Bitwise Ethereum ETF: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of the Trust's financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, the Trust's unaudited financial statements and related notes included elsewhere in this Quarterly Report, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The following discussion may contain forward-looking statements based on assumptions the Trust believes to be reasonable. The Trust's actual results could differ materially from those discussed in these forward-looking statements. See “Statement Regarding Forward-Looking Statements” above.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Trust and the Sponsor undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Quarterly Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Quarterly Report.

Trust Overview

Bitwise Ethereum ETF (the “Trust”) is a Delaware statutory trust formed on February 16, 2024. The Trust continuously issues common shares (“Shares”), representing units of undivided beneficial ownership of the Trust. The Shares are listed on the NYSE Arca Inc. (the “Exchange”) under the ticker symbol “ETHW.” The Trust’s commencement of operations was July 22, 2024. The Trust is sponsored and managed by Bitwise Investment Advisers, LLC (the “Sponsor”).

The Trust’s investment objective is to seek to provide shareholders of the Trust (“Shareholders”) with exposure to the value of ether held by the Trust that is reflective of the actual ether market in which investors can purchase or sell ether, less the expenses of the Trust’s operations and other liabilities. In seeking to achieve its investment objective, the Trust holds ether and establishes its net asset value (“NAV") by reference to the CME CF Ether – Dollar Reference Rate – New York Variant (“ETHUSD_NY”). The ETHUSD_NY was designed to provide a daily, 4:00 p.m. ET reference rate of the U.S. dollar price of one ether that may be used to develop financial products and is calculated by CF Benchmarks Ltd. (the “Benchmark Provider”) based on an aggregation of executed trade flow of major ether trading platforms (“Constituent Platforms”).

The Shares may trade at a premium over, or a discount to, the NAV per-share as a result of price volatility, trading volume and closings of the exchanges on which the Sponsor purchases ether on behalf of the Trust due to fraud, failure, security breaches or otherwise, and the fact that supply and demand forces at work in the secondary trading market for Shares are related, but not identical, to the supply and demand forces influencing the market price of ether. As a result of the foregoing, the price of the Shares as quoted on the Exchange has varied from the value of the Trust’s NAV per-share since the Shares were approved for quotation on July 23, 2024.

The following charts show the percentage of Premium/(Discount) of the Shares as quoted on the Exchange and the Trust’s NAV and a comparison of the NAV of the Trust vs. the market price as quoted on the Exchange for the period from July 2024 to September 2025.

From July 23, 2024 to September 30, 2025, the Shares of the Trust traded at an average premium, based on closing prices at 4:00 p.m. ET, and an estimated, unaudited, NAV per-share of 0.003%. During that same period, the highest premium was 1.87% on May 8, 2025, and the lowest premium was 0.001% on August 19, 2024. During that same period, the highest discount was 1.91% on August 25, 2025, and the lowest discount was 0.01% on May 15, 2025.

The following chart shows the price of ether for the period January 1, 2024 through September 30, 2025, as quoted by the Benchmark Provider, using the ETHUSD_NY.

Results of Operations

Financial Information for the Three Months and Nine Months ended September 30, 2025 and the Period from July 22, 2024 (Commencement of Operations) to September 30, 2024^

The following table sets forth statements of operations data for the three months and nine months ended September 30, 2025 and the period from July 22, 2024 (commencement of operations) to September 30, 2024.

Statements of Operations (Unaudited)

(unaudited)

(unaudited)

(unaudited)

* No comparative financial statements have been provided as the Trust’s operations commenced on July 22, 2024.

Three-Month Period ended September 30, 2025*

The following provides a discussion of the material items that impacted the Trust’s financial condition during the applicable period:

Sponsor Fee

The Trust pays a unitary Sponsor Fee of 0.20% per annum of the Trust’s ether holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of the Trust assets through January 22, 2025, and has been accruing at an annual rate of 0.20% of the Trust’s net assets since then. The Sponsor Fee for the three months ended September 30, 2025 was approximately $251. The increase in Sponsor Fee was primarily related to an increase in the Trust’s net assets value due to an increase in the fair value of ether held by the Trust and the expiration of the Sponsor Fee waiver as of January 22, 2025.

Net Realized Gain (Loss) from Ethereum

Net realized gain on the sale of ether to pay the Sponsor Fee for the three months ended September 30, 2025 was approximately $109. The increase was due to an increase in the fair value of ether sold or transferred by the Trust.

Net realized gain on investment in ether sold for redemptions for the three months ended September 30, 2025 was approximately $146. The increase was primarily due to an increase in the fair value of ether sold by the Trust.

Net Change in Unrealized Appreciation (Depreciation) from Ethereum

Net change in unrealized appreciation on investment in ether for the three months ended September 30, 2025 was approximately $187,615. The increase was primarily due to an increase in the fair value of ether held by the Trust.

Net Increase (Decrease) in Net Assets resulting from Operations

Net increase in net assets resulting from operations for the three months ended September 30, 2025 was approximately $187,619. This increase was primarily due to an increase in net realized loss and an increase in unrealized appreciation on investments in ether, with a net realized and unrealized gain on investment in ether of approximately $187,870 less the Sponsor Fee of $251, for the three months ended September 30, 2025.

The change in net realized and unrealized gain (loss) was primarily due to fluctuations in the ether price during the respective period. For the three-month period ended September 30, 2025, the net realized and unrealized gain on investment in ether was driven by appreciation in the ETHUSD_NY price of ether from $2,505.17 per ether as of June 30, 2025 to $4,131.76 per ether as of September 30, 2025.

Comparison of the Nine-Month Period ended September 30, 2025 and the Period from July 10, 2024 (Commencement of operations) to September 30, 2024

The following provides a discussion of the material items that impacted the Trust’s financial condition during the applicable period:

Sponsor Fee

The Trust pays a unitary Sponsor Fee of 0.20% per annum of the Trust’s ether holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of the Trust assets through January 22, 2025, and has been accruing at an annual rate of 0.20% of the Trust’s net assets since then. The Sponsor Fee for the nine months ended September 30, 2025 was approximately $492, of which $43 was contractually waived, resulting in a net Sponsor Fee of approximately $449 compared to the Sponsor Fee for the period from July 22, 2024 (commencement of operations) to September 30, 2024 of approximately $91, of which $91 was contractually waived, resulting in a net Sponsor Fee of $0. The increase in Sponsor Fee was primarily related to an increase in the Trust’s net assets value due to an increase in the fair value of ether held by the Trust and the expiration of the Sponsor Fee waiver as of January 22, 2025.

Net Realized Gain (Loss) from Ethereum

Net realized gain on the sale of ether to pay the Sponsor Fee for the nine months ended September 30, 2025 was approximately $120, compared to net realized gain on the sale of ether to pay the Sponsor Fee for the period from July 22, 2024 (commencement of operations) to September 30, 2024 of approximately $0 due to the Sponsor Fee being contractually waived. This change was primarily due to the expiration of the Sponsor Fee waiver as of January 22, 2025 and an increase in the fair value of ether sold or transferred by the Trust.

Net realized loss on investment in ether sold for redemptions for the nine months ended September 30, 2025 was approximately $30,202, compared to net realized loss on investment in ether sold for redemptions for the period from July 22, 2024 (commencement of operations) to September 30, 2024 of approximately $1,116. This change was primarily due to an increase in the fair value of ether sold by the Trust.

Net Change in Unrealized Appreciation (Depreciation) from Ethereum

Net change in unrealized appreciation on investment in ether for the nine months ended September 30, 2025 was approximately $130,098, compared to net change in unrealized depreciation on investment in ether for the period from July 22, 2024 (commencement of operations) to September 30, 2024 of approximately $68,271. This change was primarily due to an increase in the fair value of ether held by the Trust.

Net Increase (Decrease) in Net Assets resulting from Operations

Net increase in net assets resulting from operations for the nine months ended September 30, 2025 was approximately $99,567, compared to net decrease in net assets resulting from operations for the period from July 22, 2024 (commencement of operations) to September 30, 2024 of approximately $69,387. This change was primarily due to an increase in net realized loss and an increase in unrealized appreciation on investments in ether, with a net realized and unrealized gain on investment in ether of approximately $100,016, less the Sponsor Fee of $449, for the nine months ended September 30, 2025, compared to a net realized and unrealized loss on investment in ether of approximately $69,387, for the period from July 22, 2024 (commencement of operations) to September 30, 2024.

The change in net realized and unrealized gain (loss) was primarily due to fluctuations in the ether price during the respective period. For the nine-month period ended September 30, 2025, the net realized and unrealized gain on investment in ether was driven by appreciation in the ETHUSD_NY price of ether from $3,345.85 per ether as of December 31, 2024 to $4,131.76 per ether as of September 30, 2025. For the period from July 22, 2024 (commencement of operations) to September 30, 2024, the net realized and unrealized loss on investment in ether was driven by the depreciation in the ETHUSD_NY price of ether from $3,484.67 per ether as of July 22, 2024 (commencement of operations) to $2,591.07 per ether as of September 30, 2024.

^ Amounts displayed are in the '000s, except for per-share/coin references

Net Assets

As of September 30, 2025, the Trust held a net closing balance of 120,095.5620 ether with a total market value of $496,206,039 based on the CME CF Ether - Dollar Reference Rate - New York Variant ("ETHUSD_NY") price of $4,131.76, used to determine the Trust's NAV. The total market value of the Trust's ether held was $499,790,892 based on the price of ether (Lukka Prime Rate) in the principal market (Crypto.com) of $4,161.61, used to determine the Trust's Principal Market NAV.

Net assets increased to approximately $499,703 at September 30, 2025, with a 24.46% increase in Principal Market NAV per-share for the nine months ended September 30, 2025. The increase in net assets primarily resulted from the aforementioned appreciation in the price of ether, the net decrease in capital share transactions of approximately $4,393, and a net increase resulting from operations of $99,567.

As of September 30, 2024, the Trust held a net closing balance of 100,152.9571 ether with a total market value of $259,503,322 based on the CME CF Ether – Dollar Reference Rate –New York Variant ("ETHUSD_NY") price of $2,591.07, used to determine the Trust's NAV. The total market value of the Trust's ether held was $259,850,853 based on the price of ether (Lukka Prime Rate) in the principal market (Crypto.com) of $2,594.54, used to determine the Trust's Principal Market NAV.

Net assets increased to approximately $259,851 at September 30, 2024, with a 25.56% decrease in Principal Market NAV per-share for the period from July 22, 2024 (commencement of operations) to September 30, 2024. The increase in net assets primarily resulted from the aforementioned depreciation in the price of ether, the net increase in capital share transactions of approximately $329,238, and a net decrease resulting from operations of $69,387.

Liquidity and Capital Resources

The Trust pays the unitary Sponsor Fee of 0.20% per annum of the Trust’s ether holdings. The Sponsor contractually waived the Sponsor Fee on the first $500 million of Trust assets through January 22, 2025, and has been accruing at an annual rate of 0.20% of the Trust’s Ether holdings since then. As a result, the only ordinary expense of the Trust is expected to be the Sponsor Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume and pay the normal operating expenses of the Trust, which include the Trustee’s monthly fee and out-of-pocket expenses, the fees of the Trust’s regular service providers (Cash Custodian, Ether Custodian, Prime Execution Agent, Marketing Agent, Transfer Agent and Administrator), exchange listing fees, tax reporting fees, SEC registration fees, printing and mailing costs, audit fees and up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor may determine in its sole discretion to assume legal fees and expenses of the Trust in excess of $500,000 per annum. The Sponsor also agreed to pay the costs of the Trust’s organization.

The Trust may incur certain extraordinary, non-recurring expenses that are not assumed by the Sponsor, including but not limited to, taxes and governmental charges, any applicable brokerage commissions, financing fees, Ethereum network fees and similar transaction fees, expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the Shareholders (including, for example, in connection with any fork of the Ethereum blockchain, any Incidental Rights and any IR Asset), any indemnification of the Cash Custodian, Ether Custodian, Prime Execution Agent, Transfer Agent, Administrator or other agents, service providers or counterparties of the Trust, and extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.

The Trust does not hold a cash balance except in connection with the creation and redemption of Baskets (blocks of 10,000 Shares) or to pay expenses not assumed by the Sponsor. To pay for expenses not assumed by the Sponsor that are denominated in U.S. dollars, the Sponsor, on behalf of the Trust, may sell the Trust’s ether as necessary to pay such expenses. The cash proceeds of the sale are sent to the Sponsor to pay the expenses. Any remaining cash is distributed back to the Cash Custodian. The Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s only sources of cash are proceeds from the sale of Baskets and ether. The Trust will not borrow to meet liquidity needs.

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. While broader economic and market conditions, including evolving trade policies and tariffs, could impact the price of ether and contribute to increased market volatility, the Trust does not currently anticipate these factors will materially affect its liquidity needs.

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, 2025, the Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Trust’s financial position.

Sponsor Fee payments made to the Sponsor are calculated as a fixed percentage of the Trust’s NAV. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods as NAVs are not known until a future date.

No material changes have occurred during the nine months ended September 30, 2025.

Critical Accounting Policies

Principal Market and Fair Value Determination

The Trust’s periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) and utilize an exchange-traded price from the Trust’s principal market for ether on the Trust’s financial statement measurement date. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with U.S. GAAP. The Trust has engaged a third-party vendor to obtain a price from a principal market for ether, which will be either the market the Trust normally transacts in for ether or, if the Trust does not normally transact in any market or such market suffers an operational interruption and is unavailable, determined and designated by such third-party vendor daily based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. Under U.S. GAAP, such a price is expected to be deemed a Level 1 input in accordance with the ASC Topic 820 because it is expected to be a quoted price in active markets for identical assets or liabilities.

Investment Company Considerations

The Trust is an investment company for U.S. GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC Topic 946, Financial Services – Investment Companies. The Trust uses fair value as its method of accounting for ether in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment company under the Investment Company Act of 1940. U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.

Please refer to Note 2 to the financial statements included in this Quarterly Report for further discussion of the Trust’s Significant Accounting Policies.

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, the Trust is not required to provide the information required by this item.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to the Principal Executive Officer and Principal Financial and Accounting Officer of the Sponsor performing functions equivalent to those a principal executive officer and principal financial and accounting officer of the Trust would perform if the Trust had any officers, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor, the Sponsor evaluated the effectiveness of the design and operation of the Trust's disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor concluded that, as of September 30, 2025, the Trust’s disclosure controls and procedures were effective in ensuring material information relating to the Trust to be recorded, processed, summarized and reported by management of the Sponsor on a timely basis and to ensure the quality and timeliness of the Trust’s public disclosures with the SEC.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in the Trust’s internal controls over financial reporting that occurred during the Trust’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, these internal controls.

There have been no material changes to the risk factors described in the Trust's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025, other than the update to the risk factors set forth below.

Risks Associated with Digital Assets

The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading price of ether, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.

The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for ether. These drawdowns notwithstanding, digital asset prices, including ether, increased significantly again during 2019, decreased significantly again in the first quarter of 2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder of 2020 and the first half of 2021. Digital asset prices, including ether, continued to experience significant and sudden changes throughout 2021 followed by steep drawdowns in the third quarter of 2021, as well as throughout 2022. Since then, digital asset prices have continued to fluctuate through 2023, 2024, and early 2025. In October 2025, the crypto markets experienced a sudden flash crash in which automated liquidations reportedly exceeded $19 billion within about 24 hours and total market capitalization fell by roughly 14 percent over several days. The full impact of that event may not yet be fully reflected in the crypto asset ecosystem.

Extreme volatility in the future, including further declines in the trading price of ether, 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 perceptions, a lack of stability, and the absence of standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may lead to greater volatility in the price of ether and other digital assets, including a depreciation in value. The Trust is not actively managed and will not take any actions to take advantage, or mitigate the impacts, of volatility in the price of ether.