The investment giant BlackRock has recently filed an application with the Securities and Exchange Commission for a spot Bitcoin ETF, creating a buzz in the market. Although it is easy to assume that this product will be similar to the Grayscale Bitcoin Trust (GBTC), there are a few key distinctions worth noting.
One significant difference between BlackRock’s iShares product and GBTC is the redemption feature. While the iShares trust allows redemptions akin to an ETF, GBTC lacks this function, as pointed out by Noelle Acheson, editor of Crypto is Macro Now. A Bitcoin ETF can buy Bitcoin at the end of the trading day to bring the fund’s assets in line with its trading price; conversely, a trust has no such capability and often trades at varying premiums or discounts to its underlying assets’ value.
For instance, GBTC has traded at about a 40% discount to net asset value for years, leading Grayscale to seek SEC approval for a Bitcoin ETF. With the SEC rejecting the conversion, this dispute is currently unfolding in a Washington DC court, with a final decision anticipated later this year. Grayscale maintains that both spot and futures ETFs face similar risks regarding Bitcoin’s price, so the SEC’s approval of one product over the other is illogical.
Meanwhile, BlackRock’s spot Bitcoin fund seeks to adhere to the highest possible standards. The pricing will be calculated daily based on the CF CME Bitcoin Reference Rate, aggregating the notional value of Bitcoin trading across major Bitcoin spot exchanges. This approach will allow the firm to reliably track Bitcoin’s spot price and address some of the SEC’s concerns.
The iShares Bitcoin Trust will use Coinbase Custody as its custodian and will be listed on the Nasdaq exchange. As BlackRock is the world’s largest money manager, with $9.1 trillion of assets under management at the end of Q1, it would be difficult for the SEC to simply reject its application. Crypto market analyst Joe Consorti remarked in a recent tweet, “Given their reputation, this has the highest likelihood of happening out of all the attempts at a spot ETF so far.”
Overall, BlackRock’s bid for a spot Bitcoin ETF not only highlights the distinctions between ETFs and trusts but also raises the stakes in the ongoing debate over the SEC’s approval process. The outcome of this case could very well shape the future of Bitcoin-based investment products and influence market sentiment.
Source: Cryptonews
