BlackRock Buys BTC Mining Stocks – Is This Really Bitcoin ‘Exposure’?
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BlackRock Buys BTC Mining Stocks – Is This Really Bitcoin ‘Exposure’?

Riot Blockchain and Marathon Digital Holdings have helped BlackRock take a further step into crypto. Is it a legitimate step?
Neither the author, Kai Morris, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The institutional investment firm, BlackRock, has revealed via a SEC filing they have invested in two Bitcoin mining companies. One of BlackRock’s aims by doing this is to gain exposure to BTC via indirect, albeit regulatory safe, methods. But it raises the question: does this really count as exposure to Bitcoin?

BlackRock’s Plans with Crypto

BlackRock has kept an eye on crypto for a while now, both by “studying” the industry, and trading in Bitcoin futures. However, it is clear the firm is apprehensive about directly investing in the market. 

The SEC report reveals they own 6.71% of Marathon Digital Holdings, and 6.61% in Riot Blockchain. Combined, this makes up a total of $382,962,003.08.

Both are mining firms based in the US. While America is not commonly thought of as a crypto mining location, since the mass exodus of miners in China, many have been looking to states like Texas for their mining farms

While any form of crypto investment is good news for the industry, the fact that BlackRock chose to engage via shares, rather than via crypto ownership such as how Telsa and Microstrategy did, is certainly interesting. It does not make for a convincing embrace of the markets. 

However, in May, Rick Rieder, Chief Investment Officer at BlackRock, called Bitcoin “durable” saying that “it will be part of the investment arena for years to come”. This implies they are considering direct Bitcoin holdings, but their current actions suggest they will ease into this, via futures and investments in Bitcoin-involved companies.

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Is BlackRock’s Mining Investment Really BTC Exposure?

BlackRock appears to be treating these investments as gaining exposure to the markets, but just how true is this? To get a better understanding, let’s examine the stock prices for the Bitcoin mining companies that BlackRock recently invested in.

Below is the activity for Riot Blockchain (RIOT):

Image of RIOT’s one-week chart – image courtesy of TradingView

Now let’s see a chart for MARA:

Image of MARA’s one-week chart – image courtesy of TradingView

If we compare this to the current BTC/USD chart, we see some almost identical activity:

Image of one-week chart for BTC/USD – image courtesy of TradingView

The three charts appear to have similar patterns. From here, it certainly seems fair to say BlackRock is gaining exposure, as the fluctuations align.

However, there are other factors at play that could change this in the future. Exposure happens when a company opens itself up to the risk of a certain investment, but BlackRock’s risk could get buffered or minimized by investing in crypto-related stocks. 

For instance, there may be ways these companies can diversify their activity or alter their behavior should the market crash. Both companies could start selling different products or look into other streams of revenue. And because BlackRock is investing in them, it matters more how these individual companies compose themselves rather than what the Bitcoin market actually does. 

This is a smart move on BlackRock’s behalf, as it essentially relieves them of having to make as many decisions, banking on RIOT and MARA to act instead. They are reducing the chances of total failure by placing their faith in other companies. Considering Bitcoin’s fundamentals are still tough (albeit somewhat possible) to decipher, it could be safer to gain exposure via the stock market instead, where TA is more successful. 

Although, this is a double-edged sword– Bitcoin’s price is influenced by much more than mining practices, and so a spike in its value might not be replicated in RIOT and MARA. Mining is currently a hot topic in crypto due to China’s exodus, and recent energy concerns, but in the future, another aspect of Bitcoin might take center stage. When that happens, BlackRock might not see the same gains that other directly exposed investors do. 

With this in mind, it is undeniable BlackRock has gained some exposure to Bitcoin, but that exposure is also quite limiting. It may pay off well at the moment, but this might not always be the case, especially in the future when mining is making fewer headlines. Perhaps by the time that happens, BlackRock will have gotten confident enough to directly purchase digital assets themselves.

Do you think BlackRock has gained genuine Bitcoin exposure? Let us know in the comments below.