Will BlackRock’s ETF slingshot Bitcoin’s price skyward?

Traditional financial firms believe that digital assets will finally take hold. Or so one might conclude from last week’s plethora of announcements by the world’s major financial players.

Among them is BlackRock, the world’s largest asset manager with $9 trillion in assets under management (AUM), and the US Securities and Exchange Commission has created a “spot market” for Bitcoin-based exchange-traded funds (ETFs). applied for permission to build an ETF). staunchly resisted.

Others include Fidelity Investments, Charles Schwab, and Citadel launching a new cryptocurrency exchange, EDX. In Germany, Deutsche Bank, which boasts $1.4 trillion in balance sheet assets, has applied for a license to store crypto assets. There were others.

Collectively, these developments have boosted the cryptocurrency trading market. Bitcoin (BTC) surged 20% this week, breaking the $30,000 mark for the first time since April. If allowed, the listing of the BlackRock Bitcoin ETF on the Nasdaq Stock Exchange will likely make Bitcoin more accessible to more investors.

Companies such as Invesco and WisdomTree, as well, have even predicted a crash in Bitcoin due to the BlackRock filing.Fidelity Investments It has been submitted For the Spot Bitcoin ETF on June 29th.

“The Great Accumulation Began” Declared Cameron Winklevoss on Twitter, Michael Saylor of MicroStrategy Added“The window for institutional demand for #Bitcoin is closing.”

A large accumulation of Bitcoins has begun. Anyone watching the flurry of ETF filings knows that the window to buy pre-IPO bitcoin before the ETFs go live and the floodgates open is rapidly closing. If Bitcoin was the most obvious and best investment of the last decade, this is…

— Cameron Winklevoss (@cameron) June 21, 2023

However, after a year of crypto-related scandals, bankruptcies, lawsuits and regulatory uncertainty in the United States, some publicly said they were little shocked by these developments. According to this view, the institutions are simply succumbing to the inevitable.

Jim Gyeongsu-Liu, associate professor of finance at Johns Hopkins Cary School of Business, told Cointelegraph, “From a fundamental perspective, the movement of digital value is the next obvious evolution of the internet. I’m not surprised,” he said. “What is surprising is that the United States has not accepted it.”

The events of last week have raised several questions: How long will Bitcoin’s recent price rally last? There have been sightings by institutional investors before. Will it be different this time, or will Bitcoin and other cryptocurrencies resume flat market activity?

On the other hand, some believe that a company the size of BlackRock could really change the BTC market.

Bitcoin has a fixed supply limit of 21 million BTC, and existing inventories are relatively illiquid. 68% of BTC in circulation has not moved at all in the past year. according to to the glass node. In other words, there’s not a lot of stock in stores that BlackRock and others can buy right away. Demand outstripping supply would inevitably mean a higher BTC price, wouldn’t it?

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And where do individual investors fit in among the new institutional investors? Perhaps ordinary cryptocurrency users will also be needed to stabilize the Bitcoin price.

Finally, assuming that so-called mega-accumulation is really happening, how far will it go? Currently, the cryptocurrency market capitalization is around $1 trillion, about half of which is in Bitcoin. Could cryptocurrency market cap reach $10 trillion in 5 years?

Has the “great accumulation” begun?

“Anyone watching the flurry of ETF filings knows that the window to buy pre-IPO bitcoin before the ETFs go live and the floodgates open is rapidly closing.” Declared Winklevoss added: “If Bitcoin was the most obvious and best investment of the last decade, this [spot Bitcoin ETF] Probably the most obvious and best deal of the decade. ”

Is the co-founder of the Gemini cryptocurrency exchange correct?

Sui Chang, CEO of CF Benchmarks, told Cointelegraph, “There is significant investor demand for access to Bitcoin through regulated investment funds from a broad range of US investors. One thing is clear, otherwise BlackRock, Fidelity, Invesco and other big money managers wouldn’t be available.” ”

The entry of BlackRock and other investment managers into this new asset class isn’t all that unexpected either. “It has been known for some time that BlackRock allows customers to invest in BTC through the Aladdin platform and Bitcoin Private Funds,” Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph.

The recent negative news stories swirling around Binance and Coinbase “see an opportunity for better-known and more regulated brands, unrelated to Bitcoin, to offer end-buyers a trusted alternative. may be.” A BTC ETF is a natural step. ”

Winklevoss, Thaler and others warn that retail investors should buy bitcoin now to get the ostensibly cheap “pre-IPO” price before BTC’s price spikes. Are they correct?

“There is some truth to this given the finite supply of bitcoin and the ever-lower growth rate of the supply,” Chong added. “But a lot of investors are still buying in the $50,000 to $69,000 range and are still under the water. Trying to time a market, especially one as volatile as cryptocurrencies, is a silly business.”

Furthermore, the Winklevoss scenario “depends on confidence that institutional investors will really get on board and how large institutional ETFs and other infrastructure will work,” Keylock’s Asia Pacific business said. Head of Development Justin Danethan said: A European-based digital asset market maker told Cointelegraph.

“Forward-looking investors will probably try to pre-empt that move and buy it before it’s actually released. However, I’m personally a little less confident about how quickly this will happen. added Danethan.

Assuming BlackRock succeeds in its ETF quest and other institutional investors follow suit, will Bitcoin price stabilize significantly above its current $30,000 level? Or does long-term price stability also require broad retailer participation?

“It all depends on how much AUM we can collect if approved,” Chung replied. “If it’s a significant amount, it’s only natural that the price would go up significantly given the finite supply. I don’t know, if the demand to buy exceeds the demand to sell, the price will go up.”

Carroll Alexander, professor of finance at the University of Sussex Business School, told Cointelegraph that a large number of spot Bitcoin ETFs could actually make Bitcoin less stable and more volatile. “Too many ETFs can cause market makers trying to hedge their positions to all sell or buy at the same time. That can increase volatility…I agree with Winklevoss. plug.”

Alexander has his own BTC price scenario and assigns a key role to retail investors. In March, when BTC was trading around $20,000, she expected Bitcoin to rise to $30,000 by June and level off over the summer. It almost happened. “So the question is, what happens in September?” she asked.

“I’m not saying it will happen, but it could go up to around $50,000 because people will come back after the summer and the market will be more liquid.”

But it’s also because retail investors are no longer afraid after last year’s long period of cryptocurrency demolition, scandals, bankruptcies and regulatory action. The growing investment in the digital asset market by big financial institutions like Fidelity Investments and JPMorgan Chase has undoubtedly had a calming effect on retail investors.

“I think there will be more acceptance from really normal people as the regulations become clearer after September. I wouldn’t say that, but it’s too expensive. […] — But there is a sweet spot around $50,000 that I think will be the next long-term resistance level. ”

A June 19 global survey by Nomura Laser Digital found that 90% of professional investors Said It was “important” that any digital asset fund or investment has the backing of a large traditional financial institution, at least before it considers committing client money. Perhaps last week’s announcements by BlackRock, Fidelity, Deutsche Bank and others are the signal they’ve been waiting for.

“Probably,” Schwenk said. “Only time will tell. It’s hard to tell when the tipping point will be. It’s not enough to satisfy our survey respondents yet, but we’ll see enough momentum eventually.”

10x growth in 5 years?

How far could the situation rise in the medium term? Could it grow from $10 trillion to over $10 trillion?

“Five years ago, the market capitalization of liquid cryptocurrencies as measured by the CF Large Cap Index was around $250 billion, reaching a high of around $2.6 trillion by the end of 2021,” Chong said. “So 10x seems to be within the realm of possibility.”

There will also be a “big tailwind” for key institutions to get their distribution networks up and running to support further adoption, he added. “But before that he had five years of interest, he wasn’t 5%, now he’s 5%. It’s impossible to know what impact that will have.”

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Alexander was not so bullish. “Bitcoin ETF – I don’t think it’s necessary.” Most of his ETFs are baskets of stocks or baskets of currencies. An ETF that incorporates a basket of cryptocurrencies such as Bitcoin, Ether (ETH) and Solana (SOL) “makes a lot more sense,” she thinks.

“Exciting Times” for Bitcoin?

Sightings of institutional investors just outside the boundaries of the Cryptoverse have been reported before, but they have never fully entered. all at once. Why is this time different?

“Institutional investors are very slow and thoughtful in their due diligence process,” said Liu of Johns Hopkins. Too exciting to miss this, customers are recommending the product to them. From an empirical point of view, some exposure to cryptocurrencies is a good way to diversify your investment portfolio, he noted, summarizing:

“If institutional investors participate, their demand will definitely push the price up. It will definitely be an exciting time for BTC.”

“Whether it is an ETF application or a new EDX exchange, the involvement of a major financial institution represents a major change and a defining moment for the U.S. and global cryptocurrency markets,” concluded Danethan.