The whole cryptocurrency community are these days waiting with huge excitement for the approval of the first Bitcoin ETFs. This event expected in early January, or March at the latest, will be the mainstream adoption, and the “See I told you so” of the crypto industry. It will lead to massive inflows of new capital from mainstream investors that will increase the price of crypto significantly.

BlackRock, the largest asset management company, is leading the pack and has filled application for a Bitcoin spot exchange-traded fund (ETF). Larry Fink, CEO of BlackRock once called it the “index of money laundering” but now it initiated its participation by showing interest in cryptocurrency. There are heavy waves in the financial world with BlackRock expressing interest in Bitcoin. The rise of Bitcoin also surged with this progressive action of BlackRock. It is also introducing diversity by adding Bitcoin among the other assets and might offer alternative investment vehicles.

This article digs into the BlackRock’s Bitcoin ETF and also its impacts on the cryptomarket and how it is going to shape the crypto world.

BlackRock Introduction

Founded in 1988, BlackRock stands as the world’s largest fund manager company due to its trillions of dollars in assets under management (AUM). With its influential presence in traditional finance, BlackRock is likely to stand among the most influential players in cryptocurrency investing with this Bitcoin ETF. With its ability of providing a range of services and products to fund investors, pension funds, governments, corporations and financial institutions around the world it has now secured its position as a focal player in crypto industry and investments.

What Is the BlackRock Bitcoin ETF (IBTC)?

BlackRock Bitcoin ETF, like its competitors, has a sharp eye to track the highly demanded cryptocurrency. The BlackRock Bitcoin ETF stands among its contemporaries because it is a spot ETF. The investors who invest in the purchase of IBTC do not have exposure to only derivatives, instead they can directly claim actual Bitcoin.

Prior to diving into the technical details about the ETF, it’s important to grasp how spot ETFs actually operate. A spot ETF needs to be powered by and physically own its primary asset in order for it to operate. When it comes to a Bitcoin spot exchange-traded fund (ETF), this means that the company providing the fund has to hold the same amount of Bitcoin in reserve in order to represent each share of the publicly traded BlackRock Bitcoin ETF.

Bitcoin ETF offers a range of advantages among which the main one is that investors can easily track the price of Bitcoin while having access to the liquidity and transparency within the boundaries of financial markets. It offers a supervised and conventional investment structure. It is not only composed of a single unit or single bitcoin but it carries a group of Bitcoin which provides a lot of benefits even though the investment is made in the one which makes daily buying and selling easier.

The ticker for BlackRock’s proposed IBTC was recently seen on the DTCC website, which caused quite a stir within the cryptocurrency community. Investors became enthusiastic and skeptical about the impending approval and debut of the spot ETF as a result of this listing. It’s important to remember that the ETF hasn’t been formally introduced yet. IBTC’s inclusion on the DTCC website was a significant signal that led to a lot of market conjecture over its impending approval.

How the BlackRock Bitcoin ETF Will Work?

BlackRock has decided to set up custodian’s accounts for the investors with banks where underlying Bitcoins will be held for investors. The investors will not be responsible for managing, storing and securing the funds but the custodians will do this on their behalf. Bitcoin Spot ETF has made investors free of selling and buying assets to provide a more liquid marketplace. In this way BlackRock will provide investors direct access to Bitcoin without having them buy or store cryptocurrencies by themselves.

Futures exchanges, like the Chicago Mercantile Exchange (CME), also impose position limits on futures contracts in order to stop market manipulation. Portfolio managers of Bitcoin ETFs based on futures are required to purchase longer-dated futures contracts in order to adhere to the restrictions once position limits are reached. This guarantees that they can stay inside the regulatory framework and steer clear of concentration issues when managing the fund’s positions.

These differences, however, have an impact on how the price of Bitcoin is tracked and could lead to changes in the spot market. For example, as the contract approaches its expiration date, the accuracy with which it tracks the spot market declines. The introduction of BlackRock’s spot Bitcoin ETF is anticipated to bring about a number of positive developments for cryptocurrency market participants, such as more precise tracking of Bitcoin values and potentially more cheap investment alternatives, which might improve the overall experience of investors.

Why does the BlackRock Spot ETF intrigue people?

If you are an old and experienced crypto investor you surely are aware why financial specialists are getting their trusts up when it comes to BlackRock’s Bitcoin ETF. After all, Bitcoin ETFs such as ProShares Bitcoin strategy ETF (BITO) and Valkyrie Bitcoin strategy ETF (BTF) as of now exist, so there appears to be no reason to be very excited for another Bitcoin ETF. Typically where the thought of standard appropriation and bulk buying from education comes into play.

The appearance of IBTC isn’t just the appearance of another ETF in the game. It is instead standard appropriation and potential organization bulk buying. BlackRock must amass Bitcoin for its IBTC saves, which may trigger a surge in BTC buying volume, assist driving up the cost of Bitcoin. BlackRock’s Bitcoin ETF is expected to be among the first crypto spot funds to appear on the DTCC website, as it is already listed for the time being.

This sets it apart from other markets that offer Bitcoin futures ETFs that actively track the price of Bitcoin futures contracts, rather than the actual price of Bitcoin itself. You can access Bitcoin more easily without having to buy or manage digital assets yourself. This, in turn, has led to cryptocurrencies ranging from institutional investors looking to build up their Bitcoin reserves to FOMO individual buyers who buy and manage digital assets without having the means or knowledge to own them. This will lead to a new wave of investment in the sector.

Since the ETF filing was announced on June 16, 2023, Bitcoin has exploded from $25,000 to over $30,000. Now, with the expected launch of IBTC, Bitcoin has further risen from $26,000 to $38,000 in the last week of November. IBTC’s unique crypto spot fund proposal, if approved, will be monumental as it will provide institutions with a streamlined Bitcoin exposure route and usher in a new wave of crypto investments.

Considering Bitcoin’s recent massive price movements, it is likely that the price will deplete in the short term and some form of price correction will occur. We expect BTC to retest the $34,000 price zone. This is because it was once a supply zone that BTC could easily break through and is now acting as a demand zone for BTC buyers.

Will it be approved?

Senior ETF analyst for Bloomberg Eric Balchunas estimates 50% possibility that BlackRock’s spot Bitcoin ETF will be approved. Elliott Stein, a senior litigation analyst for Bloomberg Intelligence, made a statement that is followed by this prediction.

In addition, Balchunas claims that, in contrast to the ongoing Grayscale case, the SEC’s approval of an ETF from a reputable and well-established organization like BlackRock may be viewed as a good move toward preserving its credibility. However, it’s still unclear whether or when the BlackRock Bitcoin ETF would be approved given the SEC’s crackdown on cryptocurrencies.

Is it a good investment or a bad one?

Targets for the BlackRock Bitcoin spot ETF appear to be institutional investors constrained by regulatory frameworks and novice cryptocurrency buyers among retail investors. Due to the potential for monitoring errors, management expense fees, and worse spreads brought on by a lack of liquidity, knowledgeable investors and traders who are interested in investing would therefore be better suited purchasing actual Bitcoin.

Still, there’s no damage in purchasing and selling some of BlackRock’s Bitcoin ETF shares if an unexpected trading opportunity arises. Before deciding to invest in any cryptocurrency, whether it is the BlackRock Bitcoin ETF, IBTC, as usual, conducting own research is more helpful.

Conclusion

It has taken a while for a Bitcoin spot ETF to make its way to market, but now that a major player like BlackRock has entered the game, its success may open the door for more digital asset offerings. BlackRock’s entry with IBTC sends a strong message about the growing institutional interest in crypto, even though it makes more sense for retail Bitcoin investors to continue dollar-cost averaging into their preferred crypto asset due to tracking errors and management expense fees. This also suggests that claims made by mainstream media that the digital asset scene is dead are greatly exaggerated.

A Bitcoin spot ETF has been on the market for a while, but with the entry of a big player like BlackRock, its success could pave the way for other offerings of digital assets. Although it makes more sense for retail Bitcoin investors to maintain dollar-cost averaging into their choice crypto asset due to monitoring errors and management expense fees, BlackRock’s debut with IBTC sends a strong statement about the growing institutional interest in crypto. This implies that the mainstream media’s assertions that the digital asset scene is dying are wildly overblown.