How much bitcoin might BlackRock buy for its spot ETF?

Spot bitcoin ETFs would officially bring some of Wall Street’s most powerful players to crypto

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Artwork by Crystal Le

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Bitcoin ETFs have dominated the crypto zeitgeist ever since BlackRock threw its very valuable hat into the ring last year. 

Soon after, almost a dozen other issuers lined up behind Larry Fink and his $9 trillion powerhouse to launch their own spot funds in the US. 

Any approvals would mark the first-ever spot bitcoin ETFs on US exchanges, as the SEC has denied dozens of applications over the years. Similar products already trade in Canada and Europe. 

Fink’s vocal appreciation for the number-one crypto, alongside the raft of hopefuls in tow, is a symbolic win for crypto. Especially so considering Wall Street’s failures and repeated government bailouts are believed to have directly inspired bitcoin’s creation. 

A more cynical take would be that the rush is purely opportunistic. Fund issuers only see potential revenue in the form of management fees, so any allegiance held is purely to fiat rather than any cypherpunk ideals related to Bitcoin itself.

All told, there’s plenty to be bullish about finance giants circling bitcoin. And all the hype can be distilled into a single factoid: BlackRock and whoever else gains approval will have to buy and hold bitcoin. Maybe even lots of it, starting as early as this Thursday.

But exactly how much bitcoin will BlackRock et al have to buy? 

Rumor has it that BlackRock, for one, has $2 billion earmarked to cover day-one interest in its spot ETF, should the SEC allow it. 

Measuring the global market for bitcoin investment products potentially offers a solid indication of where this is all headed.

The interactive chart below sizes bitcoin investment products already listed around the world by their assets under management — split between physically-backed products like Purpose’s in Canada and those with synthetic exposure, such as ProShares’ BITO, a US-listed fund handling futures contracts.

The market for physically-backed bitcoin vehicles is much more competitive

(Grayscale’s Bitcoin Trust (GBTC) is not included due in part to its size. With $29 billion in bitcoin under management, GBTC would dwarf all other products on the market, rendering the charts pretty boring. Investment products holding a mix of digital assets were also excluded.)

  • The bitcoin investment product market is currently worth $10 billion without GBTC.
  • $6.3 billion is tied to physically-backed products, meaning they hold an equivalent amount of bitcoin (physically-backed products are worth $35.8 billion including GBTC).
  • $3.8 billion is with products with synthetic exposure to bitcoin through futures contracts.

Big jump in bitcoin under management after BlackRock filing

Investment products rarely disclose their bitcoin holdings day-to-day, which makes calculating exactly how much they hold outside of their financial disclosures difficult.

Going by their assets under management (AUM) hover provides a rough estimate. So, dividing AUMs of the 29 physically-backed bitcoin products on TrackInsight by bitcoin’s price gives us about 134,000 BTC held on behalf of their shareholders. 

That’s less than 1% of bitcoin’s circulating supply and one-fifth of GBTC’s treasury. Although, it isn’t to say that those products haven’t grown.

There’s 14 physically-backed bitcoin-only investment products with $100 million or more, and 13 of them are easily analyzed through TradingView data.

Note how quickly the top line shot up over the past year — far sharper than bitcoin’s price 
  • At the start of 2023, those products’ total AUM was $1.82 billion, estimated to be backed by almost 88,000 BTC.
  • The same products are now estimated to be holding more than 113,600 BTC ($5.3 billion) — a 29% increase.
  • Bitcoin’s price has practically tripled in that time.

Bitcoin-backed products listed outside the US did get a boost after BlackRock’s filing on June 16 last year — with estimated bitcoin holdings swelling by nearly half between then and now, representing $1.6 billion BTC at current prices.

It’s however tough to say what attracted those inflows: Bitcoin’s distinct uptrend since January 2023 or the anticipated buying pressure surrounding BlackRock’s ETF buzz. 

Interestingly, price and estimated holdings aren’t always correlated. The number of bitcoins held by the analyzed issuers apparently continued to rise between August 2021 and May 2022, during which time bitcoin fell 65% from $46,800 to $30,400.

The US market is far larger than Europe

The price of bitcoin had rallied 30% in the five months leading up to BlackRock’s ETF bid — which would’ve helped spur growth in investment products. The rate of growth in the wider crypto product market following the filing still indicates the filing pushed interest higher.

Whether that fresh capital sought to capitalize on buying pressure associated with successful spot ETF bids, or whether it aimed to profit on the speculation either way, is really moot.

Analysts reckon US investors will choose spot bitcoin ETFs based on their liquidity, brand and fees, with details of the latter dripping through official SEC channels ahead of the agency’s first deadline Wednesday.

For argument’s sake, let’s say BlackRock’s ETF attracts the most capital. How much bitcoin can we expect BlackRock to buy over the short term?

BTC Group’s BTCE was calculated to have bought the most bitcoin since BlackRock’s filing with 9,700 BTC ($454 million)

And let’s say the market interest in bitcoin ETFs mirrors that of gold funds: Europe’s largest gold product, Xetra-Gold ETC, is worth $13 billion. The largest fund in the US, SPDR Gold Shares ETF, is now worth more than $57 billion.

The top bitcoin-backed investment product in Europe is worth $1.17 billion. Using the same multiplier as the difference between gold markets (and still ignoring GBTC) would mean that BlackRock’s US-listed bitcoin ETF would have to buy up to $5.2 billion in bitcoin to satisfy analogous investor demand — which seems realistic. 

Bitcoin in total sees more than $39 billion in volume every day, diminishing any influence from BlackRock’s potential buying (unless it comes all at once, which is highly unlikely).

What’s clear is that ETF approval would officially bring some of Wall Street’s biggest operators to bitcoin markets, potentially for good. But it could well be that the hype around their participation has an even greater impact than the BlackRocks themselves.


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