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On January 20, BlackRock, the world's largest asset management company with more than $8.7 trillion in assets under management, appeared to have approved two of its related funds, BlackRock Global Allocation Fund Inc. and BlackRock Funds, to invest in Bitcoin futures.
BlackRock is looking to enter bitcoin, according to a prospectus filed with the U.S. Securities and Exchange Commission, as the company adds the first-ever cryptocurrency to its list of derivatives products approved for use.
Additionally, the company’s executives have spoken positively about Bitcoin over the past few months, indicating that many institutions may look to digital assets to expand their range of financial products in the near future.
For example, in an interview last November, BlackRock Chief Investment Officer Rick Rieder said Bitcoin has the potential to “replace gold to a large extent.”
Just a month ago, BlackRock posted a job ad seeking a qualified individual to serve as vice president and head of blockchain in its New York office. According to the job requirements, the applicant needs to be able to design and develop various strategies to help "drive demand for the firm's investment and technology products."
What does BlackRock's entry into Bitcoin mean for the market?
BlackRock’s investment in Bitcoin futures is an important step for the global crypto ecosystem as it brings tremendous credibility to Bitcoin as a new asset class. Jason Lau, COO of cryptocurrency exchange OKCoin, said:
“With BlackRock’s announcement, other asset managers will follow its lead in convincing their investment committees and their clients’ investment committees of the potential and maturity of Bitcoin and the crypto ecosystem.”
Currently, CME futures and investment trust shares issued by Grayscale and Bitwise are the two main vehicles for institutional participation in crypto. However, the trusts generate huge premiums relative to the underlying price of Bitcoin. Lau said that during the recent December Bitcoin price rally, G BTC had a 40% premium.
Kyle Samani, managing partner of investment firm Multicoin Capital, said BlackRock's entry is a big step forward for the industry as a whole. He believes that by allowing some of its funds to go long on Bitcoin, more investors will join the field.
Is BlackRock late to the party?
While some are pleased with the news of BlackRock’s entry into the crypto market, Maksim Balashevich, founder and CEO of cryptocurrency market intelligence platform Santiment, said that from a pure “behavioral analysis” perspective, more than just the news event itself should be considered.
On the contrary, the reaction of the masses may be more decisive, as the reaction of the masses is often the most important factor in determining market price movements. He added: "BlackRock's entry is not a special event, just another 'latecomer' from the 'big money' fund. This move will not have any impact other than further professionalization and increasing market liquidity."
When asked what effect BlackRock’s entry might have on the potential stability of Bitcoin’s value, Balashevich noted that despite these “big moves,” cryptocurrency volatility remains and there will be more ups and downs in the coming months.
Finally, on the question of whether the saturation point for institutions entering this field is getting closer, he believes that the industry is indeed "very close to the top" and "there are not many big players that can enter this market."
Is an SEC-approved Bitcoin ETF imminent?
Historically, the SEC has rejected many ETF applications (such as those filed by Phoenix Wilshire, Gemini, and others), citing price manipulation, lack of liquidity, and price index sourcing as key concerns. However, as Lau points out, with BlackRock entering the space, it seems that the groundwork could finally be laid for an ETF approval sometime in 2021.
More and more large and well-known financial companies such as BlackRock, Guggenheim, and Skybridge Capital are entering the crypto field, which may make regulators more confident about the maturity of the crypto market and the further approach of ETFs to crypto.
Recently, investment management company VanEck once again submitted an application to the SEC to create a new Bitcoin ETF. After that, Valkyrie Investments submitted another similar application. Therefore, after a brief lull, the ETF race has started again.
In addition, with Bitcoin recently breaking through the $42,000 threshold, it seems that many Wall Street institutions are quickly preparing to enter the cryptocurrency industry. Traditional financial institution MassMutual recently purchased more than $10 billion in Bitcoin, becoming a big player in the cryptocurrency field.
Not only that, many well-known investors such as Paul Tudor Jones and Stanley Druckenmiller have invested in Bitcoin, and in the corporate field, companies such as Square and PayPal have also entered the Bitcoin market. (Bitpush) |
