Some of the global financial industry’s largest market-makers might jump in to provide liquidity for BlackRock if the firm’s spot Bitcoin Exchange Traded Fund (ETF) application is approved by the US Securities and Exchange Commission (SEC), reported CoinDesk on Tuesday citing a personal familiar with the matter.
According to the source, Hudson River Trading, Jane Street and Virtu Financial have help talks with BlackRock regarding taking up a market-making role.
Dozens of other major asset managers quickly followed with their own applications, boosting risk appetite in the Bitcoin market at the time amid optimism about renewed institutional interest in the world’s largest cryptocurrency by market capitalization.
The fact that major market-makers are looking to step into the Bitcoin market could mark an important shift for trading conditions.
Crypto exchange data firm Kaiko has reported deteriorating liquidity conditions for Bitcoin consistently over the past year, with Bloomberg reporting back in May that firms like Jane Street and Jump crypto had curtailed market-making activities amid regulatory uncertainty relating to major US crypto exchanges.
Poor liquidity conditions mean that smaller sell/buy orders are able to have a larger impact on the BTC price, potentially leading to higher volatility.
Worsening liquidity is also a sign of an unhealthy market and often come as an asset is experiencing a major downturn, which up until late 2023 Bitcoin was.
Institutional Adoption Tailwinds Set to Offer Continued Support to Bitcoin (BTC) Price
The US institutional adoption narrative has been a major tailwind for Bitcoin since dozens of spot Bitcoin ETF applications from major Wall Street firms were filed in June, ensuring that short-term market dips have continually been bought into.
Indeed, Bitcoin recently pumped to fresh highs for the year in the mid-$30,000s after the SEC declined to appeal a legal defeat it sustained against digital asset firm Grayscale over their rejection of the firm’s application to turn their Bitcoin Trust (GBTC) into a spot ETF.
Why keep fighting Grayscale if you are about to approve dozens of spot Bitcoin ETF applications in the coming months, including Grayscales’, officials at the SEC are likely thinking.
Market participants thus remain highly confident that near-term approvals of spot Bitcoin ETFs in the US are highly likely, with JP Morgan recently predicting that dozens will gain approval as soon as January.
Indeed, it looks as though the Bitcoin market is on the cusp of entering a new era of institutional participation with major asset managers’ likely to see their spot Bitcoin ETFs go live soon, and a wave of market-makers likely to jump in to participate.
At the very least, expect Bitcoin price dips to be aggressively bought into, with price risks remaining firmly tilted to the upside for now.
Crypto financial services platform Matrixport recently forecast that Bitcoin would hit a minimum of $42,000 on spot ETF approvals in the US.