30 Fund Managers Have Declared Ownership of BlackRock’s Bitcoin ETF, ‘Tip of the Iceberg,’ Expert Says
Bloomberg ETF expert Eric Balchunas offers insight into emerging trends, highlighting the current state of ownership and the potential for further growth.
Asset manager Blackrock has become the leader in the Bitcoin ETF race in terms of inflows with its IBIT ETF, which is attracting increasing attention from institutions as a key development demonstrating its success.
Many fund managers have flocked to invest in the BlackRock ETF, indicating growing interest in digital assets among traditional financial institutions.
BlackRock IBIT ETF Gains Ground with 30 Fund Managers
According to Eric Balchunas, around 30 fund managers, mainly funds and consultants, have already invested in IBIT. While this currently represents just 0.2% of shares outstanding, Balchunas believes this is just the “tip of the iceberg,” indicating the potential for broader adoption and greater ownership.
Balchunas’ analysis also reveals an intriguing trend in the form of “nibbling” among investors. The small percentage of portfolio numbers associated with IBIT ETF holdings indicates cautious but persistent interest among institutional investors. This suggests a gradual build-up to the stock as fund managers cautiously embrace Bitcoin exposure through BlackRock’s offering.
While BlackRock currently leads the Bitcoin ETF race, Fidelity’s FBTC ETF emerges as second. Balchunas reports that Fidelity’s offering has attracted 11 investors, representing a comparable 0.2% of shares outstanding.
Bitcoin ETF Market Makers and Flows
Since Friday, most Bitcoin ETFs in the US market have had no inflows, which has recently caught the attention of ETF experts who are shedding light on the complexities of ETF flows. James Seyffart, an ETF expert, provides insight into the dynamics of flows within the Bitcoin ETF landscape. With nearly 3,500 ETFs in the United States, Seyffart emphasizes the normality of ETFs experiencing zero flows on any given day.
He also delves into the concept of units of creation, and explains the conditions under which shares are created or redeemed, highlighting the importance of supply and demand dynamics in driving ETF flows.
Seyffart explains the concept of creation units, blocks of shares in which ETF shares are created and redeemed. Each ETF can have a creation unit of different size, and in the case of Bitcoin spot ETFs, the creation units range from 5,000 to 50,000 shares.
He clarifies that shares are created or redeemed when there is a significant mismatch between supply and demand that exceeds the threshold of one creation unit. This mismatch must also justify access to the underlying market and be larger than the size of a creation unit. In the ETF market, market makers are crucial in facilitating trading and managing flows.
Seyffart explains that market makers trade stock-like stocks when minor mismatches occur between supply and demand. However, the expert notes that for market makers to interact with authorized participants (APs) and the underlying market, a unilateral mismatch greater than one unit of creation in either direction is required. This ensures that the cost of creating or redeeming shares is lower than that of hedging and creating markets using traditional methods.
On Monday, BlackRock was the only fund with inflows since Friday. Specifically, the IBIT Bitcoin ETF recorded net inflows of $73.4 million on April 15, following a decline from $111.1 million on Friday. By contrast, the other eight ETFs, excluding Grayscale’s GBTC, reported zero flows over the past two days, according to data from SoSo Value.
Currently, BTC is trading at $61,800, a drop of more than 4% in the last 24 hours and 10% in the last seven days.
By Audy Castaneda