Bitrabo Editorial
BlackRock has recently applied to the Securities and Exchange Commission for a Bitcoin ETF.
While some may think that this ETF will be similar to the Grayscale Bitcoin Trust (GBTC), there are notable distinctions between the two products.
BlackRock’s iShares Trust Vs. GBTC
BlackRock’s iShares product, technically classified as a trust, offers redemptions similar to an ETF, unlike GBTC.
Noelle Acheson explains that people may associate “trust” with GBTC’s lack of redemption options, but this is not the case for BlackRock’s offering.
Image: Forbes
The main difference between a BTC ETF and a trust lies in the ETF’s ability to purchase bitcoin at the end of the trading day to match the fund’s assets with its trading price.
On the other hand, a trust operates with a fixed portfolio and cannot adjust its holdings.
As a result, trusts often trade at varying premiums or discounts compared to the value of their underlying assets.
Grayscale’s Argument And SEC’s Response
Grayscale took legal action after the SEC denied the conversion.
This lawsuit is currently underway in a Washington DC court, and a final verdict is expected later this year.
Grayscale argues that both spot and futures ETFs have similar risks regarding the price of BTC.
BTCUSD retakes the $26K territory. Chart: TradingView.com
In response, the SEC has stated that its disapproval of Grayscale’s spot ETF was justified, adequately explained, supported by evidence, and in accordance with the Exchange Act.
BlackRock’s Spot Bitcoin Fund
BlackRock has revealed its approach to pricing its spot Bitcoin fund, which will rely on the CF CME Bitcoin Reference Rate.
This rate is based on the combined value of Bitcoin trading across major spot exchanges.
By using this method, the investment firm aims to address some of the concerns raised by the SEC.
To protect the iShares Bitcoin Trust, BlackRock has chosen Coinbase Custody as its custodian.
The trust will be listed on the Nasdaq exchange, providing investors with an accessible entry point into the Bitcoin market.
It is important to note that BlackRock, the world’s largest money manager with $9.1 trillion of assets under management as of the first quarter of this year, holds significant influence in the financial industry.
This influential position suggests that the SEC is unlikely to easily dismiss BlackRock’s application.
According to crypto market analyst Joe Consorti, “Given their reputation, this has the highest likelihood of happening out of all the attempts at a spot ETF so far.”
Featured Image From iStock, Charts From TradingView