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BlackRock Proposes Publicly-Traded Bitcoin Trust

On June 15, 2023, BlackRock, the world's largest asset manager, filed an application with the U.S. Securities and Exchange Commission (SEC) to create a publicly-traded Bitcoin Trust. If approved, the Trust would allow investors to gain exposure to Bitcoin through a traditional investment vehicle. While not a true spot ETF, the Trust will essentially function the same for retail investors.

The Potential Impact of a BlackRock Bitcoin Trust

  • Increase the liquidity of the BTC market

  • Lower the cost of entry for investors.

  • Attract more institutional investors to the crypto market.

  • Legitimize Bitcoin in the eyes of traditional investors.

Here are my 3 takeaways:

  • BlackRock's entry into the Bitcoin market is a major endorsement of the cryptocurrency. BlackRock is the world's largest asset manager, with over $10 trillion in assets under management. Its decision to file for a Bitcoin trust is a sign that the company sees Bitcoin as a legitimate investment.

  • The BlackRock Bitcoin Trust could pave the way for other institutional investors to enter the Bitcoin market. If BlackRock's trust is approved by the SEC, it could encourage other large asset managers to file for their own Bitcoin trusts. This would bring billions of dollars of new investment into the Bitcoin market.

  • The BlackRock Bitcoin Trust could drive up the price of Bitcoin. If a large number of institutional investors start buying Bitcoin through the BlackRock trust, it could drive up the price of Bitcoin. This could make Bitcoin more accessible to retail investors and could help to legitimize it in the eyes of the mainstream financial community, especially as the SEC tries everything it can to put a lid on the industry.

A BlackRock BTC Trust would also be a major victory for the crypto industry as it would allow for another major avenue of adoption for Bitcoin.

The Challenges of Getting a BTC Trust Approved

Despite the potential benefits, there are still challenges that need to be overcome before a BlackRock BTC Trust can be approved. These challenges include:

  • Concerns about market manipulation.

  • Investor protection.

  • The need for a reliable and secure custody solution.

The SEC will need to be satisfied that these challenges can be addressed before approving the Trust. However, if the company can overcome these challenges, it is likely that the Trust will be approved.

BlackRock vs Greyscale Bitcoin Trusts

The BlackRock Trust and the Grayscale Trust are both investment vehicles that allow retail investors to gain exposure to Bitcoin. While neither are true BTC ETFs, there are some key differences between the two.

BlackRock Bitcoin Trust

  • Ability to create and redeem shares on a daily basis

  • The trust's price is based on the underlying value of Bitcoin, less the trust's fees.

  • Less than 1% management fee

Grayscale Bitcoin Trust

  • No redemption mechanism

  • The trust's shares are priced based on the underlying value of Bitcoin, plus a premium.

  • 2% management fee

Lastly, as mentioned, while neither are true BTC ETFs, Greyscale has been working to convert their trust into a true ETF. Since Greyscale's initial application was denied by the SEC, they have sued the SEC and argued that the approval of BTC Futures-based ETF opens the door for a spot ETF to be approved under applicable law. An argument that certainly has its merit.

BlackRock's entry into the Bitcoin market is a watershed moment. It will spur other Wall Street firms to file their own Bitcoin Trusts while inching us closer to the first inevitable ETF. Simultaneously, it will promote greater adoption of Bitcoin via a known investment vehicle allowing Billions of dollars to flood into the market.

Thank you for reading, have a great weekend ahead, and I'll catch you in my next update!

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