KEY TAKEAWAYS
- BlackRock receives $100,000 in seed funding for its spot Bitcoin ETF from an unknown investor.
- The investor purchases 4,000 shares at $25.00 per share, acting as a statutory underwriter.
- BlackRock plans to pay sponsors’ fees by borrowing Bitcoin or cash as trade credit, minimizing impact on BTC price.
- Settlement of trade credits occurs on the next business day and incurs a financing fee based on the borrowed funds.
- BlackRock’s application for a Bitcoin ETF is still pending, with market experts predicting potential approval by early 2024.
BlackRock, one of the world’s largest investment management firms, has secured $100,000 in seed funding for its spot Bitcoin exchange-traded fund (ETF) from an undisclosed investor, according to recent filings.
The investor has agreed to purchase 4,000 shares at a price of $25.00 per share.
The investor’s involvement in the seed funding showcases the growing interest in digital assets among institutional giants like BlackRock.
The firm aims to utilize the funds to further develop its Bitcoin ETF offering, which is currently awaiting approval from the U.S. Securities and Exchange Commission (SEC).
In a unique approach, BlackRock plans to pay the sponsors’ fees by borrowing Bitcoin or cash as trade credit, rather than selling BTC directly.
This strategy aims to minimize the potential impact on the Bitcoin price while ensuring smooth operations of the ETF.
Settlement of trade credits, which occur on the business day following the execution date, will incur a financing fee.
This fee is calculated at 11% plus the federal funds target rate divided by 365.
For example, if the federal funds target rate was 5.50% on a given day, the hypothetical financing fee would be 11% + 5.5% divided by 365. The financing fee applies to the borrowed funds used for trade credits.
BlackRock’s application for a Bitcoin ETF has attracted significant attention, as the firm was among the first institutional giants to file for such an ETF in July.
Currently, there are 13 applications awaiting a decision from the SEC. Some of them include:
| ETF Name | Issuer |
|---|---|
| ARK 21Shares Bitcoin ETF (ARKB) | 21Shares & ARK |
| iShares Bitcoin Trust | BlackRock |
| Bitwise Bitcoin ETP Trust | Bitwise |
| VanEck Bitcoin Trust | VanEck |
| Wisdomtree Bitcoin Trust (BTCW) | Wisdomtree |
| Invesco Galaxy Bitcoin ETF | Invesco & Galaxy |
| Pando Asset Spot Bitcoin Trust | Pando |
| Fidelity Advantage Bitcoin ETF TM | Fidelity |
| Franklin Bitcoin ETF | Franklin Templeton |
| BlockFi NB Bitcoin ETF | BlockFi NB LLC |
While the SEC has previously rejected spot Bitcoin ETF applications, market experts predict that the first spot Bitcoin ETF in the United States could be approved by early 2024.
ETF analyst Eric Balchunas described the recent revelations from BlackRock as an interesting development, adding to the ongoing discussion surrounding the firm’s Bitcoin ETF.
Balchunas shared his thoughts on Twitter, noting the intriguing aspects of BlackRock’s approach without providing further details.
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