Bitcoin, the rebellious cryptocurrency aimed at disrupting the traditional financial system, has experienced a resurgence following the announcement by BlackRock, the world's largest asset manager, about its intentions to launch a spot bitcoin exchange-traded fund (ETF) in the United States. The news has reignited optimism in the market, propelling bitcoin to reach two-month highs at $30,182 over the past 11 days.
BlackRock's filing for a potential spot bitcoin ETF on June 15 has sparked renewed interest, undeterred by the Securities and Exchange Commission's (SEC) history of rejecting similar applications in the past. This development marks a significant milestone for bitcoin, as it paves the way for regulated exposure to spot bitcoin on a US stock exchange, eliminating the complexities of custody for investors.
Bitcoin's market value has surged and now constitutes nearly half of the overall $1.1 trillion crypto market, its highest share in over two years, according to data tracker CoinMarketCap.com. The cryptocurrency's market share, which stood at around 40% at the beginning of the year, has steadily increased from its low point of 34% in 2018.
Mikkel Morch, chairman at digital asset investment fund ARK36, emphasized the significance of BlackRock's ETF filing, stating, "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."
Fueling the optimism among crypto advocates is BlackRock's successful track record in obtaining SEC approval for ETFs in general, despite not having filed for a cryptocurrency-related ETF before. Analyst Andrew Bond from Rosenblatt Securities noted that BlackRock boasts an impressive approval rate of 575-1 for its previous ETF applications.
Following BlackRock's filing, other firms such as Invesco and WisdomTree have also reentered the race by reapplying for spot bitcoin ETFs after facing previous rejections from the regulator. This mini-rush of submissions to the SEC coincided with the agency's recent lawsuits against major crypto exchanges Coinbase and Binance, accusing them of violating securities laws, which created a momentary chill in the cryptocurrency market.
However, not all investors are eager to dive into the crypto space just yet. The regulatory uncertainties surrounding cryptocurrencies make some hesitant to invest. Rick Meckler, partner at Cherry Lane Investments, expressed his reservations, saying, "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. As a consequence, it has made it difficult to make an investment class for many people, myself included."
Currently, US investors seeking exposure to cryptocurrencies on stock exchanges are primarily limited to futures-based ETFs. These funds track bitcoin futures contracts, which come with additional costs associated with rolling over contracts on settlement days. For instance, ProShares' Bitcoin Strategy ETF has seen a 62% increase in value this year, but it lags behind bitcoin's 82% surge.
Bryan Armour, director of passive strategies research for North America at Morningstar, highlighted that a spot bitcoin ETF could offer a more cost-effective solution for investors, stating, "It doesn't appear that most crypto ETF holders are institutional – assets are pretty spread out."
Despite the growth of crypto investment products, they still represent a small fraction of the overall market. Excluding grantor trusts limited to accredited investors, the current crypto ETF market accounts for about $2 billion, which is less than 2% of the total crypto market, according to MorningStar Direct.
The introduction of the BITO, the first bitcoin futures ETF, in 2021 was swiftly followed by a wave of other futures-based ETF launches. A survey conducted this year by TrackInsight, J.P. Morgan Asset Management, and State Street revealed that approximately 48% of the 549 international professional investors polled expressed interest in investing in single-cryptocurrency exchange-traded products, compared to 37% who preferred direct investments.
David Wells, CEO of Enclave Markets, suggested that BlackRock's interest extends beyond institutional investors, stating, "I'd argue BlackRock is just as interested in retail as institutional. 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."
As the possibility of a spot bitcoin ETF looms, it represents a significant development in the cryptocurrency market, boosting investor confidence and attracting the attention of both institutional and retail investors. While regulatory uncertainties remain a concern, the potential for a regulated and accessible investment avenue has the potential to reshape the landscape of cryptocurrency investments. The future of bitcoin and its integration into traditional investment portfolios may be inching closer, marking a milestone in the journey envisioned by Satoshi Nakamoto, the enigmatic creator of bitcoin.
By fLEXI tEAM