Bitcoin and the ETF Revolution: How Funds Changed Everything
Bitcoin and the ETF Revolution: How Funds Changed Everything
The January 2024 approval of spot Bitcoin ETFs in the United States was one of the most significant events in Bitcoin’s history. Understanding how the ETF infrastructure works, who the major players are, and what it means for price is essential.
What ETFs Actually Do
An Exchange-Traded Fund holds Bitcoin and issues shares that trade on stock exchanges. When you buy “IBIT” (BlackRock’s Bitcoin ETF), you’re buying a share of a fund that holds actual Bitcoin.
The structure:
Sponsor (BlackRock): Issues shares, manages the fund, interfaces with authorized participants.
Custodian (Coinbase Custody): Holds the actual Bitcoin in cold storage. The Bitcoin never belongs to BlackRock — it belongs to the ETF trust.
Authorized Participants (APs): Large financial firms (Jane Street, Virtu, Goldman) that create and redeem ETF shares by delivering Bitcoin to/from the custodian.
The flow when you buy IBIT:
- You buy IBIT on NASDAQ at market price
- Your broker routes to an AP
- AP delivers cash to the
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