkdex spot price on which the NAV of the Shares is determined using the value of a bitcoin as represented by Winkdex at 4: New York time on the date of measurement. Winkdex utilizes data from Bitcoin Exchanges selected by the Index Provider to determine the weighted average price for bitcoins.
Over the past four years, many Bitcoin Exchanges have been closed due to fraud, failure or security breaches. In many of these instances, the customers of such Bitcoin Exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Bitcoin Exchanges.
Further, the collapse of Mt. Gox in February indicated that even the largest Bitcoin Exchanges could be subject to abrupt failure with consequences for both users of a Bitcoin Exchange and the Bitcoin industry as a whole. Gox, and the removal of Mt. A lack of stability in the Bitcoin Exchange Market and the closure or temporary shutdown of Bitcoin Exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the Bitcoin Network and result in greater volatility in the Winkdex spot price.
Table of Contents Since there is no limit on the number of bitcoins that the Trust may acquire, the Trust itself, as it grows, may have an impact on the supply and demand of bitcoins that ultimately may affect the price of the Shares in a manner unrelated to other factors affecting the global market for bitcoins.
The Trust Agreement places no limit on the number of bitcoins the Trust may hold. Moreover, the Trust may issue an unlimited number of Shares, subject to registration requirements, and therefore acquire an unlimited number of bitcoins. The global market for bitcoins is characterized by supply and demand constraints that generally are not present in the markets for commodities or other assets such as gold and silver.
As of December 26, , approximately 13,, bitcoins had been created. If the number of bitcoins acquired by the Trust is large enough relative to global bitcoin supply and demand, further in-kind creations and redemptions of Shares could have an impact on the supply of and demand for bitcoins in a manner unrelated to other factors affecting the global market for bitcoins.
Such an impact could affect the Winkdex spot price, which would directly affect the price at which Shares are traded on the NASDAQ or the price of future Baskets created or redeemed by the Trust.
The Trust and the Sponsor cannot provide any assurance that increased bitcoin holdings by the Trust in the future will have no long-term impact on the Winkdex spot price, thereby affecting Share trading prices. While the NASDAQ is open for trading in the Shares for a limited period each day, the Bitcoin Exchange Market is a hour marketplace; however, trading volume and liquidity on the Bitcoin Exchange Market is not consistent throughout the day and Bitcoin Exchanges, including the larger-volume markets, have been known to shut down temporarily or permanently due to security concerns, directed denial of service attacks and DDoS Attacks and other reasons.
As a result, during periods when the NASDAQ is open but large Bitcoin Exchanges or a substantial number of smaller Bitcoin Exchanges are either lightly traded or are closed, trading spreads and the resulting premium or discount on the Shares may widen and, therefore, increase the difference between the price of the Shares and the NAV per Share.
Premiums or discounts may have an adverse effect on an investment in the Shares if a Shareholder sells or acquires its Shares during a period of discount or premium, respectively. During periods when the NASDAQ is closed but Bitcoin Exchanges are open, significant changes in the price of bitcoin on the Exchange Market could result in a difference in performance between the value of bitcoins as measured by Winkdex and the most recent NAV per Share or closing trading price.
Investors may purchase Shares to hedge existing bitcoin or other Digital Math-Based Assets, commodity or currency exposure or to speculate on the price of bitcoins. Speculation on the price of bitcoins may involve long and short exposures.
To the extent that aggregate short exposure exceeds the number of Shares available for purchase for example, in the event that large redemption requests by Authorized Participants dramatically affect Share liquidity , investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders.
Those repurchases may, in turn, dramatically increase the price of the Shares until additional Shares are created through the creation process.
Purchasing activity in the Bitcoin Exchange Market associated with Basket creations or selling activity following Basket redemptions may affect the Winkdex spot price and Share trading prices. These price changes may adversely affect an investment in the Shares. Purchasing activity associated with acquiring bitcoins required for deposit with the Trust in connection with the creation of Baskets may increase the market price of bitcoins on the Bitcoin Exchange Market, which will result in higher prices for the Shares.
Increases in the market price of bitcoins may also occur as a result of the purchasing activity of other market participants. Other market participants may attempt to benefit from an increase in the market price of bitcoins that may result from increased purchasing activity of bitcoins connected with the issuance of Baskets. Consequently, the market price of bitcoins may decline immediately after Baskets are created. If the Winkdex spot price declines, the trading price of the Shares will generally also decline.
Selling activity associated with sales of bitcoins withdrawn from the Trust in connection with the redemption of Baskets may decrease the market price of bitcoins on the Bitcoin Exchange Market, which will result in lower prices for the Shares. Decreases in the market price of bitcoins may also occur as a result of the selling activity of other market participants.
An investment in the Shares may be adversely affected by competition from other methods of investing in bitcoins. The Trust will compete with direct investments in bitcoins and other potential financial vehicles, possibly including securities backed by or linked to bitcoins and DMBA ETPs similar to the Trust.
Political or economic crises may motivate large-scale sales of bitcoins, which could result in a reduction in the Winkdex spot price and adversely affect an investment in the Shares.
As an alternative to fiat currencies that are backed by central governments, Digital Math-Based Assets such as bitcoins, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events.
Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of bitcoins either globally or locally. Large-scale sales of bitcoins would result in a reduction in the Winkdex spot price and adversely affect an investment in the Shares. Table of Contents Demand for bitcoins is driven, in part, by its status as the most prominent and secure Digital Math-Based Asset.
It is possible that a Digital Math-Based Asset other than bitcoins could have features that make it more desirable to a material portion of the Digital Math-Based Asset user base, resulting in a reduction in demand for bitcoins, which could have a negative impact on the price of bitcoins and adversely affect an investment in the Shares.
This first-to-market advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in use to secure the Blockchain and transaction verification system. Furthermore, the mining hashrate of Bitcoin estimated by Blockchain.
Bitcoin also enjoys significantly greater acceptance and usage than other altcoin networks in the retail and commercial marketplace, due in large part to the relatively well-funded efforts of payment processing companies including Coinbase, BitPay and GoCoin.
Despite the marked first-mover advantage of the Bitcoin Network over other Digital Math-Based Assets, it is possible than an altcoin could become materially popular due to either a perceived or exposed shortcoming of the Bitcoin Network protocol that is not immediately addressed by the Core Developers or a perceived advantage of an altcoin that includes features not incorporated into Bitcoin.
As the Sponsor and its management have no history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable to manage the Trust. The Sponsor was formed to be the Sponsor of the Trust and has no history of past performance in managing investment vehicles like the Trust. If the experience of the Sponsor and its management is inadequate or unsuitable to manage an investment vehicle such as the Trust, the operations of the Trust may be adversely affected.
Table of Contents The value of the Shares could decrease if unanticipated operational or trading problems arise. The mechanisms and procedures governing the creation, redemption and offering of the Shares and storage of the bitcoins have been developed specifically for this product.
The Shares may trade at a price which is at, above or below the NAV per Share and any discount or premium in the trading price relative to the NAV per Share may widen as a result of non-concurrent trading hours. The trading price of the Shares will fluctuate in accordance with changes in the NAV per Share as well as market supply and demand. The price difference may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for Shares are closely related, but not identical, to the same forces influencing the Winkdex spot price.
Consequently, an Authorized Participant may be able to create or redeem a Basket of Shares at a discount or a premium to the public trading price per Share. Authorized Participants, or their clients or customers, may have an opportunity to realize a riskless profit if they can create a Basket at a discount to the public trading price of the Shares or can redeem a Basket at a premium over the public trading price of the Shares.
The Sponsor expects that the exploitation of such arbitrage opportunities by Authorized Participants and their clients and customers will tend to cause the public trading price to track NAV per Share closely over time. Such arbitrage opportunities will not be available to Shareholders who are not Authorized Participants. If Authorized Participants are able to purchase or sell large aggregations of bitcoins in the open market at prices that are different than the Winkdex spot price, the arbitrage mechanism intended to keep the price of the Shares closely linked to the Winkdex spot price may not function properly and the Shares may trade at a discount or premium to their NAV per Share.
The arbitrage mechanism on which the Trust relies to keep the price of the Shares closely linked to the Winkdex spot price may not function properly if Authorized Participants are able to purchase or sell large aggregations of bitcoins in the open market at prices that are materially higher or lower than the Winkdex spot price.
Although Winkdex is designed to accurately capture the market price of bitcoins in the top three, by volume, eligible Bitcoin Exchanges trading in US Dollars, Authorized Participants may purchase bitcoins for creation units or sell bitcoins from creation unit redemptions on public or private markets not included among the constituent Bitcoin Exchanges of Winkdex, and such transactions may take place at prices materially higher or lower than the Winkdex spot price.
Furthermore, while Winkdex provides an exponential moving average of the price of a bitcoin on three constituent Bitcoin Exchanges at any given time, the prices on each such Bitcoin Exchange may not be equal to the value of a bitcoin as represented by Winkdex. It is possible that the price of bitcoins on the constituent Bitcoin Exchange s used by an Authorized Participant could be materially higher or lower than the Winkdex representation of the average Bitcoin Exchange price. Under either such circumstance, the arbitrage mechanism will function to link the price of the Shares to the prices at which Authorized Participants are able to purchase or sell large aggregations of bitcoins.
Table of Contents If the processes of creation and redemption of Baskets encounter any unanticipated difficulties, the opportunities for arbitrage transactions intended to keep the price of the Shares closely linked to the Winkdex spot price may not exist and, as a result, the price of the Shares may fall.
If this is the case, the liquidity of Shares may decline and the price of the Shares may fluctuate independently of the Winkdex spot price and may fall.
The postponement, suspension or rejection of creation or redemption orders, as permitted in certain circumstances under the Trust Servicing Agreement, may adversely affect an investment in the Shares. Under the Trust Servicing Agreement, the Administrator or Sponsor may postpone, suspend or reject creation or redemption orders, as applicable, for a variety of permitted reasons under certain circumstances.
To the extent such orders are postponed, suspended or rejected, the arbitrage mechanism resulting from the process through which Authorized Participants create and redeem Shares directly with the Trust may fail to closely link the price of the Shares to the value of the underlying bitcoins, as measured using the Winkdex spot price. If this is the case, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the Winkdex spot price and may fall.
The Trust could experience unforeseen difficulties in operating and maintaining key elements of its technical infrastructure. Any effort to expand, update or alter the Security System is likely to be complex, and unanticipated delays in the completion of these projects may lead to project costs, operational inefficiencies or vulnerabilities to security breaches. In addition, there may be problems with the design or implementation of the Security System or with an expansion or upgrade thereto that are not evident during the testing phases of design and implementation, and that may only become apparent after the Trust has utilized the infrastructure.
This could further expose the Trust to operational inefficiencies or vulnerabilities. Any issues relating to the performance of the Security System may have an adverse impact on an investment in the Shares. The Security System may now or in the future contain undetected errors, software flaws i. The history of the Bitcoin Exchange Market has shown that Bitcoin Exchanges and large holders of bitcoins must adapt to technological change in order to secure and safeguard client accounts.
Security threats to the Security System could result in the halting of Trust operations, the suspension of redemptions, a loss of Trust assets, or damage to the reputation and brand of the Trust, each of which could result in a reduction in the price of the Shares. Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin Exchange Market since the launch of the Bitcoin Network.
The Sponsor believes that it has developed a proprietary Security System utilizing proprietary hardware equipment and redundancy, segregation and offline data storage i. Nevertheless, the Security System is not impenetrable and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by the Trust, absent gross negligence, willful misconduct or bad faith on the part of the Sponsor, the Custodian or their agents.
As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, the Sponsor may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of the Security System occurs, the market perception of the effectiveness of the Security System could be harmed, which could result in a reduction in the price of the Shares.
In the event of a security breach of the Security System, the Trust may cease operations, suspend redemptions or suffer a reduction in assets, the occurrence of each of which could result in a reduction in the price of the Shares. Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoins may be irretrievable. As a result, any incorrectly executed Bitcoin transactions could adversely affect an investment in the Shares. Bitcoin transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on the Bitcoin Network.
Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of bitcoins or a theft of bitcoins generally will not be reversible and the Trust may not be capable of seeking compensation for any such transfer or theft. To the extent that the Trust is unable to seek redress for such error or theft, such loss could adversely affect an investment in the Shares. Any of these events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.
The Trust will not insure its bitcoins. The Custodian will maintain insurance with regard to its custodial business on such terms and conditions as it considers appropriate in connection with its custodial obligations and will be responsible for all costs, fees and expenses arising from the insurance policy or policies. Trading Discussion Discussion about doing business with Bitcoin. Best trading practices, delivery methods etc. Last post by Gabb in Re: Top reasons that lea Scam Accusations , Reputation.
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