BlackRock’s iShares unit has recently filed paperwork with the U.S. Securities and Exchange Commission (SEC) for the formation of a spot Bitcoin exchange-traded fund (ETF). However, the proposed fund is named iShares Bitcoin Trust, which has raised questions about whether it’s an ETF or just a trust. The market seems to have concerns about the use of the term “trust” in public bitcoin instruments, primarily because of the Grayscale Bitcoin Trust (GBTC), which holds bitcoin and trades at a steep discount to its net asset value.
BlackRock’s product, however, is expected to function like an ETF, countering any concerns that may arise from the term “trust.” Interestingly, this development could have significant implications for exchanges and the concept of paper bitcoin.
Since the elimination of Binance’s zero-fee bitcoin trading program and the collapse of FTX, bitcoin liquidity has suffered, leading to highly volatile price swings. If the iShares Bitcoin Trust is approved, it could help alleviate liquidity issues as BlackRock, the world’s largest asset manager, would bring a significant inflow of money into the market.
There are two primary concerns we must consider. First, exchanges may have cause for concern as investors seeking bitcoin price exposure without actually using the digital currency could turn to ETFs like iShares. With much lower fees than typical exchanges, these ETFs could pose a challenge to existing marketplaces.
Secondly, there’s the question of whether the introduction of a spot ETF by BlackRock will spur the growth of paper bitcoin. Bitcoin’s fixed supply is dictated by the protocol. However, the financial markets don’t have similar restrictions and could facilitate the creation of financial instruments that increase the effective supply of bitcoin above its predetermined limit. An approval of the iShares Bitcoin Trust could result in immense speculation on derivatives markets, affecting the overall market.
However, it remains to be seen if the SEC will approve BlackRock’s filing, as the agency has rejected every spot market bitcoin ETF application so far, based on concerns that the bitcoin market can be manipulated. BlackRock’s filing comes with increased market surveillance features, which may increase the chances of approval.
Regardless of the outcome, the approval of iShares Bitcoin Trust would be a significant development for the world of cryptocurrencies, especially with BlackRock’s reputable position in the financial industry. Whether this might lead to an increase in bitcoin’s value or not, it will undoubtedly open a new avenue for investment and raise important questions about its future.
Source: Coindesk
