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| By Alex Benfield |
There are plenty of reasons to be bullish about crypto right now.
The regulatory clarity we got by way of the Ripple (XRP, “B”) ruling, the heating up of the NFT market and the advancements in the tech backing up the DeFi ecosystem are just a few examples.
But there’s one developing narrative that really takes the cake: the increasing institutional interest.
See, more institutional interest doesn’t just mean more liquidity in the market. It also means the introduction of new crypto-based financial products catered toward TradFi.
And those could be powerful tools to onboard even more retail investors and bring crypto well and truly into the mainstream.
By this point you’ve definitely heard us mention that TradFi giant, BlackRock (BLK), with over $8 trillion of assets under management, has applied for a spot Bitcoin (BTC, "A-") ETF.
The mere fact that BlackRock is even interested in incorporating Bitcoin into its business gives validation to Bitcoin and the crypto space right off the bat. Even if BlackRock only focuses a small portion of its time, attention and money into Bitcoin, it is bound to have a huge effect on the relatively small crypto industry.
And it’s not the only firm to try this play. Other Wall Street giants like Invesco and WisdomTree have also submitted their applications. And at this point, most insiders say that approval of these spot Bitcoin ETFs is only a matter of when, not if.
So, when the ETFs get approved, these firms will need to buy loads of Bitcoin to back the products. And by “loads,” I’m talking about hundreds of thousands, if not a million, in BTC — an asset with a total supply of only 21 million.
Don’t believe me?
Just for reference, the Grayscale Bitcoin Trust (GBTC) is worth about $10 billion right now. That may sound like a lot of money to you or me, but it’s peanuts to a firm like BlackRock. And Grayscale currently holds over 643,000 BTC.
I can assure you that BlackRock has no intention of being the second-largest Bitcoin-related financial product.
But it’s not just ETFs. Banks and payment systems are taking additional interest in the crypto market as well.
The largest U.S. bank, JPMorgan Chase (JPM), is continuing to roll out enterprise blockchain solutions and deposit tokens. It developed its own blockchain and coin, JPM Coin, a few years back. But last month saw the first blockchain transaction for a client settled on the blockchain.
The client in question was Siemens AG, the large Germany-based conglomerate, and the transaction was done in a Euro-denominated payment.
It’s important to note that the JPM blockchain is not publicly accessible, and JPM Coin is only available to the bank’s institutional clients and only for settling payments.
Still, this is a big event. Banks and other TradFi companies have been exploring ways to use blockchain technologies to speed up settlement in a secure way. If JPM Coin is successful, we can expect to see similar developments at other TradFi firms.
And earlier this week, PayPal (PYPL) announced it has a stablecoin, PYUSD, that can be used on its payment platform. This centralized stablecoin is issued by Paxos and supported by a full reserve.
This move will have people who never gave crypto a second thought interacting with crypto assets.
Are these new developments true crypto? No. They are still centralized and not at all trustless. But the fact that the bridges are being built is a bullish sign and a solid step pushing crypto adoption further.
Notable News, Notes and Tweets
- To really hammer home the change in attitude of these TradFi institutions when it comes to Bitcoin, I suggest you watch this clip of David Rubinstein on Bloomberg.
- JPMorgan is already (correctly) guessing that PayPal’s stablecoin will be bullish for the Ethereum (ETH, “B”) ecosystem.
- This shift in money from TradFi to DeFi has spooked the American government, which now wants to monitor even more of your financial transactions
What’s Next
Despite the uptick in institutional interest, the summer laziness still has its grip on the market.
BTC has been in its range between $28,500 and $31,500 since mid-June and is likely to finish the summer off somewhere near this level before any large shift in prices.
The fall has historically been a good season for the price of BTC, so it wouldn’t surprise me if we see more modest rallies as retail investors get in ahead of the institutions.
We still expect the bull market to kick off sometime between the end of this year and the beginning of 2024. So, if you’ve been thinking about increasing your exposure or first considering getting into crypto at all, I’d use this lull in volatility to do your research, plan your investment strategy and use near-term pullbacks to load up … before the next bull run really gets going.
And stay informed on market moves by checking in with us here at Weiss Crypto Daily so we can navigate the crypto space together.
Best,
Alex
