A substantial block sale of $1.26 billion of BlackRock’s IBIT is believed to be a swift exit by a significant investor rather than a strategic arbitrage unwind, according to insights from NYDIG.
What to know:
— The $1.26 billion block sale of BlackRock’s IBIT shares is likely a quick exit by a large investor, as per NYDIG’s analysis.
— The seller accepted a 2.3% discount (resulting in a $29.5 million loss), indicating a focus on speed and certainty over achieving the highest price.
— NYDIG dismissed the «basis trade» theory, highlighting the considerable discount and the absence of an unusual surge in related CME bitcoin futures volume.
This week, a $1.26 billion block sale of BlackRock’s iShares Bitcoin Trust (IBIT) might have been influenced by a large investor looking for a quick exit from their bitcoin holdings, rather than the typical unwinding of a hedge fund trading strategy. This perspective comes from a report by the crypto investment firm NYDIG.
The transaction took place on May 26, when 29.21 million IBIT shares were traded off-exchange at a price of $43.16 per share. The trade was executed at a $1.01 discount compared to IBIT’s market price of $44.17 at that time, which represents a 2.3% concession and approximately $29.5 million in execution costs.
NYDIG pointed out that the size of the discount indicates that the seller prioritized certainty and speed over achieving maximum price. The trade was reported through the FINRA/Nasdaq TRF Carteret facility, a venue often used for privately negotiated off-exchange transactions.
Some market observers speculated that the block sale might have been associated with a bitcoin basis trade, where investors maintain spot bitcoin exposure while shorting futures contracts. However, NYDIG refuted this theory, arguing that the discount would have substantially diminished the expected returns of such a strategy.
The firm also noted the trading activity in CME bitcoin futures, with the IBIT position equating to about 3,700 CME bitcoin futures contracts. Yet, only 91 contracts were traded during the minute the block was executed, with no notable spike in futures volume.
Greg Cipolaro, NYDIG’s global head of research, stated, “The size of the trade, the 2.3% execution discount, the absence of corresponding CME futures activity, and the limited universe of potential sellers collectively weigh against the view that the transaction represented a contemporaneous basis-trade unwind.”
This sale occurred as U.S. spot bitcoin ETFs faced ongoing outflows. Data from SoSoValue indicates that these funds experienced daily net outflows on every trading day from May 15 through May 29. The total assets in this category decreased from $107.75 billion on May 14 to $94.17 billion by May 29. Meanwhile, the bitcoin price has dropped by 16% this year, in contrast to most other assets, such as equities and commodities, which have surged as capital flows out of the crypto sector.
Identifying the seller has proven challenging.
Although IBIT recorded approximately $720 million in net redemptions on May 26 and May 27, NYDIG emphasized that ETF flow data cannot definitively identify the seller or connect specific redemptions to the block transaction.
NYDIG observed that the position surpassed the reported holdings of every disclosed IBIT investor in recent 13F filings, complicating identification efforts. The firm pointed out that public data cannot ascertain whether the sale was prompted by investor redemptions, risk management needs, or a discretionary choice to lower bitcoin exposure.
Nonetheless, NYDIG highlighted that the transaction is notable because a substantial holder opted to accept a considerable discount to exit a bitcoin-linked position valued at over $1 billion during a time of ongoing outflows and while bitcoin’s price remains below $80,000.