BlackRock’s crypto ambitions, explained
This week, bitcoin revisited $66K for the first time in roughly a month.
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
Crypto markets rally. Prices surge as ETH ETFs approach and the Fed hints at rate cuts.
How BlackRock became a crypto leader on Wall Street. The world’s largest asset manager, and its CEO, have become key BTC proponents.
This week in numbers. The rise of political crypto donations, the amount of BTC the German government sold recently, and more stats to know.
MARKET BYTES
Crypto markets bounce back
For nearly two weeks, crypto prices have generally headed upward, with a wide variety of factors powering their rise. After posting its biggest daily gain in two months on Monday, BTC spiked past $66,000 on Tuesday as ETH reached the $3,550 range.
Reports from Bloomberg, Reuters, and CNBC noted that Monday’s gains in both stock and crypto markets came as some investors speculated that former President Donald Trump’s chances of winning the presidency may have increased following the attempt on his life over the weekend.
Trump is still expected to appear as keynote speaker at the Bitcoin 2024 conference in Nashville later this month, and on Monday he chose Ohio Senator J.D. Vance, whom CoinDesk called “crypto-friendly,” as his running mate.
But there are a number of other factors potentially driving markets as well — including the seemingly imminent arrival of spot ether ETFs, growing optimism over U.S. interest rate cuts, and the expansion of the BTC mining industry.
Let’s get into those stories and more.
Analysts say spot ETH ETFs are likely to begin trading next week
This year’s crypto rally was sparked in large part by the blockbuster debut of spot BTC ETFs, which buy bitcoin and sell shares of it to investors via conventional stock markets and brokerages.
Asset managers including BlackRock, Fidelity, and Franklin Templeton now appear to be on the verge of gaining SEC approval to begin selling similar ETF products for ETH. According to the Wall Street Journal and other sources, the new funds could begin trading on Tuesday, July 23.
As of Wednesday, ETH was up roughly 9% for the week. BTC ETF products have also come roaring back after cooling earlier in July. BTC ETFs from firms including BlackRock and Fidelity added another $882 million during the week ending July 11.
How big could ETH ETFs be? Galaxy Research analysts predict that the funds could achieve monthly inflows of $1 billion, while a Citi report estimated up to $5.4 billion over the first six months. A new report from crypto analytics firm Kaiko even suggests that the ETFs could help ETH outperform BTC.
Fed chief says rate cuts can begin prior to 2% inflation target
Since last July, the Federal Reserve has kept interest rates pinned at two-decade highs as it seeks to tame inflation without triggering a recession. The Fed has been aiming for its long-held inflation target of 2% before rolling back interest rates.
But in a Monday speech at the Economic Club of Washington, D.C., Fed Chair Jerome Powell said that rates would likely begin coming down before the target has been reached — comments that boosted markets of all kinds, including crypto.
The goal is now to look for data that gives the central bank “greater confidence” that things are heading in the right direction. “If you wait until inflation gets all the way down to 2%, you’ve probably waited too long,” Powell said.
Wen rate cuts? Powell declined to specify when interest rates will begin to fall, but analysts widely believe the first cut will come in September and traders are increasingly betting on a total of three cuts before the end of the year.
Is this a “Goldilocks” moment for the mining industry?
Monday was also a “huge day” for crypto-related stocks — including publicly-traded mining firms like Cypher, Riot Platforms, and Marathon Digital — according to the Block.
Meanwhile, a new report from research and brokerage firm Bernstein argues that a variety of factors could be contributing to a “Goldilocks scenario” for the mining industry, such as the “U.S emerging as the dominant hub for bitcoin mining and latest generation mining chips, miners being valued for their lead in power interconnect, and miners emerging as strong partners for AI data centers.”
Why miners are HODLing… Some of the biggest mining firms, including Marathon Digital and Riot Platforms, have resisted selling their vast BTC holdings, even as prices have soared in recent months. Some have even added to their stashes by buying more. Why? In part because they are increasingly confident that values will continue to rise over time. “We obviously are a big believer in the bitcoin price going up further from here,” Marathon’s CFO told Cointelgraph. “We don’t need to sell bitcoin every month.”
WHALE STREET
Why the world’s largest asset manager has gone all in on crypto
Not all that long ago, BlackRock CEO Larry Fink shared what was then the prevailing view about crypto on Wall Street. “I was a proud skeptic,” he told CNBC’s Jim Cramer this week.
But that changed in a very big way this January, when a group of firms, including BlackRock, launched spot bitcoin ETFs to astronomical success. (As Fink told Cramer, studying and learning more about bitcoin has led him to become a “major believer.”)
In the months since, BlackRock’s BTC ETF (IBIT) has grown to be worth more than $18 billion. The firm is also planning to launch a spot ETH ETF as soon as next week (see story above).
But BlackRock’s crypto strategy goes beyond just buying crypto and selling shares on stock markets. In fact, the firm that Fink leads — which has more than $10 trillion dollars in assets under management — has emerged as one of the biggest players in the crypto universe, with an aggressive strategy to move important aspects of its business onchain.
Let’s dig in…
BlackRock has the most popular spot bitcoin ETF — by far.
BlackRock’s IBIT has become one of the most successful ETF launches of all time. To date, the fund has accumulated around $18 billion in assets and makes up about half of all spot bitcoin ETF trading volume. (Disclosure: Coinbase is BlackRock’s crypto custodian partner.)
Now, with a wider pool of institutional investors than ever seeking exposure to crypto in their portfolios, the firm has signaled plans to potentially purchase shares of bitcoin ETFs to include in the mix for investment products such as its Global Allocation fund and Strategic Income Opportunities fund.
BlackRock also has the largest tokenized U.S. Treasury fund
In March, BlackRock launched a new kind of fund which uses the Ethereum blockchain to “tokenize” U.S. Treasury bills.
Since then, the BlackRock USD Institutional Digital Liquidity fund (BUIDL) has become the largest player in the $2 billion tokenized T-bill market, with more than $520 million in assets under management.
Fink has previously said that “the next step going forward will be the tokenization of financial assets.”
In some ways, BUIDL works just like a standard Treasury fund, where investors can earn yield for holding T-bills. But because the assets have been tokenized, they can interact with crypto and smart contracts — allowing for instant settlement, easier transfer of ownership, and new use cases.
For example, BUIDL has integrated with a platform called FalconX that allows investors in BUIDL to use their tokens as collateral for loans and derivatives trades.
BlackRock is diversifying into other crypto initiatives
Earlier this month, MakerDAO announced the Spark Tokenization Grand Prix, a race “aimed at onboarding up to $1 billion of tokenized assets.”
BlackRock, via BUIDL, is helping to fund the competition. According to the Defiant, the Grand Prix “invites builders to onboard tokenized versions of traditional financial products, such as U.S. government bonds. MakerDAO plans to invest $1 billion into these products to integrate them into its ecosystem.”
BUIDL is also becoming a key option for crypto companies seeking a low-risk investment for their corporate treasuries, with Arbitrum’s governance DAO recently voting to allocate around $8.3 million in ARB to BlackRock’s tokenized fund.
The bottom line..
There aren’t many voices more influential in the world of finance than Fink, which means his comments about bitcoin – which he referred to on CNBC as a “legitimate financial instrument” and something that “there’s a real need for everyone to look at” — have outsized significance.
As Bloomberg analyst Eric Balchunas put it, “Hard to overstate how big a deal it is for Larry Fink […] to keep giving these full throated endorsements of bitcoin as [a] legit asset class for everyday portfolios.”
NUMBERS TO KNOW
$109 million
Total value of NFT sales recorded last week, up around 8% from the week prior. Ethereum remains the most popular network to buy and sell NFTs, accounting for more than $36.5 million in volume, compared to $27 million on Solana and $23 million on Polygon.
$3 million
Amount of crypto donations collected by GOP presidential candidate Donald Trump in the second quarter, with supporters donating $1.8 million in BTC and $900,000 in ETH, according to the Wall Street Journal. Trump became the first major presidential candidate to accept donations in crypto, the Journal noted.
$100,001 to $250,000
Value of bitcoin that Trump running mate J.D. Vance reported owning in his most recent federal financial disclosure from 2022. (Disclosure: Vance reported holding his bitcoin on Coinbase.)
50,000
Approximate number of bitcoin sold by the German government in recent weeks, equivalent to around $2 billion. The government had received the bitcoin through seizure earlier this year.
TOKEN TRIVIA
What is Bitcoin’s maximum supply?
A
There is no maximum supply
B
21 million
C
50 million
D
12 billion
Find the answer below.
Trivia Answer
B
21 million
