Original | Odaily Planet Daily(@OdailyChina)
Author|Golem(@web 3_golem)
Traditional finance has come up with another novel twist on Bitcoin.
On June 18, Franklin Templeton filed an application with the U.S. SEC to launch two new Bitcoin DRIP ETFs, designed to automatically reinvest stock dividends into Bitcoin. These two ETFs are the Franklin U.S. Equity Bitcoin DRIP Index ETF and the Franklin U.S. Innovation Bitcoin DRIP Index ETF, which track the U.S. Large Cap 500 Index and the U.S. Innovation 100 Index compiled by VettaFi, respectively.
The initial portfolio structure of both ETFs is highly compliant and secure: 95% U.S. traditional stocks (large-cap or innovative growth stocks) + 5% Bitcoin exposure. The initial 5% Bitcoin allocation will be rebalanced quarterly; if the weight exceeds the limit, the allocation will be adjusted down to 4.5%-5%. Bitcoin's allocation is only allowed to naturally increase to a maximum of 20% per quarter.
However, the truly intriguing aspect of these ETFs lies in their "modification" of the traditional DRIP (Dividend Reinvestment Plan). A traditional DRIP automatically uses stock dividends to repurchase shares of the same stock to achieve compounding, whereas Franklin's design automatically uses those dividends to acquire Bitcoin.
Therefore, the core logic of these ETFs is to intercept all dividends generated by the underlying U.S. stocks, not reinvesting them in stocks, but systematically and automatically converting them into Bitcoin purchasing power, redirecting cash flow originally belonging to the U.S. stock market towards Bitcoin.
The market expects that if Franklin's application passes the U.S. SEC review smoothly, trading could commence as early as September this year. What is the fundamental difference between these Bitcoin DRIP ETFs proposed by Franklin and existing Bitcoin spot ETFs? If approved, how much passive buying pressure could they bring to Bitcoin? Odaily Planet Daily will provide a brief analysis in this article.
Creating a New Flow of Funds for Bitcoin ETFs
The biggest difference between Bitcoin DRIP ETFs and existing Bitcoin spot ETFs is that spot ETFs involve investors actively buying Bitcoin, while DRIP ETFs utilize dividends to automatically dollar-cost average into Bitcoin, creating a new source of Bitcoin demand.
The process for a Bitcoin spot ETF to purchase Bitcoin roughly is: investors are bullish on Bitcoin → purchase spot ETF → ETF manager buys Bitcoin → Bitcoin price rises accordingly. Conversely, when the crypto market weakens, Bitcoin spot ETFs also face investor redemptions, leading to Bitcoin sales. The general process is: investors turn bearish on Bitcoin → sell spot ETF → ETF manager sells Bitcoin → Bitcoin experiences cascading price declines.
Thus, Bitcoin spot ETFs essentially only add upward momentum to Bitcoin during crypto bull markets, while becoming a major source of selling pressure during crypto bear markets. For example, currently, with AI and semiconductor stocks attracting global liquidity, Bitcoin is no longer a primary active asset allocation choice for traditional investors. Consequently, Bitcoin spot ETFs have experienced net outflows over the past two months.
According to SoSoValue data, Bitcoin spot ETFs saw net outflows exceeding $4.69 billion in May and June, and experienced 13 consecutive days of net outflows from May 15 to June 3, breaking the previous record of 8 consecutive days set in early 2025.
Bitcoin DRIP ETFs, however, do not rely on investor sentiment. Their process for buying Bitcoin is generally: underlying stocks generate dividends → ETF receives cash → automatically buys Bitcoin exposure → creates sustained buying pressure. Even if investors do nothing, the Bitcoin allocation will continue to grow. The rules for when a Bitcoin DRIP ETF sells Bitcoin are also clearly defined: rebalanced quarterly, selling any Bitcoin exceeding the 5% total asset allocation threshold.
On the surface, this appears to be regularly selling Bitcoin, but it actually treats Bitcoin as a long-term gain factor within the U.S. stock market bubble.
Investors must follow the trend. Currently, U.S. stocks are in a bull market driven by the AI tech revolution, while Bitcoin is in a cyclical bear market. Even if investors still believe Bitcoin will experience another bull market in the future, from an opportunity cost perspective, even conservative investors would choose to allocate to large-cap stocks rather than Bitcoin.
But Bitcoin DRIP ETFs are pitching an extremely compelling narrative to investors: retain 95% of the returns from large-cap stocks, use only the risk-free dividend income to chase Bitcoin's risk-adjusted returns, all with strict 5% risk control. This mechanism lowers the psychological barrier for traditional high-net-worth individuals and institutions to enter. The 5% Bitcoin allocation essentially acts as insurance for the investment portfolio; if the AI bubble bursts and global capital flows back to safe-haven assets, Bitcoin might also see gains.
The dividend-based dollar-cost averaging model of Bitcoin DRIP ETFs also differs from MicroStrategy's treasury model. MicroStrategy's logic for accumulating Bitcoin is through issuing debt or equity to raise funds for purchases, which is essentially leveraging. However, once that leverage starts to be unwound, the buying pressure disappears and can even lead to substantial Bitcoin sales. In contrast, Bitcoin DRIP ETFs accumulate Bitcoin based on a cash flow logic; as long as the underlying U.S. stock giants continue to pay stable dividends, the ETF can continuously purchase Bitcoin.
How Much Buying Pressure Can Bitcoin DRIP ETFs Create for Bitcoin?
In summary, for Bitcoin, Bitcoin DRIP ETFs represent a high-quality source of liquidity—not only continuous but also largely price-insensitive—innovatively converting the profits of real-world enterprises into automated support for Bitcoin's price. So, if approved, how much buying pressure could Bitcoin DRIP ETFs create?
According to Franklin's application documents, these two Bitcoin DRIP ETFs are not required to obtain Bitcoin exposure solely through direct Bitcoin holdings; they can achieve it through Bitcoin spot ETFs, Bitcoin futures/options, or other derivative instruments.
Therefore, Franklin's designed Bitcoin DRIP ETFs will not necessarily turn every dollar of dividend into a dollar of direct Bitcoin spot buying pressure.
It is speculated that Franklin will most likely choose to have its Bitcoin DRIP ETFs primarily purchase its own Bitcoin spot ETF (EZBC) to gain Bitcoin exposure. The reason is simple: Franklin is an asset management company. If the Bitcoin DRIP ETFs accumulate Bitcoin by buying EZBC, Franklin essentially collects an additional layer of management fees from investors and completes an internal capital loop.
From the perspective of Bitcoin buying pressure, regardless of which Bitcoin spot ETF product the Bitcoin DRIP ETF buys, it ultimately translates to the Bitcoin spot market, just with an extra layer of ETF in between.
Assuming the future AUM of Bitcoin DRIP ETFs reaches $100 billion, with an average U.S. large-cap stock dividend yield of 1%-1.5%, it would generate $1 billion to $1.5 billion in annual Bitcoin buying pressure. However, for Bitcoin, such an inflow scale would not have a material impact on its price, as the daily inflow/outflow volatility of current Bitcoin spot ETFs already reaches tens of billions of dollars.
Thus, for Bitcoin DRIP ETFs to create effective buying support for Bitcoin, either Franklin's two Bitcoin DRIP ETFs would need to attract hundreds of billions of dollars in AUM (unrealistic, as Franklin's largest ETF product is only in the tens of billions), or other asset management giants would need to adopt similar mechanisms to accumulate Bitcoin, continually expanding the Bitcoin DRIP ETF market.
