"Pre-IPO Bitcoin"
Friday June 23, 2023 - Issue # 46
(Any views expressed below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
A happier Friday than most!
Oh man, we totally deserve a new bull market if this is really real. It’s been a while since I haven’t been able to sleep properly. Last time this happened was 2021 where everyday seemed to be a new all time high and we were busy onboarding tons of clients on a daily basis. We got to the $30,500 level earlier this year on no real positive news other than the narrative surrounding regional bank failures and “bailouts” combined with upcoming halving in 2024 — Balaji certainly got everyone excited with his BTC to $1mm in 90 days bet. This feels different to me. However, with the PTSD we all endured over the last year and a half, it’s understandable why folks might not believe this rally. If you’re in that camp, let me try and explain why I’m personally excited and why this is potentially the biggest news Bitcoin can get.
Keep in mind, I’ve been working full time in this space since 2017 so my perspective is based on five and a half years of some excitement, and a lot of disappointment. I guess you could say, I’m sceptical/pessimistic.
In 2013, the Winklevoss twins filed the first application for a bitcoin exchange-traded fund (ETF). Ten years and countless rejections later, BlackRock, the world's largest asset manager with ~$10tn in assets under management applied to launch a spot Bitcoin ETF this week. Shortly thereafter, Fidelity, Invesco, Wisdom Tree, and Valkyrie announced their applications as well. Five Bitcoin ETF applications in five days!
The transformation of BlackRock's CEO Larry Fink is incredible.
2018: anti-Bitcoin & crypto
2022: loses $24mm in FTX investment
2023: files for BTC ETF
BlackRock just doesn’t randomly do things, they’re not that kind of company. They know people at the SEC, better yet, high-ranking people that used to work at the SEC work for their firm. They’re not the kind of company to just throw their hat in the ring to see what happens. This would be completely out of character if they didn’t have this all figured out — especially because Larry Fink has said in the past that they had no interest in launching any sort of crypto ETF. They have a lot riding on a successful outcome.
The biggest obstacle in the way of prior BTC ETF applications is the notion that the market could easily be manipulated and that there weren't safeguards around crypto exchanges. What makes this BlackRock situation even more hopeful is that they’re teaming up with NASDAQ for a surveillance sharing agreement with “a crypto exchange.” This is a big deal. We don’t know who the exchange is but they would have to be big enough to support a BR size ETF and the only two that come to mind are Coinbase and Binance…so my bet is on Coinbase, especially because they list them as the custodian. The fact that they had the surveillance sharing agreement in the filing is huge. Teaming up with NASDAQ, another massive company who does not mess around, has to get you thinking that they worked all of this out before their approach.
BlackRock currently holds an ETF approval record of 575-1. We’re about to see a heavyweight fight against two essentially undefeated fighters. In one corner you have all the previous failed Bitcoin ETF approvals (something like 60-0) and in the other corner you have Floyd “Money” Mayweather, I mean BlackRock. You’re not going to throw yourself into the ring with an opponent who's 60-0 if you don’t believe you can win.
Let’s dig into some easy numbers to see what an approval could do to the price of BTC.
Investment advisors in the US collectively manage more than $35 trillion in assets for institutional and individual investors. These IA’s are mostly only going to use an ETF to get their clients exposure to bitcoin. Even if they put 1% of their collective assets into bitcoin ETFs, that’s $350 billion. At 5% that’s $1.75 trillion. These are big numbers.
Am I getting ahead of myself? Probably. I’m pretty excited I can’t lie.
Check out how gold’s first ETF (GLD) impacted the price of the underlying asset after its massively successful launch.
Another great read from Arthur Hayes:
