Source of article reprint: Vernacular Blockchain
Author | Huohuo
Produced by | Vernacular Blockchain
According to news on March 21, BlackRock announced that it will launch the first tokenized fund BUIDL on Ethereum. This move directly makes the RWA (Real World Asset, which refers to the tokenization of real-world assets through blockchain technology) track hot. rise.
However, this is not the first time that BlackRock has stirred up the crypto market. As early as January, BlackRock took the lead in promoting the long-awaited Bitcoin Spot Trading Fund (ETF), which caused a sensation. Subsequently, the entire crypto market started a new round of craze. , the price of Bitcoin, which has been low for more than a year, began to break through the $40,000 mark.
It is expected that BlackRock will go deeper into the crypto industry and become a significant force in the future. As the world's largest asset management institution, why is BlackRock interested in cryptocurrencies? What impact will it have on the subsequent development of the crypto industry? Let's take a closer look at this new Bitcoin whale in the crypto industry.
01.Who is BlackRock?
BlackRock, founded in 1988, is currently the world's largest asset management, risk mitigation and consulting company.
BlackRock currently has 89 offices in 38 countries around the world, with more than 16,000 employees and clients in more than 100 countries. At the same time, BlackRock holds shares in 4,973 companies, including Apple, Microsoft, Nvidia, Amazon, Facebook, Tesla, ExxonMobil, etc.
BlackRock's top equity holdings, as of August 2023. Source: startuptalky
In terms of revenue, in 2023, BlackRock's total revenue will be $17.86 billion, of which the largest part ($14.4 billion) comes from investment consulting, management fees and securities lending. The largest contribution from the region is the Americas, with $11.9 billion in revenue in 2023. In general, financial consulting and management fees account for the majority of the company's revenue, and the US company contributes the majority of the company's revenue.
Source: https://in.tradingview.com
According to relevant reports, BlackRock's assets under management reached $10 trillion in the fourth quarter of 2023. It can be said that even without the launch of a Bitcoin spot ETF, BlackRock, as a towering tree in the global financial industry, is firmly in the top spot. So why did BlackRock start to enter the crypto industry? Is it a normal expansion of its own development? Or is it because BlackRock sees the potential of Bitcoin and Bitcoin can hedge traditional financial risks? Or does BlackRock think it is a good addition to their investment portfolio?
02. BlackRock’s Crypto Action
In fact, BlackRock began to take an interest in the crypto industry and blockchain technology as early as a few years ago, but there were many challenges at the time. First, the market volatility was relatively large, and second, there was a lack of reasonable supervision. Market rules had not yet been fully established. Moreover, over the past decade, the SEC has been rejecting applications for spot Bitcoin ETFs for fear of market manipulation, so no obvious major actions have been taken.
However, on January 11, 2024, several institutions led by BlackRock launched the first batch of Bitcoin spot ETFs in the United States, called iShares Bitcoin Trust (IBIT), which directly reversed the embarrassing situation in which spot Bitcoin ETF applications had been rejected in the past decade and opened a new chapter in the development of encryption.
1) One of the biggest promoters of Bitcoin spot ETF approval
BlackRock is an organization with a large record of ETF approvals. According to foreign media reports, the company has 575/675 applications approved by the SEC, with a success rate of nearly 100%. Only one ETF was rejected in October 2014, an actively managed ETF jointly submitted by BlackRock and Precidian Investments. The reason given by the SEC for the rejection was the lack of transparency in profits.
However, in the face of the SEC, which has rejected Bitcoin spot ETFs for ten years, BlackRock has made sufficient preparations in the application to improve the approval rate. On June 15, 2023, BlackRock submitted an application for a spot Bitcoin ETF and proposed solutions to the issues of concern to the SEC. For example, in order to meet the SEC's requirements for implementing effective monitoring measures to prevent market manipulation, BlackRock plans to sign a regulatory sharing agreement with relevant well-known platforms and list Coinbase as the custodian of the proposed ETF to ensure the safe management of Bitcoin.
Due to BlackRock’s involvement and reputation, several investment/asset management institutions joined the application competition, including Fidelity, Invesco, VanEck, Cathie Wood’s Ark Investment Management, WisdomTree and many other financial companies, most of which listed Coinbase as an ETF custody service provider.
Unfortunately, on June 30, the SEC rejected the Bitcoin spot ETF application, saying that the documents submitted by BlackRock, Fidelity and other companies lacked clarity and comprehensiveness. A few days later, BlackRock resubmitted its application. Generally speaking, the SEC's resolution time for Bitcoin spot ETF applications is up to 240 days in total. Although there may be lengthy exchanges and discussions, the fact that the application was not flatly rejected as in the past brings hope for possible approval in the future and is seen as a positive sign of progress.
According to the forecast at that time, based on the publication time of each ETF application in the Federal Register, Tokeninsight predicted that the eight institutional ETFs might be approved as follows:
As it turned out, the SEC did indeed announce the official approval of 11 spot Bitcoin ETFs, including BlackRock, in the early morning of January 11, according to the earliest predicted time.
After the news was released, Bitcoin surged briefly, rising to over $49,000. After that, Bitcoin also started a spiral upward process. So far, in less than three months, Bitcoin has exceeded $71,000.
In fact, as early as BlackRock's application for a Bitcoin spot ETF, the market has started to actively cheer with prices. Bitcoin broke through $30,000 and $40,000 in October 2023, and directly reached $45,000 after the application was approved.
Bitcoin trend over the past year
And because five of the companies applying for the issuance of Bitcoin spot ETFs chose CEX Coinbase as their custodian, the price of Coinbase also rose from US$70 in October 2023 to a high of US$187 in December.
Coinbase Token price trend in 2023
According to ChainCatcher on March 24, new spot Bitcoin ETFs (excluding GBTC) have significantly increased their Bitcoin holdings since their debut on January 11, 2024. Nine new spot Bitcoin ETFs (excluding Grayscale GBTC) currently hold 474,363.55 BTC. Among them, BlackRock IBIT leads with 242,829.94 BTC holdings, and one reserve makes IBIT a giant among its peers, accounting for 51.19% of the total holdings of these nine. When GBTC is considered together with these 9 BTC, the total rises to 824,615.55 BTC, accounting for about 3.92% of the Bitcoin cap.
According to Cointelegraph's analysis on March 25, assuming that the current fund flow does not change drastically, the amount of Bitcoin in BlackRock's spot Bitcoin ETF may exceed GBTC of crypto asset management company Grayscale in the next three weeks.
Although the market predicts that in the short term, the approval of the Bitcoin spot ETF may not have an obvious stimulating effect on the market, in the long term, its existence will significantly improve the compliance and investability of digital assets, thereby improving the market Depth and liquidity will also help reduce market volatility and enhance investor confidence.
In general, BlackRock’s reputation and influence as the world’s largest asset management company, as well as its expertise and experience in launching and managing ETFs, have convinced the SEC and the market of the feasibility and value of Bitcoin ETFs, and have had a huge impact on the crypto world. Next, we will take stock of its many investments and preparations in the crypto field.
2) Major shareholders of the largest Bitcoin holding companies
In BlackRock’s cryptocurrency portfolio, it owns 5.53% of MicroStrategy, a business intelligence and software company that is currently the largest Bitcoin holder. BlackRock has acquired MicroStrategy’s stake through its various funds and ETFs, such as the iShares Core S&P 500 ETF, iShares ESG Aware US Aggregate Bond ETF, and iShares Russell 1000 Growth ETF.
MicroStrategy currently has approximately more than 120,000 bitcoins, valued at more than $5 billion, and has issued more than $2 billion in debt to finance its purchases of bitcoin. According to a recent analysis by Forbes, BlackRock's stake in MicroStrategy is equivalent to owning more than 6,600 bitcoins, valued at more than $300 million. This makes BlackRock one of the largest institutional holders of Bitcoin, even though it does not directly own any Bitcoin. BlackRock's stake in MicroStrategy also reflects its optimistic outlook and confidence in the company and Bitcoin.
3) Investing $384 million in Bitcoin’s leading mining companies
BlackRock invested $384 million in Bitcoin Industry in August 2023 as part of its strategy to explore the potential impact of digital currencies on the global economy.
BlackRock has invested in four Bitcoin industry companies, all of which are currently the largest and most mature Bitcoin block production companies, namely Marathon Digital Holdings, Riot Blockchain, Bitfarms and Hut 8 Mining.
BlackRock's investment in Bitcoin Industry Company is a bold and innovative move. On the one hand, it promotes the growth and development of the Bitcoin network and ecosystem, improves the security, stability and diversity of the network, and supports the innovation and adoption of the technology. On the other hand, it also demonstrates its interest and participation in the field of cryptocurrency, as well as its recognition and appreciation of the value and potential of the industry.
4) Close cooperation with crypto industry organizations
Issuers have been navigating the SEC's application for a spot Bitcoin ETF for a long time. While actively promoting this matter, BlackRock has been working and consulting with other stakeholders and experts in the crypto industry (such as Coinbase, Fidelity and VanEck) to address the SEC's concerns and requests.
In 2022, BlackRock reached a partnership agreement with Coinbase to integrate its Aladdin operating platform with Coinbase's leading cryptocurrency CEX to create a sound solution for the IBIT ETF.
In addition to the Bitcoin ETF, BlackRock has also formed partnerships with some large cryptocurrency players. It holds a minority stake in stablecoin company Circle Internet Financial and manages more than $25 billion in reserves in government money market funds, backing Circle’s USDC, among others.
BlackRock also manages a private bitcoin trust for professional clients. The trust has more than $250 million in assets, and most clients have since moved their money to the new ETF, according to people familiar with the matter.
03. BlackRock CEO: Bitcoin is really good
BlackRock's acceptance of Bitcoin is gradual. During the epidemic, Rick Rieder, the company's global fixed income chief investment officer, began to allocate Bitcoin futures in its funds. According to people familiar with the matter, Robbie Mitchnick, head of BlackRock's digital assets, also helped Fink become a Bitcoin believer.
Speaking of Fink, he was listed on the "Forbes Global Billionaires List" as early as 2022. Whether it is investment talent, leadership or social skills, the 72-year-old Larry Fink is known as the "Godfather of Wall Street" and the founder of the "Financial Empire", and has made an indelible contribution to the development of BlackRock.
But Fink was not a believer in Bitcoin from the beginning. In 2017, Fink called Bitcoin a "money laundering index" and has repeatedly criticized cryptocurrencies, calling them "something that customers don't want to invest in at all."
It wasn’t until 2022 that Fink’s stance on digital assets began to change significantly. According to people familiar with the matter, Bitcoin’s rebound after the 2022 cryptocurrency crash was a major reason for BlackRock’s change of mind.
In a conference call in April of that year, Fink said the company was extensively researching the cryptocurrency space and was seeing increasing interest from clients. In the same month, BlackRock participated in Circle’s $400 million financing. Then in the summer, BlackRock quietly launched a spot Bitcoin product for U.S. institutional clients as their first private trust product. BlackRock seeded the fund with its own money and expanded it with outside investors.
Also in the same year, BlackRock also established a partnership with Coinbase, allowing institutional clients who own Bitcoin on the cryptocurrency exchange to use their software tool suite Aladdin to manage portfolios and conduct risk analysis. Therefore, Coinbase is currently the custodian of their spot Bitcoin ETF.
Today, Fink is one of Bitcoin’s most ardent believers, with his firm BlackRock lending legitimacy to the digital currency, managing the fastest-growing Bitcoin fund, establishing partnerships with the digital asset industry’s top players, and opening the door for mainstream investors to buy and sell Bitcoin as easily as investing in stocks.
Today, BlackRock’s cryptocurrency ambitions are no longer limited to Bitcoin. The asset management company is submitting a pending application to the SEC to launch an ETF that holds Ethereum, the second largest cryptocurrency by market value and the native token on the Ethereum blockchain. The regulator’s deadline is May, which is worth looking forward to.
04. Summary
As BlackRock's slogan says, "Investing in the New World", BlackRock believes that cryptocurrencies and blockchain technology can transform the financial industry and create new opportunities for growth, efficiency and inclusion.
Perhaps it is precisely because of the recognition that the demand and adoption of cryptocurrencies by institutional investors, retail investors, governments and enterprises are growing that BlackRock's interest in cryptocurrencies is no longer limited to following the trend or making a speculative gamble, but rather as a strategic long-term vision.
It can be predicted that BlackRock will be indispensable in the future encryption field.
