Staking is one of the most integral features of many of the largest blockchains in the world. Ethereum and Solana, both proof-of-stake networks, leverage it to secure their networks. Bitcoin,
Staking is one of the most integral features of many of the largest blockchains in the world. Ethereum and Solana, both proof-of-stake networks, leverage it to secure their networks. Bitcoin, the first blockchain, is based on a proof-of-work and has no native staking, yet BlackRock, on June 16th, launched a Bitcoin yield ETF, which targets a 15-25% annualized yield on its holdings.
The strategy for generating this yield is a classic TradFi strategy: writing call options against the fund’s holdings.
Watch the full interview on Roundtable!
Richard Shorten, chairman of staking platform GlobalStake, joined TheStreet Roundtable to break down this new ETF and what questions investors should be asking about it.
Related: Explained: What is crypto staking?
Shorten explained that BITA “generates the yield by essentially holding the Bitcoin assets and then writing covered calls on the assets. It's a very TradFi type strategy."
A covered call sells someone the right to buy your asset at a set price on a future date in exchange for a premium paid to the seller. The premium is pocketed, but this caps your upside at whatever price you sell the call for.
This trade off suits assets like Bitcoin well, as it gives investors some protection against the volatility crypto is known for.
You're sacrificing some of the upside in order to do that. But for very volatile assets such as Bitcoin, that creates unique opportunities to participate in both growth and income," Shorten said.
Shorten sits on the board of an ETF issuer that runs this same strategy on traditional equities.
Watch the full interview on Roundtable!
Shorten expressed his excitement for this product, arguing that it validates these kinds of products in the eyes of non-crypto native investors.
"If you are looking for validation that digital assets are a real investable thing, there's no better place to look than the proliferation of these products from very large issuers like BlackRock,” he said.
It also demonstrates that generating income on digital assets is now a demanded feature, not just a ‘nice to have.’ The world’s largest asset manager does not issue products lightly, as Shorten noted.
"Any product that they introduce is by definition something that is substantial, otherwise they're not gonna put the institutional energy behind it."
"It's probably very early days for them. A Bitcoin ETF is a level one level of complexity, a Bitcoin yield ETF is a level two, and the native crypto types are operating at level eight to ten,” Shorten said.
Watch the full interview on Roundtable!
In his opinion, TradFi and crypto are no longer separate industries, but they are at different rungs on the ladder. Every level of complexity is a new product category for issuers like BlackRock. What do levels eight to ten actually look like?
Crypto natives don't just stake. They layer yield through liquid staking tokens, restaking, DeFi lending and vault strategies, and basis trades, often stacking several at once. A covered-call wrapper is, by comparison, one of the oldest tools in the equities playbook.
BlackRock’s BITA has accumulated just under $50 million in total AUM since launching, continuing the trend of successful crypto ETFs that have launched in the last 18 months.
