Written by Nick Dimondi
On January 10th 2024 the SEC approved the trading of what it calls a “digital commodity”, the first of its kind in the global financial system.
A Bitcoin exchange traded product or exchange traded fund has been over 10 years in the making and has been the dream…and nightmare for many in the crypto space.
But what does it mean for Bitcoin and crypto overall and are we going to see massive price movements with the hundred of billions of dollars rushing into this new paradigm of money?
What is an ETF?
What's the big deal about an ETF?
People have been buying and selling Bitcoin online and in person for over a decade. Yes that is true but a majority of that has been operating, for the most part, outside of the control of most central banking cartels i.e. the Federal Reserve, World Bank, European Central Bank et al.
People buying and selling crypto are buying digital assets in an unregulated environment. This is seen as freeing by some and “the wild west” by others.
Either way, large players like banks, pension funds and investment firms haven’t been able to enter the space since they are usually playing by the book. (note: the book is more like guidelines that are made to be broken but that’s another post entirely).
But now that a government entity like the Securities and Exchange Commission have given their stamp of approval on a handful of Bitcoin products, these institutions are now able to partake in the insanity of the crypto space and still keep their accountants and lawyers happy.
Just how much money are we talking about? No one really knows, but estimates are in the hundreds of billions.
The reason that something as stodgy as a Bitcoin stock is causing such a kerfuffle, is for two reasons:
- Bitcoin is an asset that is not controlled by a governmental entity, similar to gold, lithium or corn. It’s considered a commodity. And if you haven’t noticed, there has not been an entirely new class commodity in…well…since the dawn of time.
- Bitcoin is the best performing asset in recorded history. With no one in close to second place.
These two factors have fueled several crypto bull and bear markets and have minted thousands of millionaires and hundreds of billionaires in the short 15 years that Bitcoin has been around.
It has spawned an entire industry outside of nearly all normal regulation standards and started a revolution of thought around what money actually is.
The fundamentals of Bitcoin are such that in it’s present state, it has no equal. It is the most secure and scarce asset around but also has the third feature of being the most fungible i.e. easiest to move around.
Sending or storing Bitcoin can be done with a sheet of paper and 24 words, but holding or moving any other commodity like say Oil, requires you to physically hold a barrel of oil somewhere which is very cumbersome and takes longer to turn into cash (because you have to sell the barrel to someone) and also makes you that weird “I have a barrel of oil in my house” guy.
You can of course have other people hold it for you, but that costs money, which eats into the value of your asset.
The digital nature of Bitcoin, the thing that makes it special, is only just now being understood by TradFi and the results are seismic.
The Long Road
The idea of a Bitcoin ETF is not new.
Facebook co-creators and Bitcoin OGs Cameron and Tyler Winklevoss tried to start one as early as 2013. They met heavy resistance and were ultimately rejected several times.
But the idea stuck and other big players in crypto like Greyscale kept the dream alive for over a decade.
Meanwhile, TradFi regarded Bitcoin as an oddity at best and “rat poison” at worst.
It’s been derided by all the major banks including recently JP Morgan, whose CEO, Jamie Dimon just told Elizabeth Warren in December of 2023 that Bitcoin and all crypto should be banned.
But the thing that was on Bitcoin's side was it’s security and it’s value. The network remained strong throughout the years and even with exchange hacks and block wars, the fundamental core of Bitcoin didn’t waver. And the value kept climbing.
It eventually got to a point that the banks could not deny the potential of Bitcoin any longer. That point was driven home when the market cap of Bitcoin hit 1.23 trillion dollars in November of 2021, dwarfing many Fortune 500 companies and challenging the superiority of the entire market cap of Gold.
It was then that the banks started to move in earnest (while talking negatively about Bitcoin to keep the price down and normies afraid of it) to put BTC into the hands of the regulators and get in on the action in a way that didn’t involve their usual schemes, over the counter trading and off-shoring of capital.
They needed to make it easier for the big dogs to play the crypto game.
As 2021 came to a close and the markets started to meltdown it was clear to many in the crypto space that asset managers wanted in on the action and they weren’t going to take no for an answer.
By now you may have heard that the largest asset manager in the world is offering a Bitcoin ETF.
Blackrock, with over 9 Trillion dollars in assets under management, is part of the first 11 TradFI firms that are giving their customers access to Bitcoin for the first time ever. Much can be said about Blackrock but for the purposes of this blog post the author will summarize it like this.
What Blackrock wants, Blackrock gets.
Blackrock CEO, Larry Fink, is known as one of the most influential and ruthless power players in all of finance.
So when Blackrock announced their Bitcoin iShares ETF in July of 2023 many in the crypto space new that something extraordinary was happening.
iShares ETF applications are rarely denied, and as the year went on and Larry Fink started making positive comments about not just Bitcoin but crypto in general, the writing on the wall was seen by many, except for Gary Gensler and his cronies at the SEC.
Chairman Gary tried tooth and nail to push back against the Bitcoin ETF but it was a losing battle. Financial regulators kowtowing to Wall Street is well documented, so when Larry tells a regulator to jump, they almost always nod and ask “how high?”
Note: Three weeks after Jamie Dimon called for all crypto to be banned, JP Morgan announced they were authorized participants in Blackrocks iShares Bitcoin ETF.
So what does this mean for Bitcoin?
Is this even good for Bitcoin?
A lot of people have strong opinions but no one knows.
Some say this is Valhalla and that all of crypto is going to moon for infinity, others say that this is a cynical move by TradFi to capture the Bitcoin infrastructure and ultimately destroy crypto save for a few zombie chains and deep state controlled distributed ledgers.
The more grounded take is that this is a natural progression of a new asset being adopted into the greater financial system and that price will appreciate for Bitcoin albeit at a less volatile pace once the markets adjust to demand.
But that adjustment could take years if not decades and with the precarious nature of the global financial system and the powder keg of geo-politics as a whole, it looks like the final years of this saeculum are going to be a wild ride no matter what.
But Bitcoin and its math based value might be the golden parachute that saves all of us from an inferno of a global currency collapse.
An orange savior with laser eyes that we frankly don’t deserve. And hopefully one that we won’t screw up.