Traditional financial firms finally believe that digital assets are here to stay. Or so one might conclude from the slew of announcements last week fr
Traditional financial firms finally believe that digital assets are here to stay. Or so one might conclude from the slew of announcements last week from some of the world’s premiere financial players.
Among them is BlackRock — the world’s largest asset manager with $9 trillion in assets under management (AUM) — filed for permission to build a “spot market” Bitcoin-based exchange-traded fund (ETF) — something the United States Securities and Exchange Commission has resolutely resisted.
Others include Fidelity Investments, Charles Schwab and Citadel launching EDX, a new cryptocurrency exchange. In Germany, Deutsche Bank — boasting $1.4 trillion in balance sheet assets — applied for a license to custody crypto. There were others too.
Collectively, these developments boosted crypto trading markets. Bitcoin (BTC) gained 20% in the week, surpassing the $30,000 mark for the first time since April. If allowed, a BlackRock Bitcoin ETF listing on the Nasdaq stock exchange would arguably make Bitcoin more accessible to a larger investing public.
Some even anticipated a stampede to Bitcoin due to the BlackRock filing, as others followed with their own, including Invesco and WisdomTree. Fidelity Investments filed for a spot Bitcoin ETF on June 29.
“The Great Accumulation has begun,” declared Cameron Winklevoss on Twitter, while MicroStrategy’s Michael Saylor added, “The window to front-run institutional demand 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 professed little shock about these developments, however, even after a year of crypto-related scandals, bankruptcies, lawsuits and regulatory uncertainty in the United States. By this view, the institutions were just bowing to the inevitable.
“I’m not surprised, since from a fundamental point of view, the movement of digital value is the next obvious evolution of the internet,” Jim Kyung-Soo Liew, associate professor of finance at Johns Hopkins Carey Business School, told Cointelegraph. “What is surprising is how the U.S. hasn’t embraced it.”
Last week’s events raise some questions: How enduring are Bitcoin’s most recent price gains? There have been institutional investor sightings before. Will this time be different, or will Bitcoin and other cryptocurrencies resume their sideways market activity?
On the other hand, a firm the size of BlackRock really could transform the BTC market, some believe.
Bitcoin has a fixed supply limit of 21 million BTC and its existing inventory is relatively illiquid. Sixty-eight percent of BTC in circulation hasn’t moved at all in the past year, according to Glassnode. There isn’t a lot of stock on the shelves for BlackRock and others to snap up, in other words. If demand exceeds supply, doesn’t that inevitably mean price gains for BTC?
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Also, where do retail investors fit in among the new institutional arrivals? Maybe ordinary crypto users are also needed to stabilize the price of Bitcoin.
Finally, assuming the so-called Great Accumulation really is happening, how far can it go? The cryptoverse has a market capitalization of about $1 trillion today, roughly half of which is in Bitcoin. Could the crypto market cap reach a 10-fold increase of $10 trillion in five years?
Has the “great accumulation” 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,” declared Winklevoss, adding: “If bitcoin was the most obvious and best investment of the previous decade, this [spot Bitcoin ETF] will likely be the most obvious and best trade of this decade.”
Is the co-founder of the Gemini cryptocurrency exchange right?
“Clearly, there is significant investor demand for Bitcoin access through regulated investment funds from a broad spectrum of U.S. investors,” Sui Chung, CEO of CF Benchmarks, told Cointelegraph, “Otherwise, BlackRock, Fidelity, Invesco and other major asset managers would not have filed S-1s for Bitcoin ETFs.”
The entry of BlackRock and other investment managers into this new asset class isn’t so unexpected, either. “We’ve long known that BlackRock is enabling BTC investments for clients through their Aladdin platform and Bitcoin private fund,” Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph.
The recent negative news stories swirling around Binance and Coinbase “are not related to Bitcoin and may be seen as an opportune time for a better-known, more regulated brand to provide alternatives that end-buyers can trust. A BTC ETF is a natural…
cointelegraph.com