BlackRock’s push into crypto has been expeditious, but it may be hitting the brakes after bitcoin and ether. The January launch of bitcoin exchange-traded funds was a huge breakthrough for crypto that may have changed the market forever. That’s largely thanks to the unlikely endorsement of the asset class by the firm: BlackRock first filed for its iShares Bitcoin Trust (IBIT) about seven months before the launch. Since then, the firm filed for an ETF that would track the price of spot ether, the second-largest cryptocurrency by market cap. The move heightened the enthusiasm of crypto fans who would be all too pleased to see the world’s largest asset manager bless another coin after that. But Robert Mitchnick, BlackRock’s head of digital assets, shut that possibility down at the Bitcoin Investor Day conference last week. “For our client base, it is bitcoin overwhelmingly number one, their focus,” Mitchnick said, followed by “a little bit Ethereum and very, very little everything else.” He pointed out that bitcoin and ether make up the majority of the crypto market cap – bitcoin at 52% and ether at 16%, according to CoinMarketCap. “There’s just worlds apart there in terms of track record, liquidity, product market fit, investor, narrative clarity, all these things,” he added. “So that’s where I think there’s some misplaced speculation that there’s going to be a long tail of others from us and that’s really not where we’re focused.” Mitchnick also said at the same event that bitcoin will be a good portfolio diversifier despite its recent rally with stocks, and that while the cryptocurrency’s cycles are here to stay, future returns are likely to come down now that Wall Street has embraced it. In addition to bitcoin and ether ETFs, BlackRock is also exploring digital assets through tokenization efforts. Last week, the firm launched the Ethereum-based BlackRock USD Institutional Digital Liquidity Fund, giving investors the opportunity to earn U.S. dollar yields. It is the first tokenized fund by the firm issued on a public blockchain. “There’s some irony in the fact that with … IBIT, we took a crypto native investment exposure and we put it in a traditional finance wrapper,” Mitchnick said at Bitcoin Investor Day. “And with tokenization, we’re taking traditional finance investment exposure, and we’re putting it in a crypto native wrapper.” The next generation of finance Much of that irony comes from the fact that bitcoin has anarchist roots, with its earliest proponents supporting a kind of digital currency that operated outside the traditional financial system – the very reason Wall Street loathed it. Now, the idea of tokenizing “real world assets” like gold has gained popularity among financial institutions who are cautious on crypto assets but keen on the underlying blockchain technology. BlackRock CEO Larry Fink told CNBC’s “Squawk Box” at the beginning of the year that ETFs “are step one in the technological revolution in the financial markets” and that “step two is going to be the tokenization of every financial asset.” Having both a bitcoin ETF – and an ether ETF in the running – as well as a tokenized fund on Ethereum may seem contradictory, but it’s not, according to Mitchnick. “Across our client base, there are those who are not comfortable yet with digital asset rails, but they want those investment exposures and they want that in a convenient familiar wrapper,” he said. “And we have clients who are comfortable and fluent on blockchain infrastructure, interacting with digital assets. They want traditional investing exposures in that format because it’s digitally native, global, programmable [and] instantly transferable.” “That dichotomy will persist for a while,” he added. “But eventually, we expect there will be some convergence that looks like the best of the old system and the best of this new technology fused into a next generation infrastructure set in finance.”
