How Blackrock may influence the future of Bitcoin

Blackrock is one of the largest asset managers in the world. In the wake of the Bitcoin ETF application through iShares, the traditional financial giant came to the attention of many crypto investors. Two conceivable scenarios of how Blackrock might impact Bitcoin.

As a fiduciary, Blackrock invests about 10 trillion US dollars for its clients. With its ETF provider iShares, Blackrock dominates the global ETF market. With approximately 120 million investors iShares collects client assets of about US$2.5 trillion. The company has been repeatedly criticized for its growing influence on the financial world. The question is therefore justified to what extent institutional investors can influence the largest decentralized network at odds with its censorship-resistant values.

Blackrock influences Bitcoin indirectly through Bitcoin ETFs

To physically replicate indices, iShares must buy large equity stakes in individual companies for its clients. Although the clients' funds are not owned by iShares, they are managed through a provider. There are often warnings that if too many investors sell in a panic, liquidity shortages occur.

Suppose Blackrock were to offer Bitcoin spot ETFs, the group would have to buy "real" Bitcoin according to the above scheme. Bitcoin would increasingly come under Blackrock's management along with its liquidity, which could increase the risk of cluster risk.

However, entry through Bitcoin ETFs would also have positives. After all, the strong liquidity of new investors from the traditional exchange sector could boost the Bitcoin price. More details can be found in a extensive article on the background of Bitcoin ETFs.

Blackrock affects Bitcoin directly via mining

Even if Blackrock as an ETF provider could not fully buy out the decentralized Bitcoin network, Bitcoin would not function without the miners mining new coins. Institutional investors could therefore influence Bitcoin's PoW consensus by buying shares in mining companies.

Among the largest Bitcoin mining companies from the US are RIOT Blockchain en Marathon Digital Holdings. Blackrock invested nearly $400 million in Bitcoin mining stocks in 2021 - by investing in Riot Blockchain and Marathon Holdings through a range of mutual funds and ETFs. According to Fintel, Blackrock currently has about 7.4% shares in Marathon Digital at 6.8% shares in RIOT Blockchain.

Blackrock also loaned $17 million in capital to Core Scientific, a high-revenue U.S. mining company, so that it could continue mining despite its bankruptcy filing. Thanks to this debt loan, Blackrock the largest shareholder of Core Scientific.

Bitcoin supports profit opportunities - including for Blackrock

It has long been nothing new for institutional investors to show clear interest in Bitcoin and the mining industry behind it. In view of the upcoming Bitcoin Halving in 2024 the competitive pressures for the lucrative mineral business increase. This event may especially play to the advantage of better-funded miners, which are backed by large U.S. investors such as Blackrock.

Whether through Bitcoin ETFs or the mining industry, both scenarios would be beneficial to Blackrock if demand for Bitcoin increases in the long run. In fairness, it must be admitted that the financial giant is not seeking to control Bitcoin with tyrannical intentions, but to maximize its clients' profits. Whether and to what extent the financial world benefits from this concentrated form of wealth management will probably be answered at some point in hindsight.