Crypto Ecosystem

Why BlackRock’s Bitcoin adoption is considered a big deal

, June 22, 2023

In this week’s crypto highlights, we explore the price movements of BTC, LTC, OP, and ANT. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

BlackRock filed for Bitcoin trust resembling spot Bitcoin ETF

On June 15, there were rumors the world’s largest asset manager, BlackRock, would file for a Bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC). At the time, it wasn’t clear whether it would be a futures or spot Bitcoin ETF. Some based on futures contracts are already available, while the SEC has historically declined all applications for spot Bitcoin ETFs.

The next day, BlackRock filed for its iShares Bitcoin Trust. When some crypto enthusiasts saw the word “trust,” they thought it might be something similar to Grayscale’s GBTC trust. However, GBTC is a private fund where users can’t redeem funds, while BlackRock filed for a trust with daily creations and redemptions. As a result, for investors, it would essentially look and act as a spot Bitcoin ETF. Bloomberg’s Eric Balchunas tweeted that this is exactly how the SPDR Gold Shares ($GLD) ETF works. 

Coindesk reported that with this approach, BlackRock may have found a way to earn SEC approval of the spot Bitcoin ETF. BlackRock has a reputable ETF approval rate — 575 yes, vs. 1 no. Many have speculated that BlackRock wouldn’t file for this instrument if the investment firm wasn’t sure about its approval. Furthermore, the firm will collaborate with Coinbase for its ETF custody services, as the two companies have long been strategic partners.

BlackRock’s filing sparked optimism among other institutional investors, leading to a wave of new attempts to register a spot Bitcoin ETF with the SEC. For instance, Bitwise, WisdomTree, and Invesco filed applications as well. The cherry on top was Valkyrie’s submission for a Bitcoin ETF with a ticker name “BRRR,” referring to a popular “money printer goes brrr” meme.

Although BlackRock’s attempt to adopt Bitcoin caused increased optimism in crypto markets, this news split the community. Here is a brief overview of why BlackRock’s filing approval, if successful, could be a blessing and/or a curse.

Possible blessings

  • Bitcoin may experience a large capital inflow from institutional investors, which may potentially increase liquidity in Bitcoin markets. BlackRock is a king of ETFs, with $10 trillion in assets under management. For perspective, the total Bitcoin market cap is around $580 billion. This means even minor BlackRock’s allocations to Bitcoin could significantly drive the asset price higher. When the first spot gold ETF was listed in November 2004, the gold price was around $450. Six years later, it has more than tripled.
  • BlackRock entering the space could serve as long-term validation that Bitcoin should not — and won’t — be banned in the U.S. The move could confer legitimacy on Bitcoin as an established investment tool, which financial advisors can recommend to their clients without the risk of being fired for “bold” ideas. So if your uncle is still skeptical about Bitcoin, you now can ask him if he’s smarter than the largest asset manager in the world.

Potential curses

  • This could lead to a Bitcoin transition from crypto-native platforms, to traditional finance (TradFi) institutions. Some crypto observers found parallels with recent SEC actions against crypto platforms with efforts to build a road for BlackRock and “friends” to adopt and “control” Bitcoin. For instance, BlackRock stated in its filing that it will “determine which network should be considered the appropriate network” in the case of a Bitcoin fork. This means BlackRock could potentially shift support away from the established Bitcoin network. Remember Bitcoin Cash? Now imagine “Bitcoin TradFi.”
  • Although a Bitcoin protocol says that only a certain amount of BTC can exist, the financial markets certainly don’t say the same. Institutions such as BlackRock can create exotic financial instruments that can represent any amount of Bitcoin (so-called paper Bitcoin). This could make Bitcoin more prone to immense speculations.

Fidelity, in collaboration with other financial giants, launched the EDX Markets crypto exchange

A few days after BlackRock’s filing, rumors appeared that Fidelity, another top asset manager, could file for Bitcoin ETF, as well as potentially acquire Grayscale. This pushed the Grayscale Bitcoin Trust (GBTC) share price to its 2023 high. Its discount decreased from 43% to 33%, while GBTC trading volume surged by more than 400% in a week. However, Bitcoin ETFs are not the only front that TradFi used to execute its crypto blitzkrieg this week. 

While many anticipated a Bitcoin ETF, Fidelity, in collaboration with Citadel and Schwab, launched a crypto exchange called EDX Markets, which commenced operations on June 20. According to the platform’s representatives, EDX utilizes the approach, which is based on standard practices in traditional financial markets. EDX does not store client assets, but provides them with a trading platform.

During the remainder of 2023, the exchange plans to launch a clearing house. However, after that, it will continue using third-party banking and custodial services for storing user funds. EDX also does not directly serve retail investors. Brokerage firms will interact with the platform on users’ behalf.

The exchange supports four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. None of these assets have been classified as securities by the SEC in its recent lawsuits against crypto platforms.

Prometheum co-founder appeared before U.S. Congress 

Crypto Santa Barbara on Twitter just aired a new episode dedicated to a relatively unknown crypto broker, called Prometheum. It was under the community’s spotlight when the firm’s co-founder Aaron Kaplan appeared before a U.S. House Committee to discuss crypto regulatory clarity. Remarkably, Kaplan supported the SEC’s position toward regulating the industry, stating that no new rules are required. Furthermore, speaking on CNBC last week, SEC Chairman Gary Gensler upheld Prometheum as an example of how digital asset firms can come in and register.

Nevertheless, Kaplan’s remarks during the U.S. Congressional hearing garnered disapproval from the cryptocurrency community, as members alleged that Prometheum was granted favorable treatment by regulators for echoing the SEC’s position and mirroring statements made by Gensler. As the digital asset industry delved further into the matter, some learned the contentious history of this previously obscure company.

It appears that Prometheum is the first Special Purpose Broker-Dealer (SPBD), or the first officially SEC-licensed platform to offer trading of “digital asset securities” on its platform. However, since crypto protocols are not registered as such, this means there is nothing to trade on Prometheum. The platform is not currently operational, but the company mentioned digital assets deemed securities by the SEC, as available assets. Prometheum even claimed Ethereum is a security.

In addition, Prometheum hired multiple former SEC and FINRA staff to add to its payroll, has not launched a product since 2017, and its fundraisers were associated with entities and personalities related to the Chinese government. When a U.S. official asked Aaron Kaplan why Prometheum doesn’t support Bitcoin and Ethereum, the firm’s co-founder couldn’t provide a clear answer. Interesting. Is this SEC’s example of a good child, or a reflection of Gary Gensler’s words about crypto?

Tether disclosed its reserve data amidst depeg concerns

On June 15, Tether’s USDT deviated from its peg to the U.S. dollar, due to an imbalance in Curve’s 3pool. It’s one of the leading stablecoin trading pools, where each of the three supported stablecoins (USDT, USDC, and DAI) account for a third of all funds. However, the USDT balance in 3pool temporarily surged to 70%, meaning the asset was actively sold, and this led to a shocking… 0.2% depeg. Tether CTO Paolo Ardoino said that some attackers are taking advantage of general market sentiment.

Due to increased concern within the crypto community, fueled by flashbacks from the USDC depeg in March 2023, Tether decided to disclose information about its settlement obligations as of March 2021. The company previously reported this information to the New York Attorney General’s Office (NYAG). 

The documents revealed that Tether once held securities issued by Chinese companies as part of its reserves. This confirmed long-standing speculation about its exposure to Chinese stocks that appeared after Evergrande Group’s crisis. The reports also shed light on Tether’s banking relationships, lending activities, significant loans to third parties, and accounts held at various Bahamian banks. Tether emphasized that it has since eliminated commercial paper reserves, and reduced its secured loans portfolio.

One sentence news

  • A technology, similar to the Ordinals project on the Bitcoin network, called Ethscrptions was launched, enabling users to inscribe non-financial data directly into the Ethereum mainnet. 
  • The SEC and Binance announced a deal to limit the access of employees of the parent platform to the assets of Binance.US clients.
  • Deutsche Bank applied to BaFin for a license to provide custody services for digital assets.
  • The bankrupt crypto lender Celsius announced that all of its customers’ altcoins will be converted to Bitcoin (BTC) and Ethereum (ETH).
  • A court in Podgorica found Terraform Labs founder Do Kwon guilty of forging documents while trying to leave Montenegro, and sentenced him to four months in prison.
  • San Francisco-based crypto payments firm Wyre announced its decision to wind down operations in order to protect the interests of its users and stakeholders
  • U.K. parliamentarians have voted through a new bill that could recognize crypto as a regulated activity in the country.
  • Ethereum developers proposed raising the validator limit from 32 ETH to 2,048 ETH.

Bitcoin moved back to $30,000 

BlackRock’s filling sparked a local Bitcoin price rally, reclaiming the $30,000 level last seen two months ago. Bitcoin dominance maintained its upward momentum as well, moving above 50%, and outside the 39%-49% range, which has been in place since April 2021. In addition, the proportion of BTC trading volume in relation to other cryptocurrencies has surged from 25% to 32%, since the start of 2023. This suggests that investors continue to focus more on Bitcoin over other digital assets.

Notably, this rally happened when Bitcoin volatility was at a multi-year low for a prolonged period, meaning that the market arguably was in “wait and see” mode. BlackRock’s submission acted as a trigger to encourage more crypto enthusiasts to accumulate Bitcoin. Some called it a Great Accumulation Race.

Glassnode data displays that HODLers continue HODLing, and suggests that another 6-12 months of accumulation could be ahead. In general, current market behavior hints at post-bear references from previous cycles — where it’s still not a bull market, but rather a preparation for it. This period is characterized by range-bound price movement, and potentially slow and steady price increases due to permanent accumulations. According to Glassnode, an accumulation range for this cycle could be between $20,000 and $45,000.

Bitcoin price movement has not fully repeated the March 2023 scenario, as Bitcoin experienced a bullish divergence on lower timeframes, and bounced off the 0.5 Fibonacci point. This broke the descending channel (white channel), indicating a short-term trend change.

Daily MACD approached the zero line, and its breakout upward may support the continuation of the uptrend. However, RSI reached an overbought level on daily and lower timeframes, meaning it could be more difficult for Bitcoin to continue moving upwards. As a result, a price consolidation, or even a slight correction may follow. But if the asset gains a foothold above $30,000, the next stop could be around $34,000, which corresponds to the 1.618 Fibonacci point.

Litecoin is trading in a narrowing range

While Bitcoin was outperforming the rest of the market, the Litecoin price was slightly outperforming even BTC. Amidst a turbulent beginning of the month, a significant portion of short-term Litecoin investors swiftly exited their positions, according to IntoTheBlock data. Meanwhile, long-term addresses accumulated the vast majority of these funds, which typically has a positive impact on the price. 

In addition, daily active users within the Litecoin network increased by over 10% in a week. In addition to increased optimism on crypto markets, this could be one of the catalysts that helped Litecoin bounce off the $72 support area.

The asset moved above the middle of the Bollinger channel on a daily chart. Furthermore, the Awesome oscillator (AO) approached its zero line, hinting that upward movement has the potential to continue. Daily MACD made a crossover, which could support bullish momentum. However, on lower timeframes, Litecoin reached the overbought zone, meaning a price consolidation may take place in the short term.

OP formed a death cross

The OP price became one of the largest gainers among the top 100 digital assets by market cap, surging by more than 30% in a week. The asset has decreased under a descending resistance line (blue line) since April, but recently it managed to break it. 

In addition, OP broke a descending RSI trend (cyan line), and formed a bullish divergence (white lines). This hints that a bearish-to-bullish trend change may take place. 

If the asset manages to sustain above the $1.50 resistance area, and the 50-day SMA, it could drive the asset to $1.90, where the 200-day SMA is located. If failed, OP may retest the 20-day EMA. Notably, the asset formed a death cross on a daily chart, indicating that this price recovery could be temporary, and bears still dominate the market.

ANT’s uptrend could be in danger

The ANT price has been moving inside an established uptrend (yellow channel) for almost a year, and the asset almost tripled during this period. This week ANT was also among the top performers, showing over 45% price increase. 

The asset protected its 200-day SMA, which acts as dynamic support for the price. A potential catalyst that recently helped the asset move upward may be the introduction of no-code batched withdrawals in the Aragon App.

However, the ANT price experienced a bearish divergence (white line). This indicates that the established uptrend may be fading away soon. The asset reached the overbought zone and the upper border of the ascending channel, which could increase bearish pressure in the short term. The closest support levels for the price could be near $3.80 and $3.23 levels.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.


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