VanEck Bitcoin ETF (HODL) risk factors, FY2024 10-K

Other

1. 01Risks Associated with Bitcoin and the Bitcoin Network
2. 02Due to the nature of private keys, bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoin may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect an investment in the Trust
3. 03A disruption of the internet may affect bitcoin operations, which may adversely affect the bitcoin industry and an investment in the Trust
4. 04The Bitcoin network’s decentralized governance structure may negatively affect its ability to grow and respond to challenges
5. 05Potential amendments to the Bitcoin network’s protocols and software could, if accepted and authorized by the Bitcoin network community, adversely affect an investment in the Trust
6. 06A temporary or permanent “fork” of the bitcoin blockchain could adversely affect an investment in the Trust. Shareholders will not receive the benefits of any forks or airdrops
7. 07include bitcoin, more susceptible to attack. Any of these events could cause the Bitcoin network to be less attractive to potential users, or cause a decline in speculative interest, and thereby cause bitcoin to decline in value
8. 08With respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the Incidental Rights and any IR Virtual Currency associated with such event. As such, Shareholders will not receive the benefits of any forks, and the Trust is not able to participate in any airdrop
9. 09In the event of a hard fork of the Bitcoin network, the Sponsor will, if permitted by the terms of the Trust Agreement, use its discretion to determine which network should be considered the appropriate network for the Trust’s purposes, and in doing so may adversely affect the value of the Shares
10. 10A hard fork could change the source code to the bitcoin network, including the 21 million bitcoin supply cap
11. 11The Bitcoin Blockchain could be vulnerable to a “51% attack,” which could adversely affect an investment in the Trust or the ability of the Trust to operate
12. 12If miners expend less processing power on the Bitcoin network, it could increase the likelihood of a malicious actor obtaining control
13. 13Blockchain technologies are based on theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly. These premises may be incorrect or may become incorrect due to technological advances
14. 14Currently, there is relatively small use of bitcoin in the retail and commercial marketplace in comparison to relatively large use by speculators and those perceiving bitcoin as a store of value, thus contributing to price volatility that could adversely affect an investment in the Trust
15. 15Sales of new bitcoin may cause the price of bitcoin to decline, which could negatively affect an investment in the Trust
16. 16Operational cost may exceed the award for solving blocks or transaction fees. Increased transaction fees may adversely affect the usage of the Bitcoin network
17. 17Miners could act in collusion to raise transaction fees, which may adversely affect the usage of the Bitcoin network
18. 18As technology advances, miners may be unable to acquire the digital asset mining hardware necessary to develop and launch their operations. A decline in the bitcoin mining population could adversely affect the Bitcoin network and an investment in the Trust
19. 19If profit margins of Bitcoin Mining Operations are not high, miners may elect to immediately sell bitcoin earned by mining, resulting in a reduction in the price of bitcoin that could adversely affect an investment in the Trust
20. 20Congestion or delay in the Bitcoin network may delay purchases or sales of bitcoin by the Trust
21. 21The value of the Shares relates directly to the value of bitcoins, the value of which may be highly volatile and subject to fluctuations due to a number of factors
22. 22Digital asset networks face significant scaling challenges and efforts to increase the volume of transactions may not be successful
23. 23Bitcoin trading platforms may be exposed to fraud and manipulation
24. 24Bitcoin trading platforms may be exposed to front-running
25. 25Bitcoin trading platforms may be exposed to wash trading
26. 26Competition from central bank digital currencies and emerging payments initiatives involving financial institutions could adversely affect the value of bitcoins and other digital assets
27. 27Prices of bitcoin may be affected due to stablecoins (including Tether and US Dollar Coin (“USDC”)), the activities of stablecoin issuers and their regulatory treatment
28. 28New competing digital assets may pose a challenge to bitcoin’s current market position, resulting in a reduction in demand for bitcoin, which could have a negative impact on the price of bitcoin and may have a negative impact on the performance of the Trust
29. 29Failure of funds that hold digital assets to receive SEC approval to list their shares on exchanges could adversely affect the value of the Shares
30. 30The MarketVectorTM Bitcoin Benchmark Rate has a limited history
31. 31The MarketvectorTM Bitcoin Benchmark Rate could fail to track the global bitcoin price, and a failure of the MarketvectorTM Bitcoin Benchmark Rate could adversely affect the value of the Shares
32. 32Marketvector has analyzed bitcoin trading platform data and developed insights that have informed Marketvector’s understanding of the bitcoin market and the design of the Trust. If such data or insights are inaccurate or incorrect, the value of an investment in the trust may be adversely affected
33. 33The MarketvectorTM Bitcoin Benchmark Rate used to calculate the value of the Trust’s bitcoin may be volatile, adversely affecting the value of the Shares
34. 34The MarketvectorTM Bitcoin Benchmark Rate may be affected by manipulative or fraudulent practices in the global bitcoin market or at constituent trading platforms
35. 35Litecoin. Ultimately, the transactions resulted in wash transactions that depicted a misleading picture of the Litecoin/bitcoin market
36. 36The Sponsor can remove the MarketvectorTM Bitcoin Benchmark Rate and use a different pricing or valuation methodology instead
37. 37Intellectual property rights claims may adversely affect the Trust and the value of the Shares
38. 38The value of the Shares may be influenced by a variety of factors unrelated to the value of bitcoin
39. 39The Trust is subject to market risk
40. 40The NAV may not always correspond to the market price of bitcoin and, as a result, Baskets may be created or redeemed at a value that is different from the market price of the Shares
41. 41Authorized Participants’ buying and selling activity associated with the creation and redemption of Baskets may adversely affect an investment in the Shares of the Trust
42. 42Selling activity associated with sales of bitcoin by Liquidity Providers in connection with redemption orders may decrease the bitcoin prices, which will result in lower prices for the Shares. Decreases in bitcoin prices may also occur as a result of selling activity by other market participants
43. 43The inability of Liquidity Providers to hedge their bitcoin exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares
44. 44The lack of ability to facilitate in-kind creations and redemptions of Shares could have adverse consequences for the Trust
45. 45The Shares may trade at a price that is at, above or below the Trust’s NAV per Share as a result of the non-current trading hours between the Exchange and the digital asset market
46. 46The Trust is subject to risks due to its concentration of investments in a single asset class
47. 47The lack of active trading markets for the Shares of the Trust may result in losses on Shareholders’ investments at the time of disposition of Shares
48. 48Possible illiquid markets may exacerbate losses, increase the variability between the Trust’s NAV and its market price or affect the Trust’s ability to meet cash Creation Orders and Redemption Orders
49. 49The Trust is an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Shares less attractive to investors
50. 50Several factors may affect the Trust’s ability to achieve its investment objective on a consistent basis
51. 51The amount of bitcoin represented by the Shares will decline over time
52. 52The development and commercialization of the Trust is subject to competitive pressures
53. 53Security threats to the Trust’s accounts with the Bitcoin Custodian or the Additional Bitcoin Custodian could result in the halting of Trust operations and a loss of Trust assets or damage to the reputation of the Trust, each of which could result in a reduction in the price of the Shares
54. 54The Clearing Account permits hot storage which is less secure than cold storage
55. 55suitable party but must enter into a modified Custody Agreement, Additional Bitcoin Custody Agreement or Clearing Agreement that is less favorable for the Trust or Sponsor, the value of the Shares could be adversely affected
56. 56The lack of full insurance and Shareholders’ limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Cash Custodian, Bitcoin Custodian and Additional Bitcoin Custodian expose the Trust and its Shareholders to the risk of loss of the Trust’s bitcoins for which no person or entity is liable
57. 57Loss of a critical banking relationship for, or the failure of a bank used by, the Trust could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust
58. 58The Sponsor is solely responsible for determining the value of the bitcoin holdings and bitcoin holdings per Share, and any errors, discontinuance or changes in such valuation calculations may have an adverse effect on the value of the Shares
59. 59The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Transfer Agent, the Bitcoin Custodian, the Additional Bitcoin Custodian or the Cash Custodian under the trust documents
60. 60Coinbase serves as the Bitcoin Custodian for several competing exchange-traded bitcoin products, which could adversely affect the Trust’s operations and ultimately the value of the shares

Regulatory Risk

1. 61Shareholders do not have the protections associated with ownership of Shares in an investment company registered under the 1940 Act or the protections afforded by the CEA
2. 62The Trust is not registered as an investment company under the 1940 Act, and the Sponsor believes that the Trust is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies
3. 63Future legal or regulatory developments may negatively affect the value of bitcoin or require the Trust or the Sponsor to become registered with the SEC or CFTC, which may cause the Trust to liquidate
4. 64Further, the proposed amendments could have a severe negative impact on the price of bitcoin and therefore the value of the Shares if enacted, by, among other things, making it more difficult for investors to gain access to bitcoin, or causing certain holders of bitcoin to sell their holdings
5. 65Anonymity, sanctions, and illicit financing risk
6. 66Regulatory changes or actions in foreign jurisdictions may affect the value of the Shares or restrict the use of bitcoin, mining activity or the operation of their networks or the global bitcoin markets in a manner that adversely affects the value of the Shares

Tax Risk

1. 67The treatment of the Trust for U.S. federal income tax purposes is uncertain
2. 68The treatment of digital assets for U.S. federal income tax purposes is uncertain
3. 69Future developments regarding the treatment of digital assets for U.S. federal income tax purposes could adversely affect the value of the Shares
4. 70Future developments in the treatment of digital assets for tax purposes other than U.S. federal income tax purposes could adversely affect the value of the Shares
5. 71A U.S. Tax-Exempt Shareholder may recognize “unrelated business taxable income” as a consequence of an investment in Shares
6. 72Shareholders could incur a tax liability without an associated distribution of the Trust
7. 73A hard “fork” of the Bitcoin Blockchain could result in Shareholders incurring a tax liability

Other Risks

1. 74Shareholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust
2. 75Shareholders cannot be assured that the Sponsor will be willing or able to continue to serve as sponsor to the Trust for any length of time. If the Sponsor discontinues its activities on behalf of the Trust and a substitute sponsor is not appointed, the Trust will terminate and liquidate its bitcoins
3. 76Although the Bitcoin Custodian and the Additional Bitcoin Custodian are fiduciaries with respect to the Trust’s assets, they could resign or be removed by the Sponsor, which may trigger early dissolution of the Trust
4. 77Shareholders may be adversely affected by the lack of independent advisers representing investors in the Trust
5. 78Shareholders and Authorized Participants lack the right under the Custody Agreement to assert claims directly against the Bitcoin Custodian, which significantly limits their options for recourse
6. 79The Exchange on which the Shares are listed may halt trading in the Trust’s Shares, which would adversely impact a Shareholder’s ability to sell Shares
7. 80The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares
8. 81The market infrastructure of the bitcoin spot market could result in the absence of active Authorized Participants able to support the trading activity of the Trust
9. 82Bitcoin spot exchanges are not subject to same regulatory oversight as traditional equity exchanges, which could negatively impact the ability of Authorized Participants to implement arbitrage mechanisms
10. 83Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect Shareholders’ investment in the Shares
11. 84As the Sponsor and its management have limited history of operating investment vehicles like the Trust, their experience may be inadequate or unsuitable to manage the Trust
12. 85The Sponsor is leanly staffed and relies heavily on key personnel
13. 86The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders
14. 87Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights
15. 88The Trust Agreement includes provisions that limit Shareholders’ voting rights and restrict Shareholders’ right to bring a derivative action
16. 89otherwise inappropriate. As such, Shareholder could be required to litigate a matter relating to the Trust in a Delaware court, even if that court may otherwise be inconvenient for the Shareholder
17. 90An investment in the Trust may be adversely affected by competition from other investment vehicles focused on bitcoin or other cryptocurrencies
18. 91Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances
19. 92Shares are traded and arbitraged on the secondary market, which could cause them to trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings
20. 93Shareholders may be adversely affected by an overstatement or understatement of the NAV Calculation of the Trust due to the valuation method employed on the date of the NAV calculation
21. 94The liability of the Sponsor and the Trustee is limited, and the value of the Shares will be adversely affected if the Trust is required to indemnify the Trustee or the Sponsor
22. 95Due to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks
23. 96The Trust and its service providers are subject to certain operational risks
24. 97Risk Factors Related to ERISA