While the entire crypto universe awaits the approval of BlackRock’s Bitcoin Spot ETF by the SEC, the asset manager has just dropped a bombshell that calms the heat. BlackRock reveals that it has indirect exposure to stablecoins Tether and Circle USD and that this represents a significant risk factor for the performance of its Bitcoin Spot ETF. Explanations.
BlackRock reveals the impact of stablecoin risks on its Bitcoin Spot ETF
BlackRock warns that the performance of its iShares Bitcoin Spot ETF could be significantly affected by risks associated with the stablecoins to which it is indirectly exposed (Tether and Circle USD). Among other risks, it cites the potential instability or volatility of the price of stablecoins, possible manipulation practices, operational or regulatory challenges, etc.
BlackRock also indicates that Even though their value is supposed to be fixed relative to an asset, stablecoins sometimes experience large price fluctuations. However, she specifies, a large part of cryptos is affected by the fundamental liquidity of stablecoins, in particular USDT and USDC.
The company notes that a de-pegging or rush into USDT or USDC can cause high volatility in crypto markets. This volatility of stablecoins, BlackRock warns, can in turn affect the performance of Bitcoin, which would have a direct impact on the performance of its Bitcoin Spot ETF.
Historical events proving the instability of stablecoins
For the purposes of its remarks, BlackRock recalled the events of February 17, 2021, October 15, 2021 and March 10, 2023. On February 17 and October 15, 2021, the Tether company was accused of issuing its USDT without sufficient guarantees and to contribute to artificially increasing the demand and price of bitcoin. American justice then imposed penalties and restrictions on Tether, which affected the price of bitcoin.
On March 10, 2023, the Circle USD stablecoin, for its part, saw its parity with the dollar fall below 1 dollar for several days. This was after a revelation that Silicon Valley Bank, then in receivership by the Federal Deposit Insurance Corporation, was holding $3.3 billion of its reserves.
Knowing that stablecoins depend on the banking system and the American treasury, BlackRock deduces that these institutions could influence the functioning of these assets. If this were to happen, the value of other cryptos and the performance of the world’s leading asset manager’s Bitcoin Spot ETF would also be affected. In any case, the SEC has yet to approve any spot Bitcoin ETF applications.
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