Once the pride of the cypherpunks, Bitcoin (BTC) is now neatly tucked away within the realm of traditional finance. To the point of being swallowed up? That’s the current trend, according to several analysts.
Is Traditional Finance Devouring 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 financial sector, helping to send its price soaring. But could this new trend come at a cost?
According to a Bloomberg analysis, BlackRock and other major players are luring Bitcoin “whales” to Wall Street. This is due in part to a regulatory change.
Since last July, Bitcoin holders have been able to transfer their BTC directly to fund managers in exchange for shares. This was not the case before.
This has several advantages: it does not trigger taxation, since no exchange of cash has taken place. And it allows whales to use ETFs in other transactions (loans, collateral, etc.). In other words, whales are exploring new uses for their Bitcoin, 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 completed. This means $3 billion worth of BTC no longer exists in whales’ wallets but has been funneled to Wall Street.
And this isn’t limited to BlackRock. Other players, including Galaxy, have confirmed to Bloomberg that the trend is very much underway. Long-time BTC whales are thus reportedly making the switch to traditional finance:
Some investors are making a complete shift—going “100% TradFi”—because it’s the simplest way for them to hold their Bitcoin for the long term.
Bitcoin’s complete transformation over 15 years
This is, of course, a paradigm shift. Originally, Satoshi Nakamoto 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 sell-off we’re seeing in BTC, which has been slumping since its high at the beginning of the month. According to Glassnode, long-term Bitcoin holders are indeed continuing to sell, with a decrease of 28,000 BTC in supply since October 15.
Long-term holders continue to sell their BTC – For the benefit of ETFs?
The consequences of this trend could be varied: it brings more liquidity and stability to Bitcoin, but also increased dependence on monetary policies and regulations. Furthermore, it could also lead to a concentration of power in the hands of a few asset managers.
This morning, Bitcoin is trading at $108,000. This is a significant drop from its record high on October 6 (-14%). Will it manage to rebound before the end of the year, as some hope? That will depend in part on the whales.
