NAV (Net Asset Value)

Net Asset Value is the per-share value of an ETF's underlying holdings. For a spot Bitcoin ETF, NAV is computed daily:

NAV per share = (BTC held x reference rate - liabilities) / shares outstanding

The mechanics:

• Strike time. US spot Bitcoin ETFs strike NAV daily at 4:00 PM London time using the CME CF Bitcoin Reference Rate (BRR). The choice of London 4 PM rather than New York close aligns with the established institutional benchmark and overlaps with both London and US trading hours.
• Liabilities include accrued management fees, custody fees, and any other operational costs - typically small for a passive Bitcoin product.
• Share count changes daily through creation and redemption by Authorized Participants.

Two related figures show up in ETF disclosures:

• NAV per share (end-of-day). The official figure published after market close. Used for performance reporting, accounting, and fee calculations.
• iNAV (Indicative NAV). A continuously-updated estimate of NAV, calculated and published roughly every 15 seconds during trading hours. iNAV is what traders watch to spot premium/discount opportunities in real time.

Why NAV matters:

• Arbitrage anchor. When market price > NAV, APs create new shares (deliver BTC or cash to the issuer, receive shares at NAV, sell at market price). When market price < NAV, APs redeem (buy shares at market price, deliver to issuer, receive BTC or cash at NAV). The gap closes.
• Fee basis. Management fees are charged as a percentage of NAV per year, accrued daily.
• Regulatory reference. Disclosures, prospectus calculations, and tax basis all key off NAV.

Where NAV gets interesting:

• Closed-end funds (legacy GBTC pre-conversion). Without creation/redemption, share count was fixed. NAV moved with the BTC price; market price moved with investor demand for the wrapper. The two diverged dramatically - 40% premium in 2020-2021, 50% discount in 2022-2023.
• Cash creation vs in-kind. When creation is cash-only, the issuer (or its custodian) must execute BTC trades to deploy new cash. The execution price may differ from the NAV strike rate. In-kind delivery sidesteps this entirely.
• Cash drag. BTC not yet deployed (in transit, awaiting settlement) earns nothing while still counted in NAV. A small contributor to tracking error.

NAV is the boring but load-bearing number in ETF structure. When NAV behaves as expected and the market price tracks it within basis points, the wrapper is working. When it doesn't, something is broken - and the size of the gap is exactly what premium/discount measures.