BlackRock Files Application for Bitcoin ETF

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By A D

The iShares Bitcoin Trust, a proposed investment product by BlackRock, has had an application filed with the U.S. Securities and Exchange Commission (SEC).

On June 15, 2023, BlackRock, the world’s largest asset manager, made headlines with its filing for a spot Bitcoin ETF. The company’s proposal aims to offer investors exposure to Bitcoin through a regulated and exchange-traded fund, potentially opening doors for a broader investor base to participate in the cryptocurrency market. The filing comes as no surprise, considering the growing institutional interest in digital assets and the increasing demand for more accessible investment vehicles.

Coinbase, in partnership with BlackRock, is listed as the custodian for the proposed BlackRock ETF. The collaboration between the two companies was announced last year, revealing the integration of Coinbase Prime, which offers crypto trading and custody services, with Aladdin, BlackRock’s institutional investment platform.

As a reputable and well-established crypto custodian, Coinbase will play a crucial role in ensuring the secure storage and management of the underlying Bitcoin assets of BlackRock’s ETF. This partnership adds an extra layer of credibility and reliability to BlackRock’s offering, enhancing investor confidence in the product.

The SEC has been resistant to approving the launch of a spot bitcoin exchange-traded fund (ETF) in the United States. Currently, there is an ongoing legal battle between the SEC and Grayscale over whether the conversion of the Grayscale Bitcoin Trust into an ETF should be permitted. A decision on this matter is anticipated later this year.

Numerous other firms have previously submitted and subsequently withdrawn applications to introduce spot bitcoin funds. Among the investment firms seeking approval from the SEC for Bitcoin and cryptocurrency ETFs are ARK Invest, Grayscale, Fidelity, Galaxy Digital, VanEck, Valkyrie Investments, NYDIG, SkyBridge, and WisdomTree. Should the SEC yield, it could potentially result in a flood of similar products entering the market.

Read: Valkyrie brings Leveraged Bitcoin Investment with BTFD ETF

Bitcoin futures ETFs made their debut in 2021, with the ProShares Bitcoin Strategy ETF (BITO) being the only one to achieve substantial growth, amassing approximately $800 million in assets. However, since its launch, BITO has experienced a decline of over 40% in total returns. Interestingly, the price of bitcoin reached an all-time high shortly after BITO’s introduction.

Following the initial report, the price of BTC rose by 2.2% to $25,584. Notably, the Fear & Greed Crypto Index has moved from 41 to 47, shifting out of the fear zone, subsequent to the announcement of BlackRock’s application.

bitcoin price chart shows a steady climb in the price in the past few days
At the time of writing, Bitcoin is trading at $26,638.92- up 4.21% in 24 hours. Image Source

A Bitcoin ETF would provide a regulated investment vehicle for traditional investors who may be hesitant or unable to navigate the complexities of purchasing and storing cryptocurrencies directly. TFs are known for their liquidity, making it easier for investors to buy and sell shares. With a Bitcoin ETF, investors would have the ability to enter and exit the market seamlessly, potentially increasing liquidity and reducing price volatility.

The emergence of Bitcoin ETFs and similar products could spur further innovation in the financial industry. Traditional financial institutions might explore other crypto-related offerings, such as ETFs based on other cryptocurrencies or blockchain-based financial services.

Some argue that introducing a Bitcoin ETF would go against the core principles of decentralisation and financial sovereignty that underpin cryptocurrencies. Critics believe that the involvement of traditional financial institutions could compromise the true essence of Bitcoin.

Skeptics worry that the presence of large institutional investors could lead to market manipulation, similar to what has been observed in traditional financial markets. They argue that this could distort the price discovery mechanism in the crypto market.

BlackRock’s recent filing for a Bitcoin ETF has ignited both optimism and debate within the industry. The proposal represents a significant step towards providing investors with regulated exposure to the cryptocurrency market. However, it also raises important questions about the balance between regulation and the core principles of decentralisation in the crypto world. As the SEC evaluates this application and grapples with the broader implications, the decision will shape the future of cryptocurrency investing. Will the approval of a Bitcoin ETF pave the way for more mainstream adoption or challenge the essence of decentralised finance? Only time will reveal the path ahead for cryptocurrencies and the financial industry as a whole.

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