By Stephan Roth on Monday 5 September 2022
BlackRock prepares for institutional bitcoin-binge as investors look to test hedge against inflation hypothesis
BlackRock will use Kraken's CF Benchmarks bitcoin index pricing product for its newly launched bitcoin offering. In July, BlackRock announced a deal with Coinbase to begin offering its clients exposure to bitcoin on its Aladdin platform.
The world's largest asset manager then launched a private trust, giving U.S.-based institutional investors the opportunity to trade spot bitcoin.
According to a report in The Block, the world's largest asset manager has chosen CF Benchmarks to provide the indexes for their institutional clients.
Sui Chung, the chief executive of CF Benchmarks told The Block that the agreement has been in place since 2021.
CF Benchmarks, which crypto exchange Kraken acquired in 2019, has set itself the target of becoming the premium indexing firm for cryptocurrencies.
BlackRock's decision to launch a bitcoin trust and offer exposure to cryptocurrencies comes amid a market drought. Bitcoin is currently trading at $19,759, almost 70 per cent below its all-time high recorded in November 2021.
However, this has not deterred asset and investment managers.
In April 2022, Fidelity became the first brokerage to offer exposure to crypto in retirement accounts and Schroders bought a stake in digital assets firm Forteus in July. This month, abrdn purchased a stake in the digital exchange Archax.
"These companies don't just offer crypto for the sake of it. Clients are demanding exposure to crypto and they are meeting that demand," Chung told AltFi in a recent interview.
The question is why now? Markets are down and the crypto space has entangled itself in regulatory scrutiny since the collapse of stablecoin Terra in May.
However, Chung suggests institutional investors are "testing the hedge against inflation" hypothesis.
"Bitcoin has never traded during a period of sustained inflation, it has only reacted to announcements," Chung says.
With inflation numbers set to reach 13 per cent in the UK by the end of the year and Fed chief Jerome Powell claiming last week that the Fed would raise interest rates "for some time", institutional clients may be scrambling to diversify their portfolios and traditional financial institutions have heard their plea.
BlackRock was unable to comment at the time of publication.