BlackRock has applied to the U.S. Securities and Exchange Commission (SEC) for a Bitcoin Premium Income ETF. If accepted, the fund joins the first exchange-traded products created to offer exposure to Bitcoin while simultaneously generating revenue using cryptocurrency-related options methods.
The Bitcoin Premium Income ETF would use a different approach than current spot Bitcoin ETFs, which follow the asset’s price directly, according to the filing. Rather, the fund would utilize an overlay based on options to combine holdings of spot Bitcoin or Bitcoin-related assets.
To profit from premiums paid by market participants, it would specifically employ a covered call strategy, selling options on its Bitcoin holdings.
This strategy is similar to income-oriented exchange-traded funds (ETFs) in the stock markets, which aim to provide returns by generating option premiums in addition to any capital gains or losses of the underlying asset. Investors seeking to smooth returns and mitigate downside risk during volatile periods may find that this design provides exposure to Bitcoin.
BlackRock Advances Digital Assets Strategy
The application showcases the various methods for crypto integration being investigated by major financial organizations. According to BlackRock’s filing, the company is interested in creating yield-generating vehicles that may appeal to a broader spectrum of investors, rather than just providing passive exposure.
READ MORE: Here’s Why the Crypto Crash is Happening and Liquidations Rising
The possibility of consistent income distributions would be more appealing to institutions wary of volatility than exposure to changes in the price of Bitcoin alone.
The filing also shows that issuers in the market for digital asset exchange-traded funds are becoming more competitive. Inflows into these products have shown strong demand since the legalization of spot Bitcoin funds earlier this year, but they have also raised expectations for innovation.
According to market analysts, issuers looking to differentiate their offers would be wise to incorporate income-generating initiatives as a next step.
The Bitcoin Premium Income ETF may offer a novel approach to the intersection between traditional investment strategies and digital assets, if the SEC approves it. Through regulated exchanges, it may provide retail investors an easy method to trade Bitcoin and earn income akin to that of dividend-style stock management schemes.
READ MORE: Cardano Price Eyes $0.95 Target If 0.80 Support Holds Firm
