Bitcoin and crypto prices have swung wildly over the last week after a $300 billion sell-off sparks fears of a crypto crash.
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The bitcoin price has lost almost 10% since hitting an all-time high of $123,000 per bitcoin, with analysts speculating a bitcoin price game-changer could have already quietly happened.
Now, as fears swirl around the future of the U.S. dollar, Wall Street giant BlackRock could be poised to extend its bitcoin exchange-traded fund (ETF) lead over its rivals.
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BlackRock chief executive Larry Fink has led a crypto revolution on Wall Street, sending the bitcoin price sharply higher.
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The U.S. Securities and Exchange Commission (SEC) last week authorized the use of in-kind creation and redemption mechanisms for bitcoin and crypto exchange-traded funds (ETFs).
The long-awaited move is part of the SEC’s overhaul of former chair Gary Gensler’s preference for crypto exchange-traded products to be cash only, which was perceived to be a barrier to efficiency for institutional market makers.
“It’s a new day at the SEC, and a key priority of my chairmanship is developing a fit-for-purpose regulatory framework for crypto asset markets,” SEC chair Paul Atkins said in a statement.
“The biggest takeaway is symbolic. It means there is a new sheriff in town,” Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, told the financial newswire. “Gensler’s SEC did not want this to happen. This is the first of what will be several steps toward a more pro-crypto SEC.”
BlackRock, the world’s largest asset manager which runs the dominant spot bitcoin ETF with $85 billion in assets under management, filed a request in January to allow in-kind transactions. Others, including Fidelity, which runs the second-largest bitcoin fund with $23 billion in assets under management, followed suit.
BlackRock, which manages around $10 trillion worth of assets for investors, spearheaded Wall Street’s campaign to bring a long-awaited spot bitcoin ETF to market in 2023, with a fleet of funds debuting in January 2024 that now hold almost 1.5 million bitcoin worth $170 billion.
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The bitcoin price has rocketed higher, pushed on first by Wall Street’s embrace of bitcoin and crypto and then U.S. president Donald Trump’s support.
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BlackRock’s fund alone holds 3.5% of the 21 million bitcoin that will ever exist, worth almost $85 billion at the current bitcoin price, which some have warned could be giving BlackRock outsized control over the network.
Alongside the authorization of in-kind crypto ETFs, the SEC has also approved a Nasdaq proposal to increase a position limit for options on BlackRock’s IBIT to 250,000 contracts, up from 25,000, expected to “help bring in bigger institutions and be helpful during volatility,” Balchunas posted to X.
While BlackRock’s bitcoin fund is expected to benefit from the change, the second-largest bitcoin fund, run by Fidelity, could see its market share shrink, according to NYDIG’s global head of research Greg Cipolaro.
“The change is likely to widen the monstrous lead that IBIT already has over the other players, while it hobbles [Fidelity’s] position as the second-largest options player,” Cipolaro wrote in a report.
“As volatility declines, [bitcoin] becomes more investable for institutional portfolios seeking balanced risk exposure. This dynamic could reinforce spot demand. With risk-parity pioneer Ray Dalio recently advocating for a 15% portfolio allocation to gold and crypto in the face of ballooning government debt, the feedback loop of falling volatility leading to increased spot buying could become a powerful driver of sustained demand.”
Last week, legendary billionaire Ray Dalio set markets alight when he recommended a 15% bitcoin or gold portfolio allocation, warning the Federal Reserve has been caught up in debt “doom loop” and that the dollar is past the “point of no return.”