Can BlackRock’s ETFs Lead to a Price Increase in Bitcoin?

Traditional financial institutions have finally come to accept that digital assets are here to stay, which is suggested by the numerous announcements made by some of the world’s leading financial companies last week.

BlackRock, the world’s largest asset manager with $9 trillion in assets under management (AUM), is one of them and has applied for authorization to construct a Bitcoin-based exchange-traded fund (ETF) on a “spot market” – something that the United States Securities and Exchange Commission has firmly declined.

Other notable names such as Fidelity Investments, Charles Schwab and Citadel have unveiled EDX, a cryptocurrency exchange. In Germany, the banking giant Deutsche Bank, which holds $1.4 trillion in balance sheet assets, has applied for a license to provide crypto custodial services. There have been additional similar developments as well.

Collectively, these advancements have had a positive impact on the crypto trading markets. Bitcoin (BTC) experienced a 20% increase in the week, surpassing the $30,000 threshold for the first time since April. If approved, a BlackRock Bitcoin ETF listing on the Nasdaq stock exchange would likely make Bitcoin more accessible to a broader range of investors.

Many people believed that there would be a rush to purchase Bitcoin due to the BlackRock filing, and other firms such as Invesco and WisdomTree followed suit. Fidelity Investments even presented an application for a Bitcoin ETF on June 29.

“Cameron Winklevoss announced on Twitter that ‘The Great Accumulation has begun’, and Michael Saylor of MicroStrategy warned that ‘the opportunity to get ahead of institutional demand for #Bitcoin is diminishing’.”

Many were not surprised by these events, even after a year of crypto-related issues such as bankruptcies, scandals, lawsuits, and regulatory questions in the U.S. This viewpoint perceived the institutions as simply accepting the unavoidable.

“It is not unexpected that digital value transfer is the next logical step in the development of the web,” said Jim Kyung-Soo Liew, an associate professor of finance at Johns Hopkins Carey Business School, to Cointelegraph. “What is astonishing, however, is the fact that the U.S. has not yet accepted it.”

Last week’s occurrences have brought up some inquiries: How long-lasting are Bitcoin’s most recent cost increases? There have been sightings of institutional investors in the past. Will this period be distinctive, or will Bitcoin and other digital currencies go back to their horizontal market action?

It is thought that a company as large as BlackRock could have a major impact on the Bitcoin market.

Bitcoin has a maximum supply of 21 million coins, and the current amount in circulation is not very liquid. According to Glassnode, 68% of BTC has not been moved in the last 12 months. This means that there is not much available for BlackRock and others to purchase. If there is more demand than supply, wouldn’t that result in an increase in the price of BTC?

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Perhaps ordinary crypto users are necessary to balance out the price of Bitcoin, in addition to the new institutional investors. Where do retail investors fit into this picture?

Finally, supposing the purported Great Accumulation is indeed taking place, how far could it go? Currently, the crypto market has a capitalization of roughly $1 trillion, with Bitcoin making up approximately half of that. Is it conceivable that the crypto market capitalization could reach $10 trillion in the span of five years, representing a tenfold increase?

Has the “great accumulation” begun?

Cameron Winklevoss commented that with the numerous ETF filings being made, the opportunity to invest in Bitcoin before ETFs become available is quickly diminishing. He further stated that if Bitcoin was the top investment of the past decade, then a spot Bitcoin ETF will likely be the most profitable trade of the current decade.

Is the co-founder of the Gemini cryptocurrency exchange correct?

“It is evident that a wide variety of American investors are eager to gain access to Bitcoin through regulated investment funds,” Sui Chung, CEO of CF Benchmarks, stated to Cointelegraph. “This is why big names such as BlackRock, Fidelity, and Invesco have submitted S-1s for Bitcoin ETFs.”

The involvement of BlackRock and other investment firms in this novel asset class is not surprising. “It has been known for some time that BlackRock is allowing its customers to invest in BTC through their Aladdin platform and Bitcoin private fund,” Doug Schwenk, CEO of Digital Asset Research, told Cointelegraph.

The recent reports of negative publicity surrounding Binance and Coinbase have nothing to do with Bitcoin, and may be seen as a good opportunity for a more established and regulated brand to offer alternatives that customers can trust. A Bitcoin Exchange Traded Fund (BTC ETF) would be a logical next step.

Winklevoss, Saylor, and other individuals caution that retail investors should purchase Bitcoin now while it is still at a supposedly lower “pre-IPO” price before the cost of BTC soars. Are they accurate in their advice?

Chung commented that, although there is some truth to the idea that Bitcoin has a finite supply and a decreasing rate of supply growth, many investors who bought in the range of $50k to $69k are still in the red. Additionally, cash is currently yielding more than 5%. In his opinion, attempting to time the market, especially one as volatile as crypto, is a foolhardy endeavor.

Justin d’Anethan, Head of Business Development for the Asia-Pacific Region at Keyrock, a Europe-based digital asset market maker, told Cointelegraph that the Winklevoss scenario depends on how certain one is that institutions are actually arriving and that ETFs and other infrastructure investments by large institutions will come to fruition.

“Investors with an eye to the future may attempt to anticipate the move and purchase before any news is made public. I am not as confident in how quickly this will take place,” d’Anethan remarked.

If BlackRock is successful in its endeavor to create an ETF and other institutional investors follow suit, will that stabilize Bitcoin’s price at a much higher value than the current $30,000? Or does long-term price stability also necessitate widespread retail involvement?

“Chung replied that it all hinges on how much AUM they can acquire if they receive approval,” he said. “If it’s a sizable sum, then it stands to reason that it would have a major effect on the price due to the limited supply. Bitcoin and its value don’t care who obtains it or how they do it; buying demand simply has to exceed selling demand for the price to rise.”

Carol Alexander, a professor of finance at the University of Sussex Business School, informed Cointelegraph that the potential emergence of multiple spot Bitcoin ETFs could cause BTC to become less stable and more unpredictable. She commented, “Should there be too many ETFs, all the market makers attempting to hedge their positions might sell or purchase at the same time, which could result in more volatility… I don’t agree with what Winklevoss said.”

Alexander has formulated her own BTC price outlook, which involves retail investors playing a major role. In March, when the value of BTC was around $20,000, she anticipated that it would reach $30,000 by June and remain relatively stable through the summer. This has largely been the case. Consequently, she is now wondering, “What is going to happen in September?”

“It is not certain, but it is possible that the price could reach $50,000 due to increased liquidity when people return after the summer.”

Despite the numerous crypto drawdowns, scandals, bankruptcies and regulatory actions of the past year, retail investors are no longer fearful. This may be attributed to the increasing investment of major financial institutions such as Fidelity Investments and JPMorgan Chase in the digital asset market, which appears to have had a reassuring effect on retail investors.

“I believe that from September onwards, the general public will have a greater level of acceptance towards cryptocurrency. The increased trading activity could lead to the price of cryptocurrency rising again, although I don’t think it will reach the same level as it was before ($68,000). I believe the next long-term resistance level will be around the $50,000 mark.”

In a survey conducted by Nomura Laser Digital on June 19th, 90% of professional investors declared that it is “essential” for any digital-asset funds or investments to be backed by a major traditional financial institution before they would consider investing their clients’ money. It appears that the recent announcements by BlackRock, Fidelity, Deutsche Bank, and others may have been the spark they were waiting for.

“It’s difficult to determine when the tipping point will be,” Schwenk remarked. “We have had involvement from other big, traditional companies like BNY Mellon, State Street, Standard Chartered, and Franklin Templeton, but that hasn’t been enough to satisfy survey participants yet. Eventually, though, they will recognize enough impetus.”

Ten-fold growth over five years?

In the foreseeable future, what is the potential for growth? Could the crypto market capitalization expand from its current $1 trillion to $10 trillion or more within the next five years, with the involvement of large traditional finance companies such as BlackRock, Fidelity and Deutsche Bank?

“Five years ago, the total value of liquid crypto, according to the CF Large Cap Index, was roughly $250 billion and peaked at approximately $2.6 trillion in late 2021,” Chung commented. “Therefore, a 10-fold increase appears to be attainable.”

“Major institutions utilizing their distribution networks to promote more usage would also be a great help,” he continued. “However, the interest rates during the past five years were not 5% like they are now, so it is impossible to predict the effect of that.”

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Alexander was less optimistic. “I don’t even think a Bitcoin ETF is necessary,” he stated. Rather than just a single cryptocurrency, she believes a more sensible ETF would include a variety of digital assets such as Bitcoin, Ether (ETH) and Solana (SOL).

‘Exciting times’ for Bitcoin?

Reports of institutional investors being seen just outside the world of cryptocurrency have been made in the past, yet they have not yet made a large-scale entrance. What could be the cause of this change?

“Johns Hopkins’ Liew commented that institutional investors are very deliberate in their due diligence, but have finally recognized the potential of Bitcoin. He went on to say that customers are pushing them to invest in crypto, and that from a practical standpoint, having some crypto in a portfolio is a wise way to diversify investments.”

“The engagement of major financial organizations, both for ETFs and the new EDX exchanges, marks a considerable transformation and a pivotal point for crypto markets, both in America and worldwide,” d’Anethan stated.