Cobo co-founder and CEO Shenyu predicted in the 2024 Hong Kong Web3 Carnival “Roundtable Discussion: Bitcoin 15 Years” that the prediction of “Bitcoin price reaching $1.5 million by 2030” is still conservative. Bitcoin will experience a large-scale explosion of applications in one or two cycles, and there will still be several times the space. The core players involved will be large financial institutions.
“There is no doubt that the institutionalization of cryptocurrencies is the future trend. After more than ten years of development, cryptocurrencies, once considered niche assets, are gradually moving towards mainstream assets. The participation in the cryptocurrency market is transitioning from a few geeks to being dominated by financial institutions.
For example, spot Bitcoin ETFs and the securitization of financial assets also require the participation and dominance of financial institutions. Among these financial institutions, BlackRock, as the world’s largest asset management giant, not only has a huge influence in traditional finance but also has started to deeply layout in Web3. Its influence in Web3 has surpassed Grayscale and MicroStrategy and will become the new leader.
What are BlackRock’s main layouts in Web3?
1. Major shareholder of MicroStrategy
MicroStrategy, the American listed company that continuously buys Bitcoin, is well-known to everyone. Its main business is business analytics software. In 2020, the board unanimously agreed to include Bitcoin as the company’s main reserve asset. Since then, MicroStrategy has added positions multiple times and continued to buy boldly even when it fell below the cost price. Many investment “gurus” consider MicroStrategy’s “stupid” buying strategy as unwise or even foolish. However, this “foolish” buying strategy has made MicroStrategy earn a lot of money.
MicroStrategy holds more than 210,000 bitcoins, with an average cost of $35,160 per coin. Based on the Bitcoin market price on April 10th, MicroStrategy has a profit of $7.2 billion. This continuous buying strategy of MicroStrategy not only made a lot of money in Bitcoin holdings but also drove the stock price to soar. It can be said to have achieved multiple benefits.
It is worth mentioning that while MicroStrategy’s main business revenue has been declining, its Bitcoin holdings continue to expand. This phenomenon has created a deep correlation between the company’s stock price and Bitcoin price.
When Bitcoin prices skyrocket, MicroStrategy’s stock price rises even more, which means that the stock price has a considerable premium compared to Bitcoin.
For example, in the past year, Bitcoin has risen by 131%, while MicroStrategy’s stock has risen by 360%, nearly three times the difference. In the past six months, Bitcoin has risen by 150%, but MicroStrategy’s stock has risen by 323%, twice the difference.
Due to the existence of long-term premiums, for many institutions or retail investors, holding MicroStrategy’s stock is not only able to obtain higher returns (two times or more) than investing directly in Bitcoin but also avoids unnecessary troubles such as private key management and compliance.
Therefore, before spot Bitcoin ETFs are approved by the SEC, holding MicroStrategy’s stock is equivalent to indirectly investing in Bitcoin. This is also the main reason why many asset management institutions hold MicroStrategy’s stock. Among the major holders of MicroStrategy’s stock, we can see the figure of BlackRock.
According to data from Yahoo Finance, BlackRock ranks third among the largest institutional shareholders of MicroStrategy, with a market value of $1.4 billion. BlackRock indirectly holds Bitcoin risk exposure through this form.
2. Spot Bitcoin ETF
As of now, BlackRock’s biggest contribution to the cryptocurrency market is the spot Bitcoin ETF.
In June 2023, BlackRock submitted an application for a spot Bitcoin ETF to the SEC. After more than six months of communication and coordination with the SEC, the SEC finally approved 11 spot Bitcoin ETFs on January 11, 2024.
In fact, the concept of spot Bitcoin ETF was proposed as early as 2013, but in the past ten years, the SEC has rejected more than 30 similar applications.
It can be seen that BlackRock has played a crucial role in promoting the approval of spot Bitcoin ETFs, mainly due to its enormous influence in the US political and financial circles.
As the world’s largest asset management institution, BlackRock manages funds of around $10 trillion, making it extremely powerful. At the same time, BlackRock has a close relationship with the US government. After the collapse of the Silicon Valley Bank last year, BlackRock, known as the “Wall Street Undertaker,” was hired as an advisor to help the US government arrange the sale of $114 billion in securities held by bankrupt Signature Bank and the Silicon Valley Bank.
This milestone bullish news of spot Bitcoin ETF has greatly promoted the compliance process of Bitcoin. And this epic bullish news is mainly driven by BlackRock.
As of now, the total net assets of spot Bitcoin ETFs are $57.8 billion, and the ETF net asset ratio (market value as a percentage of total Bitcoin market value) is 4.25%. The historical cumulative net inflow has reached $12.37 billion, and BlackRock IBIT has the most net inflow among spot Bitcoin ETFs.
According to statistics, BlackRock’s Bitcoin ETF now holds more than 260,000 bitcoins, surpassing MicroStrategy’s Bitcoin holdings (210,000 bitcoins). Grayscale, as an important driving force in the last bull market, currently holds 310,000 bitcoins, only 50,000 more than BlackRock IBIT.
With the continuous outflow of Grayscale’s spot Bitcoin ETF and the continuous inflow of BlackRock’s spot Bitcoin ETF, the number of bitcoins held by BlackRock IBIT will surpass the holdings of Grayscale GBTC and become the institution with the most bitcoins held. This also means that BlackRock will replace Grayscale and become the new leader in this field.
3. Entering the RWA track
After the approval of the spot Bitcoin ETF, BlackRock CEO Larry Fink stated that the next trend is the tokenization of financial assets.
The tokenization of Real World Assets (RWA) is a major catalyst in this bull market and will also be a major trend in the cryptocurrency market in the next few years.
For Web3, the mining revenue of DeFi is decreasing, and it urgently needs the supplementation of real-world assets. For Web2, it needs to significantly reduce management costs through blockchain technology. RWA builds a bridge between Web2 assets and Web3 assets, and trillions of dollars of real-world assets will enter Web3 through RWA.
According to analysis by the Boston Consulting Group, the tokenized asset market is expected to reach $16 trillion by 2030, indicating the huge potential of tokenization. Clearly, BlackRock has already set its sights on this cake.
On March 20th, BlackRock announced the launch of its first tokenized fund issued on a public blockchain, the BlackRock Institutional Digital Liquidity Fund (BUIDL).
It is reported that BUIDL will subscribe to digital assets of RWA through Securitize and serve qualified investors. The funds will be held by official custodial institutions. The fund will invest 100% of its total assets in cash, US Treasury bonds, and repurchase agreements, allowing investors to earn profits while holding tokens on the blockchain.
BlackRock’s cooperation with Securitize to launch tokenized funds has triggered a surge in the RWA track. Tokens such as ondo, RIO, CFG, and GFI have all experienced more than 100% increase. With BlackRock’s enormous influence, it will undoubtedly accelerate the development of the RWA track.
In summary, whether it is bringing Web3 assets into the Web2 world with spot Bitcoin ETFs or bringing Web2 assets into the Web3 world through RWA tokenization, BlackRock has played a crucial role in both exploration directions. Through its global influence, it will accelerate the integration of Web2 and Web3 and drive more institutions to enter. BlackRock’s contribution is indispensable in promoting the large-scale application of blockchain technology.
P.S. This article does not constitute any investment advice.