BlackRock, the world’s largest asset manager, has announced its plan to invest $10 million into a seed fund for its proposed spot Bitcoin exchange-traded fund (ETF). The firm is making this financial commitment as part of its preparations for the anticipated launch of the ETF, pending regulatory approval from the Securities and Exchange Commission (SEC).
Amended S-1 Filing and Seed Fund Details
The updated S-1 filing submitted by BlackRock with the SEC includes important details regarding the firm’s activities prior to the pending approval of the Bitcoin ETF. Specifically, BlackRock aims to inject $10 million into a seed fund to support the ETF launch. The filing revealed that on January 3, 2024, the Seed Shares were redeemed for cash, and the Seed Capital Investor purchased the Seed Creation Baskets, which consisted of 400,000 Shares at a pre-share price of $25.00. The filing further stated that “total proceeds to the Trust from the sale of the Seed Creation Baskets were $10,000,000.” The Trust then used these proceeds to purchase Bitcoin at the price of $[ ] per Bitcoin.
“On January 3, 2024, the Seed Shares were redeemed for cash and the Seed Capitol Investor purchased the Seed Creation Baskets, comprising of 400,000 Shares at a pre-share price of $25.00,” detailed the filing. “Total proceeds to the Trust from the sale of the Seed Creation Baskets were $10,000,000,” wrote the filing. “The Trust purchased [ ] bitcoin at the price of $[ ] per bitcoin with the proceeds of the Seed Creation Basket on January 3, 2024.”
While these seed movements do not guarantee the launch of the Bitcoin ETF, analyst James Seyffart suggests that BlackRock’s seed round plan aligns with the expectation for approval. Seyffart states, “BlackRock’s seed round plan for the Bitcoin ETF would still obviously jive with our Jan. approval prediction.”
It is important to note that although not yet named, the Authorized Participants involved will not handle Bitcoin directly but only cash. They will deliver cash to create Shares and receive cash when redeeming Shares. According to Bloomberg analyst Eric Balchunas, “Authorized Participants will not directly or indirectly purchase, hold, deliver, or receive Bitcoin as part of the creation or redemption process.”
Concerns Raised by Arthur Hayes
In the midst of major financial establishments like BlackRock, Fidelity, and Grayscale actively planning and revising their Bitcoin ETF applications, Arthur Hayes, co-founder and former CEO of BitMEX, has expressed concerns about the potential impact of these ETFs on Bitcoin.
“Imagine a future where the largest Western and Chinese asset managers hold all the Bitcoin in circulation,” said Hayes. “Now that a handful of firms hold all the Bitcoin, and have no actual use for the Bitcoin blockchain, the coins never move again.”
Hayes further explains that as people opt to purchase Bitcoin ETF derivatives instead of holding Bitcoin in self-custodied wallets, miners may turn off their machines due to the lack of demand. This could lead to a decline in Bitcoin’s mining activity and potentially impact its overall functioning. Hayes concludes by suggesting that if the spot Bitcoin ETFs offered by traditional financial institutions become too successful, they could ultimately “completely destroy Bitcoin.”
Overall, BlackRock’s significant investment into the seed fund for the Bitcoin ETF highlights the growing interest of major financial institutions in the cryptocurrency market. However, it is important to consider the potential implications and concerns raised by experts in the field.
