BlackRock CEO Larry Fink’s change of heart on bitcoin (BTC) may make it easier for other Wall Street executives to embrace cryptocurrencies, but some experts are warning that his preferred financial instrument – the traded fund trading, or ETF – is an investment vehicle that is starkly different from the original ideals of digital assets and could push the industry in the wrong direction.
The main distinction is that an ETF is simply a traditional investment vehicle, with bitcoin as the asset, but traded on a regulated exchange, through regulated brokers. Such structures could be anathema to Bitcoin, conceived and then launched in 2009 by a pseudonymous creator – partly in reaction to Wall Street excesses that fueled the global financial crisis a year earlier – as a peer-to-peer payment system. -peer based on the Internet. network that would be free from government control.
So, reception from crypto devotees might be mixed, though Fink’s newfound lean might have helped support bitcoin’s recent price rally, now up 82% year-to-date.
“Crypto is losing the plot,” said Jim Bianco, president of Bianco Research. “It’s supposed to be about decentralization, permissionlessness, and self-sovereignty. Getting excited about it becoming a more accessible poker chip is nice and will help degenerates in the short term, but that won’t help deliver the true promise of crypto.
Fink, who until this week was known to be a crypto skeptic and at one point called bitcoin “an index of money laundering,” said Wednesday that he could “ revolutionize finance.
However, rather than praising the central idea behind the newly built digital asset market, primarily decentralization, Fink said the main goal of the asset manager is to make it easier and cheaper to trade and invest. in bitcoins. Some industry experts have worried whether BlackRock might be there for the wrong reasons.
“Arguments have been made that ETFs, as well as bitcoin exchanges, ignore what some consider to be bitcoin’s most important feature, the ability to control their funds without needing to trust a third party to handle the transaction. ‘asset,’ said Jim Iourio, managing director of TJM Institutional Services and a former futures and options trader. “It goes against Bitcoin’s whole point of existence.”
Crypto was built on the idea that money should not be tied to any third party or intermediaries, such as banks or even governments, and is therefore immune to manipulation.
With ETFs, the provider (in this case BlackRock, if it gets regulatory approval to launch the product) owns the underlying asset and sells shares of the fund to investors. It works in a way that crypto was designed to change.
“The so-called mainstream adoption will bring waves of new entrants to bitcoin, and the risk is that they won’t care and protect the decentralization properties that make it valuable over centralized alternatives in the first place. Alex Thorn, head of research at digital asset finance firm Galaxy, wrote in a report this week.
Widespread adoption
However, when the head of the world’s largest asset manager openly admits that, contrary to what he thought a few years ago, he now sees bitcoin as “digitalized gold”, not everything can be so negative – at least for now.
Validation from people like Fink could help drive mass adoption, further entrenching bitcoin in mainstream usage and public consciousness.
Paul McCaffery, managing director of boutique investment firm Keefe Bruyette & Woods, or KBW, said he thinks Fink’s embrace could pave the way for other Wall Street investors to express their comfort with Bitcoin. and allocate more money to cryptocurrency.
“It’s a game-changer,” he said. “His comment was not about the fact that this was a good economic move for BlackRock, but rather about the promise of digital wealth.”