BITWISE INDEX SERVICES, LLC

The Bitwise Crypto Index Methodology

February 2021
 Table of Contents

I. ​Guiding Principles and Indexing Approach

II. ​Governance
A. Bitwise Crypto Index Committee
B. Bitwise Crypto Index Advisory Board

III. ​Eligibility Requirements

A. Cryptoasset Trading Venue Eligibility Requirements
B. Cryptoasset Eligibility Requirements

IV. ​Asset Pricing Methodology

A. Bitwise Cryptoasset Price
B. Definition, Pricing, and Treatment of Network Distributions

V. ​Market Capitalization Policy

A. Free-Float Adjustment

VI. ​Index Maintenance, Rules, and Distribution

A. Available Index Types
B. Available Level Types
C. Reconstitution Guidelines

VII. ​Index Series Specifics

A. The Bitwise Crypto Market-Capitalization Indexes
i. Available Indexes
a. Bitwise 10 Large Cap Crypto Index (BITX)
b. Bitwise 20 Mid Cap Crypto Index (BITW20)
c. Bitwise 70 Small Cap Crypto Index (BITW70)
d. Bitwise 100 Total Market Crypto Index (BITW100)
ii. Base Date and Base Level
B. The Bitwise Decentralized Finance Crypto Index
C. Bitwise Partnership Indexes
i. The Bitwise Select 10 Large Cap Crypto Index (BITS10)

Bitwise Index Services, LLC 1

 I. GUIDING PRINCIPLES AND INDEXING APPROACH

The Bitwise Crypto Indexes were developed to provide investors with a clear, rules-based,
and transparent way to track the value of individual cryptoassets and groups of
cryptoassets. The indexes are designed for benchmarking active strategies, serving as
underlying indexes for index-tracking funds, or simply measuring the returns of the market
over time.

The crypto market is new and presents many challenges to well-established protocols for
indexing traditional assets such as stocks and bonds. The Bitwise Crypto Indexes aim to
combine the best of traditional asset indexing methodologies with appropriate adjustments
to adapt those practices to the crypto space.

The guiding principles of the Bitwise Crypto Indexes include:

● Index and pricing decisions must follow a clear, rules-based, and transparent
process.

● If the judgment of the Bitwise Crypto Index Committee is required when applying
those rules, decisions will be made public with full documentation of the
decision-making process.

● Indexes are designed in all aspects to be investable and replicable; as such, they
will take into account measures surrounding liquidity, capital controls, trading venue
stability, custody limitations, and other factors in a rules-based manner.

Bitwise Index Services, LLC 2

 II. GOVERNANCE

The Bitwise Crypto Indexes will be governed by the Bitwise Crypto Index Committee with
the support of the Bitwise Crypto Index Advisory Board. Individual indexes may have
additional support from advisory councils, as designated in this methodology.

A. Bitwise Crypto Index Committee

i.​ ​Overview: ​The Bitwise Crypto Index Committee has sole responsibility for
developing, maintaining, and adjusting the Bitwise Crypto Index
Methodologies, and for verifying the data sources used to calculate those
indexes.

ii.​ ​Responsibilities: ​The Committee meets monthly on the third-to-last

Business Day of the month with the following goals:

● Review and verify all data sources—existing and

proposed—contributing to the Bitwise Crypto Indexes for uptime,
accuracy, and robustness

● Review and approve new methodologies or changes to existing

methodologies to the Bitwise Crypto Indexes

● Review and approve all methodological decisions that require

judgment, and provide detailed public explanations of those decisions

● Handle other matters on an as-needed basis

The indexes rely on the New York Stock Exchange’s public holiday calendar
to determine what counts as a “Business Day.”

iii. Voting​: Decisions are made by a simple vote of a majority of the

members of the Committee present at the meeting. A quorum of two
members is required for a meeting to take place.

Bitwise Index Services, LLC 3

 iv. Committee Members and Bios

a. Chairman: Matt Hougan

Matt Hougan is Chief Investment Officer for Bitwise Asset

Management. He oversees development of the Bitwise index
methodologies, conducts fundamental research on cryptoassets, and
works to educate professional investors on the role cryptoassets can
play in a portfolio. Prior to joining Bitwise, Hougan was CEO of Inside
ETFs and managing director of Global Finance at Informa. Earlier, he
was CEO of ETF.com. Hougan is a member of the ETF Hall of Fame,
co-author of the CFA Institute’s monograph of ETFs, and co-author
of the CFA Institute’s research brief on bitcoin, blockchain and
cryptocurrencies.

B. Member: Hunter Horsley

Hunter Horsley is co-founder and Chief Executive Officer of Bitwise

Asset Management. He heads the company’s efforts to be a leader in
the cryptoasset indexing world. Prior to founding Bitwise, Horsley
was a product manager at Facebook, and earlier, a product manager
at Instagram.

C. Member: David Lawant

David Lawant is a researcher at Bitwise Asset Management.

Previously, he worked for ten years as a sell-side equity research
analyst. David was ranked 13 times in the Institutional Investor
Ranking among the leading analysts in his space. David was also a
co-founder at Iron Capital, a Brazilian investment boutique, and a
partner at Hashdex, a crypto index fund. He is co-author of the CFA
Institute’s research brief on bitcoin, blockchain and cryptocurrencies.

B. Bitwise Crypto Index Advisory Board

i. Overview:​ The Bitwise Crypto Index Advisory Board (the “Advisory Board”)
is composed of leading experts in the fields of traditional asset indexing and
cryptoassets. The role of the Advisory Board is to provide considered
opinions on critical issues facing the Bitwise Crypto Index Committee, and to

Bitwise Index Services, LLC 4

 make recommendations on potential changes to the methodologies
surrounding Bitwise’s indexes.

ii. Responsibilities: ​The Advisory Board meets on an as-needed basis as

requested by the Bitwise Crypto Index Committee, addressing specific
issues where insight and perspective will be additive to the efforts of the
Committee. Advisory Board suggestions are not binding to the Index
Committee.

iii. Advisory Board Members and Bios

a. Member: Spencer Bogart, CFA

Spencer Bogart is a Partner at Blockchain Capital, the general partner

of Blockchain Capital’s venture funds. He is a fundamental
investment analyst with a rare combination of deep experience
analyzing cryptocurrencies as well as traditional equity opportunities.
Prior to joining Blockchain Capital, Bogart was a Vice President at
Needham & Company, where he authored Wall Street’s first industry
report highlighting the use cases, companies, and potential of
blockchain technology. Bogart was the most active bitcoin analyst on
Wall Street, writing detailed reports and research on bitcoin’s
fundamental value proposition, price forecast, and technical
advancements.

b. Member: Srikant Dash, CFA

Srikant Dash is one of the world’s foremost experts on indexing and

index construction. He spent 12 years at Standard & Poor’s, where
he was Managing Director and Global Head of Research & Design.
While at S&P, Dash led the team that created the industry's first
smart-beta products based on factors, dividends, and themes. Today
over $200 billion in ETF assets track indexes he built. Dash also
created the landmark SPIVA (Standard & Poor’s Index vs. Active)
report, the primary way active managers are benchmarked to index
performance on an industrywide level. He was a long-standing
member of the S&P 500 Index Committee. Dash later joined
Bloomberg as Global Head of the Index Business, transforming
Bloomberg into the largest fixed-income, commodity, and currency

Bitwise Index Services, LLC 5

 index firm in the world. He is also an independent director on the
board of subsidiaries of the National Stock Exchange, the largest
Indian exchange.

III. ELIGIBILITY REQUIREMENTS

The Bitwise Crypto Indexes are designed to capture the investable market opportunity for
cryptoassets around the world. This section outlines the rules governing which assets and
trading venues contribute to the indexes.

A. Cryptoasset Trading Venue Eligibility Requirements

i. Eligibility Requirements

Bitwise considers an entity to be an Eligible Cryptoasset Trading Venue if it

meets the following criteria:

a. Provides an open platform for exchanging at least one

cryptoasset for either another cryptoasset or for a fiat currency

This requirement exists to identify the set of institutions to consider for

further analysis.

b. Is not domiciled in a country, region, or locality that implements

meaningful capital controls on international investors

This requirement exists to eliminate assets or price inputs from

trading venues that are not accessible by international investors. The
cryptomarket has seen unusual premiums and/or discounts emerge
in markets where meaningful capital controls exist.

c. Is in compliance with local regulations and not subject to

extraordinary regulatory or legal action

This requirement exists to limit trading venues to those that are

positive actors in the community, and to limit the potential for
interruptions in service or unusual pricing due to government or
regulatory enforcement actions.

Bitwise Index Services, LLC 6

 d. Charges fees for trading

This provision is designed to exclude trading venues that encourage

wash sale trading.

Note that trading venues that engage in “trade mining”—the practice

of compensating individuals with a venue-specific coin for trading
other coins on that trading venue, as a way of offsetting the cost of
executing transactions—are also excluded under this clause.

e. Has a functioning, secure, and reliable application programming

interface (API) allowing for the timely ingestion of trade and volume
data

A functioning, secure, and reliable API is required to onboard data

from trading venues. In addition, it is a test of the reliability,
transparency, and robustness of the trading venue itself.

f. Has no significant downtime, withdrawal, or known security

issues

This requirement exists to protect the index methodology from pricing

or asset inclusion distortions that arise at trading venues with
significant downtime, withdrawal, or known security issues.

g. Accounts for more than 0.1% of the combined trailing 30-day

dollar trading volume of all cryptoassets on entities that meet rules
III.A.i.a through III.A.i.f

This requirement exists to ensure that the index captures only robust
trading venues where sufficient volume exists to support accurate
price discovery. In addition, excluding the long tail of small trading
venues eliminates significant engineering and maintenance burdens
that would have little to no impact on the resulting price data.The
Bitwise Crypto Index Committee reserves the right to add additional
trading venues that fall outside of the 0.1% requirement as
contributors if it deems those trading venues systemically important.

Bitwise Index Services, LLC 7

 h. In the opinion of the Bitwise Crypto Index Committee, relying on
all available data, does not inflate or exaggerate the volume of
trading on the trading venue.

The goal of this rule is to exclude trading venues from consideration

that may exaggerate volume or report noneconomic trading activity.

ii. Review of Eligibility and Emergency Removal

a​. ​Normal​ ​Review​: The Bitwise Crypto Index Committee will review
the list of Eligible Cryptoasset Trading Venues on an annual basis.

Failure to meet any of the Eligibility Requirements speaks to emergent

risks to the quality of data coming from a cryptoasset trading venues.

b​.​ Emergency Loss of Eligibility​: Under extraordinary circumstances,

trading venues​ may lose eligibility immediately by a unanimous vote of
the quorum of members of the Bitwise Crypto Index Committee. The
Committee will post meeting minutes of that removal online.

This rule exists to allow the Bitwise Crypto Index Committee to stop
Eligible Cryptoasset Trading Venues from contributing prices to its
indexes in extraordinary situations where Bitwise has reason to
believe the pricing from those indexes is not reflective of true price
discovery in a given asset.

iii​.​ ​Use of Eligible Cryptoasset Trading Venue Subsets for Calculating

New Indexes or Index Variants

The Bitwise Crypto Index Committee may elect to create new indexes, or
variations on existing indexes, using defined subsets of the complete list of
all Eligible Cryptoasset Trading Venues. For example, an index could be
constructed that restricts its pricing inputs from Eligible Cryptoasset Trading
Venues selected on the basis of legal domicile of the trading venue, or
specific regulatory status of the trading venue, or alternative trading volume
minimums, or any other factor that the Committee may elect to use. Any
indexes using subsets of the Eligible Cryptoasset Trading Venue will be
clearly labeled as such.

Bitwise Index Services, LLC 8

 B. Cryptoasset Eligibility Requirements

The Bitwise Crypto Indexes draw core constituents from their list of eligible
cryptoassets, which comprise those items that meet each of the following
Eligibility Requirements:

i. Eligibility Requirements

a. Is a cryptographically secured digital bearer instrument

The Bitwise Crypto Indexes use a broad definition of cryptoassets to

capture all coins and tokens associated with public blockchains,
including those using a variety of different consensus mechanisms.

b. Has a price that is not pegged to another cryptoasset, fiat

currency, group of those currencies, or hard asset

The Bitwise Crypto Indexes exclude stablecoins and other pegged

assets from consideration, as the indexes are built for investors
searching for returns as opposed to stable values. Note: An
exception to this rule can be made for indexes deliberately designed
to include these assets, but that exception will be clarified in the
individual index methodology.

c. Is freely traded and can be freely held for the foreseeable future

This requirement exists to ensure that assets may be traded and

stored in a manner that is acceptable to an institutional investor. It
also allows for the removal of assets with known terminations or
pending illiquidity, such as those that arise from the announced
freezing of a placeholder token at the end of a registration process,
among other potential situations.

d. Trades on two or more Eligible Cryptoasset Trading Venues,

without withdrawal issues specific to that cryptoasset

This requirement exists to ensure robustness in the trading venue

ecosystem supporting any given cryptoasset. It guarantees that at
least two trading venues support a given asset and that the second

Bitwise Index Services, LLC 9

 (third, fourth, etc.) trading venue(s) is (are) sufficiently robust to
maintain smooth trading in the event of a failure at any single trading
venue. Note: This rule takes into account withdrawal issues on an
asset-by-asset basis at each trading venue.

e. Is custodied by a third-party custodian regulated as a federally

chartered bank or as a state trust company, and meets additional
security practices, insurance requirements and business practice
requirements as determined by the Bitwise Crypto Index
Committee.

The list of custodians meeting the criteria above is reviewed on an

annual basis, or at the discretion of the Bitwise Crypto Index
Committee. As of January 25, 2021, the list of custodians was:

Anchorage
Bakkt Warehouse
BitGo
Coinbase Custody
Fidelity Digital Assets
Gemini Custody

This rule exists to ensure that assets can be custodied in a manner

that, in the view of the Bitwise Decentralized Finance Crypto Index
Committee, would align with the goals of professional investors in the
U.S. and meets the operational requirements of a cryptoasset fund.

f. Has no known security vulnerabilities, including critical bugs,

undue exposure to 51% attacks, or other factors, as determined
by the Bitwise Crypto Index Committee

This requirement exists to ensure the asset is not knowingly exposed

to a critical security risk that could lead to a significant loss in value.

g. Does not face undue risk of being deemed a security under U.S.
federal securities laws in the opinion of the Bitwise Crypto Index
Committee, given present knowable facts and circumstances.

Bitwise Index Services, LLC 10

 h. Has traded more than 10% of its free-float-adjusted market
capitalization on Eligible Cryptoasset Trading Venues over the past
30 days.

This requirement exists to ensure the cryptoassets included in the

index are sufficiently liquid to facilitate easy investment and
withdrawals.

ii. Loss of Eligibility and Exceptions

a​. ​Normal​ ​Loss of Eligibility​: Assets will lose eligibility and be

removed from all indexes at the next regular reconstitution event if
they violate any of the listed Eligibility Requirements for
30-consecutive days.

Failure to meet any of the Eligibility Requirements for individual

cryptoassets speaks to emergent risks surrounding that asset. The
30-consecutive-day provision avoids unnecessary churn caused by
individual-day point failures.

b​.​ Emergency Loss of Eligibility​: Under extraordinary circumstances,

assets may lose eligibility and be removed on a same-day basis by a
unanimous vote of the quorum of members of the Bitwise Crypto
Index Committee. Such emergency removals will take place at 4:00
p.m. ET following the conclusion of the meeting and public posting of
that notice on our ​website​.

This rule exists to allow the Bitwise Crypto Index Committee to act
quickly in the event of truly extraordinary circumstances, including
major security breaches, regulatory action, or identified fraud that
imperils the value of an eligible cryptoasset.

c. Hard Forks Exemption: ​Hard Forks are granted a 45-day

exemption to rule III.B.i.d.

Hard forks are new cryptoassets that are granted to holders of

existing cryptoassets when portions of the consensus nodes adopt
different policies. In the event of a hard fork, holders of an existing
cryptoasset end up with ownership of both the original cryptoasset

Bitwise Index Services, LLC 11

 and the new, hard-forked cryptoasset. These hard-fork assets can be
significant in size and importance in the marketplace.

To reduce unnecessary turnover in the indexes, hard forks are given a

45-day exemption to the volume-related portions of the Core Eligibility
Requirements, so that they are not reflexively removed from indexes
due to their “newness.”

iii. Use of Restricted Or Alternative Weightings of Eligible Cryptoasset

Subsets for Calculating ​Indexes

The Bitwise Crypto Index Committee may elect to create new indexes, or
variations on existing indexes, using defined subsets of the complete list of
all the eligible cryptoassets and/or alternative weighting schemes. For
example, an index could be constructed that restricts the maximum
percentage of eligible cryptoassets, or that makes use of alternative trading
volume or market-capitalization minimums, or any other factor that the
Committee may elect to use. Any indexes using subsets of all eligible
cryptoassets will be clearly labeled as such.

Bitwise Index Services, LLC 12

 IV. ASSET PRICING METHODOLOGY

The Bitwise Crypto Indexes are designed to capture the investable market opportunity for
cryptoassets around the world. This section outlines how Bitwise Index Services identifies
the accurate price and market capitalization of cryptoassets, and how it handles network
distributions including hard forks, airdrops, and emissions.

A. Bitwise Cryptoasset Price

The Bitwise Crypto Indexes intend to reflect the price at which an institutionally
oriented investor can trade any given cryptoasset. This price is called the Bitwise
Cryptoasset Price (CAP), and is used in calculating Bitwise index values (except in
the case of certain network distributions, as described in IV.B). The default
denomination of a CAP is the U.S. dollar, and the methodology is as follows:

i. Calculating Cryptoasset Prices In U.S. Dollars

The cryptoasset world has two modalities of trading: crypto-to-fiat trading

and crypto-to-crypto trading. To create a single unified price for every
cryptoasset, all trading pairs must be standardized to price that asset in a
single currency (for the Bitwise Crypto Indexes, this currency is the U.S.
dollar). The steps to do that are listed below in the order that they are
followed:

a. Select Quote Cryptoassets: ​To avoid circular pricing when

standardizing crypto-to-crypto trading pairs, Bitwise must select a
group of “Quote Cryptoassets.” Quote Cryptoassets are determined
on an annual basis at the Index Committee meeting that precedes the
start of a new calendar year.

Quote Cryptoassets are those that:

i. ​Have crypto-to-fiat trading on at least two Eligible

Cryptoasset Trading Venues that allow for institutional
deposits and withdrawals in a noncapital-controlled fiat
currency (henceforth called an Eligible Fiat Currency).

Bitwise Index Services, LLC 13

 This rule exists to ensure institutional investors can sell Quote
Cryptoassets for an eligible fiat currency and withdraw funds.
The rule requires two Eligible Cryptoasset Trading Venues for
reasons of robustness and to show independent adoption of
the cryptoasset.

ii. Are the largest crypto trading pair (measured by trailing

30-day dollar trading volume) for at least one of the top 100
Eligible Cryptoassets in each of the past three months.

This requirement exists to ensure that Quote Cryptoassets

have strong price discovery and are critical to the ecosystem.
Focusing on the top trading pair of a top 100 currency ensures
that each Quote Currency is systemically important for
investors, while the three-month requirement ensures it has
staying power within the community.

As of December 31, 2020, Quote Cryptoassets were:

● Bitcoin (BTC)
● Ethereum (ETH)

Under extraordinary circumstances, Quote Cryptoassets may be

removed from consideration on a same-day basis by a unanimous
vote of the quorum of members of the Bitwise Crypto Index
Committee. Such emergency removals will take place at 4:00 p.m. ET
following the conclusion of the meeting and public posting of that
notice on our ​website​.

b.​ ​Calculate Quote Cryptoassets CAPs​: Quote Cryptoassets are

unique in that the Bitwise Crypto Indexes only consider fiat-to-crypto
trades when calculating their CAPs, as the goal is to calculate the
fiat-convertible price of Eligible Cryptoassets that have
crypto-to-crypto trading pairs.

The CAP for a Quote Cryptoasset is calculated as follows:

Bitwise Index Services, LLC 14

 i. Aggregate all crypto-to-fiat trading pairs for Eligible Fiat
Currencies that take place on Eligible Cryptoasset Trading
Venues, removing any pairs that face withdrawal issues.

ii. Transform all non-U.S.-dollar fiat trading pairs into U.S.

dollar prices using synchronous data from an established FX
reference data provider.

iii. Calculate the U.S. dollar volume over the previous hour for
each crypto-to-fiat trading pair.

iv. Assign each trading pair a contribution weight based on its

share of total dollar trading volume in a given asset over the
previous hour.

v. Multiply the last traded price (adjusted into U.S. dollars) for
each trading venue pair by its contribution weight. In the event
that no trading price is pulled for a particular trading pair either
due to technical reasons or to a lack of trading volume, the
Bitwise Crypto Index Committee may substitute a fair market
value estimate for that price or eliminate that price from
consideration.

vi. Sum to find the CAP.

c​.​ Calculate the CAP for Non-Quote Cryptoassets: ​Many

cryptoassets trade (sometimes exclusively) in pairs with other
cryptoassets. The process for translating these crypto-to-crypto pairs
along with crypto-to-fiat pairs into an aggregate CAP is as follows:

i.​ ​Consider both crypto-to-fiat trading pairs and

crypto-to-crypto trading pairs on Eligible Cryptoasset Trading
Venues, excluding any trading venue pairs that have
withdrawal issues.

ii. Exclude all trading pairs that are not denominated in either
Eligible Fiat Currencies or Quote Cryptoassets.

Bitwise Index Services, LLC 15

 iii. Transform all non-U.S.-dollar fiat trading pairs into U.S.
dollars using synchronous FX data from an established FX
data supplier.

iv. Use the synchronous CAP for the relevant Quote

Cryptoassets to translate crypto-to-crypto pairs into a
crypto-to-U.S.-dollar equivalent.

v. Calculate the U.S. dollar volume for each trading pair and
assign each pair a contribution weight based on its share of
total U.S. dollar trading volume in a given cryptoasset over the
past hour.

vi. Multiply the last traded price (adjusted into U.S. dollars) by
its contribution weight. Note: In the event that no trading price
is pulled for a particular trading pair either due to technical
reasons or a lack of trading volume, the Bitwise Crypto Index
Committee may substitute a fair market value estimate for that
price or eliminate that price from consideration.

vii. Sum to find the CAP.

ii. Temporary Loss Of Multiple Trading Venue Pricing Availability

In the event that one or more of the trading venues contributing to a CAP is
found ineligible for any reason, and as a result an Eligible Cryptoasset trades
on fewer than two Eligible Cryptoasset Trading Venues for a time period, the
Bitwise Crypto Index Committee reserves the right to assign a daily fair value
estimate to that asset until such time a CAP can be restored. The fair value
process will attempt to incorporate all available pricing resources,
considering the validity of those sources and taking into account liquidity
concerns and other issues.

Cryptoassets must trade on at least two Eligible Cryptoasset Trading Venues

to receive a CAP and be eligible to enter a Bitwise Crypto Index. It is
possible, however, for one or more of those trading venues to lose eligibility,
leaving the asset with one (or even zero) Eligible Cryptoasset Trading Venues
contributing live pricing data. This rule allows for Bitwise Index Services to

Bitwise Index Services, LLC 16

 price those assets during the 30-day grace period that Eligible Cryptoassets
have to cure a trading venue related eligibility violation under rule III.B.ii.a.

B. Definition, Pricing, and Treatment of Network Distributions

Holders of cryptoassets occasionally receive distributions from a variety of sources.

i. Hard Forks

a. Definition

​Hard forks are new cryptoassets that are granted to holders of

existing cryptoassets when portions of the consensus nodes adopt
different policies. When a hard fork occurs, the Bitwise Crypto
Indexes consider the asset with the larger post-fork,
free-float-adjusted market capitalization to be the original coin, and
the asset with smaller post-fork, free-float-adjusted market
capitalization to be a new asset.

b. Pricing

There is often a multiple-day delay between the moment a hard fork

technically occurs and the time when Eligible Cryptoasset Trading
Venues enable deposits and withdrawals for both of the forked coins.
During this interregnum, Eligible Cryptoasset Trading Venues often
provide pricing for both forked coins on their trading venue by
allowing users to trade both coins within the confines of that trading
venue.

In these situations, Bitwise Crypto Indexes will treat the cryptoasset

as an aggregate asset from a pricing perspective, holding both parts
of the forked coin and aggregating their value into a single unit. This
situation will persist until 4 p.m. Eastern Time on the first day that two
or more Eligible Cryptoasset Trading Venues enable deposits and
withdrawals for both of the coins. At that point, Bitwise will recognize
the newly forked coin as a separate coin, and apply standard CAP
pricing techniques to both assets.

Bitwise Index Services, LLC 17

 In extraordinary situations, the Bitwise Cryptoasset Index Committee
reserves the right to make a fair-value estimate of the value of the
forked coins. The fair-value process will attempt to incorporate all
available pricing resources, considering the validity of those sources
and taking into account liquidity concerns, adoption risks, and other
issues.

c. Treatment

The Bitwise Crypto Index Committee will evaluate the newly forked
coin once a CAP exists to determine which of the following scenarios
its treatment should fall into:

i. If the newly forked coin has a free-float-adjusted market cap

large enough to satisfy the inclusion criteria of a given index,
and it satisfies the other eligibility requirements laid out in
section III.B, it is retained by the index until the next
reconstitution.

ii. If the newly forked coin has a free-float-adjusted market cap

that is greater than 0.05% of the index but is not large enough
to qualify for continued inclusion in the index, or fails other
eligibility requirements laid out in section III.B, it is liquidated at
4 p.m. ET on the first day it has a CAP. The proceeds from
this liquidation are invested on a pro-rata basis in the other
cryptoassets in the index.

iii. If a newly forked coin has a free-float-adjusted market cap

that is less than 0.05% of the overall index value, it is ignored,
as a way of limiting operational overhead.

ii. Emissions

​Some cryptoassets provide regular awards to holders in the form of

cryptoasset grants, often in the form of “gas” that powers transactions on
the network itself. These regular awards are referred to as “emissions.”
Emissions are native developments for certain cryptoassets. To date,
however, the daily value of distributed emissions has been de minimis for
any given cryptoasset. Given the small values involved, it would not be

Bitwise Index Services, LLC 18

 practical for investment funds handling regular inflows and outflows to
accurately track Bitwise Crypto Indexes if they accrued emissions on a daily
basis, whether they hoarded those emissions over time or liquidated them
daily. As a result, the Bitwise Crypto Indexes ignore emissions for index
calculation purposes. It is our expectation that funds tracking our indexes
may accrue emissions and periodically liquidate them to deliver excess
returns to shareholders.

iii. Airdrops

​An airdrop occurs when a new or emergent cryptoasset is granted to

holders of an existing cryptoasset on a one-off or occasional basis.

Airdrops are not native to the internal return drivers of any given cryptoasset.
Importantly, they also require agency on the part of cryptoasset holders to
claim, and the act of claiming those assets can potentially put holders of a
given cryptoasset at risk. As such, the Bitwise Crypto Indexes do not
incorporate their value into its indexes. It is our expectation that fund
managers tracking Bitwise Crypto Indexes may well take action to
idiosyncratically claim valuable airdrops, and that the value of those airdrops
will return to those funds as excess returns.

iv. Staking Rewards

A staking reward is granted to holders of a cryptoasset when they lock up

that asset as collateral to secure fairness when validating transactions or
other network actions.

Staking rewards require agency on the part of cryptoasset holders and also
introduce liquidity restrictions since the act of staking locks up coins for a
period of time. As such, the Bitwise Crypto Indexes do not incorporate the
value of staking rewards into its indexes. It is our expectation that fund
managers tracking Bitwise Crypto Indexes may well take action to
idiosyncratically claim staking rewards, and that the value of those rewards
will return to those funds as excess returns.

Bitwise Index Services, LLC 19

 V. MARKET CAPITALIZATION METHODOLOGY

The Bitwise Crypto Indexes aim to capture the importance of each cryptoasset in the
ecosystem, as measured by the aggregate value investors assign to that asset. To do so,
Bitwise must calculate the market capitalization of each cryptoasset. It does this by
multiplying the CAP by the free-float-adjusted issuance of a given cryptoasset. This section
explains how those adjustments are made.

A. Free-Float Adjustment

It is common practice in equity indexes to remove any noncirculating shares from

market-cap calculations. These include, for instance, shares in a company that are
held by governments and are likely to never trade on the public market.

Adjusting cryptoassets for free float is necessary as well. Coins may launch with a
large stated and potential issuance, but a significant portion of that supply may be
held outside of the liquid market. For the purposes of its market-cap-weighted
indexes, Bitwise will remove from consideration:

i. All coins that remain in the control of developers, principals, foundations,

or business entities affiliated with the creation of the cryptoasset.

ii. All coins that are publicly known to be lost, burned, programmatically
time-locked, or verifiably illiquid in another way.

iii. Other portions of supply that are deemed illiquid by the Bitwise Crypto
Index Committee.

Free-float adjustments are determined on a monthly basis at 4 p.m. Eastern Time

on the third-to-last Business Day of the month, and are set until the following month
and actioned upon the next index reconstitution.

VI. INDEX MAINTENANCE, RULES, AND DISTRIBUTION

The Bitwise Crypto Indexes are designed to be the leading investable benchmarks in the
cryptomarket. This section outlines certain rules regarding the maintenance and

Bitwise Index Services, LLC 20

 distribution of those indexes.

A. Available Indexes

i. Total Return Index

All Bitwise Crypto Indexes are Total Return indexes, incorporating the value
of certain Network Distributions pursuant to the rules outlined in this
Methodology.

B. Available Level Types

All Bitwise Crypto Indexes are available in two different levels, published at the
following times, unless otherwise disclaimed at the specific index level.

i. Daily Index Level: ​The Bitwise Crypto Indexes have one official daily level
that is produced at 4 p.m. Eastern Time. This level incorporates all eligible
Network Distributions that occur prior to this time.

This daily index level is distributed each day by 5 p.m. Eastern Time, unless
data or other issues preclude or delay the publication of an accurate price. In
that event, Bitwise will distribute the daily index level as soon as reasonably
possible.

ii. Hourly Levels: ​The Bitwise Crypto Indexes have Hourly Levels produced
each hour of the day. This level does not incorporate the value of network
distributions that occur between publications of the Daily Index Level.

The Hourly Level should be considered an estimated level. Bitwise will make
no attempt to correct or amend the Hourly Level to adjust for network
distributions or data corrections that occur, but rather, will amend current
Real-Time Levels to reflect that information on a once-a-day basis following
the publication of the Daily Index Level.

C. Reconstitution Guidelines

Bitwise Index Services, LLC 21

 Crypto is a fast-moving marketplace. To ensure its indexes stay up-to-speed
with changes in the crypto ecosystem, the Bitwise Crypto Indexes use
specific guidelines around reconstitution events.

i. Reconstitution Timing and Frequency​: Unless otherwise disclaimed at the

specific index level, the Bitwise Crypto Indexes are reconstituted monthly at
4 p.m. Eastern Time on the last Business Day of the month. The indexes
have a “record date” on which the new assets entering the index are
determined of 4 p.m. Eastern Time on the third-to-last Business Day of the
month.

The selection of 4:00 p.m. Eastern Time on the last Business Day of the
month is intended to ensure the indexes are reconstituted at a time of
normal trading liquidity.

ii. Buffer Zones: ​All Bitwise Crypto Indexes that use market-capitalization
guidelines to drive inclusion decisions have a “5% market-capitalization
buffering rule” to limit unnecessary turnover. An Eligible Cryptoasset held in a
Bitwise Crypto Index will only be removed if there is an asset eligible for the
index that exceeds the current asset’s free-float market capitalization by 5%
as of 4 p.m. Eastern Time on each of the five-consecutive days up to and
including the third-last Business Day of the month.

Buffer Zones are common practice in traditional asset indexing, and are
used as tools to reduce noneconomic switching of assets due to
inconsequential or fleeting differences in market capitalization.

VII. INDEX SERIES SPECIFICS

The Bitwise Crypto Indexes methodology governs a number of different index series, each
of which has its own additional rule-sets and specifics. This section outlines the indexes
that are currently available and the unique rule-sets that apply to each series.

A. The Bitwise Crypto Market-Capitalization Indexes

i. Available Indexes

Bitwise Index Services, LLC 22

 The Bitwise Crypto Market-Capitalization Indexes aim to capture the returns
of leading cryptocurrencies grouped by free-float-adjusted market
capitalization.

The following Bitwise Crypto Market-Capitalization Indexes are available and

have the itemized rule exceptions listed below:

a. Bitwise 10 Large Cap Crypto Index (BITX): ​The Bitwise 10 Large

Cap Crypto Index captures the 10 largest eligible cryptoassets by
free-float-adjusted market capitalization.

b. Bitwise 20 Mid Cap Crypto Index (BITW20): ​The Bitwise 20 Mid

Cap Crypto Index captures eligible cryptoassets ranked 11-30 by
free-float-adjusted market capitalization.

i. Exception​: The Bitwise 20 Mid Cap Crypto Index does not

apply rule III.B.i.d or rule III.B.i.e. This means it can consider
cryptoassets that trade on only one Eligible Cryptoasset
Trading Venue and does not apply a custodial eligibility
requirement. These exceptions are necessary given the focus
of the index on smaller-cap assets.

c. Bitwise 70 Small Cap Crypto Index (BITW70): ​The Bitwise 70

Small Cap Crypto Index captures eligible cryptoassets ranked 31-100
by free-float-adjusted market capitalization.

i. Exception​: The Bitwise 70 Small Cap Crypto Index does not

apply rule III.B.i.d or rule III.B.i.e. This means it can consider
cryptoassets that trade on only one Eligible Cryptoasset
Trading Venue and does not apply a custodial eligibility
requirement. These exceptions are necessary given the focus
of the index on smaller-cap assets.

d. Bitwise 100 Total Market Crypto Index (BITW100): ​The Bitwise

100 Total Market Crypto Index consolidates the holdings of the
Bitwise 10 Large Cap Crypto Index, Bitwise 20 Mid Cap Crypto
Index, and Bitwise 70 Small Cap Crypto Index into a single index
weighted by free-float-adjusted market capitalization.

Bitwise Index Services, LLC 23

 i. Exception​: Because the Bitwise 100 Total Market Crypto
Index carries over the constituents of the Bitwise 20 Mid Cap
Crypto Index and the Bitwise 70 Small Cap Crypto Index, it
carries over the exceptions that those indexes apply.

ii. Base Date and Base Level

The base date for all Bitwise Crypto Market-Capitalization Indexes, using
backtested data, is January 1, 2017. The indexes share a common base
level of 964. This level was chosen because it was the price of bitcoin in U.S.
dollars at midnight UTC on that day.

The inception date for live data on the Bitwise 10 Large Cap Index is
October 1, 2017. The inception date for live data on the Bitwise 20 Mid Cap
Index, Bitwise 70 Small Cap Index, and Bitwise 100 Total Market Index is
July 31, 2018. All data before these inception dates is backtested data.

B. The Bitwise Decentralized Finance Crypto Index

The Bitwise Decentralized Finance Crypto Index is designed to provide investors

with a clear, rules-based, and transparent way to track the value of the rapidly
emerging Decentralized Finance space.

The index has the following exceptions and additions to the Bitwise Crypto Index
Methodology:

i. Governance

a. Overview:​ The Bitwise Decentralized Finance Crypto Index Council

(the “Advisory Council”) is composed of leading experts in the
decentralized finance space. The role of the Advisory Council is to
provide considered opinions on critical issues facing the Bitwise Crypto
Index Committee that are related to the Bitwise Decentralized Finance
Crypto Index, and to make recommendations on potential changes to
the methodology.

b. Responsibilities: ​The Advisory Council is consulted on an as-needed

basis as requested by the Bitwise Crypto Index Committee, addressing
specific issues where insight and perspective will be additive to the

Bitwise Index Services, LLC 24

 efforts of the Committee. The Advisory Council does not control the
index, and recommendations or views given by Advisory Council
members are not binding to the Index Committee.

c. Advisory Board Members and Bios

i. Member: Michael Anderson, Framework Ventures

Michael Anderson is a co-founder and partner at ​Framework

Ventures​, a thesis-driven venture capital firm that builds alongside its
founders. The firm partners with founders and teams to build
token-based networks and develop the requisite cryptoeconomics,
governance, and community to scale. Prior to founding Framework,
Michael was co-founder of Hashletes, the first and only
NFLPA-licensed digital collectibles market. His earlier career bridged
consumer technology and finance, with positions at Snap, Inc.,
Dropbox, and Barclays Capital.

ii. Member: Ben Forman, ParaFi Capital

Ben Forman is the founder and managing partner of ParaFi Capital,

an alternative investment firm focused on blockchain and
decentralized finance markets. ParaFi Capital takes a unique
multidisciplinary approach to identifying untapped opportunities
through a research intensive, long-term focused investment
framework. The firm invests in digital assets that address tangible use
cases, demonstrate signs of product-market fit, and exhibit
compelling cryptoeconomic models. Before founding ParaFi, Ben was
a director at KKR, and earlier, vice president at TPG.

iii. Member: Avichal Garg, Electric Capital

Avichal Garg is a co-founder and partner on the investment team at

Electric Capital. He is a successful serial entrepreneur with executive
experience at Google and Facebook, which acquired his previous
company in 2012. At Facebook he was Director of Product
Management for the Local product group, a team of 400 engineers
responsible for $3.5B in revenue. Avichal is also a successful venture
investor and was a part-time partner at YCombinator.

Bitwise Index Services, LLC 25

 iv. Member: Aleks Larsen, Blockchain Capital

Aleks Larsen is a Senior Associate at Blockchain Capital, where he

focuses, in part, on DeFi. With a multidisciplinary background, Aleks
brings a unique combination of experience in systems engineering,
fundamental analysis and capital markets to the firm. Prior to joining
Blockchain Capital, Aleks worked as an investment banking analyst at
Guggenheim Partners, focusing on mergers & acquisitions and equity
financings within the biotechnology sector.

v. Scott Lewis, DeFi Pulse

Scott Lewis is the founder of DeFi Pulse, the leading site for analytics
and rankings of DeFi protocols. Scott is also co-founder of
Concourse Open Community, an open community of builders,
enthusiasts and researchers working towards a bountiful and
decentralized future. He is also principal at Flatbush Capital. He was
previously a trader at Integral Derivatives and Susquehanna
International Group.

ii. Cryptoasset Eligibility

a​. ​Decentralized Finance Categorization

In order to be eligible for the Bitwise Decentralized Finance Crypto Index,

a cryptoasset must be the native asset of a blockchain-enabled
application that uses smart contracts to execute decentralized financial
services. Decentralized finance applications are those that, in the opinion
of the Bitwise Crypto Index Committee, compete with one or more of the
major business lines operated by a constituent of a leading Financial
Services index.

b. Security

The Bitwise Crypto Index Committee may consider additional factors

specific to the security of decentralized finance systems and their
susceptibility to critical exploits in determining the eligibility of individual
cryptoassets. These exploits can be either technical (an error in the
software code) or economic (an unintended use of the smart contract) in

Bitwise Index Services, LLC 26

 nature. Considerations may include but are not limited to the availability
of security audits from reputable providers, the availability of formal
verification from reputable providers, “seasoning” (or how long a
decentralized finance service has been live in production), any history of
exploits, the response of the development community to any exploits,
and the advice of Advisory Council members.

c. Usage, Development, Supply Curve, Ownership, And Other

Considerations

The Bitwise Crypto Index Committee may consider additional factors

specific to the decentralized finance market in determining the eligibility of
individual cryptoassets. These factors may include but are not limited to
supply issuance curves and cliffs, distribution of token ownership, usage
and the potential for usage of the service, total value locked, developer
activity, reputations of key contributors, evidence of community, and the
advice of Advisory Council members, among other factors.

iii. Composition

a​. ​The Bitwise Decentralized Finance Crypto Index

The Bitwise Decentralized Finance Crypto Index will consist of the ten
largest cryptoassets that satisfy the index’s Eligibility Requirements, or a
smaller number if fewer than ten constituents meet the Eligibility
Requirements.

iv. Inception Date and Base Level

The inception date for the Bitwise Decentralized Finance Crypto Index
is February 15, 2021.

The index uses a base level of 1000 as of 4pm EST on the inception
date.

No backtest data was created for this index.

C. Bitwise Partnership Indexes

Bitwise Index Services, LLC 27

 Bitwise develops certain indexes to support partnerships with leading third-party
asset managers around the world. Each index has specific rules and exclusions
designed for different markets, regulatory regimes and investor categories.

i. The Bitwise Select 10 Large Cap Crypto Index (BITS10)

The Bitwise Select 10 Large Cap Crypto Index aims to capture the returns of
up to the 10 leading cryptocurrencies, as measured by free-float market
capitalization, subject to certain exclusions and conditions.

a. Exclusions and Conditions

i. Exclusions

a. Privacy Coins:​ “Privacy coins” are cryptoassets that

incorporate features designed to make the records of
transactions anonymous (as opposed to
pseudonymous or fully public).

a. Platform Dependent Tokens:​ “Platform Dependent

Tokens” are cryptoassets that are issued on a
separate, third-party blockchain; the most common
example are ERC-20 tokens.

ii. Conditions: ​In addition to the core Eligibility Criteria laid out
in III.B.i, cryptoassets must be accepted by the Swiss Stock
Exchange (SIX) as an underlying, supported for trading by
Authorised Participants expressly named as an Authorised
Participant on the Issuer’s website
(http://amun.com/en/ir#authorised-participants) or in the Final
Terms for the relevant series of products, and be available to
custody at select, third-party custodians.

As of May 31, 2019, the list of custodians included:

● Coinbase Custody
● Kingdom Trust

b. Base Date and Base Level

Bitwise Index Services, LLC 28

 The base date for the Bitwise Select 10 Large Cap Crypto Index,
using backtested data, is January 1, 2017. The index uses a base
level of 964. This level was chosen because it was the price of bitcoin
in U.S. dollars at midnight UTC on that day.

The inception date for live data on the Bitwise Select 10 Large Cap
Crypto Index is May 17, 2019. All data before this inception date is
backtested data.

c. Daily Index Level

The index value is struck once per day at 5:00 p.m. Zurich Local
Time.

d. Reconstitution Timing

The index reconstitution is set at 5:00 p.m. Zurich Local Time on the
third-to-last Swiss Business Day of the month, and actioned at 5:00
p.m. Zurich Local Time on the last Swiss Business Day of the month.

e. Swiss Business Day

The index relies on the SIX Swiss Exchange’s “Trading Calendar” to

determine what counts as a “Swiss Business Day.”

f. Emergency Loss of Eligibility for Cryptoassets

In the event that the Bitwise Cryptoasset Index Committee

determines that an asset must be removed from the index on an
emergency basis, such removal will take place at 5pm Zurich Local
Time following that decision.

Bitwise Index Services, LLC 29