What is BlackRock’s IBIT spot bitcoin ETF?

BlackRock's iShares Bitcoin BTC -0.83% Trust (IBIT) spot bitcoin exchange-traded fund (ETF) is a financial product allowing investors to gain exposure to bitcoin's price movements without owning the cryptocurrency itself. Unlike futures-based ETFs, which derive value from bitcoin futures contracts, a spot bitcoin ETF holds the underlying asset directly.

BlackRock filed for the iShares Bitcoin Trust with the SEC on June 15, 2023. It took just seven months for it to get approved. The U.S. Securities and Exchange Commission (SEC) approved IBIT and 10 other spot bitcoin ETFs on Jan. 11, 2024.

Investors can buy into IBIT through existing brokerage accounts on the NASDAQ stock exchange.

What is a spot bitcoin ETF?

In traditional financial markets, an ETF is a type of investment fund traded on stock exchanges. It typically holds assets such as stocks, commodities or bonds and trades close to its net asset value (NAV) over the course of a trading day. ETFs allow investors a way to diversify their portfolios and gain exposure to various asset classes with relative ease. 

A spot bitcoin ETF holds actual bitcoin as its underlying asset. This allows investors to participate in bitcoin's price movements without needing to purchase and store the cryptocurrency, which can be complex and risky for some investors.

Since ETFs are traded on traditional stock exchanges, they typically offer higher liquidity than cryptocurrency exchanges. This liquidity can make it easier for investors to buy and sell shares of the ETF at prevailing market prices without significantly impacting the market.

Spot bitcoin ETFs are also subject to regulatory oversight. This gives investors a sense of security and protection that may not be present when dealing with unregulated cryptocurrency exchanges. Regulatory oversight can help mitigate risks such as fraud, manipulation and operational issues.

What is IBIT's issuer BlackRock? 

BlackRock is a global investment management corporation based in the United States. It is one of the largest asset management firms in the world, with $10 trillion in assets under management for institutional and retail clients as of Dec. 31, 2023.

BlackRock offers a wide range of investment products and services, including mutual funds, ETFs, retirement planning, risk management and advisory services. The company is known for its expertise in portfolio management, risk assessment and investment research and plays a significant role in global financial markets.

What fees does IBIT charge?

IBIT's sponsor fee is 0.25% as of March 2024. This may be subject to change.

A sponsor's fee is a payment imposed by the ETF issuer, in this case, BlackRock, for managing and operating the fund. Starting from January 11, 2024, BlackRock temporarily reduced the fee to 0.12% for the fund's first $5 billion of assets. As of March, BlackRock had already broken past this figure.

How does BlackRock's ETF differ from other spot bitcoin ETFs?

BlackRock's IBIT was one of the first spot bitcoin ETFs to reach $1 billion in trading volume. IBIT also maintains high assets under management and sees a large share of positive USD inflows compared to other spot bitcoin ETFs, according to data compiled by The Block. 

BlackRock and Fidelity stand out from other spot bitcoin ETFs through their brand recognition, shown by their dominance in the market for these ETFs. They also offer competitive fees, similar to some ETFs, like VanEck's, but much lower than Grayscale's.

How does BlackRock custody its bitcoin?

Crypto exchange Coinbase is the custodian of IBIT's bitcoin. Specifically, one of Coinbase's legal entities, Coinbase Custody Trust Company, also known as Coinbase Prime, oversees BlackRock's bitcoin for the fund. Coinbase Prime provides storage, staking, governance, decentralized finance and other services to large financial institutions.

Institutional custody refers to the secure storage and management of digital assets for institutional clients, such as investment funds, hedge funds, corporations and other large entities. Institutional custody solutions meet the unique needs and requirements of institutional investors, who often hold significant amounts of digital assets and must have robust security, compliance and operational capabilities.

Are BlackRock's Bitcoin addresses public?

Yes, though BlackRock will not say publicly that it is. The blockchain analytics platform Arkham Intelligence found IBIT's public bitcoin addresses, although BlackRock has not confirmed this. The address likely shows the current amount of bitcoin that Coinbase is custodying for BlackRock.

It is possible to see when bitcoin is sent to and from the address. Anyone can also send bitcoin to the address, which can be seen on a block explorer.