“BLACKROCK IS SELLING BITCOIN!” Explained

What does it mean when people say, “Oh no, Black Rockck is selling Bitcoin or Black Rockck sold Bitcoin last week.” Short take is it doesn’t mean anything. So what is actually going on when Black Rockck buys Bitcoin or Black Rockck sells Bitcoin? First of all, Black Rockck is not buying and selling Bitcoin for themselves. They can certainly do that and I believe they have done that, but that is never what the uh headlines are actually telling you. When people announce that Black Rockck bought $1.4 4 billion of Bitcoin or Black Rockck sold $700 million of Bitcoin. What they are referring to is the Bitcoin ETF, exchange traded fund. IBIT is the ticker symbol. IBIT. IBIT is the largest Bitcoin ETF. And the way an exchangeraded fund works, it is the a basket of whatever’s in it. So, in the case of Bitcoin ETFs, which there are about a dozen of them, BlackRock is the largest, but Fidelity have has one called FBTC and a lot of the other providers, uh, Morgan Stanley has their own and others. Um, so all of them have a Bitcoin ETF. They all work exactly the same way, which is the stock is required to maintain a peg to the price of Bitcoin, which means multiple times per day, they are required to either buy or sell an amount of Bitcoin equal to the what is required uh in order for the price to of the stock to represent the price of Bitcoin. Now, they all have different prices. Some of them are like 20 bucks, some are 50 bucks, some are 60 bucks. Let’s say one of them is represented um where every share is supposed to have 1/1,000 of a price of Bitcoin. That means if Bitcoin is trading at 60,000, then the stock is supposed to trade at 60 6 thou uh $60. Okay. Well, if halfway through the day the price of Bitcoin has risen to $62, that means they are required to buy enough additional Bitcoin so that they have, you know, 60, you know, whatever that is, whatever percent more Bitcoin they’re required to have in order to reflect a $62 price instead of a $60 price. So, and the same is true if the price of Bitcoin falls, there are outflows from those exchange traded funds. And typically Bitcoin, the amount of people buying and selling Bitcoin individually is in the same ballpark of the number of people that are buying and selling in an exchange traded fund. So you see these headlines, you know, Black Rockck sold, you know, $1.4 billion over the last month of Bitcoin or whatever. All that means is the price of Bitcoin dropped. Therefore, every day or multiple times a day, they are required to sell Bitcoin to keep the price of that exchange traded fund equal. Again, if you’ve got, you know, if you’ve got $60 per share, that represents 1/1000th of a of of a Bitcoin and the price rises to 61, you got to buy more Bitcoin to make those shares still worth 1/1000th of a share. And then if it goes to 62, 63, 64, you’re required to buy enough Bitcoin to reflect that in the underlying share price. Now, if the price of Bitcoin drops because people are either selling the Bitcoin ETF or uh or the price of Bitcoin drops and people are uh you know wanting to to to settle up, it’s called an arbitrage trade, which I won’t won’t go into, the price of the the ETF, then this the reverse happens, which is they’re required to sell enough Bitcoin to make the price uh reflect the underlying. So they can’t just the exchange traded fund cannot sit on let’s call it you know let’s say they have $60 per share they have 60,000 bitcoin they own one bitcoin for every you know for every dollar of bitcoin price so they’re sitting on 60,000 bitcoin it’s actually a lot more than that but regardless again the price can’t go to 61 they got to buy another thousand bitcoin the price drops to 59 they got to sell 2,000 bitcoin if it’s going from 61 to 59 so again think about it in round terms like that which is every dollar represents 1/100,000th of a bitcoin and the amount of bitcoin that they own total is equal to the price. Now, none of the ETFs actually have round numbers like that. I think the the Black Rockck ETF has more than 800,000 Bitcoin in it and I think it trades at like I don’t know $20 a share or something like that. But again, the math is the same. I’m just simplifying it for you. But again, that means for every, you know, if there was a perfect Bitcoin ETF where the numbers were all round and matched, uh, meaning every, you know, dollar of the share price represented $1,000 in the price of Bitcoin, and they owned an exact number of Bitcoin equal to the the price of Bitcoin. Then again, the price goes from 60 to 61, they got to buy a,000 Bitcoin. It drops back to 60, they got to sell a,000 Bitcoin. And the headlines may make it sound like, you know, the largest Bitcoin ETF. It’s like it’s like the headlines always make it sound like it’s much more sensational than it is. On the upside, they they announced that Black Rockck is buying Bitcoin as though, you know, Wall Street woke up yesterday and suddenly fully embraced Bitcoin and we should all be celebrating. The truth is, no, the price of Bitcoin just went up and they had to settle up. The demand for the ETF was higher uh than the supply, so the price rose and they had to buy the Bitcoin to accommodate that. And same when the price falls, they act like, “Oh no, Wall Street has now completely lost faith in Bitcoin.” No, that means either the price of Bitcoin dropped or the selling activity on the ETF was such in either case, it resulted in the Bitcoin ETF not reflecting the underlying price of Bitcoin and they had to buy or sell Bitcoin to settle it up. So again, it’s just going to track the price of Bitcoin. The Bitcoin ETFs are all going to track the price of Bitcoin, which means they are constantly either multiple times a day or at least once a day settling up with the Bitcoin network by either buying or selling enough Bitcoin so that the share price of the Bitcoin ETF accurately reflects the current trading price of Bitcoin because they are legally required to reflect one another. They cannot uh for example, let me give you an example. Um if Black Rockck um let’s say Black Rockck is sitting on $800,000 uh dollar uh 800,000 Bitcoin, the price of Bitcoin rises, but nobody is actually selling the Bitcoin ETF. They’re only selling Bitcoin on exchanges like Coinbase. Now, you would think, wow, wouldn’t they want to just sit on the Bitcoin and the price rises and now each share represents even more Bitcoin. Well, the answer is they can’t legally do that. And the the market mechanism of that is when people which are called market makers and uh uh oh what do they call them? They’re called uh I used to know the names of all this stuff anyway uh authorized participants APs I think they’re called authorized participants uh which are companies like Jane Street or uh Sesuana and companies like that. They sit there and they do that for Black Rockck is they look at it and they say hey your price of your shares and the price of the underlying commodity is slightly different so I’m going to trade one in for the other. So they trade Bitcoin in for ETF shares or they trade ETF shares in for Bitcoin to make it settle up. So it’s not people like me and you that are making sure that balances. It’s not technically even Black Rockck that make sure it’s balances. They have authorized participants AP APS that get paid a tiny fraction of a penny uh every time they do it to settle up all of that behind the scenes using supply and demand and their own balance sheets of uh ETF shares and uh Bitcoin. So anyway, uh you can basically ignore any headline that tells you a bit that tells you Black Rockck or Fidelity, it’s almost always Black Rockck because they’re the biggest one. So in the good times, uh Black Rockck is always buying the most Bitcoin for their ETF. And in the bad times, they’re always selling the most Bitcoin ETF. So you can ignore any headlines about Black Rockck buying or selling Bitcoin. In the good times, all it means is they’re settling up. And in the bad times, all it means is they’re settling up. It doesn’t mean anything. it’s just going to track the price of Bitcoin and when the price is down there’s going to be outflows and when the price is up there’s going to be inflows. Just ignore it. It’s all noise. You can ignore all of that. Uh I hope that helps. All the Bitcoin ETFs work that way. Uh which is why part of what I try to do is highlight for you anything that is not just noise in the marketplace. There’s just a huge amount of stuff in the Bitcoin world that are headlines that don’t make any sense. It’s people recycling news from six months ago. You know, breaking news, blah blah blah. El Salvador does this and I’m like, “No, that’s not breaking. That was from six months ago and you’re just hoping everybody forgot and now you’re yield farming by reposting old news.” Like, there’s a ton of that. And of course, people don’t cite their sources. So, they always want the news to sound new and fresh. Half the time they’re recycling news from months or years ago, and I keep up with it so closely that I know what what’s news and what’s not news. So, I try to flag stuff that really matters. Uh, but again, a huge amount of what’s out there. You can just ignore it. Just ignore it. It’s all stupid stuff and it’s people engagement farming on social media trying to get clicks and a nice big headline that Black Rockck sold 1.4 billion Bitcoin gets a lot of clicks and a lot of views and a lot of you know engagement when the truth is it doesn’t mean anything. It means the price of Bitcoin was down and they had to settle up with their ETF. So what uh you know what the news headlines should have been is Black Rockck leveraged Jane Street to settle up their Bitcoin ETF to reflect the underlying spot price. Well, that’s not exciting. That doesn’t sound like anything important happened. So you’re never going to get a news headline like that. Although that’s actually the only thing that actually happened. So uh let me know if you have questions. I’m here throughout your Bitcoin journey, including in this Bitcoin bare market, which will hopefully be over soon because we’re all sick of it and we’re all ready for the multi multi-year bull market that follows, which is the fun part. It’s all why we’re here. Uh let me know if you need anything. Thank you, everyone.