BlackRock, the world's largest asset manager, said on Tuesday that it is launching a new exchange-traded fund built around an unusual trade-off. The product caps how much of Bitcoin's rally an investor can capture, and in exchange hands them regular payouts running into double digits.
The fund is called the iShares Bitcoin Premium Income ETF and will trade on the Nasdaq under the ticker symbol BITA. According to a press release from the firm, its goal is to give investors a slice of the digital asset's upside while generating options premium every month.
How the fund is built
To track Bitcoin's market price, the fund divides its holdings between the actual cryptocurrency and BlackRock's iShares Bitcoin Trust ETF (IBIT). It then raises the cash for its monthly distributions by selling options contracts against as much as 35% of the portfolio.
Each month, the fund writes call options on a slice of what it holds. Those options give the buyer the right to purchase the fund's IBIT shares at a fixed price if the market climbs, and in return the buyer pays an upfront fee known as a premium.
Because Bitcoin's volatility has historically run high, those premiums are usually worth a good deal. That lets the ETF harvest a steady stream of income and pass it on to investors under what BlackRock called a "favorable blended tax treatment" on the gains realized from option premiums.
What BlackRock's executive said
In an interview with TrendKia, Robert Mitchnick, head of digital assets at BlackRock, called the ETF a "hybrid Bitcoin exposure product" that sets up a different payoff and yield profile than the firm's $48.6 billion industry-leading alternative, IBIT.
"The way the math works today, you can think of it as 70% upside retention in IBIT and a mid-to-high-teens yield. It's going to be pretty compelling, we think, to a lot of investors."
Mitchnick said the ETF's yield element, along with its relatively conservative nature, could hold more appeal for financial advisors than IBIT does. The same logic, he added, applies to other institutional investors who may not yet have any exposure to the digital asset.
"There's no question that some of the challenge that they've had getting over the hump on Bitcoin in the past has been the absence of the yield."
He pointed to insurers and pension funds as examples.
Filing and the competition
BlackRock filed its application for BITA back in January. The product is set to go up against the NEOS Bitcoin High Income ETF, which carries a higher expense ratio and made its debut in 2024. In April, Goldman Sachs filed an application for a similar yield-generating product of its own.
Where Ethereum fits in
BlackRock has already set up several ETFs that track Ethereum's spot price, but Mitchnick said the firm has no plans to build similar products for that asset. The reason, he explained, is that one of the company's existing offerings already delivers yield-like payouts through staking.
"As successful as our Ethereum products have been, Bitcoin is at a whole 'nother level. There's much more client demand, so the opportunity to build adjacent products on Bitcoin is higher than it is for any other crypto asset."
