Sophia’s Thoughts on BlackRock’s Crypto Overtake
BlackRock was already planning on running a spot Bitcoin ETF. Now, it has launched plans for a spot Ethereum ETF. And there were rumors about a BlackRock spot Ripple ETF as well. Where will this all lead?
These are Sophia's Thoughts:
Until last week, BlackRock made it seem like it only had intentions to run a spot Bitcoin ETF. That had already electrified the market over the summer.
But, last week, BlackRock also announced it intends to run a spot Ethereum ETF. That gave Ethereum a strong boost in performance and lifted the crypto market.
And many believed BlackRock was also expanding to Ripple, but those were fake news.
Ultimately, whether it is BlackRock who wins the race to run the first spot crypto ETF in the US or not, these new developments highlight the broader institutional adoption of crypto.
🚀 Last week’s market performance
The crypto market and Bitcoin (BTC) both gained around 4.5% last week. The biggest winner of the week was 0x Protocol (ZRX), growing by 90%. This rally was boosted by strong sentiment from followers and investors. The biggest loser of the week was Tellor (TRB). It lost 36% after a massive whale sell-off.
Sophia, our crypto AI investment intelligence service, was very bullish on the crypto market earlier in the week as prices rose. But then, valuations caught up with the sentiment hype and Sophia’s mood turned neutral. This move from very bullish to neutral enabled Pallas, our AI crypto trading solution, to gain & retain 4.2% in profits over the week.
Are you interested in following Pallas and taking your profits? Then join IL Pro, Indicia Labs’s premium membership. Use the offer code SophiasThoughts to get a 3-month membership for free!
🧐 What is your crypto mood today?
In each Sophia's Thoughts newsletter, we ask about your crypto mood. Your response to this question helps Sophia get a better sense of the pulse of crypto markets. And this ultimately translates into better insights for you when combined with Sophia's AI models. Your data empowers Sophia to provide you with even better intelligence going forward!
⚫️ BlackRock’s crypto ETF plans until now
First, there was Bitcoin (BTC). BlackRock, a leading global investment company, initiated its journey towards creating a spot Bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC) on June 15, 2023. This application for what will be called the “iShares Bitcoin Trust” was an important step considering BlackRock’s stature in the financial world. The nature of BlackRock’s application is particularly noteworthy. It sparked a series of follow-on filings by Fidelity, Franklin-Templeton, and other major financial powerhouses.
In July 2023, the company updated its application to include a surveillance-sharing agreement (SSA) with its custodians, Nasdaq and Coinbase, a significant move in addressing regulatory concerns. The SSA grants regulators the power to demand additional information and play a more assertive role in overseeing trades. BlackRock’s approach aligns with regulatory needs by reducing reliance on unregulated markets and enhancing the ability to monitor and audit trades.
Bloomberg Intelligence ETF analyst James Seyffart suggested that the updates that BlackRock has made to its application are likely in response to SEC comments. They highlight the progress in the filing process and the ongoing dialogue between issuers like BlackRock and the SEC.
The move by BlackRock has had a notable impact on the cryptocurrency market, with Bitcoin prices surging following the news of the ETF filing. BlackRock’s involvement in the crypto space has added a significant level of credibility and interest in the crypto market, further fueling optimism among investors and industry observers.
📈 Ethereum gets a boost
Then came Ethereum (ETH). Last week, BlackRock officially announced its plan to launch a spot Ethereum ETF. This groundbreaking move was disclosed on November 9 through a new filing to the SEC. The filing details the proposed “iShares Ethereum Trust” following the establishment of a corporate entity under the same name in Delaware. This development comes amidst a competitive landscape where numerous financial firms, including VanEck, ARK 21Shares, Invesco, Grayscale, and Hashdex, are also seeking SEC approval for their own spot Ethereum ETFs.
The market reaction to this announcement was swift and pronounced. Ethereum’s value experienced an 11% surge, reaching above USD 2,100 within 24 hours of the announcement. Analysts and industry experts have weighed in on the potential implications of this move. David Waugh of Coinbits highlighted BlackRock’s serious commitment to expanding its presence in the broader cryptocurrency space. He noted that while the SEC has approved futures Ethereum ETFs, the timeline and outcome for spot ETF approvals remain uncertain. The announcement has also sparked a broader rally in the crypto market, reminiscent of a similar rally in the summer when BlackRock filed for a spot Bitcoin ETF.
BlackRock’s foray into the Ethereum market comes at a pivotal moment for the cryptocurrency market. The positive market response underscores the growing institutional interest in cryptocurrencies and the potential for more mainstream acceptance and investment in digital assets.
🌊 To Ripple or not to Ripple
And then there was Ripple (XRP)… not. On November 13, the cryptocurrency market was briefly stirred by a rumor that BlackRock was planning to launch a spot Ripple ETF. A regulatory filing, which was later confirmed to be fake, suggested that BlackRock was seeking approval for an XRP ETF.
The market’s reaction was swift and significant. XRP’s price jumped as much as 15%. But the gains were short-lived. Within approximately one hour, the price corrected back to around USD 0.65 after BlackRock denied any plans to launch a Ripple ETF. This quick turnaround resulted in a loss of around $7.26 million for traders in XRP futures due to the rapid price movements.
Despite the brief surge, XRP closed the day with a modest gain of 1.47%. The event highlighted the importance of verifying information in the crypto space, where we’re still vulnerable to speculation and manipulation. People are still reeling from the event.
🧐 What’s next?
Whether it will be BlackRock or not, the approval of a spot ETF in the cryptocurrency market is highly anticipated and expected to significantly impact the market. The approval of a spot Bitcoin ETF, for instance, is likely to usher in a more regulated and inclusive market environment, fostering substantial growth in demand. This development would be instrumental in attracting fresh capital to the crypto markets, as newly-approved ETFs are expected to experience inflows.
The odds of the U.S. Securities and Exchange Commission (SEC) approving spot Bitcoin ETFs in 2023 have risen to 75%, particularly following Grayscale’s recent court win. The U.S. capital markets, accounting for about 40% of the global fixed income, present a massive opportunity for a U.S. spot bitcoin ETF. Analysts from Bernstein predict that the spot bitcoin ETF market could grow to represent 10% of Bitcoin’s market cap within two to three years.
The deadlines for SEC approval are constantly evolving, with the SEC extending its review period for certain ETF applications. Therefore, it’s crucial to stay updated on these developments for the most current information.
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