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Black stone
is diving headfirst into cryptocurrencies, including a new spot Bitcoin private trust for institutional investors.
The trust is available to US institutional clients, the investment firm said on Thursday.
Black stone
(ticker: BLK) did not disclose other details, including fees or minimum investment requirements.
Initially, the trust will only hold Bitcoin, but some analysts believe BlackRock may expand to other cryptos, including Ether, the second largest token after Bitcoin.
“Despite the sharp decline in the digital asset market, we continue to see significant interest from some institutional customers in how they can efficiently and cost-effectively access these assets using our technology and product capabilities,” the company said in a statement.
BlackRock’s Bitcoin product will face competition. The
Grayscale Bitcoin Trust
(GBTC), for one, has amassed $15 billion in assets. It trades as a closed trust, over the counter, and has long traded below the underlying net asset value, or NAV.
The private trust is BlackRock’s latest crypto venture. Last week, the company announced that it is partnering with crypto exchanges
Coinbase Global
(COIN) to give users of BlackRock’s institutional management platform, Aladdin, access to Bitcoin.
“Institutions have struggled to access cryptocurrencies, but BlackRock’s partnership with Coinbase (COIN) appears to create an institutional on-ramp that has the potential to bring crypto into the mainstream,” wrote Morgan Stanley analyst Michael Cyprys.
BlackRock’s view of digital assets has changed significantly over the past six to nine months, Cyprys added — from “skepticism, to acceptance, to investment.”
The shift may be motivated by the company’s efforts to revitalize its core offerings after a challenging second quarter. High inflation, weakness in stock markets and rising interest rates weighed on earnings, which fell 30% to $7.36 per share, while assets under management fell to $8.49 trillion, down 11% from a year earlier.
BlackRock typically charges a fee for institutional investors and managers to connect to the Aladdin system — fees it may incur for crypto trading, especially as adoption increases. The company is likely to explore expansion into other cryptos as it rolls out the partnership, analysts say. It could help accelerate Bitcoin adoption among institutional investors.
“The Bitcoin community has been talking about ‘institutions are coming’ for years,” wrote Frank Downing, an analyst at Ark Investment Management. – It looks like they are finally knocking on the door.
Ark, run by CEO Cathie Wood, also has a stake in this. It is
ARK Innovation ETF
(ARKK) has stakes in Coinbase,
Block
(SQ) and other crypto-related companies
Still, it may be a while before even BlackRock sees a significant uptick in institutional crypto ownership. When Bitcoin prices were near their peak in September 2021, only 3% of US pensions and endowments owned digital assets, according to a Fidelity survey. That number is likely to have declined as Bitcoin prices fell sharply, Morgan Stanley analyst Sheena Shah wrote. Some analysts say it will take some time to rebuild investor confidence to the point where institutional investors take the plunge.
Coinbase and BlackRock will also have to navigate a regulatory minefield, as scrutiny of crypto intensifies; The Securities and Exchange Commission is investigating some of Coinbase’s business practices. Regulators may issue rules in the coming months for crypto token listings and exchanges. Several bills in Congress also aim to impose regulation on the industry.
In the long run, it could be beneficial — regulation of crypto could bolster investor confidence in digital assets, Cyprys wrote.
As more institutional leaders like BlackRock delve into crypto, it could help stabilize prices and support major tokens like Bitcoin. But it won’t happen overnight. Until then, institutional investors may still view the asset class with a cautious eye.
BlackRock shares were up 0.6% at $730 by midday Thursday. The S&P 500 was ahead 0.3%.
Write to Sabrina Escobar at [email protected]