BlackRock has filed a Form S-1 with the SEC to list the iShares Bitcoin Premium Income ETF (the “IBPI ETF”).1 The proposed IBPI ETF would manage a “covered-call” strategy on bitcoin exposure through BlackRock’s existing iShares Bitcoin Trust (“IBIT”) to generate income from bitcoin. The covered-call approach entails selling a counterparty a call option, the right to purchase its underlying at a fixed price, which generates income for the fund and premiums for investors. If the bitcoin reaches the strike price, it must be sold at that price.
BlackRock is the world’s largest asset manager, with $12.5 trillion in assets under management. This filing marks a move for BlackRock to delve deeper in the cryptocurrency ETF market. The proposed fund would manage exposure to bitcoin directly or through shares of BlackRock’s existing IBIT, while generating income by selling call options on that exposure.
Within stock-based income funds and the crypto market, utilization of the covered-call approach is becoming commonplace. Funds that currently utilize this strategy include Roundhill Bitcoin Covered Call Strategy ETF (YBTC), Amplify Bitcoin Max Income Covered Call ETF (BAGY), and the NEOS Bitcoin High Income ETF (BTCI). One potential downside of the covered-call strategy is that it trades on the potential upside for income, which is uncertain. Some cover-call ETFs may decrease net asset value by offering higher yields to investors, in part through capital returns. Distributions are frequently seen in the double-digits based on the variability of the bitcoin asset. Apart from distributions, bitcoin-focused income ETFs have underperformed bitcoin so far, which is often intended given that ETFs offer higher yields.
Legal Tokens
The largest asset manager in the world entering the bitcoin premium income ETF space speaks to the future of bitcoin and how it is being utilized for investment. While we are already seeing funds use the covered-call strategy, we can likely expect to see more funds follow BlackRock’s lead. While the risks of these investment cannot be ignored, the certainty of profiting off the sale of a call option is a promising source of income for investors.
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1 https://www.sec.gov/Archives/edgar/data/2089969/000143774926001991/bitp20260121_s1.htm