This is an opinion piece by Phil Harvey, CEO of cryptocurrency mining consultancy Sabre56.
Kicking off the first round of unequivocally positive news for the Bitcoin space since the collapse of FTX, BlackRock recently decided to deposit a bitcoin exchange-traded fund (ETF) in cash. In a few days, two additional giant fund managers have joined BlackRock while Invesco reactivated its application for a spot BTC ETF and ETF specialist WisdomTree submitted its third application for a BTC ETF to the United States Securities And Exchange Commission (SEC).
As of this writing, no one can say whether the proposed vehicles will be approved by the SEC, which recently made headlines for its brutal pursuit of the biggest crypto exchanges in the world. Coinbase And Binance. We will find out soon enough.
What is more relevant at this point is an examination of the underlying trend: institutional money is slowly making its way into the bitcoin economy. In bitcoin trading, high profile investor engagements to date have been shaky and driven by the boom and bust cycle typical of nascent industries – and certainly a defining feature of bitcoin economics to date. now.
BlackRock’s potential BTC ETF spot could be a real bridge to mass adoption. Some voices have said that it offers the best chance of approval so far, not only because of the prestige of the candidate, but also thanks to a proposed surveillance sharing agreement that seems to be the key in the eyes of the SEC. But regardless of the fate of this particular proposition, an examination of the Bitcoin infrastructure under construction today provides an unambiguously bullish picture of institutional money betting on the industry.
For example, one of the most active and successful venture capital funds in the world, Andreesen Horowitz (a16Z), has doubled down and announced its very first international office, which will be opened in Londonto largely focus on the development of the crypto-economy.
However, nowhere is the search for growth opportunities by institutional investors more pronounced than in Bitcoin’s fundamental infrastructure: mining. Mining industry champions are signing deals and building at a breakneck pace, as their competition grows fiercer and the network hash rate continues to hit all-time highs.
Bet beyond Bitcoin
Being less shiny and exciting than the asset trading counterpart it underpins, investment reporting in the mining space can be muted. However, in my experience, large investors, large utilities, and even government entities in the United States and around the world intelligently assess opportunities and employ considerable financial resources to shape the market. And it’s for good reason: the data centers that house Bitcoin miners are equipped to do a range of high-performance computing in the future and the value proposition of this in the advent of AI is clear. like the day.
BlackRock’s move is not just a bet on Bitcoin, but on the world’s most secure and energy-efficient computer network as a means to produce consensus and certify truth in the 21st century, regardless of intentions of the asset manager. As such, refraining from any predictions as to the outcome of the request, it is fair to wonder what a hypothetical bitcoin ETF would mean for the mining industry.
First, it would mean that every institutional fund manager with such an ETF would be a sort of custodian. They should build their own custodian infrastructure – an interesting test of existing industry standards and full-fledged ‘adoption’, which will come with growth.
Second, mass adoption due to improved accessibility – in conjunction with the upcoming halving event in 2024 – would be a strong indicator of a hype cycle with raging prices. While these bull runs, caused by hype and FOMO, are largely smoke and mirrors, they will funnel funds into the industry and benefit serious players who have worked through tough times to reap the rewards. .
Last but not least, institutional investors would benefit from maintaining, funding, and upgrading the existing blockchain infrastructure that verifies Bitcoin transactions and ensures network security. While it is already happening, including by domestic utilities and energy providers who benefit from miners’ shedding capabilities, a spot BTC ETF would, with high probability, increase industry investment and validate industry efforts. industry so far.
This is a guest post by Phil Harvey. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.