Blackrock iShares files for Spot BTC ETF.

He's plagiarised you JA! haha

 

Blackrock is 570+ ETF application approval versus 1 rejection

Blackrock is g0vernment approved or is it that g0vernment is approved by Blackrock?





This is the business of Wall Street. Prime brokers. Lend out the assets, to wall street traders to short in the markets, get paid the yields, keep the yields for themselves

BlockFi, Celsius, Voyager, DCG, Gemini Earn and many others, all blew up massively... but at least they were sharing the yields/rewards to the asset owners

You think Blackr0ck will share the yields? They also have a bridge for sale

 

This is the wonderful thing about crypto. It still works by that old-school rulebook of letting dumb CEOs bankrupt their organizations with no bailouts or toxic moral-hazard.

 

The sentence from @onrambitcoin is very concerning about how Blackrock will be a massive creator of paper bitcoin. Imagine if one day paper bitcoin exceeds 21 millions coins.. and hence everyone will know there is something wrong. Hopefully enough people will get wrecked to understand what paper bitcoin is, but I fear it will take much too long for this lesson to be learned.

 

Suppose they lend out all the assets. At most they'd be creating extra paper bitcoin that equals the size of the fund, right? But they'd still need to hold actual bitcoin to back all the paper bitcoin, is that correct? So, if the ETF held 10,000 bitcoin, they would issue ETF paper shares that comprised an equivalent $ value to the 10,000 bitcoin and also lend out the 10,000 real bitcoin. Basically doubling the supply of bitcoin from 10,000 to 20,000 (of which 10,000 are paper). Is this the right way to look at it?

 

It won't be that bad

Rehypothecation

BlockFi, Celsius, Voyager and the biggest player was Genesis (DCG), they all blew up because of duration mismatch, the depositors of the bitcoins wanted to withdraw to their local wallets

Blackrock won't have this problem since they are selling paper bitcoin IOU's to their ETF buyers and only the chosen blessed ones are able to redeem the bitcoins per the Onramp thread

So, they'll lend them out to traders that will pay them yields

But Blackrock will be limited to 1-1 rehypothication same as anyone else who created paper bitcoins. At the end of the day, FTX-Alameda stole 80,000 bitcoins and a simple run on them brought them down within a weekend

If Blackrock ETF ends up buying 1M bitcoins, that's still 1M bitcoins out of the supply, albeit lent out in some capacity for yields

So, think of Blackrock as another GBTC that was audited and does have 640K bitcoins in a Coinbase custody wallet

Blackrock will not be stupid enough to fraudulently say they have 1M bitcoins and cannot show the wallet addresses and get audited

This is not the same as GLD or other paper gold, where JPM says they have 1 trillion ounces in a fort knox warehouse, opens the door to show (bribed) auditors but are not allowed to touch them because of security reasons

Auditing 1 trillion ounces of gold is impossible, but auditing 1 million bitcoins in a wallet takes mere minutes, well let's say a few hours or even days so professionals get paid whatever fiat fees they want to charge

On a related subject... Fidelity is interested in buying GBTC so they can settle the lawsuit and be blessed for an ETF, instant 640K bitcoins under their ETF belt beating Blackrock

The game is on. Giddyup!!!

Bitcoiners can't really stop Blackrock or Fidelity or nation states like Russia and Iran to buy bitcoin

They'll just have to buy those bitcoins from the weak hands because me and a bunch other bitcoiners are not selling our btc's to them

 

It might work something like this.

1. Blackrock has 2,200 Bitcoins.
2. Blackrock lends 90% of them or 1,980 Bitcoins to Grayrock. The resulting supply is now 2,200 + 1,980 == 4,180 Bitcoins.
3. Grayrock lends 90% of their 1,980 Bitcoins or 1,782 Bitcoins to Palerock. The resulting supply is now 4,180 + 1,782 == 5,962.0 Bitcoins.
4. Palerock lends 90% of their 1,782 Bitcoins or 1,603.80 Bitcoins to Whiterock. The resulting supply is now 5,962.0 + 1,603.80 == 7,565.80 Bitcoins.
5. etc.

Here is some code to see what could happen if this goes on for awhile.

Code:

perl -e 'use warnings; use strict; my $base = 2200; my $reserveRequirement = 0.10;
my $originalSupply = $base;
my $currentSupply = $base;
for (my $i = 0; $i < 1000; ++$i)
{
    $base *= (1 - $reserveRequirement);
    $currentSupply += $base;
}
my $createdOutOfThinAir = $currentSupply - $originalSupply;
print "originalSupply $originalSupply currentSupply $currentSupply createdOutOfThinAir $createdOutOfThinAir\n";
'

The output is
originalSupply 2200 currentSupply 22000 createdOutOfThinAir 19800

 

This is the part that I wonder about. Yes, its easy to verify that they own 100k bitcoins. But the thing is that nobody will know how much they say they lent out. How will we know that it doesn't turn into fractional reserve banking where banks can write loans for 9x of their deposits? The only thing to bring them down, as with the banks, would be depositors fleeing, so in this case, people selling the ETFs shares and hence Blackrock having to dump bitcoin. But this probably will not happen, so it would be quite difficult to catch.

 

If the SEC gets its way and they are declared securities this will be pretty much impossible. Securities lending involves large security deposits. They also seem to be talking a lot about custody and common clearing. Early days to speculate on the final rules.

 

I think you have some things mixed up with the fractional banking system. Not quite like that. ETJ's post is more in-line with securities lending

Let's examine the players

Who are the buyers of Blackrock paper bitcoins? The ETF buyers

If Blackrock ETF sold the equivalent of 1M bitcoins, they are bound by GAAP and all kinds of wall street audit requirements, and auditors will go to their custodian Coinbase and verify the 1M bitcoins

Auditors say these 900K bitcoins you lent out, show us the collateral they provided, commercial papers, treasuries, stacks of $100 newly printed bills

Who are the borrowers? Wall Street traders, Sequoia and the likes

What do they do with the bitcoins? They make jewelry stuff, put diamonds, emeralds and wear around their necks...

Just kidding, they use them for trading the markets, risk free arbitrage opportunities on global exchanges, short here, long here, or if they can do some of those contango or backwardation, sell the bitcoins and go long the futures, lock in some APR's via short term futures settlements

So how does it affect Bitcoin's scarcity? probably not much, depends on global liquidity and market supply and demand

The buyers of the bitcoins that the borrowers/traders sold, what do they do with the bitcoins? Are they short term, medium term, or long term bitcoin investors?

When everything is settled in the markets, depends on the supply and demand of bitcoins

But it's not like fractional banking, where if you deposit $1K in the bank, they can lend out $3K creating new money, new $, fiat ponzi at its finest

Only the Bitcoin miners can create new bitcoins and in limited and diminishing amount