BlackRock, the world’s largest asset manager with over $10 trillion worth of assets under its management, recently joined the digital asset space after launching its first-ever spot private Bitcoin trust. 

According to a blog post on the company’s website, the trust will only be available to U.S-based institutional investors, and it’ll seek to track the performance of Bitcoin, less expenses, and liabilities of the trust.

In explaining their decision, BlackRock stated, “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities. Bitcoin is the oldest, largest, and most liquid digital asset and is currently our clients’ primary subject of interest within the digital asset space.”

BlackRock’s earlier forays into the cryptocurrency market

Crypto Currency market concept to represent private bitcoin Trust

The announcement came just one week after the New York-based firm tapped America’s largest crypto exchange Coinbase. This high-profile partnership was aimed at giving Aladdin clients access to crypto trading and custody via the Coinbase Prime product, starting with Bitcoin. 

“Leveraging Coinbase’s comprehensive trading, custody, prime brokerage, and reporting capabilities, typical clients will be able to manage their bitcoin exposures alongside their public and private investments,” BlackRock further expounded on the partnership.

BlackRock’s decision to enter the digital asset space was primarily fueled by Bitcoin’s string traits, consistent growth over the years, large market capitalization, strong liquidity, and the fact that it was the key asset of interest among BlackRock’s clients within the crypto space.

In March 2022, BlackRock’s CEO Larry Fink sent out a letter to investors stating that they were assessing the option of offering digital services to their clients. Later in July 2022, Larry updated their clients, disclosing that BlackRock was working with Circle, the issuer of USDC stablecoin, as a custodian and manager of some of the USDC reserves. 

He went on to add that he expects the relationship to expand as BlackRock continues to closely monitor and study the cryptocurrency space, primarily focusing on four areas of digital assets — permissioned blockchains, stablecoins, crypto assets, and tokenization — and their associated ecosystems. 

What experts are saying about BlackRock Private Bitcoin Trust

picture of Cathie Wood
Image credited to Time Article

According to other investment experts like Cathie Wood, Ark Invest’s CEO, “the illiquid supply, according to our estimates, is about 14 million out of the roughly 18-19 million Bitcoin outstanding. By our calculations, only three million units are truly liquid. So if we were to see a $1 trillion increase in demand, it would probably drive the price up much higher than the doubling I just mentioned.” 

However, she added that BlackRock’s entrance into the crypto space could lead to more institutional investors depositing money into Bitcoin, pushing BTC’s price higher.

Excluding stablecoins, Bitcoin maintains close to 50% of crypto’s market cap. In this regard, BlackRock is pushing its endeavours by encouraging organizations such as RMI and Energy Web to continue developing greater transparency in sustainable energy utilization in Bitcoin mining.