Imagine that just one day before Bitcoin plummeted, Blackstone, the world's top asset management company, spent $1 billion to buy Bitcoin! Is this crazy or wise? Is this a gamble that is doomed to fail?
On December 18, 2024, a few words from Federal Reserve Chairman Powell ignited the crypto market. Surprisingly, the Fed proposed fewer rate cuts in 2025: there will be only two rate cuts next year, while the market had expected four. Rate cuts were supposed to be a boost for the crypto market, but now they have become a bearish signal. To make matters worse, Powell made it clear that the central bank neither allows nor is interested in holding any Bitcoin.
Immediately afterwards, several experts called the 25 basis point cut in the federal funds rate a "hawkish" or even "radical" move. The move triggered a panic sell-off in the crypto market. Bitcoin plummeted 13% in 48 hours, and many altcoins were even more miserable: Dogecoin plummeted 26%, Ethereum fell 16%, and Ripple fell 18%. According to CoinGlass data, more than $1.4 billion in leveraged long positions were liquidated in a single day, and the stock market also fell sharply.
So, is Blackstone’s $1 billion investment in Bitcoin a fatal mistake?
You might think that buying $1 billion of Bitcoin the day before the crash was a disaster. However, let’s use BlackRock as an example to see if this unfortunate buying timing can be fatal in the long run.
According to Arkham, Blackstone spent $1.5 billion on Bitcoin in a week, of which $1 billion was invested just before the crash, when the price was between $103,000 and $107,000, meaning the company bought nearly 10,000 Bitcoins.
As of December 20, Blackstone owns more than 553,000 bitcoins, or about 2.6% of the total bitcoin supply. The investment increased IBIT’s (Blackstone’s iShares Bitcoin Trust) total bitcoin holdings by 1.8%.
According to the latest data from Fintel, Blackstone's total holdings are worth up to $4.7 trillion. However, other sources estimate Blackstone's holdings to be more than $11 trillion. Among these holdings, Bitcoin's share is negligible, which is consistent with Blackstone's recent recommendation: allocate up to 2% of Bitcoin in a multi-asset portfolio to hedge against market fluctuations.
Admittedly, it was unfortunate to miss a better buying opportunity the day after the crash. But when the price of Bitcoin fell below $93,000, the overall value of Blackstone's portfolio was high enough to easily absorb this drop in value without causing too much ripples. Considering that Bitcoin has recovered at a higher value after many "crashes", this price drop is almost negligible. More importantly, Blackstone is acquiring more Bitcoins, which grow in value over time and become increasingly scarce.
BlackRock appears to be one of the biggest beneficiaries of Bitcoin’s scarcity. Interestingly, it was BlackRock that sparked the online debate about the immutability of Bitcoin’s famous 21 million hard cap.
On December 18, BlackRock released a 3-minute educational video explaining the basics of Bitcoin. At one point in the video, the subtitle reads: "There is no guarantee that the 21 million supply cap of Bitcoin will not be changed."
This small remark did not escape the attention of crypto enthusiasts and professionals. Bitcoin historian and Gorilla Pool founder Kurt Wuckert Jr. raised questions on X, exploring possible reasons why Blackstone is “advocating for increased inflation.”
Removing the 21 million supply cap is not impossible. The Bitcoin community could do this through a hard fork. However, the consequences of such a move could shake the future sustainability of the first cryptocurrency. Bitcoin owes its security, by and large, to the incentives it provides to miners. But if Bitcoin is no longer scarce, the value of the rewards could fall, making the network less protected and more vulnerable.
Several users responded to Wuckert saying they believed the mention of a possible hard cap removal was just a formal disclaimer to avoid lawsuits if Bitcoin inflation occurred. Others said that a forked Bitcoin without the 21 million limit would no longer be Bitcoin but something else, and the hardcore community would stick with the original version.
Blackstone is willing to try this relatively new asset. No matter how much Bitcoin the company already owns, it will not risk investing more than it can afford to lose, and the recent purchase is just another transaction made by a company that surely sees value in Bitcoin itself. After all, 1 Bitcoin is always equal to 1 Bitcoin.
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