- Bitcoin investors are growing increasingly suspicious about the dealings between Coinbase, America’s leading crypto exchange, and BlackRock, the world’s largest asset manager.
- Despite the approval of new Bitcoin ETFs driving the price of BTC to record highs in March, investors believe it should be even higher considering the influx of capital.
- Concerns have arisen that Coinbase may not be purchasing the actual Bitcoin required by these funds, instead issuing what critics call “IOUs” or “paper Bitcoin.”
Uncovering the Truth Behind Coinbase and BlackRock: Are Bitcoin Transactions Above Board?
Bitcoin ETFs and Market Reactions
As new spot Bitcoin ETFs were approved in the U.S., the cryptocurrency market saw a significant surge, with Bitcoin prices hitting new all-time highs in March. This development led to billions of dollars flowing into the market, causing confusion among Bitcoin investors who expected higher price spikes. Coinbase, the custodian for many Bitcoin ETFs including those by BlackRock, has come under scrutiny. Critics allege that the exchange might not be buying the physical Bitcoin to back these ETFs, instead issuing “paper Bitcoin” or IOUs.
BlackRock’s ETF Amendment and Public Reaction
The rumors regarding Coinbase’s actions gained traction, culminating in Coinbase CEO Brian Armstrong addressing the issue on X, formerly known as Twitter. He reassured investors that all ETF transactions are settled on-chain. Shortly after, BlackRock amended its ETF registration with the SEC to require Coinbase to release Bitcoin within 12 hours of notice when customers buy shares of its Bitcoin ETF. This update was seen by some as validation of their concerns, although Bloomberg ETF analyst Eric Balchunas dismissed the speculation as unfounded and illegal under current regulations.
Examining the Skepticism and Trust Issues
Skeptical investors demand greater transparency from Coinbase and BlackRock, seeking on-chain receipts to verify transactions. The mistrust dates back to May when pseudonymous trader “Tyler Durden” suggested BlackRock could withdraw Bitcoin from Coinbase with off-chain transactions. The skepticism was further amplified by notable figures like crypto trader MartyParty, who questioned why Bitcoin prices were not soaring despite BlackRock’s purported massive purchases.
Industry Experts Debunking the Myths
Experts like Eric Balchunas have consistently refuted the conspiracy theories, emphasizing that it would be unlawful for ETF issuers or custodians not to hold the underlying assets. This situation is not akin to past controversies like FTX; rather, BlackRock is seen as a reputable entity with considerable legal oversight. BlackRock has indicated that it maintains transparency by running its own blockchain node and can display Bitcoin balances to clients upon request, although making such data public could expose them to security risks like dusting attacks.
Context and Perspective on Bitcoin ETF Growth
BlackRock’s IBIT, the largest and most successful Bitcoin ETF in the U.S., holds 357,732 BTC valued at approximately $22.6 billion. Bitcoin’s price has surged over 140% in the past year, driven by the approval of these ETFs, with current market data from CoinGecko corroborating this growth. While some investors remain unsatisfied with Bitcoin’s price performance, experts like Balchunas suggest that the significant increase should be viewed positively.
Conclusion
In summary, while skepticism and demands for transparency persist among Bitcoin investors, industry experts and companies involved maintain that the current ETF mechanisms are legitimate and compliant with legal standards. The rapid growth in Bitcoin’s price and the expanding ETF market provide optimism for the future, even as calls for greater transparency continue. For now, investors may need to rely on rigid regulatory frameworks and the assurances of established institutions like BlackRock and Coinbase.
