Bloomberg senior ETF analyst Eric Balchunas recently refuted allegations against Coinbase regarding the exchange not using BlackRock’s funds to buy actual Bitcoins. The rumors surfaced on social media, claiming that Coinbase was issuing letters of debt instead of backing IBIT ETF with Bitcoin and manipulating Bitcoin’s price. Balchunas dismissed these claims as absurd, emphasizing that such actions would violate regulations. Coinbase CEO Brian Armstrong also addressed the allegations, clarifying that all mints and burns related to the ETFs in the firm’s custody are ultimately settled on-chain. He highlighted that institutional clients have off-chain options before trades are settled on-chain.
Balchunas shared two reasons for the theory surfacing, including Bitcoin investors looking for a reason behind the selling pressure that has kept BTC in a downtrend since March. He emphasized that ETFs have actually helped prevent Bitcoin’s value from declining significantly. Additionally, there is common skepticism among Bitcoin investors towards governments and institutions. Balchunas compared this skepticism to gold ETFs facing similar speculation in the past, with some calling them “paper gold.” He stated, “This is like deja vu all over again.”
The controversy extended to Coinbase’s new synthetic Bitcoin product, cbBTC, as its market cap quickly surpassed $100 million upon launch, drawing scrutiny from Tron founder Justin Sun and other critics in the community. Sun alleged that cbBTC lacks proof of reserves and that the US government could freeze users’ balances. Critics labeled cbBTC as a “paper” version of Bitcoin, expressing concerns about centralization and reliance on a custodian to store the BTC backing Coinbase’s product. Armstrong responded by acknowledging the need for users to trust a centralized custodian for storing the BTC.
In conclusion, the allegations against Coinbase regarding its use of BlackRock’s funds to buy actual Bitcoins have been refuted by Bloomberg senior ETF analyst Eric Balchunas and Coinbase CEO Brian Armstrong. The controversy highlights some of the challenges and skepticism surrounding ETFs, institutional involvement in Bitcoin, and centralized custodianship of synthetic Bitcoin products like cbBTC. It is essential for investors to stay informed about these developments in the cryptocurrency space and carefully consider the risks involved in trading and holding digital assets.
