Will BlackRock's ETF Take Bitcoin Price To The Moon?
Has the world's largest financial institution finally "seen the light" on Bitcoin? Will demand outstrip supply, making a rise in BTC price inevitable? Traditional financial institutions finally believe that digital assets are here to stay.
At least, that's what one can conclude from the many announcements made by some of the world's financial leaders last week. One of them is BlackRock - the world's largest asset manager with $ 9 trillion in assets under management (AUM) - has applied for approval to create an exchange-traded fund (ETF) based on "fair market" funds bitcoin - something the United States Securities and Exchange Commission has rejected.
Others include Fidelity Investments, Charles Schwab, and Citadel to launch EDX, a new cryptocurrency exchange. In Germany, Deutsche Bank - with $1.4 trillion in assets - applied for the right to hold crypto. There are others. Collectively, these developments have boosted the crypto trading market. Bitcoin gained 20% on the week, hitting the $30,000 mark for the first time since April. If approved, the listing of the BlackRock Bitcoin ETF on the Nasdaq exchange will make Bitcoin more accessible to the investing public.
Some expected Bitcoin to run because of BlackRock's record, while others followed theirs, including Invesco and WisdomTree. Fidelity Investments filed for a Bitcoin ETF on June 29.
"The big build has begun," Cameron Winklevoss tweeted, while MicroStrategy's Michael Saylor added, "The flood of top companies for #Bitcoin is closing."
The Great Accumulation of bitcoin has begun. Anyone watching the flurry of ETF filings understands the window to purchase pre-IPO bitcoin before ETFs go live and open the floodgates is closing fast. If bitcoin was the most obvious and best investment of the previous decade, this…— Cameron Winklevoss (@cameron) June 21, 2023
Others, however, said they were a little shocked by these developments, even after a year of crypto-related woes, bankruptcies, lawsuits and regulatory uncertainty. in the United States. From this point of view, the company just bows to the inevitable. "It is not surprising, because from this point of view, the digital value movement is clearly the next evolution of the internet," said Jim Kyung-Soo Liew, associate professor of finance at Johns Hopkins Carey Business. School, and Cointelegraph. "The surprise is that the United States did not accept it."
The events of the past week raise some questions: How sustainable are the latest Bitcoin price gains? There have already been comments from corporate investors. Will this time be different, or will Bitcoin and other cryptocurrencies resume market activity? On the other hand, a company the size of BlackRock could actually change the BTC market, according to some.
Bitcoin has a limited supply of 21 million BTC and the existing inventory is very low. According to Glassnode, 68% of BTC in circulation has not moved at all in the past year. In other words, there is not much stock on the shelves for BlackRock and others. If demand outstrips supply, doesn't that mean price gains for BTC?
Also, where do retail investors stand among industry newcomers? Perhaps ordinary crypto users are also necessary to stabilize the price of Bitcoin.
Finally, if the so-called Great Gathering is indeed happening, how far will it go? The cryptoverse has a market capitalization of around $1 trillion today, of which about half is in Bitcoin. Can the crypto market reach a 10x increase of $10 trillion in five years? Has the "Great Gathering" begun? "Anyone who watches the movies of ETFs understands that the window to buy before the bitcoin IPO before the ETF goes live and opens the floodgates closes quickly," Winklevoss said, adding, "If bitcoin is clearly the best investment of the last decade, this [Bitcoin ETF spot] will probably be the most outstanding and the best market of this decade.
Is the founder of the Gemini cryptocurrency exchange real? "Clearly, there is significant investor demand for access to Bitcoin through regulated financial institutions from a broad spectrum of US investors," said CF Benchmarks CEO Sui Chung. to Cointelegraph, "Otherwise, BlackRock, Fidelity, Invesco and others in the main asset management will not have filed S-1s for Bitcoin ETFs.
The entry of BlackRock and other investment managers into this new asset class is also not unexpected. "We've known for a long time that BlackRock is enabling BTC investments for clients through their Aladdin platform and private Bitcoin funds," Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph. The recent bad news circulating around Binance and Coinbase "have nothing to do with Bitcoin and it can be seen as the right time for a beautiful and well-controlled token to give others a stop to those who the market can trust.BTC ETF is a common step.
Winklevoss, Saylor and others warn that retail investors are better off buying Bitcoin now to get its "pre-IPO" price cheaper than before the price of BTC skyrockets. Are they true?
Chung added, "There is some truth to this given the small amount of Bitcoin and the supply chain is getting stronger." "However, many investors bought between $ 50,000 and $ 69,000 and they are still under water; On top of that, the money is doing more than 5% now. For me, trying to time the market, especially a market like crypto, is a fool's race.
In addition, Winklevoss' position "depends on knowing that the company is really approaching and that ETFs and other asset plays that large companies will do," Justin d'Anethan, business manager for the Asia-Pacific region at Keyrock - a. a digital market maker based in Europe.
“ Prospective investors will try to time this move and buy before anything comes out. I personally am not sure how quickly that will happen. ”
Assuming that BlackRock is successful in its ETF quest and other institutional investors follow suit, this will stabilize the price of Bitcoin at a level higher than the current $30,000 ? Or does long-term price stability also require broader participation by retailers?
Chung replied, "It all depends on how much AUM they can collect if approved." "If it is a large amount, it means in a sense that it will increase the value of the given small amount of money. Bitcoin and its value depends on who bought Bitcoin and what it means. Buy requests will exceed sell requests and the price will appreciate.
Carol Alexander, a professor of finance at the University of Sussex Business School, told Cointelegraph that the execution of the Bitcoin ETF spot could make BTC unstable and volatile. "If there are many ETFs, all traders trying to adjust their position can sell at the same time or buy at the same time. It can increase flexibility...I don't agree with what Winklevoss said.
Alexander has his own BTC price index, which provides an important service for retail investors. In March, when BTC was trading around $20,000, he predicted that the coin would fall to $30,000 by June and go sideways in the summer. This has happened a lot. "So the question is, what will happen in September?" he asked. "I'm not saying it will happen, but it could go up to about $50,000. That's because people come back after the summer and there's more money in the market.
But it is also because investors are no longer afraid after the long string of crypto pullbacks, scandals, bankruptcies, and regulatory actions in the past year. Growing investments in digital asset markets by major financial institutions such as Fidelity Investments and JPMorgan Chase have had a chilling effect on retail investors.
“I think we're going to see a lot of acceptance from the public from September onwards as you get more clear rules and things. The additional sales can make the price go back - I'm not saying $ 68,000 where it is, that would be higher [...] - but there is a sweet spot around the $ 50,000 mark, which I think is will be next. level of long-term resistance.
In a June 19 global survey conducted by Nomura Laser Digital, 90% of professional investors said it was "important" that any currency or digital investment has the backing of a major financial institution. tradition - even before they consider investing their customers in it. him. Perhaps last week's statements from BlackRock, Fidelity, Deutsche Bank, et al. is the symbol they are waiting for.
"Maybe," Schwenk said. "Only time will tell. It is difficult to choose when the point of intervention will be. We have shares from other large traditional institutions - BNY Mellon, State Street, Standard Chartered, Franklin Templeton, etc. It's not enough to satisfy survey respondents, but eventually they'll see a lot of heat.
Tenfold Growth In Five Years?
In the meantime, how can things go? With the participation of major TradFi companies such as BlackRock, Fidelity, and Deutsche Bank, the crypto market could grow from $1 trillion to $10 trillion or more in the next five years, for example?
“ Five years ago, the total liquid crypto market capitalization, as measured by the CF Large Cap Index, was around $250 billion and peaked at around $2.6 trillion at the end of the year. 2021," Chung said. "So 10X would seem to be within the realm of possibility. ”
Larger companies putting their distribution networks to work to facilitate further adoption will also provide "a tailwind," he added. "However, interest rates are not 5% for the past five years - they are now. It is impossible to know what effect this may have.
Alexander was not optimistic. "A Bitcoin ETF - I don't see it as important." Most ETFs are baskets of stocks or baskets of funds. An ETF with a basket of cryptocurrencies like Bitcoin, Ether, and Solana "would make more sense," he says.
"Exciting Times" for Bitcoin? The vision of investors and companies outside the privacy of the cryptoverse has been reported, but they never joined the group. Why might this time be different? "Investors in the industry are slow and thoughtful in their due process," said Johns Hopkins' Liew, but "they finally saw the light of bitcoin. It's very exciting to go through." and their customers push them. "Obviously, some exposure. that crypto is a good way to diversify an investment portfolio, he said, summing up:
“ If investors and companies get into entertainment, what they want will raise the price. It will be an exciting time for BTC. The participation of large financial institutions, whether for the ETF application or the new EDX exchange, represents a significant change in a specific time for the crypto market, in the United States and around the world. ”