SEC Filing Document

Company: T. Rowe Price Active Crypto ETF
Ticker: 
CIK: 2089855
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-10-22
Accession Number: 0001999371-25-015832
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2089855/000199937125015832/activecrypto-s1_102225.htm

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Investors also represent a significant portion of market participants, purchasing bitcoin as a speculative asset or as part of a diversified investment portfolio. These transactions occur both on bitcoin spot markets and over-the-counter (OTC) markets, with the former being more accessible to retail investors and the latter catering to institutional entities handling large volumes of bitcoin. In addition to using bitcoin to purchase goods and services, investors may purchase and sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or as a long-term investment to diversify their portfolio. The value of bitcoin within the market is determined, in part, by the supply of and demand for bitcoin in the global bitcoin market, market expectations for the adoption of bitcoin as a store of value, the number of merchants that accept bitcoin as a form of payment, and the volume of peer-to-peer transactions, among other factors.

Bitcoin spot markets typically permit
investors to open accounts with the market and then purchase and sell bitcoin via websites or through mobile applications on a prefunded
basis. Prices for trades on bitcoin spot markets are typically reported publicly. An investor opening a trading account must deposit an
accepted government-issued currency into their account with the spot market, or a previously acquired crypto asset, before they can purchase
or sell assets on the spot market. The process of establishing an account with a bitcoin market and trading bitcoin is different from,
and should not be confused with, the process of users sending bitcoin from one bitcoin address to another bitcoin address on the Bitcoin
Blockchain. This latter process is an activity that occurs on the Bitcoin Network, while the former is an activity that occurs entirely
within the order book operated by the spot market. The spot market typically records the investor’s ownership of bitcoin in its
internal books and records, rather than on the Bitcoin Blockchain. The spot market ordinarily does not transfer bitcoin to the investor
on the Bitcoin Blockchain unless the investor makes a request to the exchange to withdraw the bitcoin in his or her exchange account to
an off-exchange bitcoin wallet.

In addition, bitcoin futures and options
trading occur on exchanges in the U.S. regulated by the CFTC. The market for CFTC-regulated trading of bitcoin derivatives has developed
substantially.

Although bitcoin was the first crypto
asset, in the ensuing years, the number of other crypto assets (such as ether), market participants and companies in the space has increased
significantly. The category and protocols are still being defined and evolving.

Bitcoin has generally exhibited high
price volatility relative to more traditional asset classes. One volatility measure, standard deviation, is based on the variability of
historical price returns. A higher standard deviation indicates a wider dispersion of past price returns and thus greater historical volatility.

Ether (ETH)

Ethereum is an entire system, responsible
for maintaining the ledger of ether ownership and enabling the transfer of ether among parties, as well as the components of the Ethereum
system such as the Ethereum Network, the Ethereum Blockchain, the Ethereum Protocol and the Ethereum Clients (together, the “Ethereum
System”). The native crypto asset to the Ethereum Network is ether.

Ethereum is a permissionless, decentralized
and peer-to-peer computer network of nodes that enables developers to build and deploy the so-called smart contracts and decentralized
apps (DApps) on a global scale. The Ethereum Network improves on the capabilities of the Bitcoin Network by allowing, in addition to simple
ether transfers, the creation of the smart contracts (software that are automatically executed when predetermined terms and conditions
are met). Smart contracts permit the creation of crypto assets with various properties and the deployment of decentralized applications
on Ethereum.

Ether, the native crypto asset of the
Ethereum Network, serves as a unit of account, allowing for peer-to-peer transactions and incentivizing network participants. Every ether
is fractionable to the eighteenth decimal place, with its smallest fraction equal to 0.000000000000000001 ether and called a wei.

The computational environment of the
Ethereum Network is known as the Ethereum Virtual Machine (EVM), and computational cycles in the EVM consume so-called gas units which
are denominated in fractions of ether and expressed in Gwei (short for “gigawei” or one billion wei or one billionth of one
ether). The EVM is similar to an engine, while ether is the fuel that propels it. Ether is therefore known as the “gas” token
of the Ethereum Network. Ether may also be used to pay for goods and services, stored for future use, or converted to government-backed
currency such as the dollar. The value of ether is not backed by any government, corporation, or other identified body.

Ethereum
Blockchain and Consensus Mechanism

Similar to Bitcoin, transactions on
Ethereum are broadcasted over the Ethereum Network and registered in blocks, which are set to occur every 12 seconds. Ethereum blocks
collectively track the full transaction history, the accounts and balances of users and contracts in the “Ethereum System,”
and other blockchain data that collectively are referred to as the state of Ethereum. Ethereum ensures that its state transition is deterministic,
meaning that given the same initial state and set of transactions, all nodes in the Ethereum Network are able to compute the same final
state. Blocks are organized in a chain forming the “Ethereum Blockchain,” starting from the “genesis block” at
height 0 (zero), which was created on July 30, 2015.

Unlike the Bitcoin System, which relies
on proof-of-work, Ethereum operates on a PoS consensus mechanism where users must lock a certain amount of ether to engage with transaction
validation and code execution. In contrast to proof-of-work, in which miners expend hardware and electricity to become eligible to append
new blocks to the blockchain, in PoS, users known as validators pledge capital denominated in ether as a “stake,” providing
a guarantee of action in good faith towards the honest operation of the network. If Ethereum Network participants detect a malicious activity
by a validator, such as proposing two different blocks at the same height or attesting to two different versions of the consensual Ethereum
Blockchain, they can cast a slashing alert that subtracts part of the malicious actor’s stake. As such, PoS substitutes the computational
cost to cheat on proof-of-work by the risk of losing part of a validator’s stake, aligning the incentives for consensus participants
to remain honest over time. Ethereum’s implementation of PoS also has a fork choice rule, which uses validators’ votes on
the chain with the most accumulated validator activity to select the consensual chain at any point in time.

Actors running Ethereum validators
range from individual enthusiasts to professional operations with dedicated hardware and data centers. Users activate a validator by running
consensus software on Ethereum and depositing 32 ether on a staking contract deployed on the Ethereum Network. They are rewarded with
newly issued ether as a subsidy and transaction fees paid by users to gain priority in having their transactions executed first. The Ethereum
Network’s complexity and reliance on staking attract a specific type of participant, one who is often deeply involved in the ecosystem,
increasing the likelihood for committed entities to take on the responsibilities of a validator.

Smart
Contracts, Crypto Assets and Decentralized Applications

The Ethereum Network allows users to
write and implement smart contracts — that is, general-purpose code that executes on every node in the network and can instruct
the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts, users can leverage
the EVM through its built-in programming language, Solidity, to create markets, store registries of debts or promises, represent the ownership
of property, move funds in accordance with conditional instructions and create crypto assets other than ether.

Development on the Ethereum Network
involves building more complex tools on top of smart contracts, such as DApps, organizations that are autonomous, known as decentralized
autonomous organizations (DAOs), and entirely new decentralized governance systems. For example, a company that distributes charitable
donations on behalf of users could hold donated funds in smart contracts that are paid to charities only if the charity satisfies certain
predefined conditions.

Ethereum is also a platform for creating
new crypto assets and conducting their associated initial coin offerings. It has a suite of standards that allow for the creation of fungible
crypto assets, such as governance tokens that confer voting power in DAOs or stablecoins pegged to government-backed currencies like the
dollar; non-fungible tokens allowing for the creation of unique representations of value, such as digital collectibles, digital art, decentralized
identity systems and digital characters and items in metaverses and videogames; and more versatile tokens that bring new utility to DApps
by integrating decentralized data provision and indexing. As of the data of this prospectus, a majority of crypto assets in the crypto
market were built on the Ethereum Network, with such assets representing a significant amount of the total market value of all crypto
assets.