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Bitcoin USD (BTC-USD) has had a strong year, up around 124%, and crypto enthusiasts are cheering BlackRock’s upcoming launch of spot exchange-traded funds (ETFs). Let’s look at the potential impact of the world’s largest asset Manager in crypto.
BlackRock’s entry ends the decentralization problem
The reality of BlackRock’s entry into cryptocurrency is that it ends the idea of a decentralized global currency. In my opinion, BlackRock’s filing of ETFs for Bitcoin and now Ethereum USD (ETH-USD) is a certainty that the Securities and Exchange Commission will give its blessing to a spot market ETF. I also believe that anyone who thinks the SEC will reject a spot offer really doesn’t understand how the corridors of power on Wall Street work. Larry Fink’s wealth management giant saw an opportunity and I don’t think Mr. Main Street will be the ultimate winner.
First, if Bitcoin enthusiasts are right about strong investor adoption, then that simply means that the current whale-controlled speculative behavior in BTC is being handed over to Wall Street.
BlackRock’s SEC filing for the BTC ETF stated:
“All shares of the ETF are fully backed by BTC and no new shares can be issued without the corresponding value being delivered in tokens.”“
The more investors buy shares in the spot ETF, the more BTC the asset manager has to buy. Bitcoin fans then need to be aware that Larry Fink’s BlackRock OWNS Bitcoin if the cryptocurrency finally fulfills its lofty price predictions.
Bitcoin’s rally in 2023 is purely speculative
Bitcoin took a beating in 2022 after a host of setbacks in the crypto universe that laid bare the reality of the sector. While crypto enthusiasts tout it as a decentralized refuge from the manipulation and greed of the current financial system, Terras Do Kwon and the collapse of Sam Bankman Fried’s FTX empire have laid bare the sordid reality of a world that is as greedy and lawless as anything we have have seen from Wall Street.
BTC’s 124% surge is being driven by speculation about a coin controlled by whale speculators. It is no coincidence that whale activity in BTC and other coins has reached a six-month high, according to data from Santiment. There has been no change in overall adoption, with investors pushing up prices in a thin market due to ETF applications and the Bitcoin halving next year. Halving is any four-year event in which mining rewards and Bitcoin issuance are halved, making the coin more scarce. At the halving in 2024, the mining reward will drop from 6.25 BTC per block to 3.125 BTC.
The reality of the BTC halving is that it makes the coin more scarce, and that means more control for BlackRock. And if BlackRock approves its ETF, I think it’s very likely that the other ETF giants like Vanguard and State Street will join in with a spot ETF. In my opinion, this is not the arrival of Bitcoin, but the end of Bitcoin.
Bitcoin will never be the world’s currency
I believe BlackRock’s entry into Bitcoin is designed to give Wall Street control of another commodity. BTC will never replace gold, but can provide a digital alternative. BlackRock knows this and the idea that BTC will be a payments currency that dominates the global economy is wrong, and I have been saying this for a long time.
In October 2021, I wrote an article on Seeking Alpha where BTC peaked at $61,000. In this article, I asked whether Bitcoin was simply a Trojan horse luring investors into accepting upcoming central bank digital currencies (CBDCs).
The UK is promoting a “digital pound” and this week also stepped up its plans to regulate stablecoins in the country. The Bank of England, Britain’s central bank, has now stated that the country’s financial regulator will oversee stablecoins. The BOE will rely on the Financial Conduct Authority to regulate custodian banks. However, it left open the possibility of introducing its own rules, for example regarding anti-money laundering and “Know Your Customer” requirements.
Central banks will now regulate crypto exchanges and stablecoins, while Wall Street will control Bitcoin. I believe that the world will not adopt Bitcoin because a digital version of their money is coming, which is easier for the layman to own than storing BTC in cold and hot wallets. The Bank of England has already outlined how you can use your digital pounds to “buy a cup of tea, pay the electrician and order groceries online”.
The head of the Bank for International Settlements (BIS), Augustin Carstens, said in a recent speech: “Whether in wholesale form – as a kind of digital central bank reserve – or in retail form – as a digital banknote – it is becoming increasingly clear.” … that these new Monetary forms will form the core of the future financial system.”
The Reserve Bank of India is expected to launch a CBDC in January next year. The US Treasury Secretary also emphasized the need for crypto regulation and the potential for a CBDC at an IMF meeting last month.
With the adoption of the European Union’s Law on Markets in Cryptocurrency Assets (MiCa), lawmakers introduced an audit of transactions over 1,000 euros. Digital money is easier to track and allows governments to impose higher taxes by eliminating the cash-based gig economy. Decentralization is officially dead, but many investors don’t seem to grasp the obvious path we’re on.
The outlook for the Bitcoin price
Looking at the Fibonacci levels on a price chart from Bitcoin’s November 2021 high, the current price has just crossed the 38 percent mark at around $36,000. A 50 percent retracement would be at $42,500, so BTC is not making much progress compared to the highs. The 2022 dip should ultimately lead to an oversold bottom, and now it is declining. There is still no confirmation of a new bull market.
Bitcoin weekly chart (TradingView)
I trade BTC on the futures market and would look at these two levels as a bigger picture. The daily and weekly moves are noise and what analysts think about the US dollar, Treasury yields and ETF filings is largely meaningless. This week the price is likely to test the support provided by the 38 percent level.
As Bitcoin rises, we are also returning to the 2021 era of ridiculous price predictions. This week it was Arthur Hayes, founder of the BitMEX exchange, who reiterated his stance that BTC can reach $1 million and Ethereum can rise over 4,000%. Fundstrat’s Tom Lee made similar predictions in 2021 that BTC would reach $100,000 or more.
From a sentiment perspective, we are not at 2021 levels where amateur investors are loading up credit cards to buy BTC. That could mean the move has further legs. A possible break to the resistance at $42,500 and a blow-off top around $50,000 is possible.
I agree with Bloomberg that SEC approval of a spot ETF in Bitcoin will occur by January 2024. Recent gains in BTC will begin to attract new retail investors, and the hype could continue with the BlackRock ETF, leading to halving hype.
As a BTC investor, which I am not, I would consider BTC to exhibit this type of market behavior. But beyond that, I think retail investors will be drawn into another BTC peak. BlackRock’s entry is a win for speculators, but the concept of a decentralized global currency has been destroyed. A major shift in investor acceptance of the BlackRock ETF means the asset manager will own a large portion of the coin supply. Vanguard and State Street could follow, and that creates a very big liquidity problem for the cryptocurrency sector. We’re on the road to CBDCs, and investors touting the launch of a spot ETF fail to understand that if they saw it as the future, the smart money would have flowed into BTC in every possible way. They haven’t done that and they won’t do it now if BlackRock wants to charge them high ETF fees to hold an asset that is supposedly decentralized and free from third-party involvement.
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