BlackRock’s Bitcoin ETF Filing Ignites Optimism

Unveiling the Future of Investing

June 21, 2023

BlackRock Inc.’s surprising application for a spot-Bitcoin exchange-traded fund (ETF) has brought about an unexpected silver lining for Grayscale Investments LLC. The Grayscale Bitcoin Trust (ticker GBTC), valued at $16.9 billion, has outperformed the cryptocurrency itself since the world’s largest ETF issuer submitted its application for the iShares Bitcoin Trust last week. As a result, GBTC’s discount on its underlying Bitcoin holdings has narrowed to approximately 37%, compared to 44% just a week ago.

While BlackRock’s proposed fund would potentially become a competitor to GBTC if approved, the narrowing discount indicates that investors are increasingly betting on Grayscale’s bid to convert the trust into an ETF. This newfound optimism stems from the belief that the US Securities and Exchange Commission (SEC), which has previously rejected physically-backed Bitcoin ETFs due to concerns over manipulation and investor protections, might now have a change of heart in light of BlackRock’s application, as Bloomberg Intelligence suggests.

“BlackRock’s filing for a spot Bitcoin ETF has restored hope in approval thanks to the company’s size, stature, and reputation,” noted Eric Balchunas and James Seyffart, ETF analysts at Bloomberg Intelligence. “BlackRock likely didn’t make the decision lightly and is used to working with regulators and the government at large.”

Since news of BlackRock’s application broke on June 15, GBTC shares have surged by approximately 23%, outperforming Bitcoin itself, which has seen an 8% increase over the same period.

It’s important to highlight that Grayscale is currently embroiled in a high-profile legal battle with the SEC. The asset management company filed a lawsuit against the regulator in June last year after its application to convert GBTC into a physically backed ETF was denied. The transformation of GBTC into a spot Bitcoin ETF would address a persistent issue for Grayscale, namely the trust’s discount. Unlike an ETF, GBTC cannot redeem shares in response to fluctuating demand, leading to a significant discount relative to its underlying Bitcoin holdings.

Stephane Ouellette, CEO of FRNT Financial Inc, an institutional platform focused on digital assets, believes that if the BlackRock ETF is approved, it would set a precedent for the approval of more physically settled ETFs. This could potentially pave the way for further advancements in the ETF space.

As the landscape of digital assets continues to evolve, remains committed to keeping you informed and empowered with comprehensive analysis and expert insights. Stay tuned for the latest updates on the dynamic world of investing!

Update June 22nd, 2023

In a significant move that could potentially redefine the landscape of Bitcoin-related investments, BlackRock, through its iShares division, has lodged a novel application with the U.S. Securities and Exchange Commission (SEC). The defining edge of their submission over past attempts by rival fund houses lies in the incorporation of a pioneering “surveillance-sharing agreement” with exchanges.

This strategic initiative is explicitly stated in the 19b-4 filing of Nasdaq (the exchange where the prospective ETF is intended to be listed) on its 36th page. The objective is clear – to counteract any possible attempts at market manipulation. The mechanism involves bringing Nasdaq on board to participate in a surveillance-sharing agreement with a Bitcoin spot trading platform operator.

These surveillance-sharing agreements are the keys to the vault of information encompassing trading activity in the market, clearing activities, and customer identification. Their introduction dramatically reduces the opportunities for market distortions.

Nasdaq’s proposed undertaking, referred to as the “Spot BTC SSA,” sets this particular application apart from the rest. According to Graeme Moore, the Head of Tokenization at the Polymesh Association, it is not BlackRock’s status as the world’s largest asset manager that makes a difference, but this innovative approach.

Moore highlighted that the SEC’s fears about potential Bitcoin price manipulations, cited in virtually all past rejections, arise from the lack of trust in non-regulated exchanges like Coinbase, which are perceived as insufficiently capable of inhibiting fraudulent and manipulative practices.

Contrarily, industry stalwart Dave Weisberger, CEO & Co-Founder of CoinRoutes, questioned the necessity of such a surveillance-sharing agreement. Speaking to CoinDesk, he pointed out that market data feeds from Kraken, Coinbase, ItBit, Lmax, and Bitstamp are already public. The SEC could directly access this data or outsource its collection. This would empower the SEC to detect manipulative trades and track their originators.

Historically, the SEC has underlined the importance of surveillance-sharing agreements. Earlier in January, while discussing Cboe Digital’s request to list and trade shares of the ARK 21Shares Bitcoin ETF, the agency emphasized that an exchange can meet its responsibilities under the Exchange Act Section by establishing a comprehensive surveillance-sharing agreement with a significant, regulated market related to the underlying or referenced bitcoin assets.

BlackRock’s iShares branch initiated the process for a spot bitcoin ETF on Thursday afternoon, submitting the required documentation to the SEC. This maneuver follows the path of several previously rejected ETF proposals, including those presented by Grayscale, VanEck, and WisdomTree.

Disclaimer: The content provided in this article is for informational purposes only and should not be considered financial advice. Always conduct thorough research and consult with a qualified professional before making investment decisions.


Best Growth Stocks

Learn More →