The most money-making in history – BlackRock's spot Bitcoin ETF "IBIT"

BlackRock's iShares Bitcoin Trust (IBIT) is creating a myth of issuance in the ETF industry.

This Bitcoin ETF, established only 11 months ago, has accumulated over $50 billion in assets, reaching this milestone nearly five times faster than the previous record, making it one of the most successful products in ETF history.

In terms of daily trading volume, IBIT holds over 50% market share among similar products. Based on its current asset size and a fee rate of 0.25%, the annual management fee income for this product is expected to reach $112 million.

Currently, the product's managed assets have surpassed BlackRock's gold ETF (the second largest gold fund globally), and the average daily trading volume of its options products has reached as high as $1.7 billion, far exceeding other similar products.

As a product under BlackRock, the world's largest asset management institution, IBIT's success not only opens up new business growth points for the company but also becomes a key force in pushing Bitcoin prices to break the $100,000 barrier, attracting a large number of institutional investors and previously skeptical individual investors.

Nate Geraci, president of consulting firm The ETF Store, described the product as "the greatest launch in ETF history."

A Difficult Path to Break the Ice

The journey of spot Bitcoin ETFs in the U.S. market has not been smooth sailing.

In 2013, when Bitcoin's price was still below $100, the Winklevoss brothers made the first attempt to apply for a Bitcoin ETF but were rejected by the U.S. Securities and Exchange Commission (SEC).

For many years thereafter, similar applications were not approved. It wasn't until digital asset company Grayscale won a key judicial victory, coupled with BlackRock's strong entry, that the approval of spot Bitcoin ETFs was finally pushed through.

Notably, BlackRock CEO Larry Fink's attitude towards Bitcoin has undergone a significant transformation. He once criticized Bitcoin as a tool for money laundering but later changed his stance, viewing it as "digital gold."

In January 2024, 12 institutions, including BlackRock, Fidelity, VanEck, and Grayscale, were granted permission to issue the first batch of ETFs that directly invest in Bitcoin, which currently collectively hold about $107 billion in assets.

Record Growth Rate, New Darling of the Derivatives Market

Among the many Bitcoin ETFs, IBIT stands out particularly.

Bloomberg Intelligence analyst Eric Balchunas stated that it reached the $50 billion scale five times faster than the second-fastest ETF (BlackRock's own iShares Core MSCI EAFE ETF), which took nearly four years to reach this milestone.

Based on a fee rate of 0.25%, IBIT is expected to generate about $112 million in annual revenue for BlackRock. Since its launch, the fund has only experienced 9 days of net outflows, averaging over 50% of the daily trading volume of similar products.

IBIT's success is also reflected in the activity of its derivatives market. Since the launch of options trading on November 19, IBIT options have become one of the most actively traded varieties in ETF options, with an average nominal trading volume of $1.7 billion A report from research firm Asym500 points out that the trading volume of Bitcoin ETF options for the second and third ranked Fidelity and Grayscale is only about 1% of IBIT:

"Despite the presence of thousands of ETFs in the U.S., with over a thousand listed options, establishing institutional-level options liquidity has proven quite difficult.

In the past three months, only 13 ETFs had an average daily notional trading volume exceeding $1 billion."

Reshaping the Industry Landscape

In this revolution of crypto assets, the market landscape is quietly changing.

The asset size of IBIT has surpassed that of BlackRock's gold ETF (the second largest gold fund globally), and Nate Geraci expects that if Bitcoin prices do not experience a significant decline, IBIT is likely to surpass the SPDR Gold ETF by 2025, becoming the largest commodity ETF.

Meanwhile, BlackRock's main competitor Vanguard has chosen to completely avoid the Bitcoin ETF market, even prohibiting its brokerage clients from trading such products.

Geraci stated:

"Vanguard may alienate younger investors who view cryptocurrencies as standard portfolio assets, allowing its biggest competitor to position itself as a 'more forward-looking and innovative asset manager.'"