Daily Management Review

Bitcoin Rises On Blackrock Buzz In The Cryptocurrency Space


Bitcoin Rises On Blackrock Buzz In The Cryptocurrency Space
With the help of Wall Street's elite, Bitcoin, the currency designed to challenge the financial system, has recovered from its illness of several weeks.
Over the past 11 days, the original cryptocurrency has increased 20% to two-month highs of $30,182 after BlackRock, the largest asset manager in the world, stated that it hoped to launch a spot bitcoin exchange-traded fund (ETF) in the United States.
On June 15, BlackRock submitted an application for a potential spot bitcoin ETF, unfazed by the Securities and Exchange Commission's (SEC) history of rejecting every such submission. The information allowed bitcoin to recover from its slump and end a two-week losing streak.
The possibility of an ETF, which gives investors exposure to bitcoin on a regulated U.S. stock exchange without the bother of custody, energises Satoshi Nakamoto's rebellious offspring.
According to data aggregator CoinMarketCap.com, the market value of bitcoin has increased to represent nearly half of the $1.1 trillion global cryptocurrency market, which is its biggest share in more than two years. At the beginning of the year, its share was over 40%, up from a low of 34% in 2018.
"The news of the ETF filing is evidence of adoption and interest from top global players, which is, of course, interesting to institutional investors and traders alike," said Mikkel Morch, chairman at digital asset investment fund ARK36.
BlackRock has a great track record of receiving the SEC's approval for ETFs generally, even though it hasn't filed for a crypto one yet, which gives some crypto enthusiasts hope. According to Andrew Bond, an analyst with Rosenblatt Securities, it has a 575-1 approval rating.
Invesco and WisdomTree have also reapplied for spot bitcoin ETFs after BlackRock's filing, following the regulator's rejection of their initial requests.
The SEC sued prominent cryptocurrency exchanges Coinbase and Binance for potentially breaching securities rules, sending the cryptocurrency market into a tailspin. Days later, a mini-rush of proposals to the American watchdog followed.
However, not everyone is eager to participate.
"You know what the rules of the road are in equities and bonds. But you don't fully know what the rules are going to be for crypto," said Rick Meckler, partner, Cherry Lane Investments in New Vernon, New Jersey.
"As a consequence it has made it difficult to make an investment class for many people, myself included."
American investors presently have only the option of futures-based ETFs when trying to invest in cryptocurrency on stock markets. These funds follow contracts for bitcoin futures, which have the extra expense of rolling over contracts on settlement days.
For instance, falling behind bitcoin's 82% increase this year, ProShares' Bitcoin Strategy ETF has increased by only 62%.
According to Bryan Armour, director of North American passive strategies research at Morningstar, a spot bitcoin ETF might be a more affordable option for investors to trade.
"It doesn't appear that most crypto ETF holders are institutional – assets are pretty spread out," he added.
The market for crypto investment goods is currently very small. According to MorningStar Direct, the current crypto ETF market is worth roughly $2 billion, or less than 2% of the whole cryptocurrency market, excluding grantor trusts, which are only available to approved investors and include the Grayscale Bitcoin Trust (GBTC.PK).
A surge of subsequent futures ETF launches followed the 2021 debut of BITO, the first bitcoin futures ETF and the one with the fastest market valuation of $1 billion.
In a study of 549 worldwide professional investors conducted this year by TrackInsight, J.P. Morgan Asset Management, and State Street, almost 48% of participants said they would think about investing in single-cryptocurrency exchange-traded products, compared to 37% who were interested in doing so directly.
"I'd argue BlackRock is just as interested in retail as institutional," said David Wells, CEO of Enclave Markets.
"They may start with institutions but potentially hope that bitcoin is an option that goes into investors' retirement portfolios, and hoping the BlackRock name is a strong enough impetus to buy, and that's a big draw for retail investors."