Prepared Cryptocurrencies Remain Calm amid Anticipated Market-Shaking BlackRock Exchange-Traded Fund (ETF)
In a significant move for the crypto industry, the U.S. Securities and Exchange Commission (SEC) has authorized in-kind creation and redemption mechanisms for bitcoin and crypto exchange-traded funds (ETFs). This regulatory change is set to benefit BlackRock, the world's largest asset manager, and other crypto ETF issuers, improving operational efficiency, reducing costs, and enhancing liquidity for institutional investors.
For BlackRock, which filed for in-kind transactions earlier this year, this approval is a major boost for its spot Bitcoin and Ethereum ETFs, such as the iShares Bitcoin Trust (IBIT) and the iShares Ethereum Trust (ETHA). The new policy positions BlackRock more competitively by facilitating smoother trading operations and potentially lowering tracking errors relative to spot prices.
The approval aligns with broader institutional innovation in crypto investment products. BlackRock, for instance, has been exploring strategies to enable staking within its Ethereum ETF, a move that competitors like Fidelity and Grayscale are also pursuing. This regulatory step may unlock billions in institutional capital, advancing the crypto ETF market.
The change could potentially shrink Fidelity's market share in the bitcoin market, as BlackRock's fund alone holds nearly 3.5% of the total 21 million bitcoins that will ever exist. Fidelity, which runs the second-largest bitcoin fund, has also filed for in-kind transactions.
The SEC's decision is part of an overhaul of former chair Gary Gensler's preference for crypto exchange-traded products to be cash only. Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, believes this move signals a more pro-crypto SEC.
Legendary billionaire Ray Dalio has recommended a 15% bitcoin or gold portfolio allocation, warning that the Federal Reserve has been caught up in a debt "doom loop" and that the dollar is past the "point of no return." This, coupled with the recent SEC approval, could potentially extend BlackRock's lead in bitcoin ETFs.
However, the crypto market has experienced a $300 billion sell-off, causing concerns of a crypto crash. Bitcoin's price has dropped nearly 10% since reaching an all-time high of $123,000 per bitcoin. Despite these market fluctuations, the increase in position limit for options on BlackRock's IBIT is expected to "help bring in bigger institutions and be helpful during volatility."
SEC chair Paul Atkins has stated that a key priority of his chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets. This regulatory shift, therefore, is not just a game-changer for BlackRock, but for the entire crypto industry.
NYDIG's global head of research Greg Cipolaro predicts that the change could widen BlackRock's lead over other players in the market. As the crypto market continues to evolve, it remains to be seen how this regulatory decision will impact the future of bitcoin and crypto ETFs.
- In light of the SEC's recent authorization of in-kind transactions for Bitcoin and crypto ETFs, Larry Fink, CEO of BlackRock, could potentially capitalize on this decision by expanding his firm's involvement in Bitcoin and Ethereum ETFs, such as the iShares Bitcoin Trust (IBIT) and the iShares Ethereum Trust (ETHA).
- The growth of institutional innovation in crypto investment products, as marked by the SEC's approval of in-kind transactions, could potentially escalate the competition between asset managers like Fidelity and BlackRock, as both companies seek to benefit from smoother trading operations, reduced costs, and enhanced liquidity.
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