Bitcoin on the Rise again, and other cryptocurrencies could also reap the benefits, as BlackRock, the biggest asset manager in the world has opted to work with Bitcoin to create an exchange-traded fund (ETF) which should give a big boost to the currency, according to a report by Forbes.com. This should have a dramatic impact on cryptocurrencies just days after major cryptocurrencies saw a sharp decline in value when it was announced that Goldman Sachs was canceling their plans to set up a cryptocurrency trading desk.
In just three days, the value of Bitcoin raised by more than 5% on the trading market from Monday’s value of $6,720.84. The second and third largest digital currencies also saw an increase as Ethereum and Ripple both saw increases of 6% following the announcement.
A Surprise Move by BlackRock
The story was first reported by the Financial News, a London based publication and was later confirmed by the CEO of BlackRock, Larry Fink. Fink acknowledged that it was the “huge demand” for digital currencies that made this a smart move for the asset manager.
While the move may make sense now, it was a surprise to many insiders as Fink has often shunned the currencies, even railing against Bitcoin at one point. The CEO had told Bloomberg earlier this year that they have not provided crypto exposure to their clients and had once referred to Bitcoin as the “index of money laundering.”
The Next Move to Make This Reality
While the ETF is planned by CoinBase, the institutional service behind Bitcoin, the move is not a done deal by any stretch of the imagination. The company must first file the ETF, which would help to establish the institutional-grade offerings. This would establish the index fund and custody services for any accredited investors.
However, for any of those things to become a reality, the ETF must first be approved. This is not a sure thing, as the U.S. Securities and Exchange Commission had already rejected nine such ETF requests earlier this summer according to Bitcoin Magazine.
The concern, according to the magazine, is that the markets for crypto are not mature enough making it impossible to protect them against manipulation. This was used as the rationality in rejecting the vast majority of the ETFs and could be used as a rationale to deny the ETF in this case.
The Role of the ETF
The concern is not unwarranted. The role of the ETF is to track any form of currency to ensure that unfair practices are not involved. Many investors have seen crypto’s as a great way to acquire an asset that will help to improve their portfolio, and the ETF is put in place as a sort of guarantee for investors that they can have confidence in the currency itself.
While ETF requests have failed earlier this year, it is believed by many insiders that the Bitcoin request will process through. The involvement of BlackRock is expected to carry the sufficient amount of weight necessary to guarantee its approval.
Bitcoin soared to an all-time high of over $20,000 late in 2017 but saw a significant decline where investors lost as much as 70% of the value. This has led to many feeling antsy about taking a risk on the currency, but the backing of BlackRock may have made this a whole new ballgame.
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