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Can BlackRock’s Bitcoin ETF Help Bitcoin Price Turn Around?

Last Updated June 19, 2023 11:20 AM
Darryn Pollock
Last Updated June 19, 2023 11:20 AM
Key Takeaways
  • BlackRock files for Bitcoin exchange-traded fund
  • The world’s largest asset manager will use Coinbase Custody as a custodian
  • Bitcoin proponents predict a positive market impact

American investment firm BlackRock, which is rated as the world’s largest asset manager, is looking to launch a Bitcoin exchange-traded fund to give clients indirect exposure to the preeminent cryptocurrency.

A filing  with the U.S. Securities and Exchange Commission (SEC) revealed that BlackRock’s proposed iShares Bitcoin Trust would tap Coinbase Custody as its custodian partner. The firm previously launched a spot Bitcoin private trust for institutional clients in the U.S. in 2022.

BlackRock’s move comes at a precarious time for the cryptocurrency space in the U.S., with the SEC pursuing legal recourse against the likes of Coinbase and Binance.US for what it deems as unregistered securities offerings relating to a number of cryptocurrencies listed on the exchanges.

What is a Bitcoin ETF, and why does it matter?

ETFs are a type of investment fund that allows investors to buy and sell shares that represent underlying securities, such as stocks, bonds, commodities and in this case Bitcoin.

ETFs are designed to track the price performance of specific stocks or baskets of assets. ETF are typically traded on stock exchanges alongside individual stocks

Perhaps most importantly, ETF are described as passively managed, in that they replicate or mirror the performance of an underlying asset without an investor having to buy the asset itself. 

In this case, investors would buy shares of BlackRock’s iShares Bitcoin Trust to gain exposure to Bitcoin without actually buying or holding BTC. As outlined in the SEC filing, Coinbase Custody would be the custodian of the underlying BTC of the ETF. 

When Bitcoin ETF?

BlackRock is the latest investment firm to file for approval to offer its clients a Bitcoin ETF. It joins a fairly long list of investment firms and financial institutions that have sought clearance to offer a Bitcoin ETF in the U.S. since 2017.

Global investment firm VanEck looked to launch the first-ever Bitcoin spot ETF back in 2017 which was initially denied by the SEC. Van Eck would apply two more times, with a second application ruled out in November 2021 by the Commission.

The agency’s reasoning was that the Van Eck Firm had not met standards to protect investors as well as prevent fraudulent and manipulative acts and practices. VanEck persevered with a third Bitcoin ETF  application in June 2022, imploring the SEC to reconsider its previous decisions.

Again the SEC denied VanEck’s attempts to request a proposed rule change that would permit the listing of VanEck Bitcoin Trust shares in March 2023 .

Gemini, owned by the tech mogul Winklevoss twins, also saw its applications for Bitcoin ETFs barred by the SEC alongside SolidX. The SEC would also deny nine  separate ETFs submitted by ProShares, Direxion and GraniteShares for approval in 2018.

While the SEC has continuously denied Bitcoin ETF moves, its northern neighbor Canada adopted a different approach. The Ontario Securities Commission (OSC) permitted Purpose Investments to launch a Bitcoin  ETF in February 2021. 

Part of VanEck’s argument in their third filing centered around American investors gaining exposure to the Bitcoin ETF being offered in Canada. The question still remains, when will the U.S. see a fully-fledged Bitcoin ETF?

Bullish for Bitcoin

Bitcoin and cryptocurrency proponents have painted an optimistic picture of the potential effect that a BlackRock Bitcoin ETF could have on the markets.

Galaxy Digital CEO Mike Novogratz said the move ‘would be the best thing that could happen to $BTC’ as he shared his insights given in an interview with Fox News. 

“I say a Hail Mary every night that Larry Fink and BlackRock pull off a Bitcoin  ETF.”

A tweet from Satoshi Roundtable host Bruce Fenton suggested that the move by BlackRock signals renewed institutional interest in cryptocurrency markets.

“Either way, it’s a big deal that a company the size of Blackrock is signaling such a major interest in this asset at this time.”

Meanwhile, renowned podcast host Anthony Pompliano highlighted the technicality of the filing, explaining that BlackRock had actually filed for a Bitcoin Trust. While there are similarities between an ETF and a Trust, ‘Pomp’ explained why BlackRock went the route of the latter.

“The products are technically different, especially around regulatory approvals, but the end result for investors are similar. GBTC is a trust. You can’t redeem from the fund. BlackRock is a trust, but you can redeem it appears. That is a big win for investors if it happens.”

Pompliano said that BlackRock would not have filed with the SEC ‘without having confidence it will be approved as trust.’ He added that ‘Bitcoiners are inside the castle’ of BlackRock, having met members of its team. 

“Will be interesting to see how the public markets play out in the next bull market for investors who want BTC exposure but don’t want to (or can’t) hold the asset directly,” Pompliano added.

The venture capitalist added that the possible approval of BlackRock’s Bitcoin ETF would lead to other Wall Street firms following suit, which would then lead to Bitcoin inflows.

Julian Liniger, CEO of Bitcoin self-custodial wallet Relai, summed up the inherent irony of BlackRock’s application with the SEC just as it takes the crypto industry to task in American courts. Nevertheless, the move could change the trend of Bitcoin’s market price:

“Blackrock is controlling the SEC, not the other way around. Therefore, an approval for the #Bitcoin ETF is very likely this time. Stack sats, keep them in self-custody, and enjoy the ride!”