Blackrock, the world’s largest asset management company, may potentially spearhead a Wall Street bull run.
Bitcoin price surges to pre-2022
In recent months, the cryptocurrency market has been on a feverish surge, with Bitcoin leading the charge, buoyed by sky-high expectations. While some attribute this newfound optimism to an unexpected shift from the Federal Reserve, it has led to Bitcoin’s price surging beyond US $35,000 per coin, a level not seen since early 2022. This price rally has had a ripple effect on other major cryptocurrencies like Ethereum and XRP, propelling them to higher valuations, thereby instigating growing fears of a possible “rug pull” in the Bitcoin market.
EFT taking Bitcoin out of circulation
Arthur Hayes, a renowned figure in the world of Bitcoin and cryptocurrencies, has sounded an alarm, suggesting that the entire crypto space could be unwittingly edging towards a “massive calamity.” Hayes specifically points fingers at two formidable forces: BlackRock and the U.S. government, warning that their involvement may potentially spell doom for Bitcoin.
The crux of this concern revolves around the expanding influence of BlackRock and the ongoing development of a Bitcoin spot exchange-traded fund (ETF). Hayes, a co-founder of BitMex, a pioneering crypto derivatives platform, articulates the risk, stating that if BlackRock’s Bitcoin spot ETF grows too substantial, it could threaten the very essence of Bitcoin itself. The ETF accumulates a significant amount of Bitcoin, which remains immobilized, essentially taking a substantial portion of Bitcoin out of circulation.
The situation has evolved rapidly. In June, BlackRock ignited a competitive race on Wall Street to introduce a much-anticipated U.S. Bitcoin spot ETF, a feat that had faced years of rejections from the Securities and Exchange Commission (SEC). As the summer progressed, expectations mounted that a Bitcoin spot ETF in the U.S. could become a reality. This sentiment was further bolstered when Grayscale, a crypto asset management giant and part of the Digital Currency Group, achieved a significant legal victory in its quest to transform its flagship Bitcoin trust into a fully-fledged Bitcoin spot ETF.
Turning point in cryptocurrency
Grayscale stands out as the largest publicly known holder of Bitcoin, boasting a stash of nearly 650,000 Bitcoin, which is four times the holdings of MicroStrategy, a software company that has been accumulating significant quantities of Bitcoin since 2020. As the SEC continues to deliberate on multiple Bitcoin spot ETF applications, the market appears to be banking on the possibility of such an ETF becoming accessible to traders and the broader Wall Street community in the coming months.
Hayes further underscores the concern by emphasizing the potential for Bitcoin spot ETFs, requiring institutions to acquire substantial volumes of Bitcoin, to place them in a commanding position over Bitcoin’s consensus mechanisms. Notably, BlackRock’s considerable holdings in some of the largest Bitcoin mining operations raise the spectre of these Wall Street giants not only creating Bitcoin spot ETFs but potentially venturing into Bitcoin mining ETFs as well.
A lingering question has arisen though: Could the current market exuberance ultimately lead to a catastrophic turn of events in the future? The prospect remains uncertain, and anxieties are compounded by the notion that Wall Street asset managers, including BlackRock, are often perceived as “agents of the state.” Hayes argues that they tend to act in accordance with what the state dictates, fuelling fears that the U.S. might be waging a covert war against Bitcoin and cryptocurrencies—a concept that has come to be known as Operation Choke Point 2.0.
Operation Choke Point 2.0
In the current climate, the traditional financial sector has distanced itself from the cryptocurrency industry and market. A series of bank failures earlier this year have been linked, by some, to their involvement in cryptocurrency services. There are concerns that these banking crises may have been partly orchestrated by the U.S. government and regulators.
Operation Choke Point originally emerged in 2013 as a U.S. Department of Justice initiative aimed at discouraging banks from collaborating with firearm dealers, payday lenders, and other businesses deemed high-risk for fraud and money laundering. In September, Changpeng “CZ” Zhao, the CEO of Binance, issued a frank warning regarding “Operation Chokepoint 2.0.”
These developments underscore the complex and evolving landscape surrounding Bitcoin and the broader cryptocurrency market. As the regulatory and institutional environment continues to shift, the crypto industry faces a myriad of challenges and uncertainties that may well shape its future trajectory.