The institutional news just seems to keep rolling in – and this time one of the biggest names in the entire investment world is jumping into Crypto!
BlackRock has announced that it has filed to add Bitcoin futures to two of its funds, giving their investors exposure to the king of Crypto.
But just how big is BlackRock, and how big is this news? Let’s take a deeper look.
BlackRock Inc. is THE world’s biggest asset manager, headquartered in New York with offices all around the world. They manage countless clients’ assets, from stocks to real estate – and soon, Bitcoin.
Just how big does this make BlackRock, you might ask? Well, as of the 31st of December last year, they had a reported $8.7 TRILLION assets under management. To put that into perspective, that’s roughly the value of ALL the gold in the world, 15 times the value of all the Bitcoin in the world, and more than six times Australia’s entire GDP.
BlackRock is – quite simply put – a heck of a big deal.
So, what exactly are they proposing to do with Bitcoin?
BlackRock has authorized two of its investment funds (BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund) to invest in Bitcoin futures.
Once it goes through, these funds will be allowed to allocate some of their exposure to cash-settled Bitcoin futures.
Traditional futures contracts are essentially a deal to purchase (or sell) an asset at a predetermined price, at a specific time in the future.
Thus, if I think the price of Bitcoin is going to go up in the future, I could buy futures contracts that are currently selling for a price lower than I think Bitcoin will be at the delivery date. Now, if the price does go up by then, I’m entitled to pay the cheaper price from the time of the agreement.
In the case of BlackRock, the type of futures contracts are slightly different. For now, they will only be allowed to trade in cash-settled futures, which don’t force any Bitcoin to change hands. Instead, if I buy cash-settled Bitcoin futures, the other party has to pay me the cash difference if the price goes up in the future.
More specifically, BlackRock’s two funds will only be allowed to trade Bitcoin futures that are available on exchanges regulated by the Commodity Futures Trading Commission (CFTC). This will include the popular CME Bitcoin futures, which you may have already heard about.
Although the filings aren’t a guarantee they’ll be adding Bitcoin futures to the two above funds, it’s a great sign they’re considering them. Not only could this ultimately open the door for those two funds to start putting exposure into Bitcoin, but it will greatly increase the chances of additional funds to begin doing the same.
In the longer run, it also gives a huge tick of approval to Bitcoin and the wider Cryptocurrency market.
Funnily enough, BlackRock has made a very similar U-turn to JPMorgan with their stance on Crypto.
BlackRock CEO Larry Fink has drawn comparisons to JPMorgan’s Jamie Dimon after he called Bitcoin an “index of money laundering” three years ago. In stark contrast, Fink has now been quoted saying that Bitcoin was seeing giant moves on a daily basis, and could potentially unfold into a global market.
Their CFO, Rick Reider has also said that “there is a clear demand for Bitcoin” and that “it is going to be part of the asset suite for investors for some time”.
More and more major institutions keep giving the green light for investment in Bitcoin, and it’s becoming quite obvious how large a role it is about to have as a financial asset.
The biggest asset manager in the world is now on board and about to roll out Bitcoin products – let’s make sure we beat them there!
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