BlackRock, the global asset manager, made an update to its Bitcoin exchange-traded fund (ETF) prospectus on April 5. The update revealed that five major Wall Street firms, ABN AMRO Clearing, Citadel Securities, Citigroup Global Markets, Goldman Sachs, and UBS Securities, have been added as new authorized participants. This information was disclosed in the document that amended BlackRock’s S-1 registration statement with the Securities and Exchange Commission.
Authorized participants play a critical role in the operational mechanism of the BTC ETF. They have the ability to create and redeem shares of the ETF by exchanging them for a corresponding basket of securities that reflect the ETF’s holdings or exchanging them for cash. Previously authorized participants in the ETF included JPMorgan Securities, Jane Street Capital, Macquarie Capital, and Virtu Americas.
According to Bloomberg analyst Eric Balchunas, the inclusion of these new firms indicates that “big time firms now want a piece of the action and/or are now okay being publicly associated with this.”
The Securities and Exchange Commission’s (SEC) position on the cash creation and redemption mechanism for Bitcoin ETFs was primarily aimed at mitigating market manipulation risks associated with transactions. The cash mechanism means that new shares of a Bitcoin ETF can only be created or redeemed through cash transactions, unlike the traditional in-kind model where market participants directly handle the underlying assets. This approach was developed to prevent intraday price manipulation, as proposed by asset managers like Hashdex. Following the SEC’s guidance, other asset managers, including BlackRock, ARK Invest, and Grayscale, have incorporated this mechanism into their filings.
In March, Bitcoin ETFs experienced a surge in trading volume, reaching $111 billion. However, some analysis suggests that the demand for the product is cooling down. BlackRock’s IBIT continues to dominate trading volume and assets under management, followed by Grayscale’s and Fidelity’s funds. According to data from Bitmex Research, BlackRock’s IBIT assets reached $17.6 billion on April 1.