Bitcoin has arrived.
For the last few years, we discussed how Bitcoin was being hijacked from its original purpose. With so much interest coming from Wall Street it is not surprising.
The news of late is the fact that institutions are starting to allocate a portion of their portfolios towards the leading cryptocurrency. This became possible with the approval of the Bitcoin ETFs earlier this year. It opened up the door for a different type of investor.
What this means is big money is starting to make its move.
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Institutions Are Taking Over
Many within cryptocurrency will applaud this move.
From a price perspective, this presents a remarkable opportunity. Since most people are in the "price go up" camp, this is to their liking.
Unfortunately, this is 90% of crypto.
Big money means prices will move. We have some big players starting to adopt Bitcoin. As stated, the ETFs gave pension funds and other retirement account access.
The State of Wisconsin made news with this move:
The U.S. state of Wisconsin purchased 94,562 shares of BlackRock’s iShares Bitcoin Trust (IBIT) in the first quarter of the year, a filing shows. The shares are worth nearly $100 million.
This is the pension fund from one state, in a single quarter. What happens if we extrapolate that across all 50 state, with all the unions such as teachers and firefighters, and do it over the period of a couple years?
What happens when other countries get involved?
Here is the clout we are looking at with these institutions. How many individuals would it take to generate that type of volume?
The data is reflecting how things are changing:
By Feb. 15, Bitcoin ETFs accounted for about 75% of new investment in the world’s largest cryptocurrency as it surpassed the $50,000 mark.
Source
We know things are higher 3 months later. It is not going to be surprising to see the reports for quarter 2. I would be there are other institutions that become public like Wisconsin.
In other words, they are not the only one jumping in.
Feeding The Traditional System
All of this leads to the hijacking by Wall Street.
We have touched upon how entities such as Blackrock are taking stake in the public Bitcoin mining companies. Over time, this could give them more control over the network.
The coins are already piling up with custodians. Those who are holding the BTC on behalf of these ETFs are in full control. As stated in the past, Michael Saylor is a small fish. Microstrategy is holding about $6 billion in Bitcoin.
As a comparison, Blackrock's ETF, which launched in January, is at $18.5 billion.
In addition to the potential of holding power over the networks along with the majority of coins. traditional finance is looking at pulling the volume.
Trading activity in Bitcoin could face a challenge. A company like Coinbase is going to see its volume decline as transactions are conducted through the ETFs. This means DeFi is facing competition from TradFi.
Naturally, Coinbase is as Wall Street as it gets these days. The point is the big money is going to flow to the derivative (ETF), with the underlying asset sitting with a custodian. As people trade shares of the ETF, they are not affecting the totality of the Bitcoin holdings. The shares of the ETF are simply transferred around.
Ethereum ETF?
There are many speculating about what the SEC will do regarding an Ethereum ETF.
It appears, in trying to read the tea leaves, that most believe they will keep getting denied. Word is starting to spread how the SEC views Ethereum as a security.
If, or when, this does get approved, even if it is after a new SEC chair, it will simply expand what we are referring to.
What happens when billions of dollars flow into these ETFs. While it will not likely match BTC, it will also pull trading activity away from the chain. Once again, the volume will, to a certain degree, be within TradFi.
A company like Blackrock can simply place a .25% fee on the holdings, just like they did with the Bitcoin ETF. With billions, that adds up to a serious amount of money.
Wall Street Immersion
Those who are stating that institutions are arriving in Bitcoin appear to be correct. We are seeing weekly inflows nearing a billion dollars for these ETFs. Amounts of this size are not individual retail investors.
We are moving away from the tenets that Satoshi Nakamoto laid out more than a decade ago. The flaw in the design set us on this path.
From an investment perspective, this will probably do very well for people. As a counter to the traditional financial system, it is the exact opposite.
Bitcoin is actually feeding Wall Street. Blackrock is going to such in tens of millions in fees from the Bitcoin ETF.
Pensions. hedge funds. Sovereign wealth money.
It is all likely to find exposure to Bitcoin. Unfortunately, it seems like most of it will be through the traditional Wall Street avenues.
That said, the institutions are arriving. It is a different game now.