Being a staggering 93% up year-to-date, Bitcoin is having quite a year. Price action keeps rising through Q2, and silly us believed the crypto Spring would be coming to an end at the end of this quarter. That was until a certain asset manager decided to (Black)Rock the industry on June 15th. Until that point we thought the biggest news was that Bitcoin had finally been labelled a commodity.
The S.E.C. and Gary Gensler delivered that news on June 28th. A commodity means an item that is interchangeable on exchanges for the same item. For example, each Bitcoin is interchangeable for another Bitcoin and is of identical worth, just like how a sack of corn has equal worth to any other sack of corn.
Being called digital gold and having a low correlation with all other assets, particularly stocks, makes it useful for storing value and hedging against inflation.
However, the S.E.C. will try to prove that other cryptocurrencies cannot be certified as a commodity due to their utility. Some even offer the ability to stake their coin. Ethereum is one such blockchain, although many are calling it the future of smart payment along with other layer 2 chains such as Polygon/Matic, it will not thrive without regulatory approval.
With the Ripple Labs still fighting the S.E.C. over the past two years about their cXRP token being a commodity, and with the decision coming in the very near future (most assuming an XRP victory) we are likely to find out very soon whether the courts believe that cryptocurrencies with utility are either commodities or securities.
If they lose, one potential outcome is that the S.E.C. would use this precedent to classify cryptocurrencies with utility as securities. This would create a complex regulatory landscape in which different cryptocurrencies are subject to different rules and regulations. These regulations would carry very strict investor protection requirements for all platforms and issuers, creating an environment where the mainstream would not be able to invest in crypto easily on Wall Street, apart from Bitcoin. When the crypto bulls are championing blockchain technology as the future of smart payments and digital security, this would be a huge stumbling block for mass adoption in the near future. Although, in the long run, Blockchain Technology will be the digital security many are championing now, it just may take another presidential cycle (new S.E.C. chair) before its accepted.
If XRP win, this would open the floodgates for all cryptocurrencies to become commodities, meaning the S.E.C. will have no regulatory authority on tokens being offered on exchanges, although Wall Street would still have to apply for licences to trade them. If that happens then this $1 trillion digital financial sector could 10x 20x or even 50x in the next 5 to 10 years. If this brings blockchain technology to the masses now. Just like the Internet or handheld devices, mass adoption will create an explosion in value.
However, for cryptocurrencies and blockchain tech as an industry to thrive, it will need policing. Regulations will need to be put on the industry and the companies and exchanges leading this revolution. In what form this takes and how it will be possible, no one really knows at this point. Although most governments now have their own specific cryptocurrency laws and will have whole departments regulating this sector in the future. All major players in the industry agree regulations are in the best interest of consumers, exchanges and money managers.
Speaking of money managers, BlackRock applied for a Bitcoin spot ETF in mid-June, followed by 23 other applications or reapplications for Bitcoin spot ETFs from many other Wall Street firms. BlackRock currently boasts a significant approval ratio with the S.E.C. of 575:1. This means it's very likely that Larry Fink will get his ETF, allowing your average retail & institutional trader the ability to purchase Bitcoin easily and without using decentralised exchanges. This will offer a much higher rate of security for anyone who wishes to invest in Bitcoin but doesn't trust the decentralised way to purchase, up until 2023. It may take the S.E.C. six months to a year to approve BlackRock’s application, it may take two weeks, no one knows.
What we do know is that in June 2023 Citadel Securities, Fidelity Digital Assets, and Charles Schwab have launched a digital assets trading exchange called EDX. That means along with Deutsche bank and Santander, five of Wall Street’s big names are already heavily invested in cryptos future. You can now essentially buy Bitcoin from Wall Street banks.
If we look at the charts, they predict that in the crypto Summer & Autumn, meaning June 2023 to June 2025, we are expecting to see highs of between 85,000 and 150,000 per Bitcoin. Now with this quite incredible news that Wall Street will be offering Bitcoin, we could see a run to unprecedented levels and obviously all-time highs. Trading cryptocurrency is speculation, it's not investing, so I would speculate that it's completely plausible to see Bitcoin break the $200,000 mark before the next crypto winter in 2026.
Although, following on from BlackRock and other financial institution applications, we could be twiddling our thumbs for a little while yet. Bitcoin is using the $30,000 mark as healthy support; however, we could easily drop down to the next level of $27,000 before seeing any news about these applications.
My chart currently looks like this for BTC. If we get a higher low on the support, somewhere near the green box, and then break the $31,000 resistance, we may be looking at a run up towards $40,000.
However, don't under estimate the power of BlackRock. If they need to accumulate billions worth of Bitcoin to for fill their Spot ETF, they aren't going to want to pay between $30k - $40k each. If they can force the price action to break the trend line of support, by selling off everything they have or using their 'friends' to do the same. They could cause a break down in trust and we could see the price falling down to the next few support lines of $25k or even down towards $18k. A perfect place for BlackRock to accumulate.
XRP, the S.E.C. and BlackRock could all decide how and when the next bull run starts. Next quarter will be fascinating to watch.
Disclaimer - None of what is written on this website is financial advice and only descriptions of how the author trades and for entertainment purposes.
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