Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Investment and Options Strategist
Summary: Bitcoin has emerged as a revolutionary asset, blending the allure of gold with blockchain technology. As we enter 2025, we will explore analyst predictions for bitcoin's future and examine the iShares Bitcoin Trust ETF (IBIT) as a tool for bitcoin exposure.
Bitcoin has cemented itself as a revolutionary asset, blending the allure of gold with the innovation of blockchain technology. As we step into 2025, bitcoin stands at the intersection of institutional adoption and global regulatory debates, capturing the attention of investors worldwide. Analysts are divided on its future trajectory, with forecasts ranging from cautious to stratospheric.
For investors seeking exposure to bitcoin, the iShares Bitcoin Trust ETF (IBIT) has emerged as a compelling option, offering a regulated and user-friendly avenue to participate in bitcoin’s growth. However, MiFID regulations in the eurozone limit direct access to this product for retail investors, making derivatives like IBIT options an important alternative. This article examines bitcoin's current market dynamics, analyst predictions for its future, and a detailed analysis of the IBIT ETF as a tool for bitcoin exposure.
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Bitcoin’s evolution into a globally recognized asset has been driven by its status as a hedge against inflation and its appeal as "digital gold." Recent developments, such as spot bitcoin ETFs, increasing adoption by institutional investors, and growing global liquidity, have provided tailwinds. However, risks persist, including regulatory uncertainty, competition from altcoins, and potential macroeconomic headwinds.
Many analysts foresee significant upside potential for bitcoin by the end of 2025:
Analysts remain even more bullish about bitcoin’s long-term potential:
Despite the overall optimism, some analysts have tempered expectations:
The iShares Bitcoin Trust ETF (IBIT) is a spot bitcoin ETF created by BlackRock, one of the world’s largest asset managers. Designed to provide investors with direct exposure to bitcoin without the complexities of direct ownership, IBIT holds actual bitcoin in custody, ensuring close tracking of the underlying asset's price. Unlike futures-based ETFs, this structure reduces tracking errors and provides a more transparent and straightforward investment option.
As of November 2024, IBIT’s assets under management (AUM) surpassed $6.5 billion, reflecting surging demand for bitcoin ETFs. For context, IBIT has outpaced some of BlackRock’s longest-standing products, such as the iShares Gold Trust ETF (IAU), which has approximately $5 billion in AUM. This growth underscores the shifting investor preference from traditional safe havens like gold to digital assets such as bitcoin, cementing IBIT’s position as a flagship product in BlackRock’s diverse ETF lineup.
It’s important to note that direct trading of the IBIT ETF is restricted under MiFID regulations and is therefore not available to retail investors within the eurozone. However, investors with a professional account status are eligible to trade the IBIT ETF. For those interested in upgrading their account to professional status, more details can be found here.
While direct access to IBIT is restricted, it is permitted to trade derivative products on the IBIT ETF, such as options. These derivatives provide an alternative for eurozone investors to gain exposure to the ETF’s price movements. In fact, trading options on IBIT offers flexibility for hedging, income generation, and speculative strategies. This topic will be explored in greater detail in a separate article.
IBIT benefits from strong liquidity, averaging 48.61M shares traded daily, which ensures minimal price slippage for large trades. On January 6, it recorded a volume of 46.72M shares, indicating consistent investor interest.
With a 0.12% expense ratio, IBIT offers a cost-effective option for bitcoin exposure. Compared to other ETFs with fees ranging from 0.20% to 2.00%, IBIT’s low cost is a significant advantage.
The 1,800 ratio is derived from IBIT's structure as a spot bitcoin ETF. Each IBIT share represents a fractional ownership of the total bitcoin holdings within the fund. By dividing the fund’s bitcoin holdings by the number of outstanding IBIT shares, we calculate the conversion factor that links IBIT’s price to bitcoin’s price.
For IBIT, historical data and its structure suggest that its price corresponds to approximately 1/1,800th of bitcoin’s price.
This relationship simplifies projecting IBIT’s price based on bitcoin’s movements.
IBIT stands out in the crowded bitcoin ETF space:
The iShares Bitcoin Trust ETF (IBIT) offers a simplified and cost-effective way to gain exposure to bitcoin’s price movements. Backed by BlackRock’s reputation and leadership, IBIT has quickly become one of the most prominent bitcoin ETFs globally.
For every $1,000 move in bitcoin’s price, IBIT is likely to move by approximately $0.56, providing a straightforward way for investors to model potential gains or losses. Its dominance in the bitcoin ETF market, competitive fees, and accessibility to professional investors make it a cornerstone for bitcoin exposure.
In the next article, we’ll explore how to leverage IBIT options for hedging, income generation, and trading strategies, enabling investors to maximize their potential returns in this evolving market.
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