- BlackRock is expanding its crypto offering with a product that differs significantly from the classic spot ETF. The new “iShares Bitcoin Premium Income ETF” is intended not only to reflect the Bitcoin price, but also to generate ongoing income.
- To achieve this, BlackRock relies on an active options strategy that is based on its own Bitcoin holdings, in this case the IBIT shares. The relevant documents have already been submitted to the SEC and approval is awaited.
The new ETF is intended to combine Bitcoin exposure and cash flow. The fund combines physically deposited Bitcoin positions with the systematic sale of call options. The option premiums collected form the basis of the regular distributions.
It is a profile aimed at investors who want to hold Bitcoin but at the same time want a steady stream of income. The downside: If the Bitcoin price rises sharply, the calls sold limit the upside potential.
BlackRock is nevertheless deliberately positioning the product in this segment because the success of the spot ETF IBIT has shown that regulated Bitcoin exposure products are now suitable for the masses. The next step is an income product that appeals to more conservative investor groups.
Structure, custody and regulation
The fund may hold physical Bitcoin as well as IBIT shares and cash. The digital assets are held by Coinbase Custody, while BNY Mellon looks after the classic securities and cash holdings. The options strategy is actively managed, allowing BlackRock to flexibly adjust the premium levels, terms and strikes to market conditions.
The SEC will have to address the question of how such a product fits into the existing regulatory framework. Although covered call ETFs have long been established in the equity sector, the combination of Bitcoin exposure and options trading is more complicated from a regulatory perspective. The planned stock exchange is the Nasdaqthere is no ticker abbreviation yet.
Effects on the market and competition
If approved, the ETF will change the dynamics of the Bitcoin options market. Systematic call selling increases the supply of short volatility, which tends to decrease implied volatility. At the same time, competition is emerging for existing products such as the NEOS Bitcoin Income ETF, which already manages over a billion dollars. However, BlackRock brings with it enormous brand power and sales force, which should give the segment an additional boost.
What this means for the market is that Bitcoin is becoming an asset that not only offers long-term investment potential, but can also serve as a regular source of income in the short term.
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