Key Takeaways:
- BlackRock, the world's largest asset manager, received $100,000 in seed funding for its spot Bitcoin exchange-traded fund (ETF).
- The funding allows for the creation of underlying shares that can be offered and traded in the open market.
- BlackRock plans to pay the sponsor's fee by borrowing Bitcoin or cash as Trade Credit from the Trade Credit Lender.
- Market experts predict that the SEC will likely approve the first spot Bitcoin ETF in the United States by early 2024.
BlackRock, the world's largest asset manager, has received $100,000 in seed funding for its spot Bitcoin exchange-traded fund (ETF), according to a recent filing with the Securities and Exchange Commission (SEC). The funding was provided by an unknown investor in October 2023.
The SEC filing reveals that the investor agreed to purchase $100,000 in shares on October 27, 2023, at a price of $25.00 per share. This seed funding allows the ETF to create underlying shares that can be offered and traded in the open market, providing liquidity and accessibility to investors.
Borrowing Bitcoin or Cash to Pay Sponsor's Fee
The filing also sheds light on BlackRock's plans to pay the sponsor's fee. Instead of selling Bitcoin (the ETF asset), the asset manager intends to borrow Bitcoin or cash as Trade Credit from the Trade Credit Lender on a short-term basis. This way, they can charge their fees without significantly impacting the price of Bitcoin.
The settlement of trade credits will occur on the business day following the execution date. It will attract a financing fee of 11% plus the Fed Funds Target rate divided by 365. For example, if the Fed Funds Target rate was 5.50% on November 20, 2023, the hypothetical financing fee on borrowed funds would be 11% + 5.5% divided by 365.
Predictions for the First Spot Bitcoin ETF Approval
BlackRock's filing for a spot Bitcoin ETF earlier this year prompted other institutional giants to follow suit. While most of the earlier filed spot Bitcoin ETFs were rejected by the SEC, market experts predict that the first spot Bitcoin ETF in the United States will likely be approved by early 2024.
This development has been hailed as an interesting development in the cryptocurrency space by ETF analyst Eric Balchunas.
"This is so interesting in the nerdiest way," tweeted Balchunas.
With BlackRock leading the way, the approval of a spot Bitcoin ETF could be a game-changer for the cryptocurrency market, providing more opportunities for institutional investors and potentially boosting mainstream adoption.
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