Interesting development in the world of cryptocurrency as BlackRock's iShares Bitcoin ETP has launched on the London Stock Exchange. The implications are huge and seem to open doors for a wider range of investors to access Bitcoin directly through regulated accounts, raising a few questions about the future of crypto adoption in the UK.
But is it a straightforward win?
What did BlackRock's launch mean for the crypto landscape?
In my opinion, this marks a pivotal moment for cryptocurrency as it goes mainstream. In the U.S., we have seen how the approval of spot Bitcoin ETFs (exchange-traded funds) by the SEC attracted a flood of investments in Bitcoin from various quarters. The similar path here should lead to heightened institutional confidence, potentially driving up Bitcoin’s liquidity and price.
Moreover, a 21% increase in UK retail investors engaging with cryptocurrencies over the next year seems plausible.
What risks accompany such reliance on a single asset?
The notion that dependency on Bitcoin could become a game changer isn’t unfounded, but let’s consider the pitfalls.
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The high concentration of Bitcoin being controlled by just a few custodians, including Coinbase, makes it vulnerable. A security breach at Coinbase could lead to chaos in the markets.
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Investors are ultimately reliant on BlackRock and Coinbase for managing their assets. With traditional assets, individual ownership reduces this risk; what do you do if those party's mess things up?
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What happens if regulations change? A cannabis ETF could have taught us that lesson, and it would be easy for regulators to restrict where their customers get paid or how.
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Let's not forget, Bitcoin, while gaining some traction, has less than ever of the overall market now and players can easily change price dynamics with few assets left uninvested.
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The market has been reacting more and more like equities: Bitcoin's correlation with stocks has grown.
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Lastly, liquidity and volatility are still part of the package deal here. Institutional interest is still a ride or die, and getting out can be a hard exit.
What can smaller businesses take from this and how can companies capitalize?
For European SMEs (small and medium-sized enterprises), there are lessons to be learned along with an opportunity to mint used crypto payroll solutions. BlackRock's Bitcoin ETP,
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The FCA's decision to shift gears this way is a sign of a simplified status quo. SMEs would be wise to mind how they can fit into this status quo.
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This product finally provides a semblance of regulation to allow white-labeled products. Find a seat…
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Consumer appetite is shifting, yes. Could be fun to ride the wave.
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Build that institutional-grade infra.
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Demand for regulated products will increase. And demand keeps going in waves, it seems.
Why will this change the regulatory environment?
BlackRock’s entry into the crypto market will likely influence the regulatory environment for crypto-friendly businesses in Europe by prompting a blend of competition and cooperation.
The creation of a regulated infrastructure enabling proper valuations is critical. This is a step towards enhancing regulation that can give it a framework.
And yet, it may lead others to fuel the regulatory fire for hurry-up approval numbers are hard to come by.
There seems to be a light at the end of the crypto tunnel.
