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BlackRock to inject $10M in seed funds ahead of Bitcoin ETF approval

BlackRock is injecting $10 million into the seed fund designated for its proposed spot Bitcoin exchange-traded fund after revising and amending its S-1 application ahead of the anticipated approval date of January 10.

On December 22, multiple firms like BlackRock, Hashdex and Pando Asset revealed revised presentations and amended S-1 filings following an SEC meeting with all applicants. BlackRock’s focus centered on their application, outlining the introduction of the “seed creation basket” slated for January 3, 2024, one week before the anticipated approval date.

According to a news prospectus, the leading asset management company anticipates seeding its investment product with $10 million, a 100-fold increase from the initial $100,000 seeding in October.

“On January 3, 2024, the Seed Shares were redeemed for cash and the Seed Capitol Investor purchased the Seed Creation Baskets, comprising 400,000 Shares at a pre-share price of $25.00,” detailed the filing.

“Total proceeds to the Trust from the sale of the Seed Creation Baskets were $10,000,000.”

A post by Bloomberg analyst Eric Balchunas highlighted that the Authorized Participants, although unnamed at the moment, will not engage in direct handling of Bitcoin. Instead, they will solely receive cash during the redemption of Shares. Moreover, these Authorized Participants will not be involved in the direct or indirect purchase, possession, delivery or receipt of Bitcoin during the creation or redemption process.

Seeding is the process of planting the first investment that helps an ETF to launch and become available for trading. This capital is used to generate units underlying the ETF, facilitating shares for investors in the open market. Pre-launch seeding of a financial product shows that those involved are confident in its success.

The fund injection does not guarantee an instant launch. However, according to Bloomberg Intelligence ETF analyst James Seyffart, the ETF is potentially heading toward a near-future launch in January.

“Looking like BlackRock is *planning* to make moves on Jan 3rd… But maybe means BlackRock would be expecting a launch to happen shortly after?” Seyffart wrote in a series of tweets on X.

BlackRock’s decision to seed its pending ETF aligns with a comparable action taken by ETF and Mutual Fund Manager VanEck. Earlier in October, VanEck announced its intention to seed its Bitcoin ETF with 50,000 shares backed by BTC.

ETF marketing

With the impending deadline for approving a spot Bitcoin ETF, experts suggest a marketing battle has begun among issuers to secure a portion of a market projected to hold substantial value. Bitcoin advocate Anthony Pompliano foresees the approval of the Bitcoin spot ETF and predicts institutions will invest millions in promotional efforts dedicated to Bitcoin-targeted promotional efforts.

Last month, ARK Invest CEO Cathie Wood told etf.com her forecast of an extensive marketing surge following the approval of spot bitcoin funds. According to Wood, smaller firms like ARK will need to deploy all their resources to compete with industry giants such as BlackRock Inc. and Fidelity Investments.

The VanEck fund group, for example, aired “Enter the Ether” advertisements on its X platform during the introduction of the initial ether futures ETFs while consistently releasing research focused on cryptocurrencies.

The marketing rush began with Bitwise Asset Management initiating promotions for their Bitcoin ETF products. Bitwise launched its first video ad on X on Monday, starring actor Jonathan Goldsmith, who highlights, “You know what’s captivating these days? Bitcoin.”

These promotional events are crucial, as highlighted by Bitwise chief investment officer Matt Hougan during an August webinar. According to Hougan, a U.S. spot bitcoin ETF could draw approximately $55 billion in net flows within its initial five years on the market.

While numerous companies have been intensifying their promotional efforts, BlackRock has taken a different approach by subtly honing its strategy. Recent indications suggest that the firm is concentrated on fortifying and ensuring the success of its ETF instead.