Saturday, May 25, 2024

BlackRock’s Bitcoin ETF Ticker IBIT Confirmed, Shifts Toward Cash Redemption Model

BlackRock’s proposed spot Bitcoin exchange-traded fund (ETF) has been officially assigned the ticker IBIT, according to an S-1 filing amendment with the Securities and Exchange Commission (SEC).

The filing also indicated that BlackRock would adopt a cash redemption model for its Bitcoin ETF. Initially open to the possibility of an “in-kind” redemption, the latest document suggests the SEC’s preference for cash transactions, as discussed during the recent meetings between BlackRock and the Commission.

“The Trust issues and redeems Baskets on a continuous basis,” wrote the filing in the Creation and Redemption section. “These transactions will take place in exchange for cash … Baskets are only issued or redeemed in exchange for an amount of cash determined by the Trustee on each day that NASDAQ is open for regular trading.”

Cash Redemption Model vs In-Kind Redemption Model

Through the cash creation and redemption model, the investors must use cash for transactions in exchange for Bitcoin holdings. On the contrary, the investors cannot “hand in btc in exchange for etf shares like in most ETFs,” according to Bloomberg Intelligence ETF analyst Eric Balchunas.

The cash redemption model is different from BlackRock’s previously proposed in-kind model. Unlike how the investors directly pay and receive cash when buying and exiting Bitcoin ETFs for the cash redemption model, the in-kind model proposes the investors to receive the designated goods they invested in when they want to exit, in this case Bitcoin. So the investors would buy Bitcoin ETFs in cash and sell them for actual Bitcoins.

“BlackRock has gone cash only,” said Balchunas. “That’s basically a wrap. Debate over. In-kind will have to wait. It’s all about getting ducks in row bf holidays. Good sign.”

ARK Invest and 21Shares Bitcoin ETF Also Adopts Cash Redemption

In the meantime, ARK Invest and 21Shares also have amended their spot Bitcoin filing to accept the SEC’s edict of adopting the cash creation and redemption model, at least in the early stage of issuing.

As for the spot Ethereum ETFs, the SEC’s decision on ARK Invest and 21Shares’s application has been delayed, which was originally due by Dec. 26. The final date for its decision is in May 2024.

 

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