What happened
Several cryptocurrencies and crypto stocks rose today after BlackRock (BLK 0.69%), the largest asset manager in the world, filed to launch a spot Bitcoin exchange-traded fund (ETF).
Since late afternoon yesterday, the price of Bitcoin traded 4.5% higher as of 3:42 p.m. ET today. The price of the world's second-largest cryptocurrency, Ethereum, traded 3.9% higher, while shares of the Bitcoin miner Hut 8 Mining (HUT) were up 14.5%.
So what
Bitcoin and other cryptocurrencies have struggled this week, dipping after the Federal Reserve indicated Wednesday that it thinks it will need to raise interest rates two more times this year.
Image source: Getty Images.
Riskier assets like Bitcoin typically don't perform well in a rising-rate environment because investors can get higher yields in safer assets. Cryptocurrencies have rallied this year on the belief that the Fed would soon be done with its aggressive rate-hiking.
Today, though, investors seemed to overlook these concerns as BlackRock submitted a filing to the Securities and Exchange Commission (SEC) to launch a Bitcoin ETF, which would be the first spot crypto ETF if approved.
Despite the plan's rejections in the past, some experts believe the proposal has a chance because BlackRock wants to enter a "surveillance-sharing agreement," meaning it would share data about trading activity and their customers, in an effort to prevent market manipulation.
"The SEC is very concerned with market manipulation related to Bitcoin prices, and has cited this in almost, if not all, previous rejections," Graeme Moore, head of tokenization at the Polymesh blockchain, told the website CoinDesk in an email.
The launch of a Bitcoin ETF could certainly help increase exposure to the token and drive up demand because it makes it easier for consumers to purchase, and crypto exchanges have also come under regulatory scrutiny as of late.
"The Shares have been designed to remove the obstacles represented by the complexities and operational burdens involved in a direct investment in bitcoin," BlackRock wrote in its application.
Now what
The potential for BlackRock to launch a Bitcoin ETF would be a continuation of the world's largest cryptocurrency gaining adoption in the mainstream financial system. Given BlackRock's reach, it could certainly increase exposure.
Still, the ETF proposal is far from a guarantee because the SEC has been very restrictive lately, recently suing Binance, the world's largest crypto exchange, and then Coinbase, as it looks to crack down on the industry.
The biggest thing I'm still watching as it relates to Bitcoin and other crypto stocks is the trajectory of interest rates. The Fed's indication that two more rate hikes are coming is certainly concerning, although the market doesn't seem to be buying the Fed's story. That's why job reports and consumer price reports are going to continue to be under a microscope over the next few months.
Ultimately, I still like Bitcoin and Ethereum and think they are going to make for good long-term investments. Crypto miners like Hut 8 will certainly benefit from Bitcoin's price appreciation because that's the asset they mine and hold, but crypto-mining stocks also tend to be more volatile, which is why I prefer to hold Bitcoin and Ethereum over the miners.
