BlackRock is the largest asset manager in the world and has integrated Bitcoin into a $150 billion portfolio universe.
Bloomberg reports that the firm will add a 1%-2% allocation to its portfolios for target allocations, which allow alternatives.
This represents only a tiny subset of BlackRock’s model portfolio business but it is a major step towards integrating Bitcoin in mainstream investment strategies.
In recent years, model portfolios have become more popular. They bundle money into investment strategies that are ready to go for financial advisors.
BlackRock made a notable decision at a moment when sentiment towards cryptocurrency is still weak. This was due to the fact that changes in these portfolios could trigger significant capital flows.
In a February 27, 2015 investment comment, Michael Gates wrote: “We think Bitcoin is a long-term investment that can provide unique sources of diversification and add value to your portfolios.”
BTC continues to slide
This move is in response to the declining Bitcoin price and general market unrest.
Bitcoins’ decline continued into Friday night, falling over 7% from $84,000 down to $79,000 in just a few hours.
The cryptocurrency has entered a bearish technical market at the beginning of the week.
Bitcoin’s weekly decline has been more than 18%. From a high on Monday of $96,500, it fell to $78,258 by Friday, its steepest drop since three years. This token is now down nearly 30% since its January 20th high of $109 588.
BlackRock Investment Institute’s December white paper explains that the well-documented Bitcoin volatility played a major role in the decision to set the weighting of the portfolio at a level between 1% and 2%.
The firm cautioned that any allocation above 2% would increase the overall risk of a portfolio’s crypto component.
IBIT is still one of the best-performing ETFs in history, despite recent outflows.
The fund’s inflows have exceeded $37 billion since its launch in January 2024.
BlackRock reports that the demand for Bitcoin in model portfolios is still strong. This could be a source of future investment.
BlackRock also made other adjustments to its portfolios in addition to the IBIT.
The firm’s equity overhang was reduced to 3%, from 4%. It also shifted its focus to growth strategies to align with value trading.
BlackRock has shifted billions between products to reduce its exposure in fixed income.
The iShares Treasury Bonds ETF 10-20 Years (TLH) saw a record inflow of $2.3 billion, while the iShares Treasury Bonds ETF 20+ Years (TLT) experienced a $1.8 billion outflow.
BTC ETF Outflows
Bitcoin ETFs have seen significant withdrawals. BlackRock IBIT, which is the spot Bitcoin ETF with the highest redemption net of $189 millions, saw its largest outflow on Thursday.
WisdomTree BTCW (Valkyrie) and Valkyrie BRRR (WisdomTree) recorded the second- and third-highest outflows, at $53.7 and $12.8 millions respectively.
Bitwise’s BITB, the US-based spot BTC ETF, was the only one to see net inflows of $17.6 millions.
In the last eight days, outflows of spot Bitcoin ETFs, including those offered by BlackRock, Fidelity and Grayscale, have exceeded $3.2 billion.
Early in the week saw some of the largest redemptions, including net outflows totaling $1.1 billion and $754 million respectively on February 25, 26.
Bloomberg Senior ETF Analyst Eric Balchunas stated that Bitcoin ETFs are “feeling the squeeze” but stressed that outflows only represent less than 2 percent of assets. This suggests that investors have been holding on to their Bitcoin ETFs.
Bitcoin ETFs performed well in 2024 despite recent withdrawals. Net inflows reached $36.85 Billion.
The total net assets of all Bitcoin spot ETFs are currently over $94.3 billion. This represents approximately 5.69% the market capitalization for Bitcoin.
The report BlackRock added to its model portfolio includes a Bitcoin ETF. This may change as new information is released.
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