BlackRock Bitcoin ETF: The wolf enters the chicken coop?

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Institutional-scale bitcoin (BTC) investing in America, the dream of many early gold digital asset backers, is becoming a distinct possibility.

But for some, an institutional move to BTC is nothing more than a dystopian nightmare, where a noble battle against the corruption of the fiat money system ends with the rich, once again, getting richer.

The demand for an ETF by the world’s largest asset manager, BlackRock, could not have happened at a foreign time in the history of cryptocurrency regulation.

Just as the U.S. Securities and Exchange Commission (SEC) is hounding Coinbase for allegedly flouting securities laws, BlackRock is seeking SEC approval for a spot bitcoin ETF with Coinbase as its custodial partner.

It should come as no surprise that BlackRock chose to work with Coinbase for its ETF, as they have long been strategic partners. Still, the entry of old-world wealth into the bitcoin realm is raising red flags in the community.

In a recent podcast On the Margin (Spotify/Apple), Mark Yusko voices some of the fears of handing over figurative and cryptographic keys to institutions.

While the notion of large-scale and heavily regulated investment entering bitcoin seems at first glance very optimistic for the industry, not everyone is enthusiastic. Concerns about some sort of hostile takeover are swirling in the community.

The founder of Morgan Creek Capital Management said Xapo, the institutional-scale crypto custody tool that Coinbase acquired in 2019, could come into regulatory play.

What if, he asks, BlackRock could take over this storage unit?

BlackRock would then own a significant share of crypto assets in America, he says. And if they have the gist, then regulators could shut down the Coinbase exchange as an allegedly unlicensed casino by the SEC and hand over the Xapo unit to BlackRock.

Host Ippolito adds that the response from the Bitcoin community has been rather negative regarding the ETF application.

In the file, there is a small paragraph on what BlackRock would do in the event of a hard fork, says Ippolito. BlackRock will have to make a decision.

In the event of a hard fork, Ippolito explains, there will be two different copies of Bitcoin. As happened in previous forks, one of the two will be selected as the canonical channel.

And BlackRocks will have to make a decision about that.

Fears swirl around the possibilities of BlackRock shutting down access to what some would perceive as the preferred fork, but Ippolito is concerned about the pushback from Bitcoin communities.

That makes me think they don’t really understand social consensus, he says. If you want Bitcoin to continue to rise and gain widespread adoption, you need bigger and bigger buyers.

Yusko responds to communities backlash against unwanted money entering the scene, you want any fiat of any kind in any variety to be converted into bitcoin because the bigger the network, the greater the security, the greater the adoption.

This is the only way the value of a network increases.

Short the future, long the physical

That said, Yusko admits that it’s hypothetically possible that since November last year when the futures-based ETF was issued, big institutions like JPMorgan and Blackrock have shorted bitcoin.

In fact, it’s very likely, he says. We have proof in the gold market that they do. Every year they make billions of dollars shorting the future and skirting the physical.

JPMorgan can pay a billion-dollar fine for market manipulation, Yusko says, but gain $20 billion in the process. So that’s 5%. We do not care? It’s the cost of doing business.

Still, it’s not all dark clouds for Yusko. He sees the BlackRock filing as a potential turn in the market from bearish to bullish. We said on this show that the crypto summer will start on June 15th.

And BlackRock files the papers on June 15. It’s just a stroke of luck. And it is possible that we have made the bottom.

Yusko remains confident in the future of bitcoins, although he expects things to be tough for some time.

JPMorgan, BlackRock and all the controllers of money and power felt threatened as they should have been by a disruptive innovation that will replace them. The infrastructure of trust will be replaced by the infrastructure of truth.

But man, the war is gonna be bloody.

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