BlackRock Reverses Course on Crypto, Partners with Coinbase to Offer Bitcoin to Investors
The rise of Bitcoin from a little-known digital coin to a major asset class has led to fierce polarization among leaders in the financial world.
Despite the fact that over a decade has passed since Bitcoin’s development in 2009, governments, businesses and investors still have mixed opinions about whether the cryptocurrency has any long-term value.
Although some larger companies such as Tesla and Block have embraced technology to some extent, many Bitcoin critics have suggested that the cryptocurrency will never see mass adoption unless large institutional funds start adding Bitcoin to their portfolios.
For many years, it seemed that Bitcoin’s adoption by mainstream financial institutions would never happen. In 2017, JPMorgan CEO Jamie Dimon so that Bitcoin was a “fraud” that would be regulated by the authorities as soon as it got too big.
Billionaire investor Warren Buffett, who was once the richest man in the world, went as far as to call Bitcoin “rat poison” in 2018 and said it would “almost certainly come to a bad end.”
However, despite the pessimism of recent years, as well as a major crypto crash in May 2022, the tide against cryptocurrencies has slowly turned in favor of digital assets.
Coinbase Partnership
One of the most notable firms to embrace Bitcoin in recent weeks is BlackRock (BLK), the world’s largest asset manager that was reported to have over $10 trillion under management as of January 2022.
Although BlackRock has challenged the rise of Bitcoin every step of the way, the company recently sent shockwaves through the financial world by announcing in a blog mail that it had partnered with cryptocurrency exchange Coinbase (COIN) to make Bitcoin directly available to institutional investors.
As a result of the agreement, joint customers of Coinbase and BlackRock’s investment management platform, Aladdin, will have access to crypto trading, custody, reporting capabilities and prime brokerage.
Customer access will be provided through Coinbase Prime, a platform that BlackRock and Coinbase will build out in phases.
Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock, said of the deal: “Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to effectively manage the operational lifecycle of these assets.”
Private trust
Almost a week later, BlackRock announced that it would launch a private trust that would give US-based institutional clients exposure to discover Bitcoin.
The trust will be BlackRock’s first product to offer direct exposure to the price of Bitcoin.
In a statementsaid the company, “Despite the sharp decline in the digital asset market, we continue to see significant interest from some institutional clients in how we can efficiently and cost-effectively access these assets using our technology and product capabilities.”
The global asset manager has revealed that it has four main areas of interest regarding digital tokens: permissioned blockchains, stablecoins, cryptoassets and tokenization.
BlackRock’s Crypto Timeline
While BlackRock has finally decided to enter the crypto markets, the company’s road to Bitcoin adoption was anything but smooth.
2017: Resistance to crypto
In October 2017, Larry Fink, co-founder and CEO of BlackRock cited said the digital token was nothing more than an “index of money laundering.”
Fink added, “Bitcoin just shows you how much money laundering demand there is in the world. That’s all there is.”
At this time, Bitcoin’s price was hovering around $4,800.
2021: Sentiment begins to change
March
BlackRock’s tune began to change in early 2021 when the company’s CIO of global fixed income Rick Rieder revealed that the asset manager had started buying BTC.
Although Rieder declined to give the specific allocations that BlackRock had set for Bitcoin, he did mention that the coin could serve as a hedge against inflation.
Rieder said: “I think crypto in general has captured the imagination of a lot of people. Today the volatility in it is extraordinary, but listen, people are looking for warehouses of value. People are looking for places that can appreciate under the assumption that inflation is increasing and that the debt is building up, so we’ve started to dabble a bit in that.”
Later submissions, such as March 31 disclosure, stated that the BlackRock Global Allocation Fund had gained exposure through CME’s Bitcoin futures product – buys 37 units of CME’s March 2021 bitcoin futures at the beginning of the year.
July
Despite BlackRock’s first BTC purchase of 2021, CEO Larry Fink’s BTC stance remained unchanged.
In a interview with CNBC in July, Fink said the asset manager had seen “very little demand for digital assets.”
Fink also took a veiled shot at Bitcoin investors, stating that “clients interested in crypto or other volatile assets like meme stocks may not be BlackRock’s clientele.”
October
By the end of the year, Fink’s tone began to soften up on cryptocurrency. In an interview in October, Fink said he could see a role for either Bitcoin or a digital dollar in the global financial system.
Fink seemed cautiously optimistic, saying: “I’m not a student of Bitcoin and where it’s going to go, so I can’t tell you if it’s going to go to $80,000 or zero, but I think there’s a big role for a digitized currency, and I think it’s going to help consumers all over the world.”
2022: BlackRock expands BTC supply
March
Ironically, it was in 2022, the year Bitcoin suffered its second major crash, that BlackRock took major steps toward crypto adoption.
Part of the reversal was Russia’s invasion of Ukraine, which led to massive global support in the form of BTC and ETH donations, which allowed Ukraine to purchase much-needed weapons and prop up its economy.
Many Ukrainians also turned to crypto when banks and financial institutions were destroyed, allowing them to preserve their money and instantly send money to family members.
Talking about the conflict, Fink so that the “brutal attack” would make countries “reconsider their currency dependencies”.
He added, “A global digital payment system, thoughtfully designed, can improve the settlement of international transactions while reducing the risk of money laundering and corruption.”
“Digital currencies can also help reduce the cost of cross-border payments, for example when overseas workers send their earnings back to their families.”
April
A month later, BlackRock launched a blockchain-focused exchange-traded fund (ETF) that gave investors exposure to the crypto and blockchain industry without having to directly own digital assets.
The $4.7 million ETF did not directly own cryptocurrencies, but instead tracked a number of international companies involved in the industry.
What does this mean for Bitcoin?
Cathy Wood famous so that if major financial institutions ever adopted BTC, the digital asset had the potential to reach $500,000 per coin.
However, the latest news with BlackRock has not spurred buying as many in the crypto community had hoped for.
The price of BTC has remained relatively flat since BlackRock’s Coinbase partnership in early August, leading many suggest that we are still in the depths of a bear market.
