This morning, Bitcoin experienced a long-awaited surge, breaking through $27,000 at one point, and the daily line re-standing on the MA120 moving average. The recent optimism mainly comes from the encouragement of the recent application news of Blackrock ETF.

BlackRock-fueled optimism

In fact, Bitcoin ETF is a long-term topic. Since the Winklevoss brothers first launched the Bitcoin ETF in 2013, different institutions in the United States have applied for Bitcoin ETF every year for 10 years, but without exception, they all ended in failure, and even became a "curse that it will always be passed next year."

These include traditional financial management giants such as Goldman Sachs, Invesco, and Ark Investment: US asset management company Victory Capital, asset management company Simply, Ark Investment Management, Swiss cryptocurrency ETP issuer 21Shares, asset management giant Invesco, ETF issuer Volt Equity, etc. have been reported.

So why are people so optimistic about BlackRock’s announcement of an application for a spot Bitcoin ETF submitted to the US SEC?

First of all, the market has indeed suffered from negative news for a long time. Since 2022, Terra, FTX, and regulatory crackdowns have continued. The market has almost no positive news about external capital inflows, and there is a lack of compliant investment channels. As the world's largest asset management giant with total assets of approximately US$8.6 trillion, BlackRock's influence cannot be underestimated.

Therefore, once its spot Bitcoin ETF is approved, it will provide a safe and effective "channel" for massive amounts of traditional financial funds to flow into the crypto world, which will have a more far-reaching impact on the crypto market.

For the "Bitcoin ETF" that started to sound the clarion call in 2013, after a full 10 years of continuous "application-failure-reapplication" cycle by people in the industry, 2023 finally saw the light of day.

Secondly, ETFs have a positive potential impact on the price of the underlying asset: We can review the impact of the launch of gold ETFs on the market. The first gold-backed ETF was launched on the New York Stock Exchange on November 18, 2004, and the closing price of gold on that day was $444.3 per ounce. With the inflow of funds, gold exposure was obtained in a compliant and safe manner, and the spot price rose all the way to $1,666 per ounce in 2012.

However, outside the United States, as early as February 18, 2021, this "curse" was broken by Canada's Purpose Investment Company, which launched the world's first Bitcoin ETF-Purpose Bitcoin ETF, and listed it on the Toronto Stock Exchange. The trading volume on the first day of issuance reached nearly US$400 million, which shows the market's expectations for Bitcoin ETFs.

Beware of "The best stories kill the most people"

In fact, traditional financial institutions have never concealed their ambitions to get involved in crypto assets, and they are accompanied by a series of never-ending layouts. However, we still have to be wary of "the best stories kill the most people":

You should know that Bakkt, which was launched on September 23, 2021, has attracted much attention before its launch and is expected to lead the return of the bull market - it is the first physically delivered Bitcoin futures and can directly affect the spot market.

Investors who had been dormant in the bear market for two years at that time almost fanatically regarded it as a "bull market catalyst". Unexpectedly, Bakket's launch was unexpectedly bleak. In the first 24 hours, a total of 71 Bitcoin futures contracts were traded. The first nine trading days were also quite bleak, with only 865 contracts changing hands.

The harsh reality woke the market up in time, and the volatile pattern since June 2021 was broken. Bitcoin plummeted by 20% in an instant, and the entire market also fell by 30% - 40%. The market was in a stampede, and the amount of liquidation in the global contract market reached hundreds of billions of yuan overnight, which was known as the "925 Tragedy."

More importantly, the optimism that investors had felt when Bitcoin rebounded was wiped out, and market confidence fell to the bottom again. Bakkt, the most anticipated platform, ended up killing the most people.

Looking back now, the time node is mainly 2020:

Before 2020, "Bitcoin ETF" has always been the main channel for the market to enter the "over-the-counter incremental funds" that the market has been looking forward to. Everyone expects "Bitcoin ETF" to bring in huge amounts of incremental funds, open up the way for traditional mainstream investors to invest in cryptocurrencies, and promote Bitcoin and other products to be accepted on a large scale by Wall Street as much as possible, so that the allocation of encrypted assets can be more widely recognized.

However, since the "open entry" of institutions represented by Grayscale in 2020, it seems to have taken over everyone's expectations for "Bitcoin ETF" and even played the role of "bull market engine" for a time.

But now Grayscale is no longer in its heyday - according to the latest data as of June 20, the negative premiums of Grayscale's Bitcoin, Ethereum and other trust products are still ridiculously high. Among them, the negative premium of Grayscale Bitcoin Trust is 42.86%, and the negative premium of Ethereum Trust is as high as 51.92%. The negative premium of ETC Trust has exceeded 66%.

Supervision urgently needs to be clarified

However, the legal definition of cryptocurrencies and the division of regulatory responsibilities by U.S. regulators are still not agreed upon, which may be the key reason why there has been no breakthrough in the way that crypto assets such as ETFs are bridged to traditional finance:

According to the CFTC, derivatives with securities attributes are regulated by the SEC, such as financial products derived from Bitcoin ETFs; while commodities themselves are regulated by the CFTC, such as Bitcoin and other cryptocurrencies with commodity attributes.

But there is a core problem here, which is that the scope of the definition of securities urgently needs to be clarified by law - for example, other cryptocurrencies besides Bitcoin, whether some of them may be directly defined as securities rather than commodities in the future

So in general, for the many Bitcoin ETF applications in the United States, the most important thing to pay attention to at present is actually the attitude of the regulators. The current Bitcoin ETF applications are actually waiting for the arrival of this final "regulatory point".

You can keep looking forward to it, but please be cautiously optimistic. #BTC