BlackRock and other bitcoin ETFs rob bitcoin of its room to grow

Bitcoin is over 15 years “old,” and more and more companies and brands now accept the cryptocurrency as a way of payment.

But for most people, paying with bitcoin is as familiar as paying with galactic credits.

The truth is bitcoin as it is now won’t be used to buy your coffee. But it might be funding a company that would change your life — which is why we need to give it some room to be used.

By design, bitcoin is scarce. This makes it a reliable store of value, and therefore, people want to be allowed to use it. And as bitcoin is used less for everyday transactions (your coffee, for example), it is becoming increasingly popular as a means of exchange in other ways; like strategic investments in startups by funds, VCs and angel investors. We know this because we’ve seen more startups look for providers to exchange bitcoin for fiat currency in order to run their operations (like paying salaries and office rent).

We have also seen an increase in large institutional investors purchasing bitcoin as an alternative investment, looking for ways to diversify their portfolios and seek returns that hedge against market volatility.

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Read more from our opinion section: Bitcoin’s 21 million limit is a boomer myth

And, of course, we’ve seen the popularity as a result of the recently approved BTC ETFs, with BlackRock making itself one of the largest purchasers of bitcoin ever. As of May 2024, BlackRock’s iShares Bitcoin Trust had accumulated more than 274,000 bitcoin (worth, at time of writing, around $16 billion).

For these reasons, bitcoin is clearly now seen as a viable investment opportunity for major players. And in turn, it is time to be concerned that big players may be monopolizing the market to the detriment of the companies, founders and investors that still prefer to use bitcoin as a means of exchange.

The vice grip organizations like BlackRock have on bitcoin (in order to fill their ETFs) is a threat to bitcoin’s adoption simply because they limit the circulating supply of bitcoin.

At the same time, the price increases that these institutions drive make bitcoin an even more interesting asset to invest with and hold. It’s bitcoin’s catch-22, and it’s causing real issues already.

As more companies hold bitcoin on their balance sheets, they need the ability to transact and exchange it in a more liquid ecosystem. The ETFs, on the other hand, are designed to not “let go” of their bitcoin. So what’s next?

The only answer with any teeth is regulation. Not to deregulate the bitcoin ETFs themselves, but support the regulatory approval of more financial products leveraging bitcoin’s value and making ETFs not the only game in town.

Approval of other financial products that leverage other digital assets (like the impending decision on the Ethereum ETF) could also relieve some ETF buying pressure. And the licensing and approval of more fiat to bitcoin payments and exchange rails (so the way to access bitcoin is not just through a brokerage), could also help get more bitcoin back on the market.

Within the Web3 ecosystem, more and more investors are using crypto assets to back promising startups. Some many great projects and initiatives are already funded with BTC or other stablecoins, and we should see more of them in the future.

But in order to make this happen, we need to make sure there is enough bitcoin circulating in the market. That requires more financial products with different buying models and different digital currency backing, as well as more access to mediums of exchange so that investors and companies funding their companies with bitcoin can still grow.

Best of all, the BlackRocks of the world should be on board with this plan — if their bitcoin ETFs were any indication, there’s only growing demand for digital currency investment products.

Marc Taverner is the CEO and co-founder of XEROF, a leading Swiss financial services provider specializing in cryptoassets. He has more than 30 years of experience in the technology industry and now pioneers the use of cryptoassets for liquidity and efficiency in financial services worldwide. Previously, Marc founded InComm Conferencing, a company focusing on detailed events ranging from large-port calls, operator-assisted conferences, webcasts, medical education events, investor relations calls, and onsite production. He successfully sold the company to join the C-suite of the leading European Bitcoin and blockchain firm, Bitfury. Marc then directed INATBA, one of the largest multi-stakeholder blockchain trade associations in Europe, backed by the European Commission and Abu Dhabi Global Market. During his tenure, he led the multi-stakeholder response to the EU cryptoasset regulation MiCA. Marc is also an angel investor and advisor to several web3 and crypto companies.

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