Home Estate Planning IBIT is Bitcoin’s Trojan Horse for Institutions

IBIT is Bitcoin’s Trojan Horse for Institutions

0 comment

Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.

The last time Bitcoin was over $57,000 was December 2021. Back then, euphoria was still in the air after touching $69,000. Theories of a ‘super-cycle’ were being thrown around with serious confidence. When we look at Google search trends for Bitcoin today, we are at similar levels to November 2020.

Last cycle, Bitcoin broke its previous all-time high in December 2020. Is this the end of the beginning for Bitcoin’s bull market as price discovery awaits? 

On Monday, Bitcoin spot ETFs posted their highest trading volumes to date excluding launch day. This new record now sits at over $3.24 billion. IBIT, BlackRock’s bitcoin ETF, traded over $1.3 billion and was in the top 10 most traded ETFs globally.

The higher the volume, the greater the liquidity. Increasing liquidity opens up the gates for larger institutions to partake in the market with them being able to move sizeable amounts without damaging their profits.

This all adds to the legitimacy of Bitcoin becoming a viable asset class for these institutions and their investors. 

Amazon founder Jeff Bezos once said: “your margin is my opportunity”. BlackRock followed this method with IBIT. It was previously the lowest-fee ETF aiming to capture the market by competing through price. However, the explosion of assets under management (AUM) for IBIT to over $7 billion has led to their fees increasing.

When IBIT first launched, fees were 0.12% of AUM. There was a provision that when AUM exceeded $5 billion within the first 12 months, fees would double to 0.25% for assets over $5 billion.

IBIT’s current $7 billion AUM generates an estimated $11 million per year, or 0.06% of BlackRock’s $17.8 billion 2023 revenue. From a money-making perspective, the fees alone do not do much to move the needle for multi-trillion dollar asset managers like BlackRock. What enabling the Bitcoin ETF does provide is marketing exposure. IBIT and other Bitcoin ETFs are on track to be some of the best-performing ETFs this year.

Last year saw VanEck’s Crypto & Blockchain Innovators ETF top the leaderboard with a return of 255% for 2023. Nothing markets an ETF better than strong performance and high volumes. Asset managers and investors alike will all want a piece of this action. 

Last week, BlackRock also hosted their Institutional Digital Assets Summit which could be a factor for the surge in IBIT demand as institutions experience Bitcoin FOMO. The Bitcoin chart definitely conveys this image. For once, it seems like Bitcoin has a Goliath on its side: BlackRock’s.

You may also like

Leave a Comment

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?