The world’s largest fund manager, BlackRock, has expressed interest in Bitcoin in a deal with exchange Coinbase. Apparently, BlackRock will be offering Bitcoin to its institutional clients through Coinbase Prime. The news has come to get Coinbase out of a rough patch. In fact, the stock soared on the good news. What bad streak? Well, I am referring to the announcements of layoffs, the problems with the SEC and the withdrawal of Cathie Wood in the middle of a bearish cycle for Bitcoin and the other cryptocurrencies. The BlackRock thing, combined with the Meta announcement, represent a reversal of fortune for the exchange.
The news has indeed done wonders for Coinbase’s share price over the past few days. Interestingly, this same news did not have a big effect on the price of Bitcoin. Thursday, the day of the news, was a red day for Bitcoin. Friday, the day after the news, was a green day. But we had a fairly modest candle with little volume. It could not be said that it was a particularly special day. Generally speaking, the market ignored the announcement. He was indifferent. Bitcoiners seem to be more aware of the Federal Reserve, inflation and the labor market than deals between exchanges and financial giants.
Right now, toxic maximalism is dominating the narrative on cryptotwitter. The old guard libertarians, anarcho-capitalists and conservatives are on a radicalization campaign. The slogan “Not your keys, not your coins” is the flag. This is, of course, a false equivalence. Actually, they are different things. They are apples and oranges. Because custody and ownership are different concepts. Self-custody is certainly a viable option for many. But it is not an option for everyone. The user is free to choose the mechanism that best suits their needs. Tolerance and diversity of choice are the foundations of a free market. That is the problem of toxic maximalism. Maximalism is intolerant and totalitarian. In this sense, it is the antithesis of freedom.
Now, suppose we trust a third party with custody of our BTC. The firm then files for bankruptcy. Will all custodians file for bankruptcy? Is the solution to opt for self-custody as the only option? We would return to the slogan “Not your keys, not your coins”. Now suppose that we have a property and we decide to put it up for rent to receive an income. Not your keys, not your property? Suppose we grant a credit. Your money is in distant hands. However, that debt is a liability for the debtor and an asset for the creditor. I mean, our money, deep down, is someone else’s promise. And the possibility of a default is real. Does this imply that every promise is a fraud from the start? Is our only asset the money we have in our wallet?
The capitalist system is based on relationships of this kind. In practice, it is clear that use and custody are not synonymous with ownership. In fact, our property is valuable, to a great extent, because others can work it. Now suppose we are victims of fraud. Someone made us a false promise and we lost money as a result. We have two options. First, we can stop trusting third parties permanently. In other words, never do any more dealings with others and be the sole user and custodian of our property. Second, we can report the fraud to the proper authorities. And we can look for better partners in the future. Capitalism has chosen the latter.
Of course, all this belongs more to the field of political economy than to the field of investment. Certain. In fact, If we go by the noise on cryptotwitter, anyone can come to think that Bitcoin is more of a political party than a digital asset. The objective of the investor is to make money with his investments. That usually means putting politics aside in order to make the best financial decisions. Politics blinds you. And it creates a very counterproductive bias. Therefore, the investor must be pragmatic and objective.
What does the alliance between BlackRock and Coinbase mean for the price of Bitcoin? It means that more institutional capital will have access to Bitcoin. He means that he smartmoney will have more weight in this market. And that’s great for the price of Bitcoin. In other words, it means that we now have more reasons to be bullish in the long term. What is institutional money? It is about of organizations that use other people’s money to make investments. In other words, they are the managers of someone else’s property. They are intermediaries. And they are centralized bodies.
Markets normally tell us what users want. And users usually go for the best deal. Many people turn to exchanges, because exchanges offer products and services of interest to them. How representative is maximalism? They are self-proclaimed guardians of the faith, promoting the ideas of a minority political sector. Ultimately, they do not represent the entire community. And ideology is not very impractical on a large scale. Maximalists don’t have the numbers, nor the funds to take Bitcoin to the next level. On the other hand, BlackRock, the smartmoney and institutions in general are big words. As an investor, it is always smarter to bet with the big names on Wall Street.
BlackRock manages more than $10 trillion in assets. And it is surely the most influential financial institution in the world right now. I don’t think it’s too far fetched to assume that bitcoiners will end up choosing profit over idiosyncrasy. Sooner or later, institutional adoption will be applauded, because it does wonders for the price. And this whole topic of decentralization and self-custody in absolute terms will remain a fairly popular topic within a small circle on Twitter. However, user practices as a whole will reveal another truth to us. Why entrust our money to a third party? Well, because these people think their money is in better hands with BlackRock. The act of dividing labor is as old as civilization. Self-sufficiency is a choice. But it’s not the only option. There is a world out there, rich in options, and full of people doing business with each other. In short, it is very positive for the price that large institutions want to invest in Bitcoin. Welcome!
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
It may interest you:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.