Bitcoin, BlackRock, And The End Of Decentralization (BTC-USD)

Bitcoin USD (BTC-USD) has had a strong year with a gain of around 124% and crypto enthusiasts are cheering the impending arrival of BlackRock with spot exchange-traded funds (ETFs). Let’s look at the potential impact of the world’s largest asset manager in crypto.

BlackRock’s entry ends the decentralization issue

The reality of BlackRock’s entry into cryptocurrency is that it ends the idea of a decentralized world currency. In my opinion, BlackRock’s filing of ETFs for Bitcoin, and now for Ethereum USD (ETH-USD), make it a certainty that the Securities and Exchange Commission will give their blessing to a spot market-based ETF. I also believe that anyone who thinks the SEC will decline a spot offering really doesn’t see how the corridors of power in Wall Street work. Larry Fink’s asset management behemoth has spotted an opportunity and I don’t believe Mr. Main Street will be the ultimate winner.

First of all, if the Bitcoin enthusiasts are right about strong investor adoption then it simply means that the current whale-controlled speculative behavior in BTC gets handed over to Wall Street.

In BlackRock’s SEC filing for the BTC ETF, it said:

“All shares in the ETF will be fully backed by BTC and no new shares can be issued without delivery of the corresponding value of tokens.“

The more investors that buy shares in the spot ETF, the more BTC the asset manager needs to buy. Bitcoin fans then need to realize that if the cryptocurrency eventually meets their lofty price projections, Larry Fink’s BlackRock OWNS Bitcoin.

Bitcoin’s rally in 2023 is purely speculative

Bitcoin was beaten down in 2022 after a multitude of fallouts in the crypto universe that exposed the reality of the sector. While crypto enthusiasts tout it as a decentralized haven from the manipulation and greed of the current financial system, Terra’s Do Kwon and the collapse of Sam Bankman Fried’s FTX empire exposed the dirty reality of a world that is just as greedy and lawless as anything we have seen from Wall Street.

The 124% rally in BTC is being driven by speculation in a coin that is controlled by whale speculators. It is no coincidence that whale activity in BTC and other coins has hit six-month highs according to data from Santiment. There has been no change in mainstream adoption and investors are driving prices higher in a thin market based on the ETF applications and next year’s Bitcoin halving. The halving is every four-year event that sees mining rewards and Bitcoin issuance cut in half, making the coin more scarce. In the 2024 halving, the mining reward will drop from 6.25 BTC per block to 3.125 BTC.

The reality of the BTC halving is that it makes the coin more scarce, and that means more control for BlackRock. And when BlackRock gets its ETF approved, it is highly likely in my view that the other ETF giants, such as Vanguard and State Street, join the show with a spot ETF. This is not the arrival of Bitcoin, it is the end of Bitcoin, in my view.

Bitcoin will never be the world’s currency

I believe BlackRock’s arrival into Bitcoin is to bring Wall Street control to another commodity. BTC will never replace gold but can offer a digital alternative. BlackRock knows this and the idea that BTC will be a payment currency dominating the world’s economy is wrong and I have said that for a long time.

In October 2021, I wrote an article on Seeking Alpha that called the high in BTC at $61,000. In that article, I asked if Bitcoin was simply a trojan horse for investors to accept the coming Central Bank Digital Currencies (CBDCs).

The United Kingdom has been touting a “digital pound” and this week it also stepped up plans to regulate stablecoins in the country. The Bank of England, the UK central bank, has now said that the country’s financial regulator will oversee stablecoins. The BOE will “rely on” the Financial Conduct Authority to regulate custodians. However, it left open the potential for imposing its own rules such as relating to Anti-Money Laundering and Know Your Customer requirements.

Central banks will now regulate crypto exchanges and stablecoins, while Wall Street will control Bitcoin. I believe the world will not adopt Bitcoin because a digital version of their money, which is easier to own for the layman than storing BTC in cold and hot wallets, is coming. The Bank of England has already laid out how you will “buy a cup of tea, pay the electrician, and order groceries online” with your digital pounds.

The head of the Bank of International Settlements (BIS), Augustin Carstens, said in a speech recently: “Whether in wholesale form – as a type of digital central bank reserve – or retail form – as a digital banknote – it is increasingly clear…. that these new forms of money will sit at the core of the future financial system”.

The Reserve Bank of India is set to roll out a CBDC in January next year. U.S. Treasury Secretary also stressed the need for crypto regulation and the potential for a CBDC at an IMF meeting last month.

In the passing of the European Union’s Markets in Cryptocurrency Assets (MiCa) bill, lawmakers have inserted scrutiny on transactions of over 1,000 euros. Digital money is easier to track and it allows governments to raise higher taxes by eliminating the cash-based gig economy. Decentralization is officially dead but many investors cannot seem to grasp the obvious path we are on.

The outlook for the Bitcoin price

Looking at Fibonacci levels on a price chart from the high in Bitcoin in November 2021, the current price has just edged above the 38% level at around $36,000. A 50% retracement would be at $42,500, so BTC is not breaking big ground in relation to the highs. The 2022 dump was ultimately going to lead to oversold low level and now it is retracing. There is no confirmation yet of a new bull market.

I trade BTC in the futures market and would be looking at those two levels as the bigger picture. The daily and weekly movements are noise and what analysts think of the U.S. dollar, treasury yields, and ETF filings is largely meaningless. This week the price looks set to test the support provided by the 38% level.

With the rise in Bitcoin, we are also back to the 2021 era of ridiculous price projections. This week it was Arthur Hayes, founder of the BitMEX exchange, reiterating his stance that BTC can hit $1 million and Ethereum can rise over 4,000%. Fundstrat’s Tom Lee made similar predictions in 2021 that BTC will hit $100,000 or more.

From a sentiment point of view, we are not at the 2021 level where amateur investors were loading up credit cards to buy BTC. That may mean that the move has further legs. A possible run to the $42,500 resistance and blow-off top around $50k is possible.

I would agree with Bloomberg that the SEC approval of a spot ETF in Bitcoin will happen by January 2024. The recent gains in BTC will start to attract new retail investors and the hype could continue with the BlackRock ETF and lead into the halving hype.

As an investor in BTC, which I am not, I would hold BTC for this type of market behavior. But beyond that, I think retail investors are being sucked into another BTC high. BlackRock’s entry is a win for speculators but the concept of a decentralized world currency has been destroyed. A big change in investor adoption of BlackRock’s ETF means the asset manager will own a huge part of the coin supply. Vanguard and State Street may follow and that brings a very big liquidity problem to the cryptocurrency sector. We are on a path to CBDCs and investors touting the arrival of a spot ETF fail to grasp that the smart money would have piled into BTC via all available avenues if they saw it becoming the future. They didn’t do that and they won’t do it now when BlackRock wants to charge them high ETF charges to hold an asset that is supposedly decentralized and free of third-party involvement.