BlackRock Reveals It’s Been Examining Blockchain Closely Since 2015
BlackRock, the largest ETF issuer and largest asset manager in the world, reveals its interest in cryptocurrency.
Financial News reported that global investment powerhouse and leading exchange-traded fund (ETF) issuer BlackRock has been examining cryptocurrencies and blockchain closely since 2015.
- BlackRock is the world’s largest asset manager
- The investment firm manages $6.3 trillion
- The firm has had a working group examining blockchain since 2015
- The firm currently sees small demand from clients
- The CEO said the company is a “big student of blockchain”
- Involvement by BlackRock can lead to a massive inflow into the industry
The news surfaced early Monday and quickly spread around the crypto industry as excitement engulfed investors. The announcement sent the price of Bitcoin soaring over 5 percent in a matter of minutes.
When the stature of the company in question is put into perspective, this is not a surprising market reaction. BlackRock is the largest investment manager in the world, currently holding trillions of dollars in Assets under Management (AUM) on behalf of its clients and of itself. As of June 30, it is holding over $6.3 trillion in AUM.
BlackRock’s change of heart
The fund manager’s move signals a change of tune regarding Bitcoin, and sources cited by FN indicate the possibility of the investment manager getting onto Bitcoin Futures. It follows a similar u-turn witnessed from Goldman Sachs, which is actively positioning itself in the cryptocurrency industry.
According to Financial News, the company’s spokeswoman explained that the firm has for a long time examined blockchain, though that didn’t include specific details concerning cryptocurrency or Bitcoin.
The news comes in the aftermath of the company’s CEO Larry Fink’s earlier comments that Bitcoin was likely an “instrument” for those looking to clean money. BlackRock stated that they’d be closely following developments in cryptocurrency, as it appeared the industry was set for wider use.
Following the story, CEO Larry Fink confirmed to Reuters last Monday that indeed the global leader in asset management had assembled a working group. Their task was to explore blockchain technology and the rapidly growing cryptocurrency industry.
Fink cautioned that this was even though that there was not massive demand from their investors. That does not imply that there is no interest. Should the firm decide to invest even just 0.1% of its total assets, it would represent approximately $630 million.
Keeping a close eye
In an interview carried by Reuters, Fink said that BlackRock is a “big student of blockchain” thus the need to have a working group mandated with studying any opportunities and client demand.
The move isn’t a complete surprise given that the crypto industry has been keen on the entry of big-time institutional investors for quite some time.
Bitcoin (BTC) price jumps on news
The announcement sent the price of Bitcoin (BTC)c soaring. The SEC approved Coinbase’s acquisition of Keystone Capital, and BitPay was awarded a BitLicenses coincidentally, sending the price of BTC past $7,400 in the days that followed.
The BlackRock news alone started the rally, sending Bitcoin prices north by more than 4% on Monday as news about the company surfaced. The market rallied to see prices rise to hit new levels above $6,600, at one point reaching an intraday high above $6,700 early Tuesday. BTC gained nearly $400 on July 16 before exploding past $7,000 yesterday.
It represented Bitcoin’s, as well as for most other cryptocurrencies, the best performance in close to three weeks. It also helped consolidate prices above $6,600 after the top crypto had hit a low of $6080 the previous week. The bullish news carried over and had seen the top coin lead the market in a short-term recovery. BTC is over 15% in the green in the weekly charts, a trend mirrored by most of the altcoins.
Why BlackRock could be a game-changer
BlackRock was founded in 1988 under the name The Blackstone Group. It later adopted the name BlackRock in 1992 and then listed on the New York Stock Exchange in 1999. It is a reputable and established company with a massive global reach and the deepest pockets in town.
The company’s objective is to help its clients and investors explore the best possible ways to a better financial future. The company says that as a fiduciary, it owes it to its clients to provide investment opportunities and advisory input that serves to make them reach their goals.
The company describes itself on its website as “the leading global asset manager, serving many of the world’s largest companies, pension funds, foundations, and public institutions as well as millions of people from all walks of life.“
It has advised many high profile institutions around the world, including AIG, Bank of Greece, and Central Bank of Ireland, Federal Reserve Bank of New York, Her Majesty’s Treasury, and UBS. It has also partnered AT&T, Merrill Lynch, Google, MetLife, HSBC, and Morgan Stanley among others.
Should BlackRock make a move towards investing in cryptocurrencies or merely signal its readiness to adopt and use blockchain could be a pivotal moment for the industry. It would be a significant endorsement from such a dominant player in the investment industry. The result could be an influx of other institutional investors who have hitherto been reluctant to venture into cryptocurrency.
Significantly, for Bitcoin and the rest of the crypto industry, just a fraction of the funds under BlackRock would be enough to shift sentiment north and infuse positivity in new investors. As of June 30, 2018, the firm managed over $6.3 trillion in assets. The entire crypto market has a capitalization of about $270 billion. A percentage of the over six trillion coming into crypto-based products is enormous.
More institutional investors
It has left experts and investment managers within the crypto space believing that entry by BlackRock would be nothing but a game-changer for Bitcoin.
Hedge fund Black Square Capital’s portfolio manager Chris Yoo sees it as a catalyst for more growth.
“As the largest asset manager in the world, its interest in crypto assets could be a catalyst for upward price movement and encourage other asset managers, even with more conservative strategies, to seriously explore investing in the crypto space.”
The broader implication of BlackRock’s move is that it rekindles the debate about when we are likely to see real moves by institutional investors into crypto. The narrative will continue to dominate the market, though there’s no telling when the influx will commence.
What many experts and crypto bulls do believe, however, is that a future influx of big money investors would result in a massive bull run that will dwarf that of Q4 2017. All it would take is a tiny step by a company with the pedigree of BlackRock.
Sources: Financial Times (FT); Reuters; Fortune; CNBC; Bloomberg.