BlackRock hits back at Bitcoin as latest institution to see promise in crypto

BlackRock Inc.’s announcement on Thursday that the world’s largest asset manager will create a spot Bitcoin trust for institutional clients in the United States is another sign that traditional investment houses are coming to terms with cryptocurrency as an emerging asset class, even if some are. still holding his nose.

Despite the slowdown in the broader crypto market, BlackRock — with roughly $8.5 trillion in assets under management — said in a blog post that it has seen “significant interest” from institutional clients in accessing Bitcoin through such a fund.

BlackRock follows some other heavyweights. British banking giant Barclay’s invested in cryptocurrency firm Copper last month, while Fidelity Investments, one of the largest providers of 401(k) pension plans in the US, began allowing clients to invest part of their portfolio in Bitcoin in April.

This development is clearly very supportive of Bitcoin, said Justin d’Anethan, director of institutional sales at digital asset trader Amber Group. Discard in an interview.

Thursday marks the second major recent crypto development from BlackRock. Last week, the firm announced a partnership with US cryptocurrency exchange Coinbase Global to extend the use of its Aladdin asset management software suite to institutional clients who also own digital assets through Coinbase.

“It shows you a trend,” d’Anethan said, arguing that BlackRock’s funds will pressure other large institutions to offer similar products for fear they could become obsolete. “In the coming future … you will see other fund providers or large asset managers offering investment vehicles or vehicles to their various investors.”

The move marks a departure from BlackRock CEO Larry Fink’s sentiments in 2017 when he said “Bitcoin just shows you how much money laundering demand there is in the world … that’s all it is.”

Jeff Yew, CEO of Australia’s Monochrome Digital Asset Management, said Discard in an interview that he was not surprised to see the BlackRock backflip, because other financial institutions such as JP Morgan and Goldman Sachs both expressed similar doubts before offering crypto services.

“As Bitcoin enters its second decade, it is not the first instance where a major institutional player like BlackRock has turned its opinion on the asset class to the positive side,” Yew said. “Bitcoin is such a new discipline and it just takes time for people to get their heads around it and also get around their skepticism and also get their concerns addressed through education,” he added.

Crypto Rules

US lawmakers, along with those in other countries, are trying to figure out how to regulate cryptocurrency after the multibillion-dollar collapse of the Luna-Terra stablecoin project in May and the crypto market that followed caused a series of bankruptcies and losses for hundreds of thousands of investors .

Increased institutional commitment can stimulate this regulatory effort, says Yew.

“Institutional support brings in robust frameworks and infrastructure that we are deprived of in the nascent stages of this asset class like Bitcoin,” he said. “Many of the failures we’ve seen in the market … actually have little to do with the technology or the protocol behind it, but rather poor risk management brought about by human actions in the absence of regulation.”

Following BlackRock’s announcement, Bitcoin hit a two-month high of US$24,822 before retreating to just under US$24,000 at 2:30pm in Hong Kong.

Despite the fact that Bitcoin in July recorded its best monthly performance since October, the crypto market has a long way to go before it returns to the heights of last year. D’Anethan said the BlackRock timing actually makes a lot of sense.

“When you’re in a bear market, it’s time to build as opposed to just trading or ‘hodling,'” d’Anethan said. “So when there’s another bull run, they’re in a better position than the competition to offer that kind of exposure.”

Retail crypto investors have taken a hit to their confidence during the so-called crypto winter, and Yew said he was not sure if the arrival of the institutional heavyweights will bring them back in the first place.

They may find greater confidence in any consumer protections included in regulatory changes, he said.

“Institutional support will usually signal that this asset class is prime and ripe to take the next step into the regulated environment. And I think that’s actually a good thing to protect investors in the end.”