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Alex Kimani

Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

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BlackRock Goes Bitcoin

BTC

Bitcoin prices climbed nearly 10 percent to hit $7,500 in Tuesday trading, a level they last touched nearly six weeks ago, after BlackRock. Inc. announced that it was evaluating blockchain technology and cryptocurrencies like bitcoin.

BlackRock is the world’s largest asset manager and ETF provider with about $6.3 trillion in assets under management, including owning 40 percent of the $5-trillion ETF market.

(Click to enlarge)

Source: CoinDesk

BlackRock CEO Larry Fink was, however, quick to temper expectations by saying that the company is still studying cryptos though it does not foresee huge demand.

But that has not stopped analysts weighing in on the latest development in cryptoland.

According to Chris Yoo, portfolio manager at Black Square Capital Management LLC. the interest by the largest asset manager in the world would be a catalyst for upward price movement for bitcoin even if BlackRock were to use more conservative investment strategies.

In any case, it’s a welcome paradigm shift by BlackRock and Fink, who in November described bitcoin as a “speculative investment” and noted its frequent association with money-laundering.

Others Weigh In

Not everyone saw bitcoin’s latest rally through the same prism, though. The Express linked the rally to yesterday's report that the Financial Stability Board (FSB) had presented a framework for regulating cryptos to G20 nations, which could help bring the industry closer towards mainstream global finance. Related: What Is Bitcoin Really Supposed To Be?

In yet another theory, the man who successfully called the 2008-2008 housing crisis, Professor Nouriel Roubini (aka Dr. Doom), was highly suspicious of bitcoin’s rapid climb, saying that prices must have been manipulated:

This was not the first claim of bitcoin price manipulation, specifically tying it to Tether. Professors John Griffin and Amin Shams of the University of Texas did so in an earlier report titled, Is Bitcoin Really Un-Tethered? The report claims that the pair had on numerous occasions discovered a link between the massive bitcoin rally of late 2017-early 2018 and Tether.

But whether the good professors’ claims hold any water or not is a story for another day.

For crypto investors who have been following industry developments in recent months, BlackRock’s announcement  and bitcoin’s subsequent spike is highly significant—because it has come at a time when the arrival of the first bitcoin ETF could be only months away.

Van Eck, a global money manager fund, and SolidX, a crypto startup, have laid down a proposal to the SEC that might see the world’s first bitcoin ETF hitting the market soon. It’s a pretty comprehensive ETF in that it will not only be physically backed by actual bitcoin but also be insured against loss or theft, thus removing a huge element of risk that made the SEC reject the proposed Winklevoss ETF in March of 2017.

Interestingly, none other than the CBOE Global Markets, the world’s largest options exchange, has given its backing by proposing to the SEC that it facilitate buying and selling of the ETF by bundling SolidX shares in baskets of 5 shares each (working out to 25 bitcoins per ETF).

The price of the ETF will likely end up being prohibitively expensive for the average retail investor. But as Chris Yoo has pointed out, the direct involvement of large institutional players like BlackRock, CBOE and Van Eck is likely to give leverage to bitcoin prices and the crypto industry at large.

By Alex Kimani for Safehaven.com

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