Traditional financial firms have finally accepted the longevity of digital assets, as evidenced by a series of announcements made last week by major players in the industry. BlackRock, the largest asset manager in the world with $9 trillion in assets under management, filed for permission to build a Bitcoin-based exchange-traded fund (ETF), a move that the United States Securities and Exchange Commission has been hesitant to approve. Other financial firms such as Fidelity Investments, Charles Schwab, and Citadel also entered the digital asset space by launching a new cryptocurrency exchange called EDX. In addition, Deutsche Bank in Germany applied for a license to custody crypto.
These developments had a significant impact on the crypto trading markets, with Bitcoin gaining 20% in the week and surpassing the $30,000 mark for the first time since April. The potential listing of a BlackRock Bitcoin ETF on the Nasdaq stock exchange could make Bitcoin more accessible to a broader investing public, and other firms such as Invesco and WisdomTree are expected to follow suit with their own filings. Experts and industry insiders have dubbed this period as “The Great Accumulation,” urging investors to buy Bitcoin now before ETFs are launched and the floodgates open.
While some may be surprised by these recent developments, others view them as inevitable in the evolution of the internet and digital value. “What is surprising is how the U.S. hasn’t embraced it,” said Jim Kyung-Soo Liew, an associate professor of finance at Johns Hopkins Carey Business School. However, questions remain about the sustainability of Bitcoin’s price gains and whether this influx of institutional investors will have a lasting impact or if cryptocurrencies will return to a sideways market.
The entry of BlackRock, with its $9 trillion in assets, into the BTC market could have a transformative effect. With Bitcoin’s limited supply of 21 million BTC and a significant portion remaining illiquid, increased demand from institutions like BlackRock could lead to price gains. However, it’s essential to consider the role of retail investors in stabilizing Bitcoin’s price. The broader participation of ordinary crypto users may be necessary for long-term price stability.
Assuming BlackRock and other institutional investors succeed in their ETF endeavors, it remains to be seen whether it will stabilize Bitcoin’s price at a substantially higher level than its current value of $30,000. Some experts argue that a multitude of spot Bitcoin ETFs could actually increase volatility in the market. Others, like Carol Alexander, a professor of finance at the University of Sussex Business School, believe that retail investors will play a crucial role. She predicts that with more regulatory clarity and increased acceptance from ordinary people starting in September, the price of Bitcoin could rise to around $50,000.
A global survey conducted by Nomura Laser Digital supports the idea that professional investors place importance on the backing of large traditional financial institutions before considering digital asset investments. Therefore, the recent announcements by BlackRock, Fidelity, Deutsche Bank, and others may serve as a signal to these investors that it is a suitable time to enter the market.
The overall impact of these developments remains uncertain, and only time will tell when the tipping point for widespread institutional adoption of digital assets will occur. However, with the participation of major traditional firms, the crypto market could experience significant growth, potentially reaching a market capitalization of $10 trillion in the next five years.
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