MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our audited financial statements and related notes included elsewhere in this prospectus, 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 we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Forward- Looking Statements.” Trust Overview The Trust is a passive entity that is managed and administered by the Sponsor and does not have any officers, directors or employees. The Trust holds AVAX and, from time to time on a periodic basis, issues Creation Baskets in exchange for deposits of AVAX. As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on AVAX per Share) to reflect the value of the AVAX held by the Trust, including AVAX earned as Staking Consideration, determined by reference to the Index Price, less the Trust’s expenses and other liabilities. While an investment in the Shares is not a direct investment in AVAX, the Shares are designed to provide investors with a cost-effective and convenient way to gain investment exposure to AVAX, including AVAX earned as Staking Consideration. The Trust is not managed like a business corporation or an active investment vehicle. The Trust will not utilize leverage, derivatives or any similar arrangements in seeking to meet its investment objective. Prior to October 1, 2025, the Trust valued the AVAX held by the Trust for operational purposes by reference to the CoinDesk AVAX Reference Rate. As of October 1, 2025, the Index is the CoinDesk Avalanche Benchmark Rate. As of October 1, 2025, the NAV and NAV per Share of the Trust is calculated using the Index Price based on the CoinDesk Avalanche Benchmark Rate. Prior to October 1, 2025, references to the “Index” in the Trust’s filings with the SEC, including this Registration Statement on Form S-1, refer to the CoinDesk AVAX Reference Rate. From and after October 1, 2025, references to the “Index” in the Trust’s filings with the SEC are to the CoinDesk Avalanche Benchmark Rate. Critical Accounting Policies and Estimates Investment Transactions and Revenue Recognition The Trust considers investment transactions to be the receipt of AVAX by the Trust in connection with Share creations and the delivery of AVAX by the Trust in connection with Share redemptions or for payment of expenses in AVAX. Prior to the effectiveness of the registration statement of which this prospectus forms a part, the Trust will not accept redemption requests from shareholders. The Trust records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in AVAX. Principal Market and Fair Value Determination To determine which market is the Trust’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of calculating the Trust’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”), the Trust follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurement , which outlines the application of fair value accounting. ASC 820-10 determines fair value to be the price that would be received for AVAX in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume that AVAX is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The Trust only receives AVAX in connection with a creation order from an Authorized Participant and does not itself transact on any Digital Asset Markets. Therefore, the Trust looks to market-based volume and level of activity for Digital Asset Markets. An Authorized Participant, or a Liquidity Provider, may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets (referred to as “Trading Platform Markets”),
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