All You Need to Know About iShares Bitcoin Trust (IBIT): BlackRock's Spot Bitcoin ETF

All You Need to Know About iShares Bitcoin Trust (IBIT): BlackRock’s Spot Bitcoin ETF

UTC by John Caroline · 5 min read
All You Need to Know About iShares Bitcoin Trust (IBIT): BlackRock’s Spot Bitcoin ETF
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This guide entails the necessary details needed to help you understand how to access and explore the exclusive world of Bitcoin (BTC) via the cost-effective mechanism of ETF.

The inception of cryptocurrencies started with the creation of Bitcoin (BTC), which, over the years, has retained its position as the king of cryptos and is loved by most crypto users. Evidently, Bitcoin has always topped the list of thriving cryptocurrencies and has garnered so much attention that every crypto user (new and existing) wants a scoop of it.

The massive emergence of Bitcoin led to the innovation of unique mechanics that allowed traditional access to Bitcoin to ease investors of certain complexities. One of these is the iShare Bitcoin Trust (IBIT) launched by BlackRock Inc (NYSE: BLK), the world’s largest asset manager. The invention of IBIT came into play following concerns to provide crypto investors with an easy way to hold a portion of Bitcoin in the form of traditional stocks without having to buy it directly.

This ETF also afford holders the opportunity track the price of Bitcoin in a cost effective way. In this guide, we will explore the basics of IBIT, its history and its benefits to crypto investors worldwide.

Bitcoin ETFs Defined

Bitcoin ETFs have been a hot topic in the world of cryptocurrencies right from the early days of Bitcoin since the Winklevoss twins first tried to make one. Due to regulatory concerns, the evolution of Bitcoin ETFs has been challenging, which later saw the emergence of Bitcoin futures ETFs.

While the Bitcoin futures ETFs have been around for a few years, spot Bitcoin ETFs got the green light on January 10, 2024, after BlackRock’s spot Bitcoin ETF had reportedly cleared the final SEC hurdle, thereby announcing the official launch of its iShares Bitcoin Trust.

Now, an exchange-traded fund (ETF) is like a stock that you can buy and sell on the stock market. It holds different things like stocks, commodities, or bonds. A Bitcoin ETF, in particular, follows the value of Bitcoin. It serves as a way for people to invest in Bitcoin without actually owning the digital currency.

So far, there are two types of Bitcoin ETFs, which include Bitcoin futures ETFs and spot Bitcoin ETFs. The difference is in what they invest in. A futures ETF invests in contracts that predict Bitcoin’s future price, allowing investors to bet on its movements without owning Bitcoin. On the other hand, a spot Bitcoin ETF invests directly in Bitcoin itself. If you own shares in a spot Bitcoin ETF, you essentially own a piece of Bitcoin.

The cool thing about Bitcoin ETFs is that they bring Bitcoin into the traditional financial system. This means more people, including those who like regular investments or want Bitcoin in their retirement plans, can get in on the action.

iShares Bitcoin Trust

Created by BlackRock, iShares Bitcoin Trust (IBIT) stands as a testament to a legacy defined by remarkable innovation.

Basically, the iShares Bitcoin Trust is a Bitcoin spot ETF that seeks to reflect generally the performance of the price of Bitcoin. This BlackRock’s Bitcoin spot ETF creates shares that represent partial ownership of the total Bitcoin it holds while closely tracking the overall performance of the price of Bitcoin.

Due to its design, IBIT serves investors by regularly creating and selling shares. As of January 2024, the Trust disclosed registering an unspecified number of shares with the the U.S. Securities and Exchange Commission (SEC) following specific rules. When it issues or redeems shares, it does so in blocks of 40,000 shares or multiples of that number. Each of these blocks, also known as a “basket,” is exchanged for cash. This process considers the amount of bitcoin linked to each share, minus any owed fees to the Sponsor or outstanding expenses.

IBIT Launch

IBIt was officially launched on January 10, 2024 by the world’s largest asset manager and ETF provider BlackRock. Prior to the launch, the idea behind IBIT had seen several regulatory concerns and denial from the SEC. After several years of tests and deliberations, the SEC eventually gave its approval to the registration statement for the spot Bitcoin ETF.

This was a big deal in the crypto space because it marked a key milestone for investors who want a regulated way to dive into the cryptocurrency market using an exchange-traded fund.

Due to the massive anticipations that had awaited its launch, IBIT began trading a day after, with massive gains trooping in just a few days after it launched.

Notably, IBIT recorded up to $4.6 billion worth of shares trade hands in just one day after it started trading. This saw the stock rise by 22.25%,  reaching a trading price of $26.81 next day following the launch.

Why IBIT?

IBIT poses lots of benefits to potential Bitcoin investors worldwide, allowing them to embrace crypto assets, exercise their rights to free sharing, and gain profits. Its ability to incorporate the traditional investment model into the crypto realm provides investors with the opportunity to leverage the price benefits of a digital asset in a traditional style.

IBIT makes it easy for investors to get into Bitcoin, all within the comfort of a regular brokerage account. Also, it allows you to forget the hassle of holding Bitcoin directly, as IBIT streamlines the process, easing operational burdens. Plus, it helps sidestep potential high trading costs and the complexities of tax reporting. Notably, IBIT boasts a track record of innovation, which ensures that you are getting quality with a history of excellence.

Final Thoughts

The advent of IBIT marks a remarkable milestone in the history of Bitcoin as people now have the opportunity to indirectly own portions of Bitcoin while they can easily keep their eyes on the performance of the price of Bitcoin.

IBIT has emerged as a compelling choice for investors seeking exposure to Bitcoin. By providing easy access within traditional brokerage accounts, IBIT addresses the operational challenges associated with holding Bitcoin directly, offering convenience and potentially lowering trading costs.

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FAQ

What is ETF?

An Exchange-Traded Fund (ETF) is like a stock that you can buy and sell on the stock market. It holds different things like stocks, commodities, or bonds.

What is ETP?

Exchange-traded products comprise exchange-traded funds (ETFs), exchange-traded notes (ETNs), and some other similar product types.

What is spot Bitcoin ETF?

Spot Bitcoin ETF invests directly in Bitcoin itself. If you own shares in a spot Bitcoin ETF, you essentially own a piece of Bitcoin.

What is futures Bitcoin ETF?

Futures Bitcoin ETF is a Bitcoin ETF that invests in contracts that predict Bitcoin’s future price, allowing investors to bet on its movements without owning Bitcoin.

What is iShares Bitcoin Trust?

iShares Bitcoin Trust is a Bitcoin spot ETF that seeks to reflect generally the performance of the price of Bitcoin while creating shares that represent partial ownership of the total Bitcoin it holds.

What are the key features of IBIT?

Among the key features of IBIT are accessibility, convenience, and cost-effectiveness.

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