Why Is the BlackRock Bitcoin ETF Such a Big Deal for Crypto?
Since the very beginning, but especially during the past years, the crypto industry has had pretty much to deal with. With sudden lawsuits, major thefts, surprising raises, or concerning falls, crypto seems to be the Montagne Russe of the financial sector.
While cryptocurrencies are indeed intriguing and provide high levels of security and privacy, central authorities still beg to differ. By the beginning of June 2023, the SEC (Securities and Exchange Commission) only started lawsuits against multiple crypto projects, including Binance and Coinbase, the first 2 largest cryptocurrency exchanges in the world, the latter being the largest in the US.
Thus, is crypto’s path paved only with lawsuits, charges, sudden regulations, and inevitable bear market conditions, considering authorities’ actions? Well, while some believe this is crypto’s fate, Blackrock stole the spotlight when it filed for a Bitcoin ETF this month.
The announcement was made on June 15, 2023, and it made quite a buzz among crypto enthusiasts and not only. Now, why is the BlackRock Bitcoin ETF such a big deal for the crypto industry?
What Is an ETF?
ETF is short for exchange-traded funds, and, as its name suggests, it is traded on an exchange, unlike mutual funds, for instance. Exchange-traded funds are traded like stocks, and this is not the only similarity between them.
The price of ETF’s shares can change during a trading day, as the stocks included in a specific ETF are traded on the market during that period. Basically, ETFs are funds that are traded on an exchange and track a specific index, commodity, sector, or other assets.
An ETF can track the price of an individual commodity or of multiple securities. Furthermore, ETFs can track investment strategies, and they can be built to include securities from multiple industries.
For example, the first ETF ever created was SDPR S&P 500 ETF (SPY), which tracks the S&P 500 Index. The ETF is still active and among the most popular.
Also called Standard & Poor’s 500 Index, it is a market-cap-weighted index including 500 of the most popular publicly traded companies in the US. While SDPR S&P 500 does not track the first 500 companies by market cap, it is still extremely relevant, as the companies included in the ETF are chosen based on multiple criteria, including market capitalization.
Are There Any Bitcoin ETFs?
Currently, Canada is one of the few jurisdictions that accept spot Bitcoin ETFs trading on the stock market. The first such investment product was launched in 2021 and is called Purpose Bitcoin ETF (TSX: BTCC).
At the moment, the SEC rejected all Bitcoin ETFs fled. And while there is not a Bitcoin ETF accepted by the SEC yet, there are some exchanges that have started trading crypto.
For instance, eToro is one notable example. The platform that first started as an FX trading platform is now allowing its users to trade over 80 cryptocurrencies, including the most popular, such as Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Litecoin (LTC), Solana (SOL), or Polkadot (DOT).
You can even buy Dogecoin on eToro, meaning that the platform has truly become a strong pillar in the crypto trading topic.
What Is BlackRock?
Launched in 1988 in New York, BlackRock is one of the largest investment management companies worldwide, with almost $10 trillion in assets under management. The company offers plenty of funds, equities, and money market instruments.
Each day, clients from over 100 countries use BlackRock to look for mutual funds, exchange-traded funds, and many other investment opportunities. BlackRock operates globally and has 70 offices in 30 countries. The company is a component of the S&P 500 and S&P 100 ETFs.
Over time, BlackRock has been criticized by some for investing in companies involved in industries or topics that can be considered somewhat questionable, such as fossil fuels, arms, and human rights violations. Another round of criticism came once the COVID-19 pandemic started, as BlackRock has been pretty close to the Federal Reserve during the pandemic.
Furthermore, some US states, such as Virginia, Florida, and Louisiana, refuse to do business with the firm due to its ESG policies. And despite all the criticism received over the years, BlackRock still remains the biggest investment company in the world, and it seems that its plans raise some questions once more.
The Effect of a BlackRock Bitcoin ETF on the Crypto Market
BlackRock has recently announced that it filed for a Bitcoin ETF. And while there have been 28 other attempts in the past, it seems that not only is BlackRock assured by somebody or something that “29th is the charm”, but it also makes many crypto investors turn to the optimistic side of the road in this matter.
Over the past years, 20 other companies have applied for a Bitcoin ETF, some of them trying even twice. However, considering that such a proposition always reaches the SEC and the institution’s attitude regarding crypto has not been too positive, ever, the 28 attempts to build a Bitcoin ETF did not pass, the SEC rejecting them due to the risk of fraud and manipulation in the market.
The thing that surprises most people is that BlackRock, the biggest investment company in the world, has never filed for a crypto ETF before. Thus, why would a company such as BlackRock never file for a Bitcoin ETF before but decide to do so during times when the SEC crypto crackdown is somehow blooming?
Speculators believe that BlackRock made an extremely well-informed decision when filing for a Bitcoin ETF. It is likely that a company like BlackRock, which has had 576 flings sent to the SEC from which only 1 was rejected, does not try its luck with a Bitcoin ETF.
All in all, BlackRock’s announcement regarding the Bitcoin ETF made a buzz in the crypto space, too. Furthermore, the price of Bitcoin could not stay the same when the SEC is deciding the cryptocurrency’s fate on the stock market.
Thus, on June 23, 2023, Bitcoin reached its highest value for the past year, having a price of $31,268. Before reaching this value, BTC had a 1-year high of around $30,000. And Bitcoin is not the only surprise on the crypto market. Ethereum, the 2nd largest cryptocurrency in the world, has also risen, reaching almost $2,000 on June 22.
Basically, the crypto market is awaiting the SEC green light for BlackRock’s Bitcoin ETF, and once (or if) the institution accepts BlackRock’s proposition, many things could change for crypto. While there are some exchanges that were allowed to build ETFs based on Bitcoin futures contracts, having a Bitcoin ETF can bring significantly more benefits for the crypto industry and for crypto investors in general.
The simple fact that the biggest asset manager in the world filed for a Bitcoin ETF can be seen as a positive development concerning regulatory approval.
In Conclusion
During times when crypto is still new and users are still getting used to trading digital currencies, regulators seem to have a tough time admitting that crypto is most likely to be here to stay. Over the past years, there have been 20 US companies that filed for a Bitcoin ETF (Exchange-Trade Fund).
However, the SEC rejected all propositions. However, on June 15, 2023, BlackRock, one of the biggest asset managers in the world, announced that it filed for a Bitcoin ETF and is waiting for the SEC’s reply.
While there are some speculations regarding BlackRock’s sudden movement, many consider that the SEC accepting a Bitcoin ETF would truly be an improvement in what concerns regulatory approval.
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