NEW YORK - BlackRock (NYSE:BLK), the world's largest asset manager, has taken a significant step towards embracing cryptocurrencies by initiating paperwork for an Ether-tracking Exchange-Traded Fund (E.T.F.) last week, signaling increased optimism in the digital asset sector. The move comes as Bitcoin's price recently surged to $35,000, its highest point since the 2022 market downturn.
The cryptocurrency industry has been abuzz with activity following several key developments. In the last week of October 2023, Ether's value rose by 10% to approximately $2,100, leading some investors to speculate that the prolonged "crypto winter" might be coming to an end.
This renewed enthusiasm was further bolstered by BlackRock's recent filing for an E.T.F. that would track the price of XRP, issued by Ripple. This filing suggests a growing confidence among traditional financial institutions in the potential of cryptocurrencies.
The backdrop for these filings includes a series of interactions between the crypto industry and regulatory bodies. In August 2023, Grayscale Investments won a legal battle against the Securities and Exchange Commission (S.E.C.), which had been criticized for its "arbitrary and capricious" actions regarding cryptocurrency E.T.F. applications. This victory was seen as a positive sign for the industry, with hope that a Bitcoin E.T.F. might soon be tradable on conventional stock exchanges.
In contrast to Grayscale's win, the S.E.C.'s stance over the years has been cautious. From mid-2021 to August 2022, while it approved E.T.F.s betting on Bitcoin's future prices, it rejected applications for E.T.F.s directly linked to Bitcoin's current price. This distinction is crucial as it allows investors to gain exposure to Bitcoin without needing digital wallets, by owning shares in a fund containing the cryptocurrency.
Following Grayscale's legal challenge and subsequent win in June 2022 against the S.E.C.'s earlier decision, two offices within the S.E.C. have since started working with firms to create Bitcoin E.T.F.s. This collaboration indicates a more advanced stage in the approval process
Despite this progress and BlackRock's recent moves, not all financial analysts are optimistic. Last week, analysts labeled the recent surge in cryptocurrency prices as "overdone." They argued that the approval of cryptocurrency E.T.F.s would likely just redistribute existing capital rather than attract new investments into the space.
Moreover, Fidelity Investments is also waiting in the wings with a pending application for a Bitcoin fund.
The interest from major financial institutions like BlackRock and Fidelity in cryptocurrency-based E.T.F.s reflects a changing tide in investment strategies and underlines the growing importance of digital assets in mainstream finance. As regulatory clarity improves and traditional financial entities continue to enter the crypto space, market participants will closely watch for further developments that could shape the landscape of investment products tied to digital currencies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.