by Introduction to Nasdaq’s Proposal for In-Kind Redemptions
In a significant move for the cryptocurrency market, Nasdaq has filed with the U.S. Securities and Exchange Commission (SEC) to initiate a proposed rule change that would allow for in-kind creation and redemption of shares for the BlackRock iShares Bitcoin Trust (IBIT). This development not only underscores the growing acceptance of Bitcoin exchange-traded funds (ETFs) but also indicates a shift towards more efficient trading mechanisms for institutional investors.
Understanding In-Kind Redemptions
In-kind redemption is a process that enables large institutional investors, known as authorized participants (APs), to directly exchange shares of an ETF for the underlying asset—in this case, Bitcoin (BTC). This mechanism allows APs to closely monitor demand for the ETF and respond swiftly by either buying or selling shares without the need for cash transactions. It streamlines the trading process and enhances liquidity, making it an attractive feature for institutional players in the cryptocurrency market.
Why Retail Investors are Excluded
It’s important to note that retail investors are not eligible to participate in this in-kind redemption process. This exclusivity is primarily aimed at institutional investors who possess the scale and resources to manage large transactions. Retail investors can still partake in Bitcoin investments through various means, such as purchasing Bitcoin directly or through traditional investment channels. For those interested in getting started, visit our guides on How to Buy Bitcoin and How to Buy Cryptocurrency.
The Background of BlackRock’s IBIT
BlackRock’s iShares Bitcoin Trust has made headlines since its launch, being the largest spot Bitcoin ETF available. Within its first year, the fund attracted nearly $40 billion in inflows, marking it as the most successful ETF debut in history. The SEC’s approval of spot Bitcoin ETFs, including IBIT, last January initially permitted cash redemptions, which drew mixed reactions from the financial community.
Criticism of the SEC’s Initial Approval
Critics argue that the SEC’s initial approval of cash-only redemptions dampened the potential efficiency of Bitcoin ETFs. Bloomberg Intelligence ETF analyst James Seyffart commented on social media platform X, stating, “It should have been approved in the first place but Gensler/Crenshaw didn’t want to allow it for a whole host of reasons they gave. Mainly [they
