Bitwise Ethereum ETF Annual Report - Your 2025 Performance Review

Welcome to your performance review for the Bitwise Ethereum ETF (ETHW), covering its first full year of operations from July 22, 2024, through December 31, 2025. This summary aims to provide a clear, jargon-free understanding of how your investment performed, what drives this ETF, and key factors to consider. We'll focus on the essential information, presented in a straightforward manner.

Business Overview: What is the Bitwise Ethereum ETF (ETHW) and How Does It Work?

The Bitwise Ethereum ETF, trading as ETHW on the NYSE Arca, launched on July 22, 2024, and began trading the very next day. Its core mission is simple: to offer a direct and convenient way to invest in Ethereum (or "ether," the digital currency) without the complexities of buying, storing, and securing crypto yourself. When you buy shares of ETHW, you gain exposure to the price movements of ether, as the ETF holds actual ether on your behalf.

To ensure fair valuation, the ETF uses the CME CF Ether – Dollar Reference Rate – New York Variant. This widely recognized benchmark aggregates ether prices from major spot exchanges, providing a reliable, once-daily price for ether in US dollars at 4:00 p.m. New York time.

Who Manages Your Investment?

Bitwise Investment Advisers, LLC serves as the "Sponsor," overseeing the ETF's strategy and operations. They partner with key service providers:

• Coinbase Custody Trust Company, LLC: The "Ether Custodian," responsible for the secure offline (cold storage) safekeeping of the ETF's ether holdings.
• The Bank of New York Mellon (BNY Mellon): Acts as the "Administrator" (handling daily operations and accounting), "Transfer Agent" (managing share records), and "Cash Custodian" (securing the ETF's cash assets).

How ETHW Manages Its Ether Holdings

ETHW is a passively managed ETF. This means it does not try to predict market movements or actively trade ether to outperform the market. Instead, it simply aims to track the price of ether as closely as possible. The ETF does not use leverage (borrowed money) or employ hedging strategies to mitigate price swings, meaning its value will directly reflect ether's performance, minus operational costs.

When investors buy or sell large blocks of ETF shares (known as "Baskets" of 10,000 shares), these transactions are conducted with cash. The ETF then uses this cash to buy or sell ether on the open market, maintaining its holdings in line with outstanding shares. This cash-based creation/redemption mechanism helps keep the ETF's market price aligned with the underlying value of its ether holdings through arbitrage.

Key Financials (as of December 31, 2025)

• Assets Under Management (AUM): The ETF concluded 2025 with approximately $269.3 million in assets.
• Ether Holdings: The ETF held approximately 90,820 ether.
• Ether Price: The CME CF Ether – Dollar Reference Rate was $2,964.79 per ether.
• Shares Outstanding: There were approximately 15,282,327 shares of ETHW outstanding.
• Expense Ratio: The ETF has an annual management fee. This fee covers the costs of operating the ETF and is deducted from the ETF's assets.

Management Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations: From its inception on July 22, 2024, through December 31, 2025, ether's price movements primarily drove the ETF's financial performance. The Net Asset Value (NAV) return closely mirrored the CME CF Ether – Dollar Reference Rate, reflecting the ETF's passive investment strategy.

The market price return also closely tracked the NAV. This indicates that efficient arbitrage mechanisms largely kept the ETF's trading price aligned with its intrinsic value.

The significant appreciation or depreciation of ether during the period was the primary factor influencing the ETF's returns. The expense ratio is directly deducted from the ETF's assets, impacting its overall performance relative to the spot ether price.

Financial Condition, Liquidity, and Capital Resources: As of December 31, 2025, the ETF reported Assets Under Management (AUM) of approximately $269.3 million, primarily consisting of its ether holdings. The ETF's capital resources include its ether holdings and any cash held for operational purposes or pending ether purchases/sales.

The ETF does not engage in borrowing or leverage, meaning it carries no debt. The Bank of New York Mellon, as Cash Custodian, securely holds the ETF's cash assets.

The ETF maintains its liquidity through a continuous creation and redemption mechanism. This process allows authorized participants to create or redeem large blocks of shares (known as "Baskets") for cash. This mechanism enables the ETF to adjust its ether holdings to match investor demand and helps ensure the market price of ETHW shares remains closely aligned with its NAV. The ETF's AUM and the deduction of its expense ratio support its ability to meet obligations, primarily operational expenses.

Important Risks to Consider

Investing in ETHW involves unique risks due to the nature of ether and the evolving crypto market:

• High Volatility: Ether's price is notoriously volatile, experiencing significant and rapid fluctuations. This means the value of your investment can change dramatically in short periods. Historically, ether has seen daily price swings of over 10%.
• New and Evolving Market: The cryptocurrency market is still relatively young and subject to rapid technological, economic, and social changes. Its long-term viability and adoption are not guaranteed.
• Regulatory Uncertainty: Governments worldwide are still developing their approach to cryptocurrencies. New laws, regulations, or enforcement actions (e.g., regarding securities classification, AML, or sanctions) could negatively impact ether's value, the ETF's operations, or its ability to hold ether.
• Limited Operating History: As a new ETF, ETHW lacks a long performance track record for investors to evaluate its long-term behavior across various market cycles.
• Reliance on Service Providers: The ETF depends on its custodians (Coinbase for ether, BNY Mellon for cash) and administrator. Issues like security breaches, operational failures, or insolvency at these partners could severely impact the ETF.
• Cybersecurity Risk: The digital nature of ether and the infrastructure supporting it are vulnerable to cyberattacks, hacking, and other security breaches, which could lead to loss of assets.
• Trading at Premium/Discount: While arbitrage mechanisms are designed to keep the ETF's market price close to its Net Asset Value (NAV), there can be periods where the ETF trades at a premium (above NAV) or a discount (below NAV), especially during periods of high market volatility or low liquidity.
• Tax Implications: Investing in ETHW may have complex tax implications, including potential capital gains or losses upon sale. Investors should consult with a tax advisor regarding their specific situation.
• Fork and Airdrop Risk: In the event of a "fork" (a split in the underlying blockchain) or an "airdrop" (distribution of new tokens), the ETF's policy on whether it will support, hold, or distribute the new assets may vary and could impact the value of your investment.

Financial Health (Debt, Cash, Liquidity)

As detailed in the "Management Discussion and Analysis," the ETF maintains a strong financial position characterized by its substantial Assets Under Management (AUM) and its operational structure designed for liquidity. The ETF explicitly does not utilize leverage or incur debt, meaning its financial health is not subject to interest rate risk or credit risk associated with borrowing. The Bank of New York Mellon securely holds its cash assets. The continuous creation and redemption process with authorized participants provides liquidity for shareholders, facilitating the efficient conversion of ETF shares into the underlying ether value (via cash) and vice-versa. This mechanism, along with the daily valuation of its ether holdings, ensures the ETF's ongoing financial stability and ability to meet its operational commitments.

Future Outlook: What's Next? An Outlook

As we look ahead, the continued development and adoption of the Ethereum network, broader cryptocurrency market trends, and the evolving global regulatory landscape will largely shape the Bitwise Ethereum ETF's future. Bitwise remains committed to providing transparent and secure access to ether for investors, adapting to market developments as they unfold. The ETF's strategy will continue to focus on passively tracking the price of ether, relying on the efficiency of its creation/redemption mechanism and the security provided by its service providers. The long-term success of the ETF is intrinsically linked to the growth and stability of the Ethereum ecosystem and the broader acceptance of digital assets as an investable asset class.

Competitive Position

The Bitwise Ethereum ETF operates within an evolving and increasingly competitive landscape for digital asset investment products. Its primary competition includes:

• Other Spot Ethereum ETFs: Should other spot Ethereum ETFs be approved and launched, they would directly compete for investor assets based on factors such as expense ratio, brand recognition, liquidity, and the reputation of their custodians and sponsors.
• Ethereum Futures ETFs: Existing or future ETFs that invest in Ethereum futures contracts offer indirect exposure to ether, but typically involve different risk profiles and expense structures compared to a spot ETF.
• Direct Investment in Ether: Investors can directly purchase and hold ether through cryptocurrency exchanges or brokers. The ETF aims to differentiate itself by offering a regulated, traditional brokerage account-accessible vehicle that handles the complexities of custody and security.
• Other Digital Asset Investment Products: This includes private funds, trusts, or other publicly traded products offering exposure to ether or other cryptocurrencies.

The Bitwise Ethereum ETF seeks to maintain its competitive position through its transparent structure, the reputation of its Sponsor and service providers (including Coinbase Custody for cold storage), its competitive expense ratio, and the liquidity provided by its cash creation/redemption model. The ability to trade ETHW on a major stock exchange (NYSE Arca) also offers a level of accessibility and familiarity for traditional investors. The long-term competitive advantage will depend on its ability to consistently track the underlying asset, manage operational costs effectively, and adapt to regulatory and market changes.