Franklin Templeton to Launch Nasdaq Bitcoin DRIP ETFs on October 27
The two new funds will convert stock dividends into Bitcoin exposure, targeting investors seeking passive accumulation of the cryptocurrency.
Key takeaways
- 1Franklin Templeton will launch two Bitcoin DRIP ETFs on Nasdaq on October 27.
- 2The funds will initially allocate 95% to US stocks and 5% to Bitcoin.
- 3Perpetual preferred stock has financed 136,000 bitcoin purchases in 20 months.
- 4The Bitcoin-focused preferred stock market is valued at $12 billion.
- 5Franklin Templeton's spot Bitcoin ETF (EZBC) has seen $335 million in total inflows.
Franklin Templeton, the $1.8 trillion asset manager, will launch two Nasdaq-listed exchange-traded funds (ETFs) on October 27 that convert stock dividends into Bitcoin. The US Equity Bitcoin DRIP Index ETF (FBEQ) and the US Innovation Bitcoin DRIP Index ETF (FIBT) received final regulatory clearance for trading on Nasdaq, according to an SEC filing.
Both funds will begin with a 95 percent allocation to US stocks and 5 percent to Bitcoin. Instead of reinvesting dividends into more stock, the funds will use regular and special dividends from their stock holdings to purchase additional Bitcoin exposure. This mechanism, known as a Dividend Reinvestment Plan (DRIP), allows the Bitcoin share of the portfolio to grow over time, Bitcoin Magazine reported.
The Bitcoin position in the ETFs will have limits. If the allocation exceeds 5 percent at a quarterly rebalance, it will be trimmed to 4.5 percent. Should Bitcoin rise above 20 percent of the index between rebalances, it will be cut back to 4.5 percent within two business days, with proceeds returning to stocks. The ETFs will gain Bitcoin exposure through existing Bitcoin exchange-traded products, futures, options, or depositary receipts, CoinGape said. Each fund carries a 0.09 percent expense ratio.
Franklin Templeton, which launched its spot Bitcoin ETF (EZBC) in January 2024, aims to reach investors who might not buy Bitcoin directly. CEO Jenny Johnson has stated that blockchains could challenge Wall Street's fee structures, Bitcoin Magazine reported. The firm's EZBC fund has seen $335 million in total inflows, according to CoinGape.
These new DRIP ETFs represent another strategy for linking traditional financial products with Bitcoin, alongside the perpetual preferred stock used by companies like Strategy (MSTR) and Strive (ASST). These preferred shares have financed the purchase of some 136,000 bitcoin in the 20 months since their introduction, representing over 0.5 percent of the cryptocurrency's maximum supply, Fidelity Digital Assets reported via CoinDesk.
The $12 billion market for Bitcoin-focused preferred stock allows companies to raise cash for Bitcoin purchases while attracting income investors reluctant to own Bitcoin directly. However, companies face a balancing act between funding Bitcoin acquisitions and meeting growing dividend payments on these securities. Strategy, the largest corporate Bitcoin holder, recently spent $193 million repurchasing its STRC preferred shares while buying only 267 Bitcoin, according to CoinDesk, citing CoinShares' head of research James Butterfill.
While preferred shares offer management discretion over Bitcoin spending, the DRIP ETFs provide a passive, rules-based method for accumulating Bitcoin. US spot Bitcoin ETFs, which offer direct Bitcoin exposure without ongoing dividend commitments, have attracted approximately $57 billion in cumulative net inflows and hold about $106 billion in assets, CoinDesk reported. The success of Franklin Templeton's new funds will become clearer after their October 27 launch.
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