🪙 BlackRock caves in
The world's largest asset manager to soon offer crypto services to institutional clients.
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The Big Story
Crypto's impact is undeniable; it forced us to question how we, as individuals and society at large, perceive money. What’s more, the coronavirus pandemic has propelled the digital movement even further as people explored different investments avenues to maximise their returns amid global inflation and unemployment worries.
While many companies embraced the digital revolution early on, some Wall Street giants weren’t so welcoming. But that seems to be changing as BlackRock, the world's largest asset manager with over $10 trillion AUM, plans to offer crypto services to clients.
In a letter to its shareholders, CEO Larry Fink confirmed that the company is examining how to help clients wanting to invest in digital currencies.
"As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients," Fink said.
He believes that the Russian invasion of Ukraine has potentially accelerated the need for digital currencies, prompting nations to re-evaluate their currency dependencies. "A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption," he wrote, adding that crypto can bring down the costs of cross-border transactions.
A reversal of stance
Fink's latest comments are at sharp odds with his assessment of the space last year when he said that institutional clients remained uninterested in investing in digital currencies despite acknowledging it as having the potential of becoming a "great asset class." While BlackRock currently doesn't have crypto on its balance sheet, it's still exposed to Bitcoin through its stake in Microstrategy, a Virginia-based tech firm that holds over $5.3 billion worth of Bitcoins.
Nations and institutions have been exploring a pivot to crypto ever since China piloted its digital yuan in 2020. Last year, the European Central Bank launched its two-year digital euro project. More recently, the Federal Reserve also released a study saying that it's still researching and developing a potential US Central Bank Digital Currency (CBDC), and is leaning toward banks and financial firms for managing digital accounts for customers.
Bull market for crypto
In an interview with CNBC, Treasury Secretary Janet Yellen said that while she still has some apprehensions about crypto—which she thinks are valid—the innovation that digital currencies can bring to the payment system "can be a healthy thing."
Her evolving viewpoint regarding the crypto market is seen as a bullish signal by crypto investors, considering that the Treasury Department and several other federal agencies are working on a regulatory framework for crypto following President Joe Biden’s signing of a crypto executive order.
Another significant bull run catalyst is Luna Foundation Guard, an open-source organization focused on the Terra blockchain, which announced its plans to back the network’s token with over $10 billion in Bitcoin reserve. Since the end of January, Terra bought more than $1 billion in Bitcoin, including $135 million in four purchases to back its UST Stablecoin Reserve.
Both these factors hugely contributed to the growing optimism over Bitcoin, which erased this year's losses and increased more than 35%, surpassing the $48,000-mark. Several analysts predict that the world's largest crypto could encounter its next resistance level at $52,000, and if it breaks through that, it could even reach $65,000!
What's next?
For a traditional money manager like BlackRock to embrace digital currencies is exactly the kind of validation that the crypto market needs. It would also give the asset class its much-needed credibility and allow investors to not rely only on online brokers. While BlackRock prepares for its crypto trading pivot, competitors like Fidelity and Schwab have already started exploring crypto exchange-traded funds. It's only a matter of time until other big players enter the space.
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