Bloomberg’s senior ETF analyst, Eric Balchunas, has recently debunked claims that Coinbase is not utilizing BlackRock’s funds to acquire actual Bitcoin (BTC). These allegations emerged on social media on September 16, suggesting that Coinbase was issuing debt letters instead of supporting the IBIT ETF with real Bitcoin. There were further accusations that the exchange was manipulating Bitcoin’s price using the asset manager’s funds.
Balchunas quickly dismissed these rumors as bizarre, stating:
“BlackRock isn’t playing around folks. They would flip out if $COIN was screwing around with their BTC.”
He emphasized that undertaking such actions would be a clear violation of regulations.
Response from Coinbase CEO
In light of the allegations, Coinbase CEO Brian Armstrong clarified that all mints and burns related to the ETFs managed by the firm are “ultimately settled on-chain.” He explained that institutional clients have the option to conduct trades over-the-counter (OTC) before the final settlement on-chain, with all funds being settled in Coinbase Prime vaults within one business day.
Armstrong remarked:
“This is what it looks like if you want a bunch of institutional money to flow into Bitcoin.”
However, he did not provide additional details, noting that the firm’s institutional clients prefer their addresses to remain confidential to avoid receiving random small transactions.
ETF’s Role in Market Dynamics
Balchunas offered insights into the reasons behind the rumors, highlighting two points:
- Bitcoin investors are searching for explanations for the selling pressure, which has kept BTC in a downward trend since March.
- There is a prevailing skepticism among Bitcoin investors regarding governments and institutions.
He stated:
“Instead of looking in [the] mirror, it must be the ETFs, but all they’ve done is saved your bags from sliding into oblivion multiple times.”
Balchunas compared the current situation to past skepticism faced by gold ETFs, where “gold bugs” referred to SPDR Gold Shares (GLD) as “paper gold.” He added:
“This is like deja vu all over again.”
Controversy Surrounding cbBTC
Coinbase’s newly launched synthetic Bitcoin product, cbBTC, has also come under scrutiny, especially after seeing its market cap exceed $100 million on the first day of trading. Tron founder Justin Sun criticized cbBTC, claiming it lacks proof of reserves and suggested that the U.S. government could freeze users’ balances at any time. Sun stated:
“Essentially, it’s just ‘trust me.’ Any U.S. government subpoena could seize all your BTC. There’s no better representation of central bank Bitcoin than this. It’s a dark day for BTC.”
Many community members echoed similar concerns, dubbing cbBTC a “paper” version of Bitcoin.
In response, Armstrong acknowledged that users must place their trust in a centralized custodian to manage the BTC backing Coinbase’s product.
