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BlackRock Has Been Quietly Trading Bitcoin Futures Since January
From techno nerds to Wall Street’s largest financiers, Bitcoin has come a long way in maturing as a digital gold.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
If we’re to take initial steps from major financial organizations as significant, the 2021 bull market could be just warming up. BlackRock, Morgan Stanley and Goldman Sachs are the latest to enter the crypto arena.
BlackRock’s Bitcoin Future the Beginning of Larger Investments?
BlackRock, the colossus soaring above all other asset managers with $8.7 trillion in AUM, has started turning its eye on Bitcoin. BlackRock’s chief investment officer, Rick Rieder, revealed this on CNBC’s Squawk Box business show. According to Wednesday’s SEC filing, BlackRock held $6.5 million worth in CME BTC futures since January.
Since then, BlackRock’s 37 future contracts have appreciated over $360k. If you recall, futures are mainly used to hedge against price movements of an underlying asset from becoming unfavorable. Let’s take the current global semiconductor shortage as an example.
A GPU company is heavily dependent on semiconductor manufacturers such as TSMC. Accordingly, if the prices of chips rise, that company would suffer losses to its profits margin. To ensure against this, a hypothetical GPU firm would create futures contracts – buying chips at a certain price for a certain period.
Therefore, if the price of chips goes higher, futures contract ensures the company’s bottom line is not affected. In turn, the semiconductor manufacturer benefits from a secured income source. Moreover, if, for whatever reason, the chips lower in price than the agreed one in futures, it would benefit the manufacturer over the GPU company.
BlackRock’s Reasoning to Invest in Bitcoin
It is no understatement to say BlackRock is the worlds’ most powerful monetary entity. It even started handling the Federal Reserve’s affairs last September in order to stave off another stock market crash. BlackRock’s BTC futures involve two funds:
- BlackRock Strategic Income Opportunities
- BlackRock Global Allocation Fund – BTC futures represent only 0.03% of the asset within this fund.
Overall, BlackRock’s BTC CME (Chicago Mercantile Exchange) futures represent a minuscule slice of its total holdings – merely 00014%. BlackRock’s Rieder stated that this tiny dabbling into dominant cryptocurrency stems from the unsustainable nature of the current financial system.
“People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building, so we’ve started to dabble a bit into it.”
This aligns with the popular outlook that macroeconomic factors could push Bitcoin to reach $100k this year, regardless of inevitable price corrections. Interestingly, BlackRock’s chief, Larry Fink, follows similar pivoting on Bitcoin as Jamie Dimon’s portrayal of it as “fraud”.
“It’s just not a real thing, eventually it will be closed”, Jamie Dimon, the CEO of JPMorgan Chase at Delivering Alpha conference on September 12, 2017.
In the same year, within a month apart, Larry Fink framed Bitcoin as an “index of money laundering“.
“Bitcoin just shows you how much demand for money laundering there is in the world”, Larry Fink, the CEO of BlackRock, at the Institute of International Finance conference on October 13, 2017.
Unfortunately, that old-school canard has not yet retired. Only a few months back, the world’s biggest central bankers, from the Fed and ECB, tried to dishonestly portray Bitcoin as seedy crime money. In the meantime, both Morgan Stanley and Goldman Sachs have started offering Bitcoin funds.
In early March, Morgan Stanley’s clients who exceed $2 million in accounts gained access to Bitcoin funds. Likewise, Goldman Sachs should follow in Q2 2021 with both physical Bitcoin and derivatives. Mary Rich, the bank’s chief of digital assets, explained why:
“There’s a contingent of clients who are looking to this asset as a hedge against inflation, and the macro backdrop over the past year has certainly played into that,”
Once again, confirming what we already know—we are participating in a historic MMT experiment. At the end of that road could very well be CBDC tokenization of the economy, accompanied by UBI implementation.
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