What an incredible day for bitcoin and crypto! Bitcoin broke $60k and kept going as high as $64k. It did seem like bitcoin's price has been moving too fast. But it has been two years since we saw these prices, and definitely about time bitcoin made new high. I have stated many times before, I may have doubts about how high bitcoin can go, but I never doubted bitcoin's ability to go back to its previous all time highs. We are not there yet, but is close enough to conclude new all time high not too far away. I didn't expect it would happened before the halving event. Another fact about bitcoin is it make big moves when nobody is expecting to do so. Amazing! This could all be short lived excitement, and its price can drop significantly in no time. That too would be a welcome scenario, as it would provide another opportunity to accumulate more.
If we rely on simple supply and demand mechanisms, it is clear that bitcoin spot ETF have played a role in bitcoin's recent price actions. As everybody believes, and I can't argue against, institutions are demonstrating high interest in bitcoin as an investment instrument. It hasn't been too long since the launch of ETFs and we are still in the begging of the year. It is not easy to imagine how the rest of the year will look like. But one thing is clear, big money is here to stay. I am not fond of big money managers and funds, and their involvement in bitcoin. But that is the reality. It is quite possible in near future bitcoin may not be affordable for ordinary people to be involved in, if those with access to endless money continue accumulating. But also bitcoin has always been an open network, and anybody is welcome participate. Even big money funds, institutions, and governments. At the very least they will be exposed to a transparent money system, and perhaps can learn a thing or two about transparency and its benefits for all. While they may be used to making money in not so transparent, and sometimes not so legal ways, they may come to understanding that there is a way to make money while being transparent as well. Perhaps much better way.
The biggest winner with the approval of bitcoin spot ETFs has been Coinbase. I am not fond of Coinbase either. I don't believe Coinbase is an honest company and definitely is not a pioneer in decentralization. I do congratulate Coinbase with good business strategy that put them in the center of bitcoin ETFs, entering into partnership by offering bitcoin custody services. Coinbase definitely was successful in building a business around the blockchain technologies and building bitcoin custody services. This side of their business is impressive so far. Much better than their business where they make money by overcharging fees for trades made by retail investors. Bitcoin custody is a huge responsibility. Maybe this is not such a good idea for many ETFs to use only Coinbase, but also diversify. However, there aren't many contenders. Maybe there are few, but not many who could convince ETFs and SEC. Not yet. I am sure this space will continue to grow and competition will grow.
Among the ones who would like a piece of the pie in bitcoin custody services are the big banks. A couple of weeks ago group of entities representing banks have asked SEC in a letter to let banks into the bitcoin game. The letter was sent by a trade group coalition made of the Bank Policy Institute, American Bankers Association, Financial Services Forum, Securities Industry and Financial Markets Association. It is evident that they have been following the drama regarding the approval of spot bitcoin ETFs and the latest developments. So far ETFs have been a success and there is decent interest in them. But unfortunately banks can't participate in providing products and services as asset custodians.
*** The Commission recently approved 11 Spot Bitcoin ETPs, allowing investors access to this asset class through a regulated product. However, notably absent from those approved products are banking organizations serving as the asset custodians, a role they regularly play for most other ETPs.***source
Almost sounds like they are complaining that they missed on potential money making opportunities. I am not against the idea. I have actually always thought that sooner or later banks would start thinking about getting involved in crypto technologies as way of expanding their business, expertise, and transitioning into the future. Showing opposition to bitcoin or crypto wouldn't help banks in the future. Because bitcoin and crypto are technologies, and have shown better systems for finance and money, there is no going back. It doesn't mean banks should abandon their traditional business activities, or reject fiat, no. It just means to be knowledgable of the advancements in technology and money. Banks are in the business of money and finance. Keeping up with latest innovations and advancement in money and finance would just be a responsible way of conducting business. However, the problem over the year with banks and crypto has been their inability to understand that money can also be innovated with advancement of technologies.
Unfortunately by their desire to become custodians for bitcoin and crypto assets, I don't think they really are demonstrating interest in the technology or new money, but rather they seem to feel like they are missing out on potential profit opportunities. But it is their own fault. They haven't dedicated enough research, development, and resources to understand the technology and build infrastructure to become trustworthy custodians. I do agree they should be involved in the space. But simply showing desire, and not actually putting in the work and effort may not be enough. I know banks are used to be bailed out when they fail keeping fiat safe and secure. Who will bail them out when they lose bitcoins under their custody? It is not like they have shown to have the greatest cyber security systems in place either. We have seen so many instances of banks being hacked, information stole, money stolen, etc. We have seen banks failing just last year when Fed and Treasury stepped offering endless money to bail them out.
Moreover, they have been the most honest organizations either. There have been many situations when they played against their customers and clients, violated rules, regulations, and laws just to make a little bit more money. In January there was a report when Morgan Stanley was found making profits by using confidential information, for which they were fined a quarter billion dollars. They agreed to pay this much as a fine when they were caught by SEC. I wonder how much profits they made with having market advantage. I wonder about the cases when they just got a way with dishonest actions in the market and making money by playing against their own clients.
Banks sure don't have the greatest reputation. I am not in favor of Coinbase either. As I already mentioned, I am not for ETFs, banks, or Coinbase. They are just business entities. They can do much better. I do encourage them to be involved in bitcoin and crypto, even it means expanding their business and gaining more influence in the space. I believe there are benefits for these entities not only as way of making money and staying relevant in the future of money, but also embracing transparency and playing fair game in free marketplace.
It will be interesting to see how SEC will respond or react to the letter. I don't rule out the possibility that banks will eventually become custodians for bitcoin and other crypto assets. Such transition may just be a better approach, as this will create an opportunity for banks to learn the tech and develop beneficial solutions, and perhaps even create services for ordinary people. That said, bitcoin and crypto's biggest innovation is there is no longer a need for middleman. Everybody can be their own bank. People can be in control of their own property without trusting other companies or banks. It will take time for self custody to become a norm.