The chart might not show it, but things are looking up in Bitcoin land. Despite trading at the same price as 90 days ago, Bitcoin has been making moves behind the scenes. A radical improvement in the macro landscape has warmed formerly frosty institutions to the decentralized cryptocurrency. This radical alteration in Bitcoin’s perception can be partially attributed to the unlikeliest of sources – Larry Fink.
The billionaire BlackRock CEO is not the cheerleader bitcoiners expected, particularly given his firm’s fondness for ESG investments that are the antithesis of Bitcoin’s energy intensive Proof of Work. But Fink knows money when he sees it, and in BTC, he believes he’s found the right financial instrument at the right time. If anyone can get a mythical Bitcoin ETF over the line, it’s BlackRock.
“It’s refreshing to witness the world’s largest asset manager recognizing the value of Bitcoin and by extension, tokenized digital assets,” muses Szymon Sypniewicz, co-founder and CEO of Ramp Network. “Fink’s change of heart on the potential of decentralized networks doesn’t come as a surprise, but rather as validation of the web3 vision and the fact that our industry can no longer be ignored. And as Blackrock’s Bitcoin ETF application shows, if you can’t fight them, join them.”
Crypto Wants to Believe
The crypto community has become accustomed to TradFi titans talking smack about their industry, only to reverse their opinion the moment they have skin in the game and a vested interest in pumping their bags. Last year it wasn’t expedient to discuss crypto, what with FTX imploding and the domino effect taking out a string of lenders, VCs, and consumer savings platforms. This year, with the trauma from Sam Bankman-Fried’s malfeasance having dissipated and another Bitcoin halving looming, crypto is okay again.
Despite SEC chair Gary Gensler’s crusade to declare everything bar BTC a security, calmer heads and bigger brains are prevailing. While the US Securities and Exchange Commission remains nominally the final boss of financial assets, BlackRock is an unstoppable juggernaut that inevitably gets its way. No company is too big to fail, but the Fink-led investment firm is too well-connected to acquiesce. BlackRock wants a Bitcoin ETF and the market is wagering it’s going to get one – and sooner rather than later.
As Nexo co-founder Antoni Trenchev puts it, “A foundational rule in real estate exclaims “Location, location, location!” When it comes to the first U.S. Bitcoin spot ETF, the same principle might read “Timing, timing, timing.” He adds: “Looking at the “biggest guy” from the bunch, BlackRock – $9 trillion in assets under management plus an ETF approval ratio of 575 to 1 – is a reasonably solid proof of knowledge.”
A foundational rule in real estate exclaims “Location, location, location!” When it comes to the first U.S. #Bitcoin spot ETF, the same principle might read “Timing, timing, timing.”
— Antoni Trenchev (@AntoniNexo) July 10, 2023
The slew of gate-crashers lining up on the SEC’s door virtually at the same time is a fascinating…
“The timing sends an unequivocal signal to regulators: TradFi wants in. No if’s, but’s, or maybe’s.” The long-term implications of this, Trenchev believes, are “Unadulterated buying pressure, to the extent of a BTC-in-401(k)’s potential. We might just be witnessing the end times before Bitcoin claims its pop star status.”
A Volte-Face and a Change of Tack
Five years ago, Larry Fink was dismissing Bitcoin as an instrument for money laundering. Last week, he declared it a “international asset” that could “revolutionize finance.” Back then, he didn’t have a dog in the fight. Now, he has a lucrative ETF to float, which could earn his company billions while giving it a new frontier on which to ply its trade. After all, you don’t grow to $9 trillion AUM by putting all your eggs in one basket. There’s more to investment than ESG, as even its greatest proponent will concede.
Dexalot COO Tim Shan believes Fink’s recent comments are a net positive for BTC in the short term and “a big positive for crypto. As Shan reasons, “Some critics are saying that ETFs are not what crypto is about. That is completely true. But I think that’s looking too far into the future.
“Crypto’s first priority is to win acceptance from the 99% of the world that doesn’t believe in the technology or thinks it’s filled with fraud and “money laundering” as Fink described. Having the head of the largest asset manager in the world in its corner helps a long way to validate crypto.”
Ben Caselin is Vice President of Dubai-headquartered crypto exchange MaskEX. He points out that while BlackRock’s CEO Larry Fink’s change of heart with respect to Bitcoin is significant, in his recent statement he conflated bitcoin and other digital assets, leading it to be somewhat confusing. When he talks about tokenization, this is not new, nor is it revolutionary.
“In a way, tokenizing traditional assets, such as real estate, is similar to issuing fractional shares for equity. It is a way to make otherwise less liquid assets more liquid, lower the barrier and make it more accessible. While generally positive, tokenization still relies on centralized custodians and authorities, will not necessarily revive the assets that are tokenized, and it is not revolutionary. Bitcoin, however, could indeed revolutionize finance, but it has little to do with BlackRock’s potential ETF. Bitcoin revolutionizes finance in so far as it fundamentally reduces the importance of middlemen, including Larry Fink.”
Building upon this idea, Szymon Sypniewicz observes: “DeFi, one could argue, is already revolutionizing finance. By definition, the decentralized nature of cryptoassets and the resulting disintermediation they allow for can greatly increase access to financial products that have historically been restricted to a minority of investors, both by reducing the entry cost and the amount of red tape required to join in. The global nature of blockchains stands in stark contrast with the fragmented, inefficient, and costly ways of conducting cross-border transactions.”
All Eyes on TradFi
The market has been closely muttering Fink’s every utterance on crypto of late. While the BlackRock ETF, together with a clutch of competing applications, struggle to get over the line, the market has been positioning itself for the anticipated institutional rush. They’ve been promised similar in the past only to be disappointed, so the hesitancy to believe this time around, as reflected in the chart, is understandable. BTC is up an impressive 84% for the year to date, but the recent spate of bullish news has failed to have the impact that might have been expected.
There are various explanations for this. For one thing, it could be 2024 by the time an ETF is approved – even if there’s an outside chance one could be actioned as early as next month. Then there’s the Bitcoin halving, scheduled for around May of next year, when a reduction in the block reward assigned to miners will ease sell pressure while psychologically boosting the scarcity meme. Bitcoin may be booked on a rocket ride, in other words, but it isn’t scheduled to depart just yet.
Of course, there’s a lot that could go wrong between now and then to put a dent in those aspirations. The SEC could remain stubborn and Fink et al could get bored and move on to other things. There are also other events in the pipeline, such as the release of Mt Gox bitcoins to long-suffering creditors, and the US government’s own stash of black market-confiscated coins that must reach the market at some stage.
These events could conspire to put a temporary dampener on Bitcoin’s stellar trajectory. In the meantime, the market remains in “wait and see” mode, with only fleeting candles from over-leveraged traders breaking weeks of sideways action. Something’s got to give, but for now the interminable ETF dance between institutions and regulators continues.
