Crypto market expansion
- Just a couple of days ago, we wrote that Blackrock, the world’s largest investment bank with about $10 trillion in assets, is applying for a spot Bitcoin ETF.
- Following them, Fidelity, which manages $5 trillion in assets, is applying for a spot Bitcoin ETF.
- Today, Wisdomtree, which manages $87 billion in assets, also filed for a spot Bitcoin ETF.
- Deutsche Bank, Germany’s largest bank, is applying for a blockchain and cryptocurrency license to provide these services to the public and businesses in the EU.
- A new crypto exchange, EDX Markets (EDXM), backed by Citadel Securities, Fidelity, and Schwab, has launched.
The market continues to rise
Amidst these events Bitcoin soared above $30k and is now +21% in six days. After a two-month decline, such a sharp and unexpected market reversal was driven by optimism associated with at least 10 new ETF filings, including the arrival of financial market giants on the scene.
The assessment of ETF launch preparations has been contradictory so far, with two opposing views to give you an example.
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User @FieldNas doubts the prospects, seeing it as another manipulation of the market:
“Blackrock, Deutshe, Fidelity Et al.
They’re gonna make a lot of paper bitcoin. This may not be the institutional adoption you were hoping for.”
Other experts are optimistic (judging by the reaction of the market, this is the majority). Thielen Markus notes in his Daily Insights report:
“The SEC’s probability of approving the Blackrock Bitcoin ETF is high. The ETF might be approved by September/October 2023 and will attract $10bn within 3 months and $20bn within 6 months — materially supporting Bitcoin prices.”
Other versions of strong growth
In addition to the main version of growth due to the entry into crypto of the “titans of the financial market” (as Bloomberg called them), some experts are calling for alternative versions, which probably reinforce each other:
- The falling yuan exchange rate. If you look at the YUAN/USD rate, you can clearly see a strong correlation between the depreciating yuan and the rising BTC. A similar correlation has been seen in many developing countries with high inflation, where people are trying to protect their savings by parking their assets in BTC. According to this version, China, with its huge population and economy, will unwittingly pump up the BTC rate.
- The U.S. House of Representatives will vote on the crypto bill in July. Passage of this legislation could greatly confuse the cards for players like the SEC, bringing clarity to crypto in the U.S. and limiting regulators from arbitrarily attacking markets.
- The fourth reason for the market growth is the strong liquidation trend in the last 24 hours, which has pushed the price up. We’ll talk about this factor in more detail below.
The market is drowning in losses locally
As Bitcoin rallied from about $27k upward, short positions began to accumulate. At the same time, when approaching $29k, the number of shorts became predominant. Nevertheless, as you can see now, the market continued to grow further, drowning a huge number of traders in liquidations.
A side effect of the large number of liquidations is a short-term upward momentum (for an asset that is being shorted en masse). Despite the losses and danger, even at current levels, the number of shorts is quite high. In our opinion, if the BTC rate crosses $31-32k, it can trigger a huge avalanche of liquidations, which will lead to strong volatility in the market.
Another important factor is the increasing level of Bitcoin sales on the side of miners, who rush to fix profits at the current high level, which blocks the price movement higher.
What’s going on globally?
Blackrock and Fidelity, the super giants of the financial sector, entered the market and even Alphabet (Google) is quite a small company compared to them. Is this the long-awaited recognition and mass adoption? No, it’s more something else.
Recently, we have witnessed a serial repression by the regulator, which filed charges of one kind or another against the leading players, Binance, Coinbase, and Kraken. The crypto industry is under tremendous pressure from the regulator. This was preceded by the bankruptcies of major crypto players such as FTX.
Since the beginning of 2023, after the authorities started attacking crypto banks, a number of experts have been spreading the theory of an organized government attack on crypto. An important phase of this operation, referred to as Chokepoint 2.0, is the arrival of major system players in the industry after the government has eliminated (or paralyzed) competitors there.
Earlier, the SEC rejected hundreds of applications from small firms to launch Bitcoin ETFs. The emergence of Blackrock and Fidelity players after a series of attacks is momentous and predictable. User @WClementeIII describes the current situation this way:
“If Blackrock’s spot ETF application gets approved, it is undeniable that Operation Chokepoint 2.0 was orchestrated to drive out crypto native companies and bring in large traditional firms that are buddy-buddy with the US govt to try and control Bitcoin/crypto.”
“Crypto is ripe for traditional finances takeover”
It usually takes about six months to review an ETF application. Around the fall, we will find out if a plan to take over the market by large multinational companies has been launched. If so, in the beginning of 2024, there will be HUGE capital coming into the crypto market from traditional markets, around the same time another Bitcoin halving will take place.
It’s already obvious that the super-big players with capitals exceeding the budgets of most countries are trying to launch their alternative cryptocurrency infrastructure with their own exchanges and ETFs. Dawn Fitzpatrick, CEO of Soros Fund Management in early June 2023, summed it up briefly: “crypto is ripe for traditional finances takeover.”
As you can see from the current high price of Bitcoin, the market has taken the arrival of super players as a positive event. But time will tell how this will really turn out for the market.