BlackRock Executive Calls Bitcoin “Too Much to Ignore”, Discusses New Bitcoin Premium Income ETF
BlackRock, the world’s largest asset manager with more than $10 trillion under management, has launched a new Bitcoin exchange-traded product designed to generate monthly income for investors – a move the firm’s ETF chief says aims to attract a wave of traditional investors who have kept their distance from the asset because of its volatility.
Jay Jacobs, BlackRock’s US Head of Equity, spoke to him CoinTelegraph to discuss the launch of the iShares Bitcoin Premium Income ETF, ticker BITA, which began trading this week. The product represents a departure from traditional Bitcoin exposure by layering an integrated call strategy on top of the company’s iShares Bitcoin Trust, known as IBIT.
“You can think of this as a hybrid strategy for investors,” Jacobs said. “You both have a great opportunity in Bitcoin, and the ability to generate income with Bitcoin.”
BITA participates in Bitcoin through IBIT and sells call options in the currency for about 25 to 35% of the portfolio. The premium collected from the sale of those options is passed on to the owners as income.
Jacobs said the strategy targets an annual yield of between 15 and 25%, although the actual figure will depend on the volatility of Bitcoin at any given time – a direct application of the Black-Scholes options pricing model, where higher volatility generates higher premiums.
The trade-off is the participation rate.
If Bitcoin goes up 10% a year and the fund sells about 30% of that in options, the return on the fund’s price would be about 7 percent. Add a 15% revenue share, and the total return comes to about 22% — a rate that Jacobs noted would surpass Bitcoin in that particular scenario.
In Bitcoin’s biggest rally, the numbers tilt the other way. If Bitcoin gains 100% per year, BITA holders will see about 70% in appreciation and 15% in revenue, totaling about 85%. That doesn’t make for a definitive long position, but Jacobs positioned that outcome as an acceptable trade-off, not a mistake.
Turning bitcoin’s volatility into a feature
One of the main themes of Jacobs’ discussion was the idea that Bitcoin’s long-criticized volatility is exactly what makes a product like BITA work. Options prices are a function of volatility, and Bitcoin’s historically high volatility means the premiums available for selling covered calls are huge.
“You make money on volatility by selling options that are driven more by that volatility,” Jacobs said. For investors who saw Bitcoin price volatility as a barrier to entry, the product offers a different framework: volatility as a source of income instead of a source of risk.
Jacobs outlined several different profiles of BITA investors. Cash-oriented investors who seek profit across asset classes represent one group. Long-term holders of Bitcoin in a bear market or on the sidelines represent another – people who stay cheap in the asset but want cash flow at the moment.
The third group, which Jacobs described as more institutional in nature, is made up of portfolio managers who have historically needed cash-flow-producing assets to justify an allocation.
“Assets that don’t have cash flow associated with them have always been somewhat difficult, if not impossible, to put into those portfolios — Bitcoin, gold, silver — cash flow is zero,” Jacobs said. BITA is designed to change that equation for those investors.
IBIT is a foundation
Jacobs also spoke about IBIT’s extensive footprint since its launch nearly two and a half years ago. He said nearly three-quarters of IBIT’s buyers were buying an iShares product for the first time, indicating that Bitcoin ETFs have served as an on-ramp to the broader ETF ecosystem rather than just a new wrap for existing investors.
Financial advisors on major banking networks, who were barred from accessing digital assets until those platforms opened access to IBIT, represent a segment Jacobs called a source of growing momentum — one that runs counter to the transfer of wealth being generated as millennials enter their prime and accumulate investable assets.
