One Streak Snaps, Another Stacks

Last year the world’s largest asset manager, BlackRock, launched a spot bitcoin private trust for U.S. institutional clients. This week it’s trying to bring that exposure to everyday investors through a spot Bitcoin ETF, despite the Securities & Exchange Commission (SEC) stopping all previous attempts in their tracks. 🛑

Let’s dive into what’s going on. 👇

BlackRock submitted an iShares Bitcoin Trust application to the SEC this week. In its filing, it describes the purpose saying, “The shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding, and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange.”

The regulator is presently battling with Grayscale over whether it should be allowed to convert its Grayscale Bitcoin Trust into an ETF. While there are currently exchange-traded products that track tied to Bitcoin or other crypto futures, a spot ETF would track the underlying asset’s price more closely and likely at a much lower cost.

However, the key concern expressed by the SEC has been the potential for market manipulation related to Bitcoin prices. To address that, BlackRock is partnering with Nasdaq to enter into a surveillance-sharing agreement with an operator of a spot trading platform for Bitcoin.

Its application also differs in that a Delaware statutory trust will issue the Trust, which will operate under a trust agreement between BlackRock, the Trustee, and a Delaware Trustee. Other proposed ETFs have typically been structured as investment trusts.

Additionally, BlackRock will build on its existing Coinbase partnership, naming it the Bitcoin custodian for the proposed ETF. 🏦

Whether or not these changes will be sufficient to get past the SEC’s judgment remains to be seen. 🤷

Nonetheless, for BlackRock to file this at a time when the SEC is taking an enforcement-first approach toward crypto means they feel confident in their due diligence and think they have a decent chance of getting it passed. Additionally, the filing shows that despite skepticism across Wall Street and Main Street, the world’s largest asset manager has some confidence in the longevity of the asset class.

Or, maybe they’re just keeping their hat in the ring in case Grayscale wins its lawsuit. A win for Grayscale would open the floodgates for more spot Bitcoin ETFs to be passed, so asset managers want to ensure they’re in the queue. It could be the case that BlackRock is just covering its bases. 🌊

Nevertheless, it’ll likely be months before we have an answer from the SEC. For now, the markets have some optimism due to BlackRock’s apparent vote of confidence in the space. 👍

We know pulling people’s attention away from stocks is tough, especially when they’re rallying. But as we close out the week, we wanted to point out that many of this week’s top-performing assets were commodities.

The chart below from Finviz shows that nine of the top ten performers this week were commodity futures, with Natural Gas topping the list at +16.19%. 🤩

That’s in stark contrast to the last year, where many of these same commodities fell aggressively as supply chains improved and the Fed worked to bring down demand. But now that many in the market believe that inflation has been tamed and the U.S. economy remains intact, could there be a potential for a rebound? 🤔

It’s a question a select group of investors are considering. Very often, the risk that matters is the one that people have forgotten about. And right now, little attention is being paid to commodity prices as they begin to move up again.

Time will tell if this trend continues to develop. Nonetheless, we thought putting on everyone’s radars as we head into the second half of the year was worthwhile. 👀