In this article we try to summarize everything that is happening with BlackRock and Bitcoin: since the hedge fund filed with the SEC for a spot ETF of the cryptocurrency, several other institutional players have jumped into the market changing the current market scenarios.
It is also worth noting how trading volumes for BTC on centralized exchanges for both spot and derivative markets have increased significantly.
Full details below.
Summary
BlackRock and its application to the SEC for a spot bitcoin ETF
BlackRock, the world’s largest asset management firm with AUM of $8.6 trillion, filed a registration document with the US Securities and Exchange Commission on 8 June 2023 requesting the launch of a spot ETF for Bitcoin.
This event opened the door to a totally different period from what we might have expected until a few days before, with the SEC ready to declare war on cryptocurrencies and exchanges in the sector.
In addition to causing a price rally for BTC and the rest of the cryptocurrencies, BlackRock’s stance inspired a number of other hedge funds to file their own applications for an institutional financial product on Bitcoin.
The likes of Fidelity, Invesco Galaxy, VanEck, Wisdom Tree, and Wise Origin followed in the New York giant’s footsteps, seeing a golden opportunity to be able to attract a significant amount of new clients.
The BlackRock effect has also been felt by Proshares Bitcoin ETF strategy, which offers exposure to crypto with futures contracts, which has amassed $1 billion in assets.
In the meantime, however, the hedge fund is re-applying for a new registration document with the SEC, after the latter called the first filing “inadequate” and named Coinbase as its “sharing oversight” partner.
Although the odds of an approval for such a financial product are high at the moment, it is important to remember that the SEC may delay a final decision for many more months until a federal judge forces it to give a final answer.
Hence, there is no need to get caught up in the frenzy because the positive effects of asset-managed companies entering the crypto sector could wane between now and the next few months, only to come back into vogue if a spot ETF for Bitcoin is finally approved.
In the meantime, it is interesting to note that Coinbase is enjoying the FOMO of the moment, mainly due to BlackRock’s recommendation, and with the COIN stock experiencing a major price rally.
Following the advent of BlackRock, trading volumes on centralized exchanges are on the rise
Following BlackRock’s advent on the crypto sector with the call for a spot Bitcoin ETF, cryptocurrency exchanges have seen a major increase in trading volumes on spot and derivatives markets.
The numbers from CCData show that in June, the combined volume of spot and derivative trades on the centralized exchanges increased 14.2% to $2.71 trillion: this is the first monthly increase in this context since March.
Most analysts agree that much of the uptick in volume is due to the optimism unleashed by the latest exploits of BlackRock and the companies that have replicated its steps.
This result is fairly obvious when we consider that the hedge fund in Larry Fink‘s hands manages a huge sum of assets and is the largest asset management company in the world.
Going into more detail we can see how from 19 June onwards the daily spot volumes (for BTC only) marked by the exchanges rose from $12.16 billion to the $19.47 billion touched on 26 June.
Such a rapid boom hardly occurs without strong news as was the case with BlackRock.
On the futures front, we observed the same trend, with aggregate open interest for Bitcoin contracts rising from $8.72 billion on 19 June to $10.22 billion after only three days.Â
Moreover, this value remained stable until 5 July, before registering a slight decline.
Finally, looking at the data on the options market, we can draw the exact same conclusion, since after the BlackRock news came out, the aggregate open interest for these contracts on Bitcoin rose from $8.82 billion to $12.48 billion in just 11 trading days.
However, since early July, values have returned to their previous levels, effectively nullifying the increase seen between 19 and 30 June.
Bitcoin price analysis
Immediately after BlackRock filed a registration document with the SEC for a spot Bitcoin ETF, the price of the cryptocurrency experienced a significant price rally.
On 19 June, Bitcoin did not cross the $26,500 mark while a few days later it managed to conquer the $30,000 mark, staying above it for quite some time.
Currently BTC stands at $30,090 but short-term price action would suggest an imminent downside coming after the rejection from local highs observed on Thursday, 6 July.
Usually when an asset attacks the local high and is rejected by closing the candle with a red spike, a period of decline follows, at least in the short term.
Hence, it is likely that Bitcoin will again collide with the EMA 60 at $28,000 with quite plausible assumptions of a return to $25,000.
In any case, despite the bearish potential these days, the main trend remains bullish, with prices rising since the beginning of the year.
At this particular time, one should not be fooled by news and attempts at market manipulation: following a bearish 2022 and a predominantly bullish first half of 2023, prices could now swing unexpectedly.
It is probably still early for a return of the bull market, but it is too late for a continuation of the bear market.
What we are likely to see between now and early 2024 is a period of fake collapses and deceptive rallies.
Smart players are accumulating BTC in anticipation of the next halving and new bullish cycle, as are longtime HODLers who record an illiquid supply of the cryptocurrency at all-time highs.
On-chain data tell us that many entities are slowly positioning themselves in the market, aware that Bitcoin and the rest of the market will sooner or later explode.
In fact, although the short-term direction of crypto market prices is unknown, over the medium to long term the path is already marked.
Most likely, the real boom could occur when the SEC accepts BlackRock’s filing and opens the doors to an initial spot Bitcoin ETF, bringing several billion dollars in liquidity to the markets.
Take it easy traders, all in good time.
