Anyone who regularly follows the latest cryptocurrency news is already aware that we’ve been on a wild ride over the past few months.
From the collapse of FTX and the subsequent bearish climate to potential regulatory actions by the Securities and Exchange Commission (SEC), we’re boldly going where no crypto has gone before.
This is why recent rumours involving what may potentially represent the first spot Bitcoin exchange-traded fund (ETF) could represent a bit of much-needed good news. What does this proposition involve, is it realistic to assume that the SEC would approve such a move and what impacts might it have upon the markets themselves?
Crypto Lists has been following this story closely and we’ll summarize the main takeaway points below.
The Big Boys at Blackrock
Blackrock is currently the most prolific asset management firm in the world, which is what makes this possible venture into the crypto ecosystem so interesting. In terms of the proverbial “nuts and bolts”, this company filed a proposal with the SEC that involved creating a spot Bitcoin trust (technically known as the iShares Bitcoin Trust). so, what’s the big deal?
The sheer financial clout of Blackrock should first be stressed. This firm currently holds more than $9.5 trillion AUM (assets under management). So, its experts would hardly make such a gamble if they didn’t believe that it’ll pay off. Secondly, many industry analysts believe that the initial proposition of a trust is actually intended to serve as an spot ETF in the future.
To be clear, experts seem somewhat divided on whether this venture is a trust or a spot ETF. The one major difference of Blackrock’s concept when compared to other platforms such as the Grayscale Bitcoin Trust (GBTC) is that Blackrock clients will be able to redeem their BTC assets in multiple blocks of 40,000. This isn’t currently possible when dealing with Grayscale and similar firms.
So, what has crypto investors so hyped? While an SEC approval would certainly represent a win for decentralized finance, there’s another even more important aspect to consider. Up until this point, all crypto ETFs are classified as futures contracts. Institutional investors haven’t been overly keen to become involved with crypto ETF futures due to limited levels of exposure as well as potential liquidity issues.
On the other side of the token, spot crypto ETFs will essentially remove such barriers. This could cause some of the largest institutional traders to become involved; leading to a bull run that already makes our mouths water. Also, spot crypto trading might open the door for so-called “hybrid” exchanges to emerge.
Just imagine for a moment if well-established financial instruments such as Forex pairs, commodities and options were brought together beneath the umbrella of a single crypto ecosystem. Not only would this provide investors with even more possibilities for diversification, but the amount of liquidity pumped into the DeFi sector should transform even the most pessimistic of outlooks.
Waiting with Bated Breath
What are the chances that Blackrock will be approved for such a venture? Once again, opinions are split. Some feel that their proposal for a trust is simply a mask for an ETF that will be immediately refused, as the Security and Exchange Commission has yet to grant permission for a single spot Bitcoin ETF.
Another possible hiccup is that Blackrock has chosen to use Coinbase as their custodian. This move that has raised some eyebrows when we note that Coinbase is already labeled as an “unlicensed and illegal securities exchange” by the SEC.
Still, others are extremely optimistic. Without putting on our tinfoil hats, here are a few interesting outcomes that could actually work in favor of Blackrock and the SEC alike:
- The SEC is able to oversee the first crypto exchange in accordance with its regulations.
- Coinbase isn’t relegated to the dung heap of digital failures.
- Blackrock becomes the first spot Bitcoin ETF.
And So We Wait
In theory, everyone would essentially win. Although this might seem to be a far-fetched situation at first glance, Blackrock hasn’t accumulated such massive wealth by sheer luck.
We should finally remember that the term “eventually” is the most relevant here. We’re not expecting to read the headline “Blackrock Approved for Spot Bitcoin ETF Fund” in tomorrow’s newspaper. A good deal of haggling and compromise may be needed. Still, Crypto Lists is quite excited by this turn of events. Be sure to keep up with our latest posts to see how the proposal unfolds.