Asset manager BlackRock disclosed in its most recent filing with the US SEC that in October 2023, it obtained $100,000 in initial funding from an unidentified investor to support its spot Bitcoin exchange-traded fund (ETF).
The agreement stipulated that the investor would acquire 4,000 shares of the Seed Creation Baskets on October 27, 2023, for $100,000 (or $25.00 per share), acting as a “statutory underwriter concerning the Seed Creation Baskets,” according to the SEC filing.
BlackRock’s most recent filing also disclosed specifics regarding the asset manager’s strategy for remitting the sponsor’s fee, which involves obtaining short-term trade credit in the form of Bitcoin or currency from the trade credit lender.
BlackRock may “charge their fees” through a loan rather than selling Bitcoin (the ETF asset). Thus, they “do not significantly affect the price of Bitcoin.”
The trade-credit settlement will take place on the business day after the date of execution. This process will incur a financing fee equal to the product of 11% and the federal fund’s target rate, divided by 365 ((11% + fed funds target)/365).
As an illustration, consider a hypothetical scenario in which the Fed funds target rate was 5.50% on November 20, 2023. In that case, the financing charge for the borrowed funds would be 11% plus 5.5% divided by 365.
ETF analyst Eric Balchunas characterized the recent disclosures as a peculiarly intriguing progression.
July saw BlackRock among the first institutional behemoths to propose a spot Bitcoin ETF. One of thirteen applications awaiting a decision from the SEC is that of BlackRock.
Although the SEC has previously denied applications for spot BTC ETFs, market analysts anticipate that the SEC will likely approve the first spot BTC ETF in the United States by early 2024.
