BlackRock Files for Bitcoin ETF

BlackRock, the world's largest asset manager, has applied for an exchange-traded fund (ETF) that would involve Bitcoin. This move is seen as a significant development, as BlackRock is considered a major player in the traditional financial sector, overseeing more than $9.1 trillion of assets as of March. The application for a spot Bitcoin ETF is submitted to the US Securities and Exchange Commission (SEC), and BlackRock has chosen Coinbase as its custodial partner for this ETF.

This partnership is not surprising given that BlackRock and Coinbase have been strategic partners for some time, though there are mixed opinions as to whether this is ultimately good for Bitcoin and the ethos of decentralization that it has supported since its inception.

Concerns

The entry of BlackRock into the Bitcoin space has generated mixed reactions within the cryptocurrency community. On one hand, some view this development positively as it could bring in large-scale and regulated investment into Bitcoin, which might be bullish for the industry. On the other hand, there are concerns about large institutions like BlackRock having too much control over Bitcoin, which was initially conceived as a decentralized currency that would be free from the control of traditional financial institutions.

Mark Yusko, who established Morgan Creek Capital Management, voiced his apprehensions about Xapo, a tool used by institutions to securely store cryptocurrencies, which Coinbase purchased in 2019. He raised questions about the potential implications if BlackRock were to gain control of this crypto storage facility. Yusko hinted that such a development could lead to BlackRock possessing a large share of the cryptocurrency assets in the United States.

#ToldYa #CanYouSeeItYet 👀 https://t.co/EEQ9TScFcs

— Mark W. Yusko #TwoPointOneQuadrillion (@MarkYusko) June 19, 2023

He also raised concerns about how BlackRock would handle a hard fork to the Bitcoin protocol. If a hard fork were to happen, there would essentially be two different copies of Bitcoin - leading to BlackRock needing to make a decision about which one to support. Considering BlackRock's vast size, there are worries that they could potentially close off access to what is believed to be the more favorable fork, in which case adopters of the ETF would have no choice but to play ball. More on this can be seen via the On the Margin podcast HERE.

There are also speculations as to whether industry leaders in the financial sector have been short-selling Bitcoin since the idea of a Bitcoin ETF was first proposed. Historically, we have seen this happen with other asset classes so it is not that far-fetched that it has been happening with Bitcoin.

Possible Advantages

Proponents of this news regarding BlackRock's move to file for a Bitcoin spot ETF theorize that having a major player like BlackRock getting involved with Bitcoin legitimizes and helps to de-stigmatize the industry. As new players begin to enter the industry, this could lead to new innovation and an increased level of adoption regarding Bitcoin and blockchain technology.

In the 19b-4 section of the NASDAQ filing, there is a proposed surveillance sharing agreement, referred to as the "Spot BTC SSA", that could reduce the risk of market manipulation. The surveillance sharing agreement essentially serves as a means for sharing market trading activity, customer identification, and clearing activity in an effort to reduce any kind of possible market manipulation. The SEC has historically been very wary of Bitcoin market manipulation, and the inclusion of this agreement could significantly increase BlackRock's chances of getting the ETF approved. Whether this is an advantage or disadvantage to the Bitcoin community depends on your perspective, but it certainly is beneficial to BlackRock's chances of getting approved.

Final Thoughts

It is important to recognize that integrating institutional players like BlackRock into the Bitcoin market represents a significant shift. While this can bring increased liquidity and validation to blockchain technology, it also raises questions about the initial ethos of Bitcoin as a decentralized and democratized form of money. The debate continues as to whether the involvement of major financial institutions in the Bitcoin space is ultimately beneficial or detrimental to the original vision and values of Satoshi.