BlackRock's IBIT ETF: In-Kind Bitcoin Upgrade
Nasdaq Seeks In-Kind Redemption for BlackRock's IBIT Bitcoin ETF
Nasdaq has filed a proposal with the SEC to amend the operational framework of BlackRock's iShares Bitcoin ETF (IBIT). This amendment would introduce in-kind creation and redemption, allowing authorized participants (APs) – primarily institutional investors – to transact directly in Bitcoin, rather than relying solely on a cash-based system. This change was filed on January 24th.
In-Kind Creation and Redemption: A Streamlined Approach
The proposed in-kind process will significantly simplify the ETF's mechanics, reducing the number of intermediaries. This should lead to:
- Improved Tax Efficiency: Direct Bitcoin transactions can offer tax advantages.
- Enhanced Price Alignment: Tracking Bitcoin's market value more closely.
- Streamlined Process: Fewer steps and parties involved in creation and redemption.
It's important to note that this in-kind process would be exclusive to institutional investors; retail investors will continue to utilize the cash-based system.
Analyst Perspectives and Market Impact
Crypto analyst Tom Wan highlighted the increased efficiency, comparing the potential to European ETPs. ETF analyst James Seyffart of Bloomberg emphasized the smoother trading that should result from this streamlined, multi-step reduction process. This enhanced efficiency could boost the attractiveness of Bitcoin ETFs for institutional investment.
IBIT's Growth and Market Context
This Nasdaq filing comes at a time of significant growth for IBIT. Over $2 billion in inflows were observed over a recent six-day period, according to SoSoValue. Since its launch, IBIT has attracted $39.7 billion in total inflows, establishing it as the leading spot Bitcoin ETF in the US. This strong performance underlines the market demand for Bitcoin-based investment vehicles.
Need for In-Kind Transfer
The initial launch of spot Bitcoin ETFs in January 2024 involved only cash-based redemption models due to SEC regulations. However, the increasing maturity of the market has fueled the demand for in-kind transfers, aligning better with the decentralized nature of crypto assets.
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