I am very happy to discuss the liquidation issue of $IBIT with Teacher Jiang.
First, we need to clarify a few details.
The Bitcoin spot ETF trades the ETF, not $BTC.
The secondary market for BlackRock's spot ETF trades $IBIT, and only IBIT.
The situation involving Bitcoin in the spot ETF only occurs during primary market purchases and redemptions, which are provided to BlackRock by various APs (although they are not market makers, they can be understood as such).
When primary market users need to issue new IBIT, BlackRock requires APs to provide spot BTC as a "certificate" corresponding to the newly issued IBIT. These BTC are held in a custody wallet, and BlackRock or any organization cannot use or trade them, as they are under regulation. The current custodian is Coinbase.
When primary market users need to redeem IBIT, BlackRock needs to transfer BTC to APs, who then sell the BTC and provide the funds to BlackRock, which completes the redemption.
Here comes the key point: please note that APs providing or selling BTC may not necessarily be through the market, especially not necessarily through the secondary market. APs may hold BTC themselves, and for APs, they only need to complete the required BTC or USD transaction within T+1 time. Therefore, the less than 6,000 BTC sold across the U.S. on Thursday is all the BTC sold by the ETF; this portion may not all enter the market, and even if it does, it is at most 6,000 BTC.
IBIT itself tracks the price of Bitcoin, which is also very important‼️ The ETF corresponds to the price, not the BTC itself. This is very similar to $MSTR (only in terms of appearance, the structure is different). If MSTR rises, does BTC necessarily rise? If MSTR falls, does BTC necessarily fall? No one would believe that. Does the change in MSTR's stock price affect the price of BTC? There is definitely no direct transmission because MSTR is an independent asset. The same goes for IBIT.
IBIT tracks the price trend of BTC; if BTC rises, IBIT will rise 99.99% of the time. However, if today BTC rises by 20%, and BlackRock suddenly announces that all stored BTC has been stolen and cannot be compensated, then IBIT will definitely fall. That's the reasoning.
Whether the secondary market of IBIT will affect the spot price of BTC has no direct transmission. Teacher Jiang mentioned that the secondary market received sell-offs from market makers, which is possible, but at most it is 6,000 BTC, which is the upper limit, and APs are almost impossible to sell to the market. The BTC that APs can obtain is only from the outflows of all ETF institutions, including BlackRock. On Thursday, the BTC outflow from IBIT was less than 4,000 BTC, so a significant drop cannot be solely attributed to these 4,000 BTC; I do not believe that.
It is not ruled out that APs may have other BTC to sell, but this has nothing to do with IBIT itself. APs are independent and also have their own BTC reserves and trading. However, the BTC that APs can obtain from IBIT is only from the primary market exits; there are no additional BTC beyond that.
All pressure in the secondary market for IBIT is on the IBIT ticket itself. Users buying and selling IBIT is equivalent to buying and selling BTC (price fluctuations) and does not actually touch BTC itself.
That’s all. Welcome Teacher Jiang @Jiangzhuoer2 and friends to discuss amicably.
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