Once the flagship of cypherpunks, Bitcoin (BTC) is now safely tucked away in the bosom of traditional finance. To the point of being swallowed up? That’s the current trend, according to several analysts.
Is traditional finance swallowing up Bitcoin?
The arrival of spot Bitcoin ETFs has been a minor revolution for the largest cryptocurrency: it has allowed it to reach a wider audience in the finance sector, helping to send its price skyrocketing. But does this new trend come at a price?
According to an analysis by Bloomberg, BlackRock and other major players are attracting Bitcoin whales to Wall Street. This is partly due to a regulatory change. Since last July, Bitcoin holders have been able to transfer their BTC directly to managers in exchange for shares. This was not the case until then.
This has several advantages: it does not generate taxation, as no exchange of money has taken place. And it allows whales to use ETFs in other transactions (loans, collateral, etc.). In other words, whales are moving towards new uses, rather than simply holding their BTC in wallets.
$3 billion converted at BlackRock alone
According to Robbie Mitchnick, BlackRock’s head of digital assets, more than $3 billion in conversions have been made. That’s $3 billion in BTC that no longer exists in whale wallets, but has been directed to Wall Street.
And this doesn’t just apply to BlackRock. Other players, including Galaxy, have confirmed to Bloomberg that the trend is indeed present. The historic BTC whales are therefore converting to traditional finance:
Some investors are making a complete switch to “100% TradFi” because it is the easiest way for them to hold their Bitcoin in the long term.
The complete transformation of Bitcoin in 15 years
This is, of course, a paradigm shift. Satoshi Nakamoto originally created Bitcoin to escape traditional finance and government control, motivated in part by the 2008 crisis. But history has come full circle: Bitcoin is now one of the most sought-after assets on Wall Street, through ETFs.
This trend could be contributing to the sales we are seeing in BTC, which has been down since its high at the beginning of the month. According to Glassnode, long-term Bitcoin holders continue to sell, with a decline of 28,000 BTC in supply since October 15.
The consequences of this trend can be varied: it brings more liquidity and stability to Bitcoin, but also increased dependence on monetary policies and regulations. Furthermore, it can also lead to a concentration of power in the hands of a few asset managers.
This morning, the price of Bitcoin stands at $108,000. This is a sharp drop from the record high on October 6 (-14%). Will it manage to recover before the end of the year, as some hope? That will depend in part on the whales.
