BlackRock has applied to the appropriate authorities to get a Bitcoin ETF approved.
The investment giant has a perfect record of ETF approvals, with over 500 approvals to zero rejections from the SEC. BlackRock, by listing a bitcoin ETF on the NASDAQ, might pave the way for institutional short-selling of bitcoin, unlike the already OTC-traded Grayscale Bitcoin Trust (GBTC), which Barry Silbert’s Grayscale would want to turn into an ETF.
Unlike other OTC securities, BlackRock’s planned bitcoin ETF is likely to be DTC qualified. Simply put, short-sellers will be able to quickly and easily discover shares to borrow from the largest trust firm in the world thanks to BlackRock’s bitcoin ETF. DTC handles securities worth quadrillions of dollars annually.
Members are able to lend shares to other members with ease since DTC only takes deposits from its members, who are often clearinghouses, and maintains a clean ledger of ownership of each security at all times. Brokers holding ETFs on deposit for their clients at DTC may quickly and inexpensively borrow shares from DTC to use in short sales.
The ability to short-sell securities is another benefit of DTC eligibility. To engage in short selling, one often borrows stock from a third party, sells it on the open market, and then repurchases it from the original owner.
This strategy is often used by institutional investors that anticipate a decline in the stock price of a certain firm. The odd “short squeeze,” in which the price of a company rapidly moves in a direction they do not predict, may pose considerable problems if they estimate incorrectly.
When the GameStop stock was being targeted for a pump by the WallStreetBets community, more than 100% of the sortable shares were borrowed. As a result of the short squeeze, billions of dollars were lost by institutional investors and DTC loans were depleted.
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