We May Have Jumped the Gun a Tad on BlackRock

Picture Credit: Reuters

Introduction

On July 16th, 2018, I distinctly recall being bombarded with a host of alerts, articles, and tweets from folks in the crypto community claiming that BlackRock had finally decided to make their foray into cryptocurrency.

These messages were followed up with an overall increase in sentiment around the community. The common perception among most in the space was that this such a big name with a wealth of resources like BlackRock would almost surely lead to a massive boost in the long-term for crypto.

However, I was a bit skeptical of this information when I first heard it in the same way that I usually get skeptical when I start to see the evangelical praises of crypto being sung from people that insist that ‘institutional money’ will provide itself as the ‘savior’ for crypto.

Who is BlackRock?

One of (if not) the biggest hedge/investment funds on planet earth.

According to their website, they have over $6.3 trillion (AUM) worth in assets that they manage per year, which is a staggering number.

So, it seems obvious that the conclusion upon hearing the news that “Blackrock is entering crypto” would be joy (if you’re a bull), because you’re figuring that they can leverage the necessary resources to send the price into the same dizzying gains that we saw in 2017.

Where Did This Report Even Come From?

That’s a great question.

https://www.cnbc.com/2018/07/16/bitcoin-jumps-after-report-says-blackrock-exploring-cryptocurrencies.html

There is nothing inaccurate about the news as shown above.

However, what is inaccurate is how said news has been portrayed.

People have extrapolated “shown an interest” or “formulated a group” to = setting up a structure to begin investing heavily into the space.

You may be thinking,

“Well, if they’re already ‘interested’, then their entry into the market at some point in time should be virtually inevitable at this point.”

If so, I’m not so sure that this is correct.

BlackRock May Not Even Have Sufficient Investor Interest in Crypto

Bloomberg released an article yesterday which seemed to inadvertently dispel all of the ‘hype’ stemming from BlackRock’s alleged interest in cryptocurrency.

Here’s the headline for the article that they put out about the issue:

Source: https://www.bloomberg.com/news/articles/2018-07-16/blackrock-s-fink-says-clients-have-zero-interest-in-crypto

That’s a pretty strongly-worded statement — especially coming from Larry Fink.

Who is Larry Fink?

Props to Wikipedia

So, this is someone who clearly has the authority and should be considered a high enough ranking member to correctly assert whether there is truly customer demand for crypto or not.

His Version of ‘Customer Demand’ May Be Inaccurate

The statements that Bloomberg make in their article seem to build up the argument that the CEO feels that by virtue of clients not directly asking for an option to invest in cryptocurrencies that their clients simply have no interest in investing in cryptocurrency at all.

However, this could very well not be the case due to a host of potential alternative and plausible reason for why their customers have not specifically requested that they be given the option to invest in cryptocurrency.

  1. They might have assumed that the lack of crypto trading options in the investment firm was an implicit way of stating that they do not intend on trading cryptoassets.
  2. Blackrock’s clients may not actually know about cryptocurrency. Thus, they do not ask. But that does not mean that it can be assumed that they would be disinterested in cryptoucrrency if they did learn what it is. In fact, that could inflame their interests.
  3. Clients may have already sought alternative measures for investing in cryptocurrency. Fink never reported that he specifically polled clients at the firm to see whether they were interested in it as an asset class/potential investment. He merely stated that no one had come to BlackRock specifically as a client asking for options (and it would be rather unusual of a client to do so anyway).

Blackrock’s CEO Seems to be Doggedly Pessimistic About Cryptocurrencies

The Bloomberg also states that the CEO intimated the following thoughts:

The above paragraph essentially amounts to a “We’re keeping our eyes on it.”

This is what I figured would be the case when I first heard the news anyway.

I’m willing to bet that there was a serious lack of knowledge at BlackRock regarding cryptocurrency and because of that, they probably want to get ‘up to speed’ on regulations, pending regulations, unspoken ‘rules’ to how the space moves, and a good idea of what blockchain technology actually is, which projects are legitimate or bullshit, etc., before really moving into crypto.

Who knows, maybe they had this information released just to test the liquidity of the markets and see if Bitcoin could be manipulated so easily that the mere announcement that their firm might invest in it one day could cause a fluctuation in the price and an increase in volatility.

In either case, to reserve some of the more bullish sentiments regarding this news until something a bit more substantive comes out from BlackRock’s camp.

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