market supply and demand. However, the Shares may trade on NASDAQ at a price that is at, above or below the Trust’s NAV per Share for a variety of reasons. For example, NASDAQ is open for trading in the Shares for a limited period each day, but the Digital Asset Trading Platform Market is a 24-hour marketplace. During periods when NASDAQ is closed but Digital Asset Trading Platforms are open, significant changes in the price of AVAX on the Digital Asset Trading Platform Market could result in a difference in performance between the value of AVAX as measured by the Index and the most recent NAV per Share or closing trading price. For example, if the price of AVAX on the Digital Asset Trading Platform Market, and the value of AVAX as measured by the Index, move significantly in a negative direction after the close of NASDAQ, the trading price of the Shares may “gap” down to the full extent of such negative price shift when NASDAQ reopens. If the price of AVAX on the Digital Asset Trading Platform Market drops significantly during hours NASDAQ is closed, shareholders may not be able to sell their Shares until after the “gap” down has been fully realized, resulting in an inability to rapidly mitigate losses in a negative market. Even during periods when NASDAQ is open, large Digital Asset Trading Platforms (or a substantial number of smaller Digital Asset Trading Platforms) may be lightly traded or closed for any number of reasons, which could increase trading spreads and widen any premium or discount on the Shares. Shareholders may suffer a loss on their investment if the Shares trade above or below the Trust’s NAV per Share. If the Shares trade on NASDAQ in the future at a premium, investors who purchase Shares on NASDAQ will pay more for their Shares than investors who purchase Shares directly from Authorized Participants. In contrast, if the Shares trade on NASDAQ in the future at a discount, investors who purchase Shares directly from Authorized Participants will pay more for their Shares than investors who purchase Shares on NASDAQ. As a result, shareholders who purchase Shares on NASDAQ at a premium may suffer a loss on their investment if they sell their Shares at a time when the premium has decreased from the premium at which they purchased the Shares even if the NAV per Share remains the same. Likewise, shareholders that purchase Shares directly from the Trust may suffer a loss on their investment if they sell their Shares at a time when the Shares are trading at a discount on NASDAQ. Furthermore, shareholders may suffer a loss on their investment even if the NAV per Share increases because the decrease in any premium or increase in any discount may offset any increase in the NAV per Share. The inability of Authorized Participants and market makers to hedge their AVAX exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares. Authorized Participants and market makers will generally want to hedge their exposure in connection with Basket purchase and redemption orders. To the extent Authorized Participants and market makers are unable to hedge their exposure due to market conditions (e.g., insufficient AVAX liquidity in the market, inability to locate an appropriate hedge counterparty, extreme volatility in the price of AVAX, wide spreads between prices quoted on different Digital Asset Trading Platforms, the closing of Digital Asset Trading Platforms due to fraud, failures, security breaches or otherwise etc.), such conditions may make it difficult to purchase or redeem Baskets or cause them to not create or redeem Baskets. In addition, the hedging mechanisms employed by Authorized Participants and market makers to hedge their exposure to AVAX may not function as intended, which may make it more difficult for them to enter into such transactions. Such events could negatively impact the market price of the Shares and the spread at which the Shares trade on the open market. Arbitrage transactions intended to keep the price of the Shares closely linked to the price of AVAX may be problematic if the process for the purchase and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares. If the processes of creation and redemption of Shares (which depend on timely transfers of AVAX to and by the Custodian) encounter any unanticipated difficulties due to, for example, the price volatility of AVAX, the insolvency, business failure or interruption, default, failure to perform, security breach, or other problems affecting the Custodian, the closing of Digital Asset Trading Platforms to fraud, failures, security breaches or otherwise, or network outages or congestion, spikes in transaction fees demanded by validators, or other problems or disruptions affecting the Avalanche Network, then potential market participants, such as the Authorized Participants and their customers, who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying AVAX may not take the risk that, as a result of those difficulties, they may not be able to realize the profit they expect.
71
Made with FlippingBook - professional solution for displaying marketing and sales documents online