Bitcoin hit $30k for the first time since April when BlackRock filed for a Bitcoin ETF.
If they launch a spot Bitcoin ETF, it could be a game changer for the entire crypto community.
However, there are suspicions surrounding BlackRock’s motives.
In this post, I will talk about that and the potential implications of an SEC-approved Bitcoin ETF.
Bitcoin ETFs Explained
You might also probably not know what ETF is, so I will start there.
A Bitcoin ETF is a type of investment fund that tracks the price of Bitcoin.
It allows you to buy and sell Bitcoin without having to own BTC.
ETFs are traded on stock exchanges, which means that they can be bought and sold just like stocks.
This makes them a more accessible way to invest in Bitcoin than buying it directly.
Bitcoin ETFs are hotcakes because they provide investors with exposure to Bitcoin.
And yet, not have to deal with the technical aspects of buying and storing BTC.
That is, they don’t have to register with any crypto exchange.
Also, they don’t need to store any private keys.
Here is a simple analogy to help you understand Bitcoin ETFs.
Imagine that you want to invest in gold, but you don’t want to own any gold bars.
You could buy shares in a gold ETF instead.
This would allow you to track the price of gold without having to worry about storing or transporting physical gold.
Bitcoin ETFs work similarly.
They allow you to track the price of Bitcoin without having to own any Bitcoin.
In June 2023, BlackRock applied for a Spots Bitcoin ETF.
This came as a shock to the crypto community considering how BlackRock had criticized Bitcoin in the past.
But hold up, let’s not jump the gun here.
Let me take you back to how it all started.
Read more: What is Bitcoin ETF? – A Worthy Read
BlackRock History With Bitcoin
BlackRock is the world’s largest asset manager, with over $9 trillion in assets under management.
In the past, the company had been critical of Bitcoin, calling it a “speculative asset” and a “bubble.”
In 2017, BlackRock CEO Larry Fink said that Bitcoin was “not a real investment” and that it was “not a store of value.”
Then in 2020, BlackRock’s chief investment strategist, Rick Rieder, said that Bitcoin was “not an investable asset” and that it was “not a good way to diversify a portfolio.”
Fast forward to March 2022, BlackRock announced that it would be launching a new investment research team to study cryptocurrencies.
And in June 2023, BlackRock applied with the SEC to launch a spot Bitcoin ETF.
It then means that BlackRock is taking Bitcoin seriously as an investment asset.
Now, Bitcoin Futures ETFs have been available for trading since 2017, but Spot Bitcoin ETFs have been more difficult to get approved.
The Securities and Exchange Commission (SEC) has rejected several applications for Spot Bitcoin ETFs, citing concerns about market manipulation and investor protection.
Also, the SEC is hesitant to approve a Spot Bitcoin ETF because it could legitimize Bitcoin as a currency.
On the other hand, the SEC may simply be waiting for the Bitcoin market to mature before approving a spot ETF.
This makes it more surprising that the industry giant, BlackRock would be filing for spot Bitcoin ETF.
‘Why the sudden change of heart?’ is the million-dollar question.
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Back to why BlackRock now wants to get into Bitcoin.
Read about that below.
Why BlackRock Is Suddenly Interested in Bitcoin
The sudden change of heart from BlackRock is likely due to several factors.
First, the price of Bitcoin has risen significantly in recent years, making it more attractive to investors.
Second, the Bitcoin market has become more mature, with more institutional investors getting involved.
Thirdly, BlackRock probably wants the U.S. to come to par with other jurisdictions regarding crypto regulations.
For example, the EU has brought crypto-assets, crypto-assets issuers, and crypto-asset service providers under a regulatory framework.
Hong Kong has become crypto-friendly, as well as UAE and the UK.
Canada too has approved spot ETFs.
I guess it’s safe to say that BlackRock wants the U.S. to fall in line.
The fourth reason is this: BlackRock is simply trying to make money.
If it can launch a successful Bitcoin ETF, it could potentially make billions of dollars in fees.
The fifth reason is that BlackRock is trying to gain control of the Bitcoin market.
Once it gets a large number of investors to buy into its ETF, it will have a significant amount of influence over the price of Bitcoin.
Now, what’s the likelihood that BlackRock’s filing will be approved by the SEC?
For starters, knowing the reputation of BlackRock, it wouldn’t file for a Bitcoin ETF if it wasn’t sure of success.
In case you didn’t know, BlackRock is a major player in the global financial markets.
And it has a significant impact on the way that money is invested around the world.
The company’s size and influence make it a powerful force in the markets.
Thus, its decisions can have a major impact on the prices of stocks, bonds, and other assets.
As of July 2023, BlackRock has 412 ETFs that have been approved to trade on U.S. exchanges.
These ETFs have a total of $2.45 trillion in assets under management.
So, for a company like that, I doubt if it would risk its reputation by filing for a Bitcoin ETF.
Secondly, in the filing, BlackRock provided measures to curb market manipulation.
This had been the SEC’s fear that has prevented the approval of Bitcoin ETFs in the past.
Blackrock has chosen Coinbase to store its Bitcoin if the Bitcoin ETF is approved.
Why is this? What are the possible implications of the BTC ETF? What are the risks involved?
I answered these questions below.
SEC’s Decision on BlackRock’s Bitcoin ETF
I earlier mentioned that BlackRock chose to partner with Coinbase to address the SEC’s concerns about market manipulation and investor protection.
The question is: Why Coinbase and not a big U.S. bank?
Here is why:
Coinbase is the most well-known and respected crypto exchange in the U.S.
It is a public company and has been in the crypto exchange business for years now without the issue of hack or mistrust.
It is already a popular choice for institutional investors who want to trade or custody crypto assets
Its selection as a custodian would lend an air of legitimacy to the ETF and this would help to convince regulators to approve it.
It will also attract even more institutional investors which would boost the ETF’s liquidity and trading volume.
However, there are no guarantees that BlackRock’s filing will be approved.
Now let’s look at the potential positive implications of a Bitcoin Spot ETF.
Implications of a Bitcoin Spot ETF
1. A surge in demand for Bitcoin because it would make Bitcoin more accessible to a wider range of investors, including institutional investors.
2. Bitcoin may attain a new ATH if demand increases.
3. Increased volatility in the Bitcoin market.
4. Mainstream acceptance of Bitcoin.
On the flip side,
What are the Risks?
Here are two of them.
For traditional ETF traders:
Bitcoin is a volatile asset when compared to non-volatile traditional ETFs.
Hence, traditional ETF traders will need to get used to this new and fast way of transacting to get by.
This may take a while and might involve them losing funds in the process.
For crypto traders getting into ETFs:
ETFs are subject to the same fees as other investment funds.
So you might pay more in fees.
These are just some of the potential implications of BlackRock launching a spot Bitcoin ETF.
It’s still too early to say for sure what will happen, but we will keep our fingers crossed.
Meanwhile, are you going to start accumulating Bitcoin?
Let me know in the comment section.
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