This is wild! 6 Bitcoin ETF applications in 6 days! Bitcoin & altcoins cannot stop pumping. All of these Bitcoin ETF filings are very exciting but keep in mind that none have been approved yet. But they indeed have triggered a price rally.
Is this the next big BTC bull run we all have been eagerly waiting for? Will altcoins suffer if the BTC ETF is approved? And a hunch. Could Bitcoin ETF Ruin Bitcoin? Let’s dive in!
Bitcoin ETF & Why Bitcoin ETF?
A Bitcoin ETF creates a simple, legally compliant way to trade the price of Bitcoin. On Oct. 19th, 2021, marked the launch of the first U.S.-listed Bitcoin ETF. And as expected, it was a hit. Within 48 hours of its launch, BITO Bitcoin ETF Becomes Fastest ETF Ever To Hit $1 Billion AUM.
But its timing was worse, the Bitcoin market began a massive slide. And that was the end of the first ETF. In fact, the SEC has rejected dozens of Bitcoin ETF applications. Then why are 6 major financial players suddenly FOMOING on BTC ETFs?
Well, the reason is BlackRock. BlackRock, the world’s largest asset manager with over $9 Trillion in assets under management applied for the BTC ETF first time ever. A historical examination reveals intricate dynamics between the Securities and Exchange Commission (SEC) and BlackRock.
So, BlackRock has a 99.86% success rate getting ETFs approved. Out of 576 ETF applications 575 were approved. Only once had an ETF it proposed rejected by the SEC in 2014. Does that mean BlackRock BTC ETF will most likely get approved? Before I answer that. Only for those who don’t understand ETF fully. Let me explain it simply:
What is an ETF?
An ETF is an investment vehicle that is publicly traded, like a stock, but tracks the performance of an underlying asset, in the case of a Bitcoin ETF, the underlying asset would be BTC.
A BTC ETF will provide investors with a way to gain exposure to the value of BTC without worrying about any legal complications.
Source: Twitter
Get this, a Bitcoin ETF works in much the same way as any other ETF. Investors buy shares in the ETF through whatever brokerage they buy stocks from and can trade them the same way they’d trade shares in Apple or Tesla. Bitcoin ETFs track the current price of Bitcoin and should act in lockstep with Bitcoin’s price swings.
What Is the Need for a Bitcoin ETF?
So, why wouldn’t investors just buy Bitcoin? For most regular retail investors, Bitcoin and cryptocurrencies in general still look risky.
Besides having unclear regulations around them, owning Bitcoin requires keeping a Bitcoin wallet and trusting crypto exchanges, which are still uncharted territory for people unfamiliar with the space and require a certain level of self-education.
Holding Bitcoin places the burden of security squarely on you, making you responsible for keeping your own private keys safe (unless you want to entrust them to the exchange). This may mean buying a hardware wallet to protect purchased Bitcoin or storing private keys in a secure manner. You’d also have to work out how to file taxes for sales of Bitcoin that resulted in capital gains.
With a Bitcoin ETF, investors need not worry about private keys, storage, or security. They own shares in the ETF just like their shares of stock and can gain exposure to the cryptocurrency market without having to go through the hoops of purchasing and holding crypto. And to put it plainly, that is an extremely appealing proposition for many regular folks—as well as sophisticated institutional investors.
BlackRock – First Bitcoin SPOT ETF
The $10 trillion asset management giant BlackRock filed with the Securities and Exchange Commission (SEC) to launch a Bitcoin Spot ETF on Thursday. This would be the first Bitcoin spot ETF in the US, and it would allow investors to get exposure to Bitcoin without actually buying it.
Source: Twitter
BlackRock is proposing to use two partners to hold the Bitcoin and cash for the ETF: Coinbase Custody and BNY Mellon. The custodial arm of Coinbase is the “Bitcoin Custodian” and it will hold all the Bitcoin to back the ETF. The Bank of New York Mellon is the “Cash Custodian” and it will hold the investors’ cash.
The SEC has been hesitant to approve Bitcoin ETFs in the past, due to concerns about the ability of large whales to manipulate Bitcoin’s price and market manipulation. However, BlackRock is addressing these concerns by proposing to only use the top Bitcoin exchanges and by entering into a surveillance-sharing agreement with Nasdaq.
When Will the Bitcoin ETF Be Approved?
The SEC is expected to take several months to review the filing. So will the price continue to rally till then? I feel yes, we could see a slight upside movement as BlackRock Bitcoin spot ETF would be a major milestone for the cryptocurrency industry.
It would make it easier for investors to get exposure to Bitcoin, and it could help to legitimize the cryptocurrency market.
Can BlackRock Succeed?
Grayscale’s spot ETF proposal was rejected last year because it tried to form a surveillance-sharing agreement with the CME Bitcoin Futures market, which the SEC did not consider closely related enough to the spot Bitcoin market.
Grayscale has since sued the SEC, and judges overseeing the case have expressed skepticism over the SEC’s argument. So, Blackrock said it would determine the value of the Bitcoin in its trust each day with reference to the CF Benchmarks Index.
The Index tracks the price of Bitcoin across Coinbase, Bitstamp, iBit, Kraken, Gemini, and LMAX Digital and strives for “resistance to manipulation” while not including “any futures prices in its methodology.”
Many hedge funds and other investment firms have filed applications with the U.S. Securities and Exchange Commission (SEC) for Bitcoin ETFs in the past week— We’ve seen 6 Bitcoin ETF applications in 6 days!
- Blackrock
- Fidelity
- Invesco
- Wisdom Tree
- Valkyrie
- Bitstamp
Source: Twitter
The SEC is facing a fresh wave of spot Bitcoin ETF applications from major investment firms, in the wake of BlackRock’s filing:
- WisdomTree – ETF provider WisdomTree re-submitted an application requesting regulatory approval for the launch of the WisdomTree Bitcoin Trust on Tuesday, June 20. The watchdog has previously rejected WisdomTree’s attempt to release a BTC ETF, citing possible risks for consumers, such as fraud and market manipulation.
- Invesco – Eric Balchunas announced on his Twitter account that Invesco has renewed its efforts to launch a Bitcoin ETF in the United States. The company’s first filing was in 2021 when it partnered with Galaxy Digital.
Invesco was initially interested in launching a Bitcoin Futures ETF; however, it abandoned those plans at the end of 2021. Instead, it is focusing on a product that enables customers to invest in the primary cryptocurrency based on its actual market price.
3. Valkyrie Financial – This services firm updated its filing for the Valkyrie Bitcoin Fund on Wednesday with the Securities and Exchange Commission, a fresh prospectus reflecting today’s dominant crypto narrative.
4. Fidelity – They said to enter the Bitcoin (BTC) ETF space soon. Other than filing for an ETF, it is being said it can buy Grayscale Investments.
Real Deal??
We’ve been seeing continued outflows among exchange-traded products, mutual funds, and over-the-counter (OTC) trusts. This is because of the crackdown on crypto markets by high-profile SEC lawsuits against Coinbase and Binance. It labeled a slew of altcoins securities. In total, investors have pulled $423 million from funds over the past nine weeks.
People have been feeling out of the ordinary. This happened when one of the world’s most prestigious financial institutions applies for a cryptocurrency investment product. It was during a tough regulatory crackdown.
CoinShares attributed the comparative trickle of outflows to BlackRock’s Bitcoin exchange-traded product (ETP) gambit.
Senior ETF analyst Eric Balchunas said this on Twitter, defending the use of the “ETF” label, saying It’s the “real deal”. He also pointed out that BlackRock has a nearly undefeated record when it comes to the SEC. With 575 of its ETF applications being approved. In contrast, other Bitcoin ETF applicants over the years can’t say the same.
Asset managers VanEck, Ark Invest, and Bitwise have all been rejected by the regulator. The issue is so contentious, Grayscale Investments even sued the SEC after it was rejected for converting its Grayscale Bitcoin Trust (GBTC) to an ETF. BlackRock is a serious institution and New York Mellon would be the custodian for the Trust’s cash holdings—another reputable financial institution. The current regulatory environment may prove difficult to manage an ETF, but the Wall Street giant doesn’t just play around and certainly has the best odds yet.
Impacts of Bitcoin’s ETF
a) Price Action of Bitcoin
- Bitcoin market dominance has reached 50% for the first time in two years due to BlackRock’s filing for a Bitcoin spot ETF.
- Bitcoin climbed to $30,000 for the first time since April, buoyed by The BlackRock announcement on a Bitcoin ETF and EDX Markets. The rally is backed by institutional demand!
- BlackRock’s ETF is expected to be around $5 billion. This is certainly going to be the world’s most anticipated ETF ever.
Source: Twitter
Potential Impacts of Bitcoin’s ETF
- Bitcoin market dominance: The launch of the BlackRock ETF could lead to Bitcoin increasing its market dominance further. As more institutional investors gain exposure to cryptocurrency. This is because the ETF will make it easier for institutional investors to buy and sell Bitcoin, which could increase demand for the cryptocurrency.
- Halving: The launch of the ETF could also coincide with the Bitcoin halving. Which is an event that occurs every four years when the reward for mining a block of Bitcoin is halved. This could lead to a further increase in the price of Bitcoin, as the halving will reduce the supply of new Bitcoin that is being mined.
- Can Really Drive up Institutional Adoption: Approval of BlackRock’s Bitcoin ETF could increase institutional adoption, providing a regulated and secure avenue for investors to access Bitcoin.
GBTC Sees Over 400% Surge in Trading Volume
Grayscale’s Bitcoin Investment Trust (GBTC) is currently enjoying some attention from investors, and its trading volume is a testament to this fact. This follows after GBTC’s trading volume spiked by over 400% within the last week.
As of June 14, the daily trading volume of GBTC was still standing at $16.1 million. But within just 5 days, following the BlackRock filing for a spot Bitcoin ETF on June 15, that volume surged massively to about $80 million.
In this case, Grayscale itself can be optimistic about its proposal to convert GBTC into a spot bitcoin ETF. Although Grayscale, like many others, has had its proposal rejected by the SEC up until this moment.
Plus there have been rumors earlier this week that claims Fidelity might be planning to acquire Grayscale. If that also turns out to be true, then that helps GBTC’s cause with the SEC, especially with regard to Fidelity’s repute as an old, traditional firm.
Whatever might be the case, there is a general sense of optimism around BlackRock being successful in its bid for a spot in Bitcoin ETF. And when that happens, it is expected to pave the way for Grayscale to get its non-redeemable trust shares changed, too.
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