One of the most important measures for the security of the Bitcoin Network is the "hash rate". As described above, miners solve these difficult computational challenges (solving the 'hash') in order to secure the network and earn newly minted Bitcoin. The "hash-rate" is the easiest way to measure the processing power of all the miners working to secure the network. Since inception, the total hash rate has steadily increased. However, it is not static. It can be adjusted up or down as unprofitable miners disconnect from the Bitcoin Network. All things being equal, having fewer miners connected to the network lowers the difficulty level, which incentivizes sidelined miners to enter the market again. This equilibrium of market forces ensures that the Bitcoin Network has a high enough hash rate and difficulty rating to keep it secure.

Hash rate is measured in hashes per second, or computations per second. The thirty-day moving average hash rate is 134 million tera hash per second. A tera hash is 1,000,000,000,000 (1 trillion) hashes per second.

Another important metric is the number of nodes connected to the network. A node is a computer connected into the Bitcoin Network. A "full node" is a computer connected to the Bitcoin Network which hosts and synchronizes a copy of the entire Bitcoin blockchain. According to the Bitcoin Core documentation, "a full node is a program that fully validates transactions and blocks". Almost all full nodes also support the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes. This differs from a light node, which requires less download and storage capacity as its only task is to verify transactions in the blockchain, along with all the other nodes.

The number of nodes is important, but so too is the geographically decentralized distribution. A decentralized network ensures that the network can continue to run, even in the event of natural disaster, a change in the law, a black-out or some other unforeseen event. In this respect, it is similar to the internet. Right now, there are over 10,000 nodes being run in 96 different countries, with the United States, Germany, France, The Netherlands, Canada, the United Kingdom, Singapore, Russia and Japan as part of the top ten.

Bitcoin is a deflationary currency with a known rate of inflation, which declines periodically. When Bitcoin was first launched, the rate of inflation was quite high, but has declined steadily. This steadily declining growth in the Bitcoin outstanding will continue until all 21 million Bitcoin are mined, in approximately 2140. Every 210,000 blocks or approximately every four years, the amount of new Bitcoin issued to miners for securing the network declines by 50%. This is known colloquially in the industry as the "halving." The first such event where the supply was halved occurred on November 28, 2012. Prior to that, miners received 50 Bitcoin per block hashed, in what is known as the "coinbase transaction." From November 28, 2012 until July 9, 2016 the mining reward was 25 Bitcoin. From this point until May 11, 2020, the reward was 12.5 Bitcoin. Since then the reward has been 6.25 Bitcoin. These adjustments are all programmatic and predetermined based on the number of blocks mined and thus happen automatically.

The Manager believes that this steady declining rate of growth in the supply of Bitcoin will not adversely affect the economic incentive of miners to support and secure the network. However, the Manager does think that this steadily declining rate of inflation is constructive for the price of an individual Bitcoin. So long as growth in demand remains constant, a declining supply of new Bitcoin will cause the supply/demand to fall out of equilibrium, thus putting upward pressure on the price of Bitcoin. One metric used to assess this supply/demand imbalance is the stock to flow ratio. The stock to flow ratio expresses the number of years it would take to double the total stock of something at the current rate of production. Today there are currently 18,580,044 Bitcoins in circulation. At the current block reward of 6.5 Bitcoins/block, there are approximately 908 new Bitcoin created per day or 331,542 per year. This gives us a stock-to-flow ratio of approximately 56.0. With each halving, the stock to flow ratio increases.

Bitcoin and other digital assets are being adopted widely by Fidelity, Square, PayPal and numerous other large corporations. Fidelity announced the launch of Fidelity Digital Assets in 2018. In 2020, Square announced that it would allocate a percentage of its treasury to holding Bitcoin, in addition to offering a number of Bitcoin services to customers. It joined other firms, including NASDAQ-listed Microstrategy, which has so far purchased more than $1 billion of Bitcoin for its treasury. PayPal, after rolling out Bitcoin buying and selling to a select group of customers, made it available to all customers in November 2020 and to its network of 26 million merchants. VISA and Mastercard have turned their attention towards central bank digital currencies and other implementations of blockchain and payments.

Furthermore, enterprise adoption of the underlying blockchain technology is widespread and goes beyond the financial services industry. This broad enterprise acceptance of blockchain is also reflected in industry surveys. Deloitte, a consultancy, released the results of its 2019 Blockchain Survey, in which it found that 53% of enterprise respondents cited blockchain as a top five strategic priority and 56% said blockchain will disrupt their industry.

The Manager believes that the platform ecosystem has matured and developed significantly in recent years. To the Manager's knowledge, many platforms now require customers to adhere to anti-money laundering and know your customer requirements and procedures. Additionally, to the Manager's knowledge, a growing number of platforms have taken additional steps to become regulated as trust companies and are now vertically integrating their services across trading execution, custody and other services, much like a more traditional financial services firm. The Manager understands that many of these firms have insurance for assets held in cold storage as well as general insurance policies to protect against theft or malfeasance, similar to many mature companies. The Manager also understands that it is fairly common for these policies to be underwritten by major brand-name insurance companies and to cover over $100 million of lost or stolen assets or other unforeseen losses. The Manager believes that this is a significant change from only two or three years ago when few, if any, companies operating in this industry had insurance.

Some regulators have also clarified existing financial market rules and in some cases implemented new ones to ensure the market matures in an orderly and stable manner. For example, in 2015 the New York Department of Financial Services introduced the BitLicense, a specific licensing and regulatory requirement for cryptocurrency companies. Since then a number of platforms who also operate other services such as custody, have been granted that license. Additionally, the SEC, CFTC, and Financial Industry Regulatory Authority (FINRA), as well as the U.S. Office of the Comptroller of the Currency have all clarified their positions related to Bitcoin and the custody of digital assets by regulated financial institutions.

The Manager believes that the recent entrance of large, mature, and sophisticated financial institutions such as Fidelity, CME Group, PayPal and Square is helping to grow and advance the industry, which will in turn attract incremental participants, including institutions, to the asset class. The Manager also believes that absent the clarification of rules and regulations by governing bodies, that this recent maturation would not have occurred. It would appear that encouraging regulators to continue to engage with industry will enable it to grow in a sustainable and mature manner.

The Manager expects to purchase Bitcoin for the Fund from a combination of regulated, licensed platforms that adhere to AML and KYC requirements, as well as certain OTC providers where it already has relationships and who also adhere to the same rules and requirements.