Blackrock ETF Awakens Bitcoin Whales
Whales accumulate anticipating a potential BTC ETF
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Just as we were discounting crypto activity to be low during the summer, the market decided to aggressively react in favor following the Blackrock Bitcoin spot ETF application. While this was filed on last Thursday, the US market started to get strong bids on Tuesday as it reopened following the long weekend.
This week in the ITB newsletter, we evaluate the potential implications the Blackrock ETF could bring to crypto, its likelihood of passing and the optimistic on-chain activity building up as a result.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Interestingly, Bitcoin and Ethereum fees declined in dollar terms despite their prices increasing double digits
- This suggests stronger demand to acquire BTC and ETH rather than to use their underlying blockchains
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Over $1.4 billion worth of Bitcoin and Ether was withdrawn from CEXs as buying activity resurged
Blackrock ETF Awakens Bitcoin Whales
Crypto investors quickly shifted from pessimism regarding regulations to an upbeat outlook regarding a potential Bitcoin spot ETF. Part of the reason behind this 180° turn is likely due to Blackrock, the world’s largest asset manager with ~$10T in assets, being the company behind the application. Blackrock’s stellar record getting 575 out 576 ETF applications approved has reawaken the hopes that a Bitcoin spot ETF gets approved.
While the Bitcoin spot ETF narrative has been around for years, it is worth understanding its importance. In contrast to the Bitcoin futures ETF approved in late 2021, this ETF would buy actual Bitcoin as opposed to derivatives contracts. This would facilitate inflows into Bitcoin from traditional players and potentially fuel its price. A common comparison is gold’s performance following the launch of its first spot ETF.
Golden Performance — Following the introduction of its spot ETF in 2003, gold outperformed most global assets throughout the years that followed
- Gold’s price increased by 27% in the first year after launch of the ETF, 172% within five years and 369% within 10 years
- It is worth noting, however, that even though the timeline of the ETF launch does precede gold’s bull market, it does not necessarily imply causation
Looking on-chain, we can see that large players appear to have come back following the prospects of a Bitcoin spot ETF and greater TradFi participation
Transactions over $1M reach a yearly high — whale transactions climbed over the past week
- On top of the Blackrock ETF news, this week we also saw the launch of EDX, a crypto exchange backed by traditional finance companies such as Fidelity, Charles Schwab and Citadel
- Additionally, the Federal Reserve Chair Jerome Powell remarked that cryptocurrencies appear to have “staying power”, further adding to the market’s sentiment
Large Holders Inflows also reach yearly highs — the amount of Bitcoin added to addresses owning 0.1% or more of the supply climbed by the highest so far in 2023
- Not only are large transactions climbing, whales appear to be accumulating
- Comparing this with CEX netflows, we can confirm that the entities accumulating are not exchange-related as their netflows were negative while large holders’ were highly positive
Will this finally be the moment the SEC approves the sought-out spot Bitcoin ETF? Bloomberg’s senior ETF analyst gives it a 50% chance. However, on-chain data seems to suggest that whales appear highly optimistic following the recent news.
