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The BlackRock Bitcoin ETF gives investors direct exposure and claim to actual Bitcoin, instead of Bitcoin derivatives. Learn more about it here.

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In 2017, BlackRock CEO Larry Fink called Bitcoin an “index of money laundering.” Yet, with the asset manager’s latest announcement of their own Bitcoin Spot ETF filing, the tide has definitely shifted. If you’re wondering about the latest catalyst to cause the spike in

, it’s that a trillion-dollar asset manager like BlackRock has turned bullish for Bitcoin. While this isn’t the first time a big-name institution is revealing its intentions to invest in crypto, it’s definitely surprising for an asset manager as big as BlackRock to attempt to make Bitcoin more available to the mass market. 

Is this new and exciting development that further blurs the worlds of traditional finance and crypto a boon or bane for crypto? In this article we’ll explore Bitcoin ETFs and discover how BlackRock’s spot ETF switches things up from conventional Bitcoin futures ETFs.

Thus far, the SEC has only approved Bitcoin

ETFs, leaving Bitcoin spot ETFs on the back burner. While typical retail investors might not be jumping for joy due to the announcement of BlackRock's Bitcoin ETF application, institutional investors will be excited to know that their options for Bitcoin exposure will widen. This is because smart money typically has specific mandates and rules that prohibit it from investing in Bitcoin directly. Later, we'll elaborate on the effect of these large-scale investors buying in.

Despite recently making headlines with its application for a Bitcoin ETF and signaling its entrance into the world of digital assets, BlackRock has always been a force to reckon with in the world of traditional finance. When it comes to asset management companies, BlackRock is one of the world's largest, thanks to its trillions of dollars in assets under management (AUM). 

Founded in 1988, the company provides a range of services and products to fund investors, pension funds, governments, corporations and financial institutions around the world. With its massive size and presence in traditional finance, BlackRock has an opportunity to become one of the most influential players in cryptocurrency investing with this Bitcoin ETF filing.

Like its competition, the BlackRock Bitcoin ETF will attempt to track the price of the coveted cryptocurrency. However, what makes BlackRock's Bitcoin ETF special is that it's a spot ETF. This means investors purchasing the BlackRock Bitcoin ETF will finally have direct exposure and claim to actual Bitcoin, instead of Bitcoin derivatives, such as futures or swaps.

Before diving into specifics, it’s key to understand how spot ETFs work. In order for a spot ETF to function, it must physically own and be backed by its underlying asset. In the case of a Bitcoin spot ETF, this means the institution offering Bitcoin must own the equivalent amount of Bitcoin and keep it in reserve to represent each share of publicly traded BlackRock Bitcoin ETF.

How the BlackRock Bitcoin Spot ETF Will Work

In establishing its Bitcoin spot ETF, BlackRock will first set up custodian accounts with banks and other financial institutions that will hold the underlying Bitcoin for investors. These custodians will be responsible for managing, storing and safeguarding the assets of the fund on behalf of its investors. 

In this way, BlackRock will give investors access to Bitcoin without their having to buy or store the cryptocurrency themselves. Additionally, it will provide a much more liquid marketplace, since investors won’t need to worry about buying and selling large amounts of Bitcoin at a time.

While these might seem like small catalysts in the grand scheme of things, they’ll have huge ramifications for crypto in the institutional space, more of which we’ll cover in our next section.

Why Is Everyone Excited Over BlackRock’s Bitcoin ETF?

in crypto, you’re probably wondering why investors are getting their hopes up when it comes to

. After all, Bitcoin ETFs such as ProShares Bitcoin Strategy ETF (

) already exist, so there seems to be no reason to get excited about another Bitcoin ETF — right?

This is where the idea of mainstream adoption and bulk buying from institutions comes into play. 

BlackRock will need to purchase Bitcoin for its reserves when issuing its spot Bitcoin ETF. As BlackRock is an asset management company with trillions in AUM, this will likely result in a surge in buying volume for BTC as they build up their Bitcoin reserves over time. This announcement might also cause speculators to jump on the bandwagon, and buy in due to the fear of missing out (FOMO) on unrealized crypto gains. This two-pronged buying frenzy will likely cause a BTC price surge if regulators approve BlackRock’s BTC ETF.

While all of the above sounds great, there’s still one big problem: If BlackRock’s spot Bitcoin ETF isn’t approved by regulators, all of this excitement will be for naught.

Thankfully, BlackRock has had an impressive and extensive record of getting things across the legal line. With more than 500 ETF approvals and a history of meeting market demand for its products, the company has demonstrated a remarkable ability to navigate the regulatory landscape when it comes to getting its funds to market. This reputation alone is a huge reason why there’s been a recent rally in Bitcoin prices, as speculators are expecting the asset management giant to announce the ETF launch in the coming months.

As mentioned above, BlackRock's Bitcoin ETF has the potential to be the first crypto spot fund on the market. This makes it unlike the rest of the market, which offers Bitcoin futures ETFs (since they actively track the price of Bitcoin futures contracts, rather than the actual price of Bitcoin itself). The effects of this milestone will be monumental, since institutions will have much more accessible exposure to Bitcoin without having to purchase or manage the digital asset itself, resulting in a new wave of investments into the crypto space. These range from institutional investors attempting to build up their Bitcoin reserves to FOMO retail buyers who may not have the means or knowledge to buy and manage digital assets on their own.

Since the ETF filing announcement on Jun 16, 2023, Bitcoin has seen an explosive rally from $25,000 to more than $30,000. Given its recent high-volume price movement, BTC prices will likely exhibit exhaustion and experience some form of price correction in the short term. We foresee it retesting the $30,000 price zone, as it was a former

 BTC easily broke through that now acts as an area of demand for BTC buyers. 

In the long run, if BlackRock gets its Bitcoin spot ETF approved, we foresee it going to $35,000 to $40,000 as a buying frenzy might recur, in which retail crypto traders attempt to take advantage of the short-term euphoria. However, if regulators reject the ETF application, we might see a mass sell-off as retail crypto traders panic-sell their BTC holdings, sending prices back toward $25,000.

BlackRock’s Bitcoin Spot ETF vs. Bitcoin Futures ETFs

Ownership is a major point when comparing a Bitcoin spot ETF to Bitcoin futures ETFs. As the institution offering the spot ETF will have to own the Bitcoin in its reserves, it can track the actual price of Bitcoin directly, rather than the price of a futures contract that’s dependent on the buying and selling of speculators. Therefore, rather than relying on contracts that have been agreed upon at some point in the future to estimate the value of Bitcoin, a spot ETF uses the current market price and reflects more of what’s currently happening within the crypto space.

Instead of viewing pricing based on Bitcoin futures contracts as a downside, Bitcoin futures ETF buyers have a different perspective. Since Bitcoin futures ETFs are tied to contracts with predetermined expiration dates and fixed prices, they can more conservatively provide stability for investors who don’t want to take on too much risk due to Bitcoin’s volatility.

Will BlackRock Bitcoin ETF Be a Good Investment?

BlackRock Bitcoin spot ETF's main targets seem to be institutional investors bound by regulations, as well as retail investors who aren’t experienced in buying crypto. Therefore, crypto-savvy investors and traders with investing in mind would be better off buying actual Bitcoin because of possible tracking errors, management expense fees and worse spread that may arise due to a lack of liquidity. However, if there's a sudden trading opportunity that presents itself, then there's definitely no harm in buying and selling some of BlackRock’s Bitcoin ETF shares. As always,

 before choosing to invest in any cryptocurrencies, including the BlackRock Bitcoin ETF. 

The journey to bringing a Bitcoin spot ETF to market has been a long one, but its success could pave the way for future digital asset products now that a heavyweight institution like BlackRock has entered the fray. While it makes more sense for retail Bitcoin investors to continue to

into their preferred crypto asset because of management expense fees and tracking errors, approval of the BlackRock Bitcoin ETF will send a message to the masses that institutions are on board with crypto — and that the digital asset scene is far from being dead, as mainstream media has proclaimed. 

From this perspective, the BlackRock Bitcoin ETF is certainly bullish for the crypto industry. By assisting in the creation of a product such as an ETF, regulatory bodies will be able to establish standard procedures for investing in cryptocurrencies while also providing added security for investors’ assets. This could help to legitimize the cryptocurrency industry and give it greater credibility with potential adopters.

BlackRock Bitcoin ETF: Exploring What It Is and Its Impact on Bitcoin Prices

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