BlackRock’s Bitcoin ETF application is a big deal | CoinDesk JAPAN | Coin Desk Japan

In February 2022, it was first reported that BlackRock, the world’s largest asset management company, was planning a crypto asset (virtual currency) trading service. And last week, there was finally movement.

Related article: BlackRock plans cryptocurrency trading service: insiders

iShares, BlackRock’s Exchange Traded Fund (ETF) Brand, Approves Spot Bitcoin (BTC)-Based ETF from U.S. Securities and Exchange Commission (SEC) June 15 applied.

Trust or ETF

As with any online discussion, many people get caught up in the phrasing and end up with empty discussions. So, is this proposed fund really an ETF or just a trust? That’s the argument. Oddly enough, at the top of BlackRock’s application form, the name of the fund being applied for is “iShares Bitcoin Trust.”

Before we go any further, just to be clear, the SPDR Gold Shares ETF works exactly like this, as Bloomberg’s Eric Balchunas tweeted. It’s a trust, but it works like an ETF.

Without going into too much detail, if the iShares Bitcoin Trust were approved and set up and redeemed daily, it would look and function like an ETF. Who cares if it’s strictly “trust”?

The answer is “many people”. Considering Grayscale’s bitcoin investment product, Grayscale Bitcoin Trust (GBTC), the market seems uneasy about the word “trust.” GBTC holds bitcoin and allows customers to invest in the underlying bitcoin in the form of securities in over-the-counter trading. Currently, GBTC is traded at a large discount rate compared to the Bitcoin price, so anxiety is spreading.

To be clear, as of June 15th, according to the Grayscale website, GBTC is priced at $13.40 per unit, while the Bitcoin held by GBTC is priced at 1. It is 23 dollars (about 3260 yen) per mouth.

This is undesirable for a number of reasons. But since BlackRock’s product is largely an ETF, it shouldn’t have the same problem. That said, an interesting thing to think about about BlackRock’s iShares Bitcoin Trust, which is technically a trust but at most an ETF, is its impact on exchanges and bitcoin.

Impact on exchanges

Bitcoin liquidity has been sluggish since Binance ended its fee-free bitcoin trading service in March, and even before that, since the FTX bankruptcy last November. As for FTX, the bankruptcy team has not been able to find all the bitcoins that FTX should guarantee to its customers.

And of course the bear market is alienating market participants.

Prices are volatile as the market becomes less liquid. However, once the iSahres fund is approved and BlackRock enters the Bitcoin market, it is likely that all liquidity concerns will disappear once and for all. The high profile of BlackRock’s Bitcoin ETF application is amazing. BlackRock is the world’s largest asset manager. If applied, it would at least give the Bitcoin ETF the legitimacy of the stamp of approval and attract a lot of money.

If that happens, the Bitcoin price may also rise. But there are two other points that I think will be very important going forward.

First, exchanges should have a little fear. If a new investor considers investing in Bitcoin and doesn’t care about the attractive aspects of Bitcoin, such as utilities, they will try to buy Bitcoin at the lowest possible price.

Why pay a 1% transaction fee on an exchange when buying an ETF is much easier for an investor who isn’t interested in actually spending Bitcoin?

Bitcoin Supply Cap Exceeded

Second, since the supply of bitcoin is capped, a BlackRock physical ETF could accelerate the expansion of “paper” bitcoin.

The Bitcoin protocol dictates that there can only be a certain number of Bitcoins, but the financial markets, of course, don’t say that. Financial markets allow financial products that can represent just about anything, including any amount of bitcoin.

The dollar price of bitcoin is determined by how much dollars an exchange pays for bitcoin, which is determined by the market. So how can the market be immune to massive speculation in the derivatives market that pushes the real supply of Bitcoin beyond its supply cap? Potentially nothing.

Of course, we don’t know if the SEC will approve BlackRock’s filing. So far, the SEC has rejected all Bitcoin ETFs that have been filed. The reason is that the Bitcoin market can be manipulated.

However, the proposed BlackRock ETF will feature enhanced market surveillance, and some analysts believe it will be the first bitcoin ETF. And after all, the applicant is BlackRock. Will the SEC say no to BlackRock?

Whether the Bitcoin price rises, falls, or settles to a fair value, if the iShares Bitcoin Trust gets approved, it’s a big deal.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: pbk-pg / Shutterstock.com
| Original: BlackRock’s Bitcoin ETF Would Be a Big Deal