The largest asset manager in the world, BlackRock, recently announced it plans to introduce a spot Bitcoin exchange-traded fund (ETF) in order to provide investors with proximate exposure to the leading cryptocurrency.
According to a filing with the U.S. Securities and Exchange Commission (SEC), Coinbase Custody would serve as the custodian partner for BlackRock’s proposed iShares Bitcoin Trust. Prior to 2022, the company introduced a spot Bitcoin private trust for institutional clients in the United States.
It is important to define the main difference between spot Bitcoin ETFs and Bitcoin Futures ETFs.
Although investors can currently invest in Bitcoin futures ETFs, the United States has not yet approved a spot Bitcoin ETF. A spot Bitcoin ETF is backed by real Bitcoin (BTC), whereas a Bitcoin futures ETF is backed by derivatives on the cryptocurrency.
The number of options available to American investors would increase with the addition of a Bitcoin ETF.
A spot Bitcoin ETF has yet to be introduced in the United States because to opposition from the SEC. Currently, the SEC and Grayscale are engaged in a legal dispute over whether the company will be permitted to convert its Grayscale Bitcoin Trust into an ETF. Later this year, a decision on that matter is anticipated.
Other businesses have submitted and then withdrawn applications to start spot Bitcoin funds. There might be an overabundance of those products on the market if the SEC caves.
Bloomberg ETF analyst Eric Balchunas recently commented the legal fight between Grayscale and the SEC, which arose when the agency rejected the digital asset manager’s proposal to convert its Bitcoin trust into an ETF, may also be the reason behind BlackRock move.
The alternative view is that BlackRock is preparing for a scenario in which the SEC loses the Grayscale case and suddenly opens the door to Bitcoin ETF since they are aware of this possibility. Balchunas asserted that BlackRock has a strong track record of obtaining Bitcoin ETF approval.
“Fun fact: BlackRock’s record of getting ETFs approved by the SEC is 575-1. That’s another reason this is so big. They don’t play around,” he stated.
If they ever start trading, ETFs often take months to launch after an initial filing. According to Aisha Hunt , principal at asset management legal firm Kelley Hunt & Charles, the proposed BlackRock fund would probably encounter strong opposition from the SEC, and the filing could be withdrawn before an ETF is ever established.
BlackRock’s was already famous for pumping stocks and this decision was made at a time when cryptocurrency values are still well off their all-time highs, and the sector is coming under more and more scrutiny in Washington, D.C. The action follows the denial of many other ETF proposals, including those from WisdomTree and VanEck.
|Spot Bitcoin ETF||· Investors can access Bitcoin directly without needing to register with a cryptocurrency exchange or establish a wallet
· Diversification of the portfolio
· Regulation for investor protection. Investors in a spot Bitcoin ETF gain by investing in a regulated instrument issued by a licensed issuer rather than an uncontrolled off-market cryptocurrency exchange
|· Traditional exchanges have trading hours that are limited, as opposed to cryptocurrency exchanges, which are open 24/7
· Fees for managing ETFs
|Futures Bitcoin ETF||· Due to the simplicity of setup, lack of custody fees, and other criteria for spot ETFs, they might have cheaper management fees||· Decay and divergence potential
· There is no physically-backed Bitcoin in the ETF
· Traditional exchanges have trading hours that are limited, as opposed to cryptocurrency exchanges, which are open 24/7
In order to enable ETF trading, BlackRock created iShares . With a portfolio of more than 1,250 products, iShares is the market leader in exchange-traded funds (ETFs) worldwide. iShares ETFs, a division of BlackRock, leverage knowledge and innovation to advance the financial sector and the interests of our investors.
According to the company , iShares ETFs can be bought and sold during normal trading hours through the one’s broker or trading platform. To trade iShares ETFs, one can use any online, discount or full-service brokerage account.
iShares ETFs are traded in Canada on the NEO platform or the Toronto Stock platform.
They are available for trading at any time throughout regular market trading hours (9:30 AM to 4:00 PM), and all stock-specific trading methods, including market, limit, and stop orders, are permitted.
Due to the promise of a “surveillance-sharing agreement” between exchanges, Blackrock’s (BLK) iShares Bitcoin Trust application to the SEC this week may have a better chance than prior attempts by other fund managers.
On page 36 of the aforementioned Nasdaq 19b-4 filing (where the proposed ETF will be listed), it is indicated that Nasdaq would be involved in entering into a surveillance-sharing agreement with an operator of a spot trading platform for Bitcoin (BTC) in order to mitigate against market manipulation.
Surveillance-sharing agreements permit the exchange of data regarding customer identification, clearing activities, and market trading activity, which greatly reduces the likelihood of market manipulation.
According to Graeme Moore , Head of Tokenization, Polymesh Association, not just the company’s size as the largest asset manager in the world, but also the planned surveillance-sharing agreement, known as the “Spot BTC SSA,” is what differentiates this application.
However, not everyone seems to approve the BlackRock’s move. The creator of the Cardano blockchain, Charles Hoskinon, is among those who aren’t really thrilled about it. Hoskinson lambasted those who applauded the participation of the massive asset management company in a tweet , alleging that their actions revealed dubious morals, mental health, and greed.
Furthermore, Hoskinson came to the conclusion that maximalists, who have extreme beliefs in favor of a single cryptocurrency, are zealots out to destroy the entire sector.
Hoskinson’s stance indicates his disapproval of those who demonstrate fierce allegiance to a single cryptocurrency and reject any kind of accommodation or cooperation. Maximalists frequently assume that their preferred cryptocurrency is the best option available and discount the potential advantages of other projects or institutional support.