What you need to know about BlackRock’s Bitcoin ETF

We’ve known for some time that the financial world is planning a shift toward digital currencies. The U.S. has its FedNow Digital dollar coming next month. China has successfully tested its Digital Currency Electronic Payment (DC/EP) and is already rolling it out on major e-commerce platforms. The European Central Bank (ECB) is developing its Digital Euro with urgency. And now, suddenly, BlackRock is jumping on the crypto train, filing for its own Bitcoin ETF with the U.S. Security and Exchange Commission (SEC).

The world is going cryptocurrency crazy once again, and we know what happened last time. Is BTC on the verge of going north of $75K, or is it nothing more than institutional hype?

BlackRock’s ETF approval

BlackRock is not the first company to apply for a Bitcoin ETF with the SEC. The last two Bitcoin ETF applications were promptly rejected, citing concerns of fraud and market manipulation. But BlackRock might have added a clause that will change the SEC’s outlook. The key difference with BlackRock’s recent SEC filing is that it intends to enter into a “surveillance sharing agreement” with the Chicago Mercantile Exchange (CME). That means the CME would constantly survey market conditions and price actions in real-time with the aim of preventing price manipulations. Will that be enough to win over the SEC?

The securities watchdog has been waging war against crypto for a while now, so BlackRock’s ETF application seems ill-timed. The longstanding case of SEC vs Ripple (XRP) has created controversy and stifled XRP growth for years. More recently, Binance and Coinbase found themselves in the regulator’s crosshairs too with charges of “securities” law violations.

Bizarrely, BlackRock chose Coinbase as custodian for its Bitcoin ETF, despite the SEC’s recent lawsuit, which prompts the question: how could BlackRock get approval for an ETF that is associated with an exchange currently under investigation by the SEC? On the surface, SEC approval seems like a fairytale proposition, but keep in mind that of the hundreds of approved ETFs that BlackRock submitted, only one request was ever rejected.

Why is BlackRock boarding the Bitcoin train now?

BlackRock is the world's largest asset management firm with over $9 trillion in global investments, offices in 30 countries, and clients from 100+ countries. But despite all its wealth and influence, it is still heavily tied to the health of the U.S. dollar. If American billionaire investors Ray Dalio and Warren Buffet are right about an approaching collapse of the U.S. economy, BlackRock’s holdings will suffer irreparable damage. Diversification is always recommended during uncertain times, and Bitcoin might be the perfect insurance for BlackRock.

All experienced traders know that if an entity has significant funds, a solid reputation, and the attention of world media, it’s relatively easy to influence an asset price, and given a $9+ trillion balance sheet and global presence, it’s not hard to imagine BlackRock gaining a firm hand on bitcoin’s price action, which would be insulating its investors from a greenback crash and possibly even a global recession.

There’s nothing conspiratorial about the idea. BlackRock is simply joining the digital revolution and diversifying against the uncertainty of today’s traditional markets. That said, there are some conspiracies circulating.

The SEC has been paving the way for BlackRock

Speculation has been circulating on social media that the SEC’s war on crypto is actually clearing out the competition and laying the foundation for BlackRock's entry into the Bitcoin arena. But extensive research into that claim has yielded nothing more than gossip. That doesn’t mean the rumors are incorrect though. Trading on such unfounded speculation would be foolish, but keeping it in mind might be smart when following Bitcoin ETF updates.

 How would a BlackRock ETF affect BTC prices?

If BlackRock’s ETF is approved, the further legitimizing of blockchain technology and the investment medium may attract larger investors, and BlackRock will be required to match rising trading volumes with CoinBase. Increased investment volumes should have a bullish effect on BTC prices, but perhaps not as much as you might think. Mathematically speaking, dividing the market capitalization of Bitcoin by its circulating supply shows the Bitcoin price.

BlackRock’s investors have more than $9 trillion in active investments, but to surpass BTC’s 2021 ATH of $68,789, they would need to shift 10% ($900 billion) of their investments to the Bitcoin ETF. This is a highly unlikely scenario that would generate a new ATH of $76,415 per coin.

While every $1 billion in Bitcoin purchases increases the price of BTC by only $51, that’s a hypothetical and unreliable calculation, since supply and demand ratios are the primary price mover. Moreover, Bitcoin is perpetually fluid, and volatile. So yes, BlackRock may influence prices and possibly even trigger a bull run, but the days of $10K in a single day seem unlikely in 2023.

Conclusion

The SEC’s approval of BlackRock’s ETF application might seem likely when taking into account their track record and influence, but an approval will also put the regulator in a complicated and conflicting position, given its war on crypto and the current CoinBase legal action. As with all things crypto, expect the unexpected and be cautious with your leverage settings. Stay current on crypto news and reports with the Exness Trade app and be ready for a volatile summer.