Why BlackRock’s Bitcoin trust matters

The fund provides Bitcoin exposure to US institutional clients.

By Rick Betancur / August 15, 2022

BlackRock Inc, late last week, launched its Bitcoin offering to institutional clients. As the largest asset manager in the world the firm’s investment choices cause deep ripples in the market. BlackRock stock is up 3.18% since closing Friday night and Bitcoin continues to vacillate between 24k and 25k, having gained close to 20% since its lows this year.

”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.”

The firm remains bullish on Bitcoin alone, citing it as “the oldest, largest, and most liquid cryptoasset,” one which continues to be the “primary” interest of its clients.

Bitcoin with its recent downturns has been held primarily by “Hodlers,” who are long-term holders reluctant to sell regardless of market conditions, and “Whales” who are individual buyers who buy large quantities.

Institutional investors, however, are the traditional stock markets bread and butter, lending credence to the investment world. Many signs point to Bitcoin’s recent downturns coming from institutional investors shedding risk, according to data from CoinShare’s Digital Asset Fund Flows report $51.4 million worth of exposure to shorting Bitcoin were enacted in early July alone.

That attitude is changing, as the first week of August saw record inflows into crypto, totaled with the previous 5 weeks this accounted for $529 million in inflows from institutional investments. This sends strong signals that the “risk-off” attitude is being abandoned.

Vestly Takeaway: Record inflation levels, fears of a recession, and the Ukraine-Russia war have all fed into a crypto market which has seen deep declines since last year.

Good news of a slowing inflation rate, down to 8.5% year over year which is better than June’s 9.1% increase which sent the markets tumbling. The Fed’s expected .75 interest rate raise, the sentiment that inflation has now peaked and is coming down, and Americans accepting higher prices have all combined to possibly signal the market’s “bottom.”

Although timing markets is extremely difficult, if the bottom is in then it’s the best time to buy. Bitcoin, as the largest crypto by cap and market share, seems to have a unique pull for investors.