Investment management giant BlackRock filed an amended version of its spot Bitcoin ETF S-1 application form on Wednesday, following numerous updated filings from rival firms.
The updated filing includes five additional pages of text warning of additional risks the fund’s investors may face, including risks related to Bitcoin itself.
Bitcoin Lacks Transparency, Says BlackRock
In the filing dated October 18, BlackRock modified a risk disclosure related to how its share prices can be impacted by chaotic events in the crypto industry at large. While previously addressing how fraud and security failures around major Bitcoin exchanges could affect the fund, BlackRock expanded its warning to include Bitcoin itself, whose market is “unregulated” and “lacks transparency.”
“Due to the unregulated nature and lack of transparency surrounding the operations of digital asset exchanges… as well as the wider bitcoin market, the value of bitcoin and, consequently, the value of the Shares may be adversely affected, causing losses to Shareholders,” wrote BlackRock.
The filing cited data from 2019 claiming that 80.95% of spot Bitcoin volume was “false or noneconomic in nature” – particularly that volume being traded outside of U.S. regulated venues. More recent analysis from Bitwise, a rival ETF applicant, suggests that fake volume as a share of total BTC volume is far less than it was four years ago, though it is still significant.
Regarding such rivals, however, BlackRock’s amendments acknowledge the fierce competition the company faces from other applicants, which may absorb market share from BlackRock’s own product. “There can be no assurance that the Trust will achieve initial market acceptance and scale due to competition.”
According to Bloomberg ETF analyst James Seyffart, eleven different companies besides BlackRock are racing to launch a spot Bitcoin ETF as of October 17.
The new applications also explain how BlackRock will calculate Bitcoin’s price, using an aggregate from several spot Bitcoin exchanges to form its benchmark.
Progress on ETFs
In an interview on Monday, Ark Invest CEO Cathie Wood noted a change in behavior from the SEC concerning its tone toward ETF issuers, given its willingness to ask constructive questions regarding their applications.
“The fact that the SEC chose to ask questions is a change in behavior,” said Wood. “Therefore, I do think hopes are rising that a – or a number of – Bitcoin ETFs will be approved.”
Galaxy Digital CEO Mike Novogratz is equally bullish, predicting on Wednesday that a spot Bitcoin ETF will likely be greenlighted within the next three months.
After Bitcoin pulled above $28,000 earlier this week, BlackRock CEO Larry Fink called the asset’s rally a “flight to quality.”
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