A recent block sale involving BlackRock’s iShares Bitcoin Trust (IBIT) has raised eyebrows in the financial world, primarily due to its substantial size of $1.26 billion. This transaction, conducted on May 26, consisted of 29.21 million IBIT shares sold off-exchange at $43.16 per share, marking a significant discount of $1.01 from the market price of $44.17 at that time. The sale resulted in approximately $29.5 million in execution costs due to the 2.3% concession.
According to an analysis by the crypto investment firm NYDIG, this transaction may have been instigated by a large investor seeking a quick divestment from bitcoin exposure, rather than the unwinding of a common hedge-fund strategy known as a bitcoin basis trade. Market speculation had suggested that the sale might be linked to such a trading strategy, which typically involves holding spot bitcoin while shorting futures contracts. However, NYDIG’s research dismissed this theory, emphasizing that the significant discount in the sale contradicts the economic logic of a basis trade, which aims to optimize returns.
Furthermore, NYDIG observed that the IBIT position conveyed an exposure equivalent to roughly 3,700 CME bitcoin futures contracts. Yet, only 91 of those contracts traded in the minute coinciding with the block execution, indicating no unusual activity in futures markets to support the basis-trade theory.
Greg Cipolaro, NYDIG’s global head of research, elaborated that several factors—including the trade’s size, the notable execution discount, lack of increased CME futures activity, and the narrow pool of potential sellers—diminish the likelihood that this transaction was a routine basis trade unwind.
The context surrounding the sale is noteworthy, as U.S. spot bitcoin ETFs have been witnessing ongoing outflows. Data from SoSoValue shows that these funds experienced net outflows consistently from May 15 to May 29, leading to a decline in total assets from $107.75 billion on May 14 to $94.17 billion by May 29. In this timeframe, the price of bitcoin itself dropped by 16%, contrasting sharply with the performance of equities and commodities that have recently benefited from inflows.
Despite IBIT reporting around $720 million in net redemptions during May 26 and 27, NYDIG clarified that ETF flow data alone is insufficient for pinpointing the specific seller or directly correlating the block transaction with individual redemptions. Notably, the position’s size exceeded the reported holdings of every IBIT investor in recent 13F filings, complicating efforts to identify the reasons behind the sale. Factors like investor redemptions, risk-management constraints, or a calculated decision to lower bitcoin exposure remain uncertain.
Nevertheless, the transaction is particularly striking, given that a large holder chose to accept a considerable discount to exit a bitcoin-linked position exceeding $1 billion amid persistent outflows, all while the bitcoin price continues to lag below the $80,000 mark.
