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REX Wire Bitcoin ETF Conspiracy Theory
BlackRock's Bitcoin ETF throws bones to the US government, Federal Reserve, financial institutions, and even the SEC.
The crypto space is known for its conspiracy theories. To paraphrase the old saying, "Ask two right-wing libertarians, get three conspiracy theories".
So when news broke of BlackRock's intention to launch a spot Bitcoin ETF, closely followed by a similar announcement from Fidelity, Crypto Twitter put on its tinfoil hat and got creative—though to be fair, some of the "conspiracy theories" fit the facts far better than more benign explanations.
So BlackRock, Citadel, Deutsche Bank and NASDAQ have all started to enter the crypto space in the last week.— Adam Cochran (adamscochran.eth) (@adamscochran) June 20, 2023
They've bullied out participants so they can scoop up cheap coins.
The trajectory for crypto has never been more clear.
I'm sorry, but after watching, Blackrock, Fidelity, Citadel, Schwab and now Deutsche Bank, all apply for #Bitcoin ETFs, spot exchanges, etc. only a few days after the SEC drops a TRO on Binance and sues Coinbase... how can't you think this entire past year was a giant inside job…— Preston Pysh (@PrestonPysh) June 20, 2023
The announcement, which seemingly came out of the blue at a time when the SEC and the other instruments of Operation Choke Point 2.0 are furiously trying to crush the crypto sector in the US, has reinvigorated bearish markets. BlackRock, a $10 trillion financial giant, has the clout to get the job done where others have tried and failed. It's not a done deal, but this is one organization that might be able to put the SEC back on its leash.
Unless, of course, there really is something else going on.
Saving The Almighty Dollar
If there is a secret agenda here, then the simplest explanation is usually the best. It might go something like this:
- The financial sector is in big trouble. Banks bought long-dated bonds with trillions of QE money, reassured by the Fed that interest rates would stay low for years. Then inflation soared (due to the same QE money), the Fed jacked up interest rates, the value of those bonds plummeted, and a lot of banks are underwater. Oops.
- The Fed has two options. Let inflation run rampant and destroy the economy, or raise interest rates and kill a bunch of banks, and destroy the economy.
- Either way, people are going to pull money out of the banks and find somewhere safe where they can access it when they need it, that has some resistance to inflation. Gold. Select real estate, maybe. Potentially some fiat currencies viewed as safer than others. And absolutely crypto.
- Operation Choke Point 2.0 is a coordinated effort to close that new escape hatch.
- The SEC's role has been to take down crypto businesses and crush the sector through enforcement of unclear and unwritten regulation (and honestly, that's not a stretch given the Kafkaesque nature of Gensler's approach to date).
- Bitcoin is the only crypto that has clear regulatory status: It's a commodity. The SEC defines almost all alts as securities. Given that it's fighting battles on many fronts, not least Coinbase and Binance, this is one it can't afford to contest, especially against an opponent as influential and well-resourced as BlackRock. But then, perhaps it doesn't want to.
- Let's say the SEC waves through BlackRock's application, which is swiftly followed by more from Fidelity, Vanguard, and others. These regulated products from established and respected institutions immediately, from day 1, provide the leading means for retail and institutional investors to gain exposure to crypto.
- Note that they're not buying crypto itself. They don't hold the private keys. They can't use the BTC they "own". This is a centralized product, controlled by BlackRock, and ultimately by the US government.
- Bitcoins are bought by the ETFs from exchanges, which end up losing even more business in the long term. In relatively short order, BTC revalues by a factor of 10x. The ETFs become the largest and most liquid markets for BTC in the world.
- There is a limited amount of BTC in existence. There will be redemptions and arbitrage between the ETFs and regular exchanges, but more and more trading activity will occur within these Bitcoin ETFs, as the ETFs dwarf old-school exchanges.
- As a result, money stays "in the system". In fact, there will be likely net inflows, as global institutions invest in BTC via US ETFs, meaning they first need to sell their own currencies for USD—just as oil is traded in dollars. Fees are collected by American corporations.
- The US becomes the center of institutional bitcoin trading, which promises to become a huge market. It reduces capital outflows and helps to keep money in the banking system (which is really important right now), thereby easing the Fed's considerable headache.
- The SEC, meanwhile, can claim it's not anti-crypto: After all, it has just given bitcoin the biggest boost the industry has ever seen.
TL;DR squashing crypto (i.e. alts) by enforcement while giving financial institutions a shot at cornering the global BTC market benefits the US government, Fed, institutions, and even the SEC.
Put like that, it's barely even a conspiracy theory. It's just common sense: If you can't beat them, join them.
Got a better explanation, or a more entertaining conspiracy theory? Let us know!
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