Imagine being invited to a party thrown by the guys over on Wall Street, where they’re serving up Bitcoin instead of champagne. Exciting, right? But there’s a catch — these are the guys who are infamous for grabbing the biggest piece of the cake. This is the dilemma the crypto community faces as traditional finance giants, BlackRock and Invesco, seek approval for their Bitcoin Exchange-Traded Funds (ETFs).
Institutional investment in Bitcoin, once the dream of digital asset enthusiasts, is becoming a distinct reality. Yet, for some, it feels more like a dystopian nightmare where the rich get richer and the decentralization of finance become compromised.
BlackRock, the world’s largest asset manager, has applied for a spot Bitcoin ETF, a significant move in cryptocurrency’s regulatory landscape. Ironically, their proposed custodial partner is none other than Coinbase, currently in the SEC’s crosshairs for alleged securities law violations.
A long-standing strategic partnership with Coinbase makes it unsurprising for BlackRock to choose them for their ETF. However, this intrusion of old-world wealth into the crypto space is raising eyebrows and, inevitably, red flags within the community.
The crypto community’s anxiety doesn’t stem solely from potential manipulation. There are suspicions that large institutions like BlackRock and JPMorgan might short Bitcoin. JPMorgan can afford to pay hefty fines for market manipulation, but they stand to make much more in profits, making the penalties just a minor cost of doing business.
The Invesco spot Bitcoin ETF application, filed in conjunction with Galaxy Digital, brings another heavyweight into the ring. It follows on the heels of BlackRock’s move, adding further dynamism to the market. Their initial application was filed in the fall of 2021, emphasizing that the absence of a spot Bitcoin ETF pushes investors towards riskier alternatives.
The heart of the matter here is investor protection and preventing market manipulation. The solution proposed by both BlackRock and Invesco involves a surveillance sharing agreement with a significant, regulated market. This agreement would enable the exchange of crucial information about market trading activity, clearing processes, and customer identification.
However, as the SEC hasn’t given any indication as to when it plans to make an announcement regarding a Bitcoin ETF, we’re left on edge. What remains to be seen is whether these Bitcoin ETFs will prove to be the golden ticket for broad adoption and heightened network security or if they will unleash a Pandora’s box of manipulation and control.
