BlackRock files for Bitcoin ETF that caps losses and gains

Key points

• The iShares Bitcoin Managed Protection ETF would trade under the ticker PBIT and was filed with the SEC on 19 Oct.
• Each options tranche would initially limit losses to about 10% of the reference asset's starting value, before expenses.
• The fund would not hold Bitcoin or Bitcoin ETPs directly, using FLEX options, cash and investment-grade bonds instead.

BlackRock has filed for a Bitcoin ETF that aims to soften market falls at the cost of some upside. The asset manager submitted a registration statement with the SEC on 19 Oct for the iShares Bitcoin Managed Protection ETF, which would trade as PBIT, Bitcoin.com News reports.

The fund would not hold Bitcoin or Bitcoin exchange-traded products directly.

The strategy would generally run three overlapping sets of options, or tranches, starting in different months. Each would pair purchased call options, struck at roughly 10% below the reference asset's starting value, with sold calls that cap gains above a set price. That would initially limit losses to about 10% of the starting value per tranche before expenses, though the filing says this is not a guaranteed cap for shareholders.

Selling calls would fund the protection but restrict returns in rallies, so PBIT could lag Bitcoin in rising markets. IBIT, by contrast, tracks Bitcoin's price without the protection overlay and held about $65.3bn in net assets as of 16 Oct. BlackRock's income-focused BITA launched on 16 June. The PBIT filing becomes effective 75 days after 19 Oct, and the management fee is not yet set.

What to watch: The registration statement is set to become effective 75 days after 19 Oct, and no sales are allowed until then.

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