On January 20, BlackRock, the world’s largest asset manager with more than $ 8.7 trillion in assets under management, appeared to have given the green light to two of its associated funds, BlackRock Global Allocation Fund Inc. and BlackRock Funds , to invest in Bitcoin futures.
In this regard, the prospectus documents filed with the U.S. Securities and Exchange Commission suggest that BlackRock is looking to get involved with Bitcoin (BTC), especially since the first cryptocurrency was added to the company’s lists of derivative products released for use.
In addition, in recent months, company executives have spoken positively about Bitcoin, alluding to the fact that, in the near future, several institutions may look to digital assets to expand their list of financial offerings.
For example, in an interview last November, Rick Rieder, director of investments at BlackRock, said that Bitcoin has the potential to “take the place of gold in large part”. A somewhat similar sentiment was echoed by the company’s CEO, Larry Fink, who told the media that Bitcoin has caught the attention of the masses and has the potential to possibly evolve into a global market of its own.
Finally, it’s also worth remembering that exactly a month ago, BlackRock posted a job advertisement looking for a qualified individual for the position of vice president, blockchain leader for their New York office. According to the post, the role required candidates to be able to plan and put in place a number of strategies that can help “boost demand for the company’s investment and technology offerings”.
What does BlackRock’s entry mean for the market?
BlackRock’s investment in Bitcoin futures is a significant step forward for the global crypto ecosystem as it brings enormous credibility to Bitcoin as a new asset class. Jason Lau, chief operating officer for the cryptocurrency exchange OKCoin, told Cointelegraph that this move will open the door for other asset managers to follow, since most traditional asset managers are typically “consensus followers”, adding:
“With the announcement of BlackRock, other asset managers will be able to point to BlackRock’s work in convincing its investment committees and client investment advice about the potential and maturity of BTC and the crypto ecosystem.”
Currently, CME’s futures and investments trust shares issued by Grayscale and Bitwise are two of the main vehicles for institutions to get involved with cryptography. However, due to this severe limitation, there have been large trusts premiums in relation to the underlying price of BTC. For example, Lau stated that during the recent BTC price appreciation in December, the gray scale had a 40% premium on the underlying value of Bitcoin.
Kyle Samani, managing partner at Multicoin Capital – a thesis-driven investment firm – told Cointelegraph that BlackRock’s entry is a big step forward for the entire industry. He believes that, by allowing some of his funds to operate bought at BTC, this will allow more investors to enter the space.
Is BlackRock late for the party?
While some are rejoicing at the news that BlackRock is entering the crypto market, Maksim Balashevich, founder and CEO of Santiment – a market intelligence platform for cryptocurrencies – told Cointelegraph that from a purely “analytics” perspective behavior “is not just the big headlines that should be considered.
Rather, the reaction of the masses, which, for the most part, is the single most crucial factor that determines market price action, could be more decisive. He added: “BlackRock enrollment is not a special event, but just another ‘latecomer’ of ‘big money’ funds. The change will have no implications, except for greater professionalization, increasing market liquidity. “
When asked about the impact that BlackRock’s entry could have on the potential stabilization of Bitcoin’s value, Balashevich pointed out that despite these “big moves”, crypto volatility is here to stay and that many other ups and downs will happen in the coming months. “Players like BlackRock are sharks playing against each other,” he said.
Finally, on whether the saturation point in terms of institutional entry into this space approaches, he believes that the industry is in fact “getting very close to the top” and that “there are not many big players left to enter the market. “
Is a SEC-approved ETF Bitcoin on the horizon?
Historically, the SEC has rejected a number of ETF proposals – such as those submitted by Phoenix Wilshire, Gemini, etc. – identifying price manipulation, lack of liquidity and sources of price indexation as main concerns. However, with BlackRock making inroads into this space, it seems that the scenario may finally be set for an ETF to be approved sometime in 2021, as Lau pointed out:
“An increasing number of big, renowned financial firms like BlackRock, Guggenheim, SkyBridge, etc. are entering the cryptographic space and giving their approval sign. This can give the regulator more confidence in the maturity of the crypto market and the need for an ETF to give more access to cryptography. “
He stressed that it will be extremely interesting to see if BlackRock’s ETF business, iShares, decides to become the first big to recognize this window of opportunity and file for an ETF itself. Recently, investment management firm VanEck once again submitted an application to the SEC to create a new Bitcoin ETF. This move was followed by another similar application presented by Valkyrie Investments. Therefore, the ETF race is back after a brief lull.
In addition, with Bitcoin recently exceeding the $ 42,000 limit, it appears that several Wall Street institutions are heating up quickly for the crypto industry, as highlighted by the fact that MassMutual recently became the latest big player name of the traditional financing realm to acquire $ 100 + million BTC.
Not only that, several high-profile investors, like Paul Tudor Jones and Stanley Druckenmiller, have approached this relatively new asset class in recent times, and from the corporate domain, companies like Square and PayPal have bought Bitcoin.