A rule of thumb is the longer a futures contract has until expiration, the less closely it will track the asset spot market. Should that occur, as it did in 2021 when ProShares Bitcoin Strategy ETF, ticker BITO, launched, the portfolio managers had to move further out on the futures curve by buying longer-dated futures contracts. The exchange that lists bitcoin futures, the CME, also imposes position limits to avoid any one firm from controlling too much of the market. This creates an added cost for the fund that a spot bitcoin ETF wouldn’t incur. Each month, the portfolio managers must roll into the next month’s futures contract, often at a slightly higher price. First, the intention of these funds is to hold the front-month futures contracts. How Will BlackRock’s Bitcoin ETF Work?įutures-based bitcoin ETFs do a better job of tracking bitcoin’s price, but they also introduce other differences from holding bitcoin. So, investors’ only option is to sell at the prevailing price, which is currently heavily discounted. Grayscale currently doesn’t allow redemptions. This would help keep the ETF’s price in line with its NAV. The iShares Bitcoin Trust would have continuous offerings like other ETFs, meaning authorized participants would be able to create and redeem shares at NAV at any time. It operates more like a closed-end fund than an ETF, meaning investors have faced large premiums and discounts in its price versus NAV that have nothing to do with bitcoin. Who Are BlackRrock’s Competitors in the Bitcoin Space?Ĭurrently, the largest bitcoin offering in the U.S. A spot bitcoin ETF like the one BlackRock is proposing would create a fourth bucket because it doesn’t fit in the others. Currently, the bitcoin ETF market is composed of three types of funds-grantor trusts, futures-based ETFs, and bitcoin-adjacent equity funds. There’s not a fundamental value to lean on for investors, so this consideration should outweigh all others, including fund structure.Īside from investment merit, it’s worth understanding where a spot bitcoin ETF would fit in with other offerings available in the U.S. Bitcoin is highly volatile, and its future is uncertain. Whether that means investors should buy this fund should it hit the market is another question. Between the SEC’s crackdown on high-fee, imperfect bitcoin ETFs currently on the market, an iShares spot bitcoin ETF would be a welcome face-lift. BlackRock Would Make Bitcoin LegitimateĪs the world’s largest asset manager, BlackRock would immediately give legitimacy to a bitcoin market in need of it. The surprised filing came on the heels of the SEC’s lawsuit against Coinbase COIN and Binance, making the timing in BlackRock’s partnership with Coinbase and the filing even more odd. Bryan Armour: BlackRock BLK shocked the financial world when it filed for the iShares Bitcoin Trust on June 15, becoming the most prominent filer for a spot bitcoin ETF after years of rejection of the strategy by the U.S.
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