Will BlackRocks spot Bitcoin ETF breathe life into the comatose crypto market?

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US asset manager BlackRock, the world’s largest asset manager, which manages $9.5 trillion in assets, has filed for a Bitcoin Exchange-Traded Fund (ETF). If approved, it could be the first such product in the crypto market, and it should breathe new life into depressed virtual digital assets. The filing by the world’s largest asset manager came at a time when the U.S. Securities and Exchange Commission (SEC) has taken a tough stance against some of the world’s biggest crypto companies, such as Coinbase and Binance. Notably, BlackRock chose the Nasdaq-listed Coinbase to serve as the depository for its Bitcoin product. BlackRocks’ move is a testament to the fact that Bitcoin is attracting the attention of major financial institutions. Whether the SEC will approve the request remains to be seen, but the digital asset ecosystem has received the much-needed boost to enter the next phase of growth and mass adoption, said Shivam Thakral, CEO of crypto exchange BuyUcoin. . Is it really an ETF? The first point to note here is that there are many crypto-based investment products in the market. In fact, the SEC has in the past approved bitcoin futures ETFs that hold bitcoin futures contracts, but there are no spot crypto ETFs yet. Read also | Calculation of the increased pension: Should one opt for an increased pension by EPFO ​​​​new formula? It’s Complicated The first Bitcoin-based ETF, called ProShares Bitcoin Strategy ETF (BITO), started trading in October 2021. BITO was one of the most sought-after funds after its launch as it became the most popular ETF fastest across all categories, and hit the $1 billion mark in assets under management (AUM) in history. Since then, many other crypto-based ETFs, like the one on Ethereum, have appeared on the market, but they have all been futures-based. The BlackRocks iShares Bitcoin Trust application to establish a trust is not an ETF in the traditional sense. What is an investment trust? In crypto, an Investment Trust is a closed-end fund incorporated as a corporation, which can buy and sell stocks on the stock exchange. The trust invests in a portfolio of assets and therefore the value of the fund unit is linked to the value of the underlying assets it holds. Since it is a closed-end fund, the net asset value (NAV) of each stock may decouple from the market price of the assets and may show a huge divergence. Grayscale’s Bitcoin Trust (GBTC) product is the largest crypto-based product available on the market, with an AUM of over $15 billion as of the end of May. Unlike GBTC, the BlackRocks Trust, if approved, will allow redemptions, which could be a big win for investors. “The real difference in the BlackRocks application is twofold. BlackRock’s involvement with Coinbase, particularly in this market state, is a decision that inspires confidence and, secondly, to avoid previous criticisms regarding the spot price feed BlackRock plans to use the CF Benchmarks Index, created by an FCA-regulated UK company, and is the same benchmark used by the CME to settle Bitcoin futures, Parth Chaturvedi said, chief investment officer, CoinSwitch Ventures sends notices to tax evaders for fake donations It’s worth pointing out that this isn’t BlackRock’s first foray into crypto. ‘assets has launched a Bitcoin private trust spot for institutional clients in the US. Granted, the BlackRocks Bitcoin product is technically a Trust and not an ETF in the traditional sense, but its Trust is offered to operate as an ETF. and Bitwise, were all rejected by the regulator. The SEC has argued that spot Bitcoin is not safe enough to be offered to retail investors. The rejections were based on ETFs’ failure to comply with SEC rules, which are designed to prevent fraudulent and manipulative acts and practices. The issue was so contentious that last year Grayscale sued the SEC after it rejected GBTC’s application to convert it to an ETF. While a trust is a preferred vehicle for institutional investors, an ETF is a preferred vehicle for retail investors, increasing the penetration and depth of an asset class. BlackRock’s success in obtaining SEC approvals inspires confidence in skeptics and investors alike. Over its history, the fund manager has applied for 576 ETFs from the SEC, of ​​which only one has been refused so far. BlackRock has included an agreement to share oversight between exchanges in its application, which will help ease SEC concerns about market manipulation and could tip the scales in favor of asset manager enforcement. Implications if the ETF is approved Dhruvil Shah, vice president of technology at Liminal, a wallet infrastructure and custodial solutions platform, said: BlackRock’s decision to launch a Bitcoin ETF in the face of regulatory scrutiny shows that it is committed to adopting digital assets and offering alternative investment opportunities. Despite the latest actions from the SEC, BlackRock’s stock demonstrates confidence in the future of digital assets. Read also | Sovereign Gold Bond 2023-2024 Series I opens today: should you invest? BlackRock’s Bitcoin ETF differs from previous ETFs because it would be a spot ETF, meaning it would hold actual Bitcoins on its book. BlackRock ETF should actually buy BTC spot and therefore demand will increase, at least for the amount that Bitcoin is taken out of circulation. There is no doubt that this will lead to higher prices and a significant increase in sentiment, said Ajeet Khurana, founder and CEO of Reflexical, a crypto advisory firm. Additionally, a Bitcoin-based spot ETF with a buy-back option should bring the fund’s price closer to the asset class. Currently, units of GBTC, which is a Grayscale BTC Trust, are trading at a 40% discount to the price of Bitcoin itself, a major disadvantage of an Investment Trust. Minal Thukral, Executive Vice President, Growth and Strategy, CoinDCX, added: This could drive more institutional investors to invest in Bitcoin, which could have a significant impact on the price of the crypto. While it’s still too early to tell the impact of BlackRock’s Bitcoin ETF on the market, it could be a major breakthrough for the entire crypto industry. Key takeaway for investors Bitcoin, the original cryptocurrency, is currently trading around the $26,500 level, which is a far cry from its all-time high of $69,045, reached on November 10, 2021. Read also | The Motilal Oswals Nifty Microcap 250 Index fund aims to choose tomorrow’s multibaggers today. Should you invest? In the past, the crypto market has reacted much more enthusiastically to positive market developments. For example, when the first Bitcoin-based ETF – ProShares Bitcoin Strategy ETF was approved in October 2021, the crypto market jumped over 10%. Today, over a seven-day period, Bitcoin is up around 3%. While BlackRock is the world’s largest asset manager and has an excellent track record of winning product approvals, it remains to be seen whether the SEC will greenlight a Bitcoin ETF spot at a time when it is. sued major crypto exchanges for trading unregistered securities and allegations of malpractice.

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