Bitcoin Correction: Trump’s Influence and BlackRock’s Inaction?

After surging past $70,000 in early June, Bitcoin has experienced a sharp correction, now struggling to hold around the $65,000 mark.

Many anticipated that the recent rally would break through $73,000 and head towards $85,000, given the strong trading volume and technical indicators suggesting a critical breakout. However, Bitcoin fell back to $65,000 instead of continuing its upward trajectory. Despite favorable CPI news and the ongoing rise of tech stocks, Bitcoin’s downtrend has dragged many altcoins down with it, with some dropping as much as 50% from their peaks—an unusual occurrence even in a bull market.

Throughout this year, Bitcoin has shown bullish behavior, surpassing $70,000 multiple times, while altcoins have lagged behind. Their gains haven’t matched Bitcoin’s, and their losses have been exponentially greater.

This situation is reminiscent of the US stock market versus the Chinese stock market, where only a few stocks hit new highs while the majority are declining or reaching new lows.

So, what’s driving this recent downturn? Some speculate that BlackRock’s influence is a significant factor.

In recent days, some of the selling pressure has come from miners. They had hoarded a lot of coins before the halving, hoping to sell at higher prices afterward. But as the halving passed a month ago and the market didn’t meet expectations, combined with concerns over the Federal Reserve’s potential rate cuts, miners decided to sell more coins now to secure cash in case of a further drop. The increased mining difficulty and halved rewards are also forcing smaller miners to sell their coins to survive.

Additionally, a notable influencer mentioned on social media that despite consistent net inflows into Bitcoin ETFs, prices have been plummeting. A closer look at the top ETF holders reveals many are hedge funds. These funds are engaging in arbitrage by simultaneously buying Bitcoin ETFs and shorting Bitcoin futures on the CME, exploiting the price differences. This strategy, known as carry trade in the forex market, allows them to earn interest rate differentials. If the Bitcoin price remains unchanged, they can earn significant returns annually. However, if the price moves against them, they must cover their short positions and sell off their holdings.

Meanwhile, big players, or “whales,” are increasing their Bitcoin positions. Retail investors, on the other hand, are exiting the market. This shift has been ongoing since late last year, with institutional investors entering the market and retail investors coming in late at higher prices, especially in altcoins. This recent market adjustment has hit retail investors hard.

BlackRock, a major player known for its substantial influence in capital markets, has also been criticized for its opaque practices in the crypto space. They reportedly buy Bitcoin on OTC markets and store it in Coinbase, but don’t disclose specific Bitcoin addresses to their clients. This lack of transparency has always been a point of contention for crypto enthusiasts who value decentralization and openness.

BlackRock’s involvement in the market isn’t just for transaction fees but for the lucrative trading and market-making opportunities. Their substantial cash reserves and Bitcoin holdings mean they can significantly influence Bitcoin prices. Any concerns about market manipulation should be directed to the SEC, but it’s well understood that the SEC is unlikely to challenge BlackRock.

Recently, BlackRock’s assertion to apply for an Ethereum ETF regardless of its classification by the SEC shows their influence. The SEC has indefinitely shelved the issue of whether ETFs are securities, effectively backing down. Larry Fink, BlackRock’s CEO, is pushing the token economy using Ethereum’s technology. SEC Chairman Gary Gensler, recognizing BlackRock’s influence, is unlikely to obstruct their path, especially given the high stakes and potential backlash.

With BlackRock openly pursuing both Bitcoin and Ethereum ETFs, long-term prospects for these cryptocurrencies seem solid. Consider the rapid inflow of funds into Bitcoin ETFs—$33.6 billion in just over 100 days, compared to gold ETFs taking five years to reach $15 billion. The trend is clear.

Thus, the best strategy for retail investors might be to consistently invest in Bitcoin over the long term, without being swayed by short-term market fluctuations. Once purchased, it might be best to set it aside and avoid constant market watching to prevent stress over potential drops.