‘Floodgates Of Capital’—Crypto Is Set For $21 Trillion Boom As Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, Luna, Shiba Inu, Dogecoin Prices Skyrocket
bitcoin price
The crypto market is on fire.
In the past week, the price of bitcoin rose 7.4%, currently trading at $24,523, and the price of ethereum rose 16.8% to just under $1,900. Most altcoins follow the major’s color. XRP
Meanwhile, last week, America’s largest crypto exchange, Coinbase
The news marks a major leap forward in bitcoin’s institutional adoption, which brought forth a flurry of bold conversations.
Dan Tapiero, the founder of 10T, a nearly $1 billion crypto fund, predicted that Blackrock will open the floodgates of capital into crypto and push the price into seven figures: “5% change in [Blackrock] assets are $500 billion greater than [today’s bitcoin] value today. A catalyst for a path to $250,000+ [bitcoin] becoming clear,” he tweeted.
Still, bitcoin and other major cryptos have only trailed the stock market on the news. Why is crypto so indifferent to such a large institutional vote of confidence?
Bitcoins
Let’s look at what this partnership actually means.
In short, Coinbase will give Blackrock’s “Aladdin” customers direct access to bitcoin. For the first time, most institutional investors will be able to hold, trade and broker the actual cryptocurrency instead of derivative instruments.
Aladdin is Blackrock’s flagship asset management platform that acts as a “dashboard” for some of the largest fund managers in the world. As of 2020, it managed an insane $21.6 trillion, which is about 7% of all assets in the world.
But while Aladdin theoretically opens a door to trillions of institutional dollars, bitcoin’s slow reaction suggests big investors won’t rush to back up the truck on crypto — especially in light of recent events.
“This year has been terrible for crypto, with a couple trillion dollars of value wiped out and the liquidation of several major hedge funds and exchanges, not to mention the resulting security damage in the non-fungible token, or NFT, space.” Bloomberg columnist Jared Dillian wrote.
“More people are now questioning the viability and usefulness of the blockchain technology that underpins crypto,” he added.
Remember, the Blackrock-Coinbase partnership wasn’t the only institutional gain for bitcoin this year.
As I wrote in Meanwhile in Markets, last April, Fidelity announced that it would become the first asset manager to offer bitcoin in 401(k) plans. Considering savers have over $12 trillion in 401(k)s, even a small allocation could blow any cryptocurrency through the roof.
But just like bitcoin’s addition to Aladdin, 401ks are likely to be more of a gradual long-term tailwind than a short-term boost.
It has to do with the fact that most of those $12 trillion in 401(k)s are parked in “meal funds” and none of those funds are allocating even a sliver of their portfolios to bitcoin yet because bitcoin is still too volatile and unregulated.
“It’s something to watch, but a way out,” David Ireland, a fund manager at SSGA who oversees $150 billion in meal assets, told CNBC. “It’s certainly not a hard no, but there’s a lot more, I think, to understand here.”
We’ll get there
Bitcoin’s string of positive news shows that it has a real chance to become a legitimate alternative asset class, deserving of a meaningful allocation in institutional portfolios.
That said, it would be naive to expect trillions of institutional dollars to pour into crypto overnight.
While institutions can theoretically distribute this money, in reality they cannot due to legal and reputational risks. So, until there is a strong regulatory framework governing crypto, most fund managers will not bet on bitcoin.
As Dillian wrote: “The best thing for the crypto world would be the last thing it would ever want to see: regulation. I say this as someone who generally has a weak view of regulation. Getting rid of all the scams and pump-and-dump schemes would make crypto a safer place to invest.”
We’ll get there.
Since June, the Senate has hammered out a landmark crypto legislation called Act on responsible financial innovation. In turn, the EU’s watchdogs are pushing their own set of crypto rules that will reportedly take effect in 2023.
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