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 as of 4:00 PM New York time. Several, including the iShares Bitcoin Trust, use the New York variant of the CME CF Bitcoin Reference Rate (BRRNY), which measures trades from 3:00 to 4:00 PM New York. Others use different benchmarks, such as the Fidelity Bitcoin Reference Rate.
• Liabilities are mostly the accrued sponsor's fee, plus any expenses the sponsor does not cover, so they are typically small for a passive Bitcoin product. At the iShares Bitcoin Trust, for example, the sponsor's fee pays for custody.
• 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:

• Legacy GBTC (before January 2024). New shares were sold in private placements, and buyers had to hold them for a set period before reselling. With no redemption program, APs could not arbitrage the gap. NAV moved with the BTC price, while the market price moved with demand for the shares. From May 2015 to January 10, 2024, while quoted over the counter on OTCQX, the shares closed as much as 142% above NAV and as much as 49% below it.
• Cash creation vs in-kind. In a cash creation, the fund buys BTC through its trading counterparties, and the execution price may differ from the rate used for NAV. At the iShares Bitcoin Trust the AP covers any shortfall and keeps any gain, so the difference stays out of the fund. In-kind delivery takes the fund out of the trade.

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.