One of the world’s largest asset managers momentarily delighted Bitcoiners today when it released a three-minute advertisement for bitcoin (BTC). Just 90 seconds into the video, however, delight turned to dismay when viewers spotted BlackRock’s finely printed supply disclaimer overlaid atop an otherwise glowing overview of the currency’s monetary credentials.

In the video, which was amplified by MicroStrategy Chairman Michael Saylor, BlackRock disclaimed, “There is no guarantee that bitcoin’s 21 million supply cap will not be changed.”

The disappointment at the sighting was palpable. 

Bitcoiners labeled it “misinformation,” “FUD,” “underhanded,” “laughable,” and a homophonic euphemism for retarded. The topic immediately trended on X.

Unbeknownst to most Bitcoiners, that disclaimer is also present in BlackRock’s prospectus for its spot BTC ETF. IBIT, the world’s largest spot BTC ETF, discloses various risk factors to investors in its Securities and Exchange Commission (SEC) filings. One of those risks is that the supply of BTC might increase beyond 21 million.

“Although many observers believe this is unlikely at present, there is no guarantee that the current 21 million supply cap for outstanding bitcoin, which is estimated to be reached by approximately the year 2140, will not be changed. If a hard fork changing the 21 million supply cap is widely adopted, the limit on the supply of bitcoin could be lifted, which could have an adverse impact on the value of bitcoin.”

-BlackRock

It’s a remote possibility– so remote as to be “laughable” or “FUD,” according to some — yet BlackRock’s lawyers consider it pertinent to an average investor’s decision-making.

How would bitcoin’s supply exceed 21 million?

The first possibility of a supply increase is a bug. There were a few hours in Bitcoin’s nascent history, for example, when the BTC supply briefly exploded over 184 billion. Satoshi Nakamoto corrected that August 2010 bug, known as the “value overflow incident,” within hours.

Patched up and operating smoothly ever since, it’s hard to take the threat of any new bugs seriously — especially with a $2 trillion prize attached to any successful hack.

Nevertheless, although BTC’s supply has continuously remained below 21 million for more than a decade with no foreseeable inflation bugs, it’s technically possible that someone might exploit an esoteric bug in the future and briefly alter its supply.

For this reason, BlackRock must legally disclaim the 21 million supply cap of BTC. In its IBIT prospectus, BlackRock notes on page 57, “the 21 million supply cap could be changed in a hard fork.”

Read more: Did Michael Saylor pay Bitcoin developers to stop working?

If not an inflation bug, then a voluntary fork

The second possibility for breaching BTC’s 21 million supply cap is a voluntary hard fork.

BTC’s maximum supply is rigid, with zero tail emissions. One researcher estimates it at 20,999,817.31308491 or less. However, there have been various proposals to increase the quantity of circulating BTC via a voluntary fork, such as Peter Todd’s tail emissions proposal.

Tail emissions are a type of proposal that would financially incentivize miners when Bitcoin’s mining reward drops to zero in the year 2140. Although most variants of tail emissions propose recirculating provably burned or unspendable BTC into mining rewards — thereby honoring the 21 million cap — some variants of tail emissions propose lifting the supply cap slightly in order to incentivize miners to secure the network beyond 2140 if transaction fees do not sufficiently subsidize miners’ electricity, machinery, and effort.

However, there are vanishingly few Bitcoiners who currently support any version of tail emissions that exceed BTC’s current supply cap.

There will never be more than 21 million bitcoin.*

Operators of nodes around the world enforce the current version of Bitcoin’s mining rules. Anyone who tries to validate a block or transaction that doesn’t comply with BTC’s 21 million supply cap will be rejected by the vast majority of these nodes.

With over 15 years of consistent enforcement of this supply cap, there are very few people who think BTC’s supply limit will ever change.

There are at least 67,000 nodes around the world that enforce BTC’s 21 million supply cap, and about 19,000 are online and reachable at any given moment. All of them stand guard to defend against any breach of this ceiling.

*From the perspective of a BlackRock lawyer, however, they would still prefer to note the risk — even if it is in fine print.

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November has marked the arrival of a new class of bitcoin investor. Just as the progressive introductions of custodial exchanges, publicly-listed trusts, futures, and spot ETFs ushered in new types of capital allocators, this month is a peak for a different type of bitcoin product: corporate leverage.

This week alone, four public companies have added billions of dollars in collective debt to their balance sheets in order to buy bitcoin: MicroStrategy, Marathon Holdings, Semler Scientific, and MetaPlanet.

In addition, Blackrock suddenly announced the listing of options — yet another form of leverage — atop its flagship spot bitcoin ETF, IBIT.

The introduction of options on Blackrock’s institutional, marginable, price-tracking ETF will allow sophisticated market participants access to powerful hedging strategies. IBIT options are scheduled to commence trading on NASDAQ today.

For context, bitcoin has rallied 32% since the start of the month, and corporate leverage is only a part of that mix.

MicroStrategy’s $42 billion and Donald Trump ignite November rally

Initially fueled by MicroStrategy’s noteworthy $42 billion capital allocation plan — doubling the company’s market capitalization as of the time of the announcement — it rocketed even higher on the evening of November 5.

The re-election of Donald Trump, who made various pro-crypto promises for his upcoming term, earned cheers from millions of bitcoin investors and an 8% rally within 24 hours.

Read more: All bitcoin models destroyed: Stock-to-Flow, Power Law, Rainbow

Both MicroStrategy CEO Michael Saylor and President-elect Donald Trump have made good on their considerable promises for the past two weeks. Saylor closed billions of dollars of his convertible debt round to buy tens of thousands of bitcoin, and Trump has announced various pro-bitcoin appointments to his administration.

This week, at least four public companies are actively tapping corporate debt markets to leverage their own balance sheets for bitcoin exposure. This also allows bond traders — yet another class of investor — to gain exposure to bitcoin’s price via convertible, option-enhanced, or warrant-covered commercial paper.

With Blackrock’s listing of IBIT options as an additional hedging option on the NASDAQ this week, a new era of leveraged bitcoin trading fueled by corporate debt has begun.

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Crypto X (formerly Twitter) lit up last night following BlackRock CEO Laurence Fink’s prediction that bitcoin “will become as big as the US housing market.” The only problem is, he never actually said that.

The confusion stemmed from a DLNews report that claimed Fink made the comment during a BlackRock earnings call last Friday. However, the outlet has since published a correction on the story and clarified that, “Fink was referring to BlackRock mortgage products he didn’t name.”

Despite the misreport, Fink’s sentiment during the call was still bullish on bitcoin. He said that regardless of which presidential candidate is elected, “I do believe the utilization of digital assets are going to become more and more of a reality worldwide.”

Read more: Larry Fink flips on bitcoin, ‘digital gold’ not ‘index for money laundering’

“We believe bitcoin is an asset class in itself. It is an alternative to other commodities like gold,” he added. 

“I think the application of this form of investment will be expanded to the role of Ethereum as a blockchain can grow dramatically. So if we can create more acceptability, more transparency, more analytics related to these assets, then it will be expanded.”

These statements reflect a changing approach for Fink, who back in 2017 called bitcoin an “index for money laundering.”

The call revealed that BlackRock’s assets under management reached a record high of  $11.48 trillion last week. The company’s bitcoin ETF has also managed to amass $23 billion during its first nine months.

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BlackRock CEO Larry Fink appeared on CNBC today to announce that he’s pivoted his stance on bitcoin. Once a staunch skeptic, the $10.6 trillion asset management executive explained that he now believes bitcoin is akin to ‘digital gold.’

Speaking with Jim Cramer and Carl Quintanilla, when asked about Bitcoin and Ethereum Fink said, “I was a skeptic. I was a proud skeptic. And I studied it, learned about it, and I came away saying, okay, my opinion for five years was wrong… I believe bitcoin is legitimate… it is a legitimate financial instrument.”

That view is quite different from comments he made in 2017 when he called bitcoin an “index for money laundering.”

Read more: BlackRock ETF might open door to institutional shorting of bitcoin

Bitcoin for making money, not hope

Fink went on to explain that bitcoin has a place in portfolios to hedge against currency debasement and international exposure and to serve as a haven amid fear. He also referred to bitcoin as “digital gold” and admitted that it has “industrial use.”

At the end of his TV segment, Fink denied that bitcoin is ‘hope’ — a Michael Saylor marketing slogan — instead saying that he thinks people invest in bitcoin simply to make money.

BlackRock also hit the headlines today for its links to Thomas Matthew Crooks, the failed assassin at Donald Trump’s July 13, rally. Last year, the firm produced a commercial about a Pennsylvania teacher’s use of BlackRock’s retirement planning services that briefly featured the young Crooks.

BlackRock has deleted its public archives of the ad, which included two fleeting appearances of Crooks as a student. Crooks appeared at the 3 and 19 second timestamps and had no speaking lines.

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BlackRock’s recently deployed $100 million Ethereum-based investment fund has prompted a meme-fuelled on-chain response from the crypto community.

The investment behemoth’s move into decentralized finance (DeFi) follows a wildly successful bitcoin ETF launch and echoes CEO Larry Fink’s previous comments that ETFs are “just stepping stones towards tokenization.”

The newly created BlackRock USD Institutional Digital Liquidity Fund (BUIDL) was launched in conjunction with Securitize, according to the Notice of Exempt Offering of Securities filed with the SEC last week.

But shortly after the funds were identified, on-chain trolls began sending memecoins and NFTs to Blackrock’s address.

Read more: Bitcoin ETFs have first net outflows in weeks 

A total of 36 deposits of just 0.000069 USDC were sent by big-dick-fink.eth, typically paying around $7 to $9 in gas fees for each transaction. The same user also repeatedly sent a link to a meme of Fink calling to “send it” via transaction input data, as well as registering the address via Ethereum Name Service (ENS) as bigdickfink.eth.

Other tokens sent to the BlackRock BUIDL address include PEPE, Mog Coin, and EGG, as well as GoblinTown and CryptoDickButt NFTs.

The address was also ‘tainted’ with ETH sent from Tornado Cash, a crypto mixer that’s sanctioned by the US Treasury.

Read more: Tornado Cash funds ‘at risk’ after hacker injects malicious code

Yesterday, CoinDesk reported that Tornado Cash developer Alexey Pertsev is to be accused of laundering $1.2 billion via the mixer at his upcoming trial in the Netherlands. Pertsev’s two co-founders, Roman Semenov and Roman Storm, are also facing charges in the US.

Old money, new threats

Moving money from traditional finance to the on-chain Wild West of DeFi will present plenty of novel risks for BlackRock.

Crypto auditor Charles Wang points out that the fund’s contract is a simple proxy, owned by a single externally-owned account (EOA), rather than a more secure multi-signature setup. He also notes that the proxy currently points to an unverified implementation.

A potential compromise of the EOA’s private key would be disastrous, and not uncommon.

Read more: Axie co-founder hacked for $10M two years after $625M Ronin attack 

As well as spear-phishing attempts, BlackRock will have to exercise caution when using DeFi projects. Constant phishing scams are regularly emptying users’ wallets, often of seven figures at a time, and hacks are rife across the sector.

Just yesterday, around $2 million was stolen from old Dolomite Exchange contracts, and Paraswap’s new router contract was found to contain a critical vulnerability, though the majority of at-risk funds were rescued.

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The price of Ripple’s XRP briefly jumped 13% on Monday after a fake filing, supposedly from investment firm BlackRock Inc., was posted on an official government website in Delaware.

As reported by Bloomberg, something called the ‘iShares XRP Trust’ appeared on the Delaware Department of State’s Division of Corporations website. The portal is where all investment trusts incorporated in the state are registered.

The news of the filing was quickly shared on social media and the price of XRP duly spiked. However, the filing was quickly outed as a fake by a BlackRock spokesperson, and by the end of the day, the crypto’s price plummeted.

It’s not currently clear who submitted the listing in BlackRock’s name.

According to Bloomberg Intelligence analyst James Seyffart, “This isn’t the best look for the crypto industry and definitely hurts the credibility of the good actors in the space, but it was sniffed out as fake pretty quickly.”

“We saw a similar event last week that turned out to be real for the Ethereum trust. But an XRP ETF filing would be a bit of a stretch at this time,” he added (via Bloomberg).

Another fake fund involving BlackRock

This isn’t the only erroneous media report about a supposedly imminent crypto product involving BlackRock that’s affected markets in the past few weeks.

Nearly $100 million worth of positions were liquidated in October after false reports of an approved spot Bitcoin Exchange Traded Fund (ETF) sent the currency’s price soaring before a hasty correction brought it back to Earth.

Read now: Crypto X keeps getting the Bitcoin ETF wrong

In a now-deleted article, crypto outlet Cointelegraph reported that the Securities and Exchange Commission (SEC) had approved an iShares spot Bitcoin ETF managed by BlackRock.

Cointelegraph posted on X (formerly Twitter) “BREAKING: SEC APPROVES ISHARES BITCOIN SPOT ETF.” The post was then edited to include the word “REPORTEDLY,” before the outlet deleted it altogether.

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Nearly $100 million worth of positions were liquidated in barely an hour today after erroneous reports of an approved spot Bitcoin Exchange Traded Fund (ETF) sent the currency’s price soaring before a hasty correction sent it crashing back to Earth.

In a now-deleted article, Cointelegraph reported that the Securities and Exchange Commission (SEC) had approved an iShares spot Bitcoin ETF managed by BlackRock.

Cointelegraph posted on X (formerly Twitter) “BREAKING: SEC APPROVES ISHARES BITCOIN SPOT ETF.” The post was then edited to include the word “REPORTEDLY,” before the outlet deleted it altogether.  

Read more: Grayscale SEC win brings spot GBTC ETF approval a step closer

Confirmation from Fox News Journalist Eleanor Terrett, Bloomberg analyst James Seyffart, and CoinDesk, all say the BlackRock spot Bitcoin ETF is not approved and is still under review. 

Bitcoin surged from $27,900 to $30,000 after the initial report before falling back to around $27,900 following the correction. A Bitcoin ETF approval is considered a bullish sentiment within the community. 

In response to the ordeal, Cointelegraph posted, “We apologize for a tweet that led to the dissemination of inaccurate information regarding the Blackrock Bitcoin ETF.”

It said, “An internal investigation is currently underway. We are committed to transparency and will share the findings of the investigation with the public once it is concluded within three hours.”

Crypto sleuth ZachXBT has pointed out that, at first glance at least, it looks as though Cointelegraph got its unvetted breaking news from an anonymous Telegram user who subsequently deleted their account.

Meanwhile, CEO Yana Prikhodchenko (she goes by just Yana on the Cointelegraph website) who took over from Wes Kaplan in April of 2023, has yet to make a public statement about the debacle.

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BlackRock has filed for regulatory approval of a bitcoin ETF. The SEC has never approved one, but investment giant has a nearly flawless track record when applying for ETFs: over 500 approvals per one denial. Unlike the over-the-counter traded Grayscale Bitcoin Trust (GBTC), which Barry Silbert’s Grayscale would like to convert into an ETF, BlackRock could open the door for institutional short-selling of bitcoin via a NASDAQ-listed bitcoin ETF.

BlackRock’s proposed bitcoin ETF will almost certainly be DTC eligible, whereas most over-the-counter securities are not. The Depository Trust Company, or DTC, serves as a securities repository with over $32 trillion worth of securities deposited within its system. It’s by far the largest source of US broker ‘borrows,’ also known as ‘locates.’

Put simply, BlackRock’s bitcoin ETF will allow short-sellers to easily locate shares to borrow from the world’s most voluminous trust company. DTC processes quadrillions of dollars worth of securities every year.

Because DTC only accepts deposits from its members, usually clearinghouses, and keeps a tidy ledger of ownership of each security at all times, members may lend shares easily to other members. In this way, brokers who holds ETFs on deposit with DTC on behalf of their customers can easily lend those shares out for short-selling borrows.

DTC eligibility: The key to institutional bitcoin ETF shorting

DTC eligibility helps ensure the liquidity of securities because brokers and clearing houses typically require it to deposit shares with them for trading on the secondary market. Experts often recommend avoiding trading in securities that are not eligible for DTC because moving them between brokerage accounts is difficult.

DTC eligibility also makes it possible to short-sell securities. The typical method for short-selling involves borrowing the stock, selling it on the open market, and then repurchasing it later to return to the owner.

Institutional investors often use this tactic if they expect the price of a company’s stock to drop. Of course, they can guess wrong, and the occasional ‘short squeeze’ — the price of a stock suddenly moving in a way they do not expect — can cause significant issues.

GameStop was shorted by more than 100% of the available shares to borrow when the WallStreetBets community targeted it for a pump. This short squeeze exhausted DTC borrows and caused institutional investors to lose billions of dollars.

Read more: Coinbase pitches “inflation-proof” flatcoins against struggling USDC

However, the chaos caused by WallStreetBets has not discouraged institutional investors from using short selling as a trading tactic. Shorting is as popular as ever. When DTC lists shares of BlackRock’s proposed bitcoin ETF as eligible to borrow in its system, shares will become as eligible for short-selling as any other security on NASDAQ.

Short-selling shares will likely become common in a DTC-eligible bitcoin ETF like BlackRock’s, considering bitcoin’s volatility. Some institutional investors might wish they could have shorted GBTC given its substantial discount to net asset value (NAV). However, they couldn’t short GBTC because it was not eligible in DTC’s platform, making it difficult to locate GBTC borrows to short-sell.

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