In October 2023, BlackRock, the world’s largest asset manager, received a noteworthy infusion of $100,000 in seed funding for its Bitcoin (BTC) exchange-traded fund (ETF), as reported in their recent filing with the United States Securities and Exchange Commission (SEC).
The SEC disclosure shed light on the specifics of this investment, revealing that an undisclosed investor had committed to purchasing 4,000 shares at a price of $25.00 per share, totaling $100,000, on October 27, 2023.
This investor also assumed the role of a “statutory underwriter” concerning the Seed Creation Baskets.
Additionally, BlackRock disclosed its strategy for managing sponsor’s fees, indicating that it intends to acquire Bitcoin or cash through short-term trade credit from a trade credit lender.
This approach allows BlackRock to collect its fees via loans, mitigating the need to sell BTC from the ETF assets. Consequently, this method minimizes any significant impact on the BTC price.
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Trade credit settlements are scheduled to transpire on the subsequent business day following the execution date and incur a financing fee.
This fee is calculated at 11%, plus the federal funds target rate divided by 365. For instance, if the federal funds target rate was 5.50% on November 20, 2023, the hypothetical financing fee on borrowed funds would amount to (11% + 5.5%) divided by 365.
Eric Balchunas, an ETF analyst, described these revelations as an intriguing development within the financial sector.
BlackRock emerged as an early pioneer among institutional giants by filing for a spot Bitcoin ETF back in July. Notably, their application is among the 13 awaiting a verdict from the SEC.
Although the SEC has previously rejected applications for spot BTC ETFs, market experts speculate that the agency is likely to grant approval for the first spot BTC ETF in the United States by early 2024, reflecting the growing acceptance and integration of cryptocurrencies into traditional finance.
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