BlackRock has added its iShares spot Bitcoin exchange-traded fund to some of its model portfolios. The firm included a 1-2% allocation for IBIT in portfolios that allow alternative investments. Model portfolios are baskets of investments put together by financial advisors.
Michael Gates, who manages BlackRock’s Target Allocation ETF model portfolio suite, said the firm thinks Bitcoin has “long-term investment merit.” He also said it could provide “unique and additive sources of diversification to portfolios.”
Earlier this year, BlackRock CEO Larry Fink said sovereign wealth funds could make the price of Bitcoin go up. He said they could use it to protect against inflation and political or economic uncertainty. Fink stated that Bitcoin could be used as a hedge against currency problems or economic instability in different countries.
IBIT is the biggest Bitcoin ETF right now. It manages $47.89 billion worth of assets. In January 2024, the SEC approved the first spot market Bitcoin ETFs.
This led to a lot of money flowing into Bitcoin. The SEC also approved Ethereum ETFs for trading in July. Investors should be careful before making any risky investments in Bitcoin, cryptocurrency, or digital assets.
Bitcoin has gone back up after falling below $80,000 per bitcoin. The price is now around $85,000 per bitcoin. This happened as BlackRock added bitcoin into its $150 billion model-portfolio system for the first time.
Analysts called this a “big deal.”
BlackRock CEO Larry Fink has been a big supporter of bitcoin and crypto. This has helped push the bitcoin price higher. James Seyffart, an ETF analyst, said “This is a big deal because this is the first of those models to add bitcoin.
It probably won’t be the last.”
BlackRock is putting a 1% to 2% allocation to the IBIT iShares Bitcoin Trust ETF in some of its portfolios. These are meant for investors who are okay with higher risk. This is an important step in BlackRock’s efforts to get a spot bitcoin ETF approved in the U.S.
In 2023, several bitcoin funds launched and became some of the fastest-growing ETFs ever.
In November, U.S. spot bitcoin ETFs passed $100 billion in assets for the first time. BlackRock’s iShares Bitcoin Trust (IBIT) led the way with $48 billion. It provides exposure to nearly 600,000 bitcoin.
Michael Gates from BlackRock wrote “We believe bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios.”
But Seyffart noted that bitcoin is a controversial asset. So it’s not clear if or when IBIT would be added to the main models that attract a lot more money. Recently, Abu Dhabi’s $1 trillion sovereign wealth fund said it bought $436 million worth of BlackRock’s bitcoin ETF in the last quarter of last year.
The bitcoin price rebound, along with U.S. inflation data meeting expectations, makes it more likely that the Federal Reserve will continue with its planned interest rate cuts.
Bitcoin added to BlackRock portfolios
This has encouraged bullish traders and analysts.
Matt Mena, a crypto research strategist, said “With PCE aligning with expectations and inflation concerns balanced by upcoming rate cut prospects, bitcoin may finally get the catalyst it needs to break out of its current $80,000 to $85,000 range and push toward the coveted $100,000 psychological level.”
He added “ETF inflows continue to build momentum, institutional demand is growing, and with regulatory clarity improving, bitcoin is on the verge of another major leg up. If this breakout occurs, it could open the door for an accelerated price discovery phase, further solidifying crypto’s role in the broader macro landscape.”
The world’s largest asset manager is now allowing Bitcoin into its $150 billion model-portfolio universe. BlackRock Inc.
is adding a 1% to 2% allocation to the $48 billion iShares Bitcoin Trust ETF (IBIT) in some of its portfolios that allow for alternatives. This is according to an investment outlook seen by Bloomberg. While that’s a small part of BlackRock’s entire model portfolio business, the addition opens up a potential source of new demand for IBIT at a time when cryptocurrency sentiment is turning negative.
Model portfolios, which bundle together funds into pre-made strategies to sell to financial advisers, have gotten very popular in recent years. Changes to their holdings can lead to huge flows in either direction. Michael Gates from BlackRock wrote in investment commentary dated Feb.
27th “We believe Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios.”
The move by BlackRock comes as Bitcoin prices fall alongside stocks. A mix of economic worries and trade tensions are hurting risk appetite. The cryptocurrency is currently trading around $83,000, after reaching nearly $110,000 last month.
Bitcoin’s well-known volatility is a main reason why the asset manager outlined a 1% to 2% weighting as a “reasonable range” in a December paper from the BlackRock Investment Institute. At the time, it added that anything beyond 2% would greatly increase crypto’s share of overall portfolio risk. IBIT’s January 2024 launch was one of the most successful debuts on record.
The fund took in more than $37 billion worth of inflows last year alone. While demand has slowed recently — investors have pulled $900 million over the past week — interest from advisers for exposure within model portfolios was strong, according to BlackRock. Eve Cout from BlackRock said in an interview “They all want to allocate more to alternatives, but they need guidance on how to size, scale, and rebalance the position.”
The IBIT addition was just one of several allocation changes outlined in Thursday’s letter.
Lower earnings expectations led the firm’s model-portfolio team to reduce its preference for equities to 3% from 4%. It also brought its tilt to growth strategies versus value trades closer in-line. Within fixed-income, BlackRock is cutting its long-duration exposure.
Billions of dollars moved between several BlackRock products on Thursday as a result. Among the biggest flows was a record $2.3 billion going into the iShares 10-20 Year Treasury Bond ETF (TLH). At the same time, $1.8 billion left the iShares 20+ Year Treasury Bond ETF (TLT).
A BlackRock spokesperson confirmed that the firm adjusted its model portfolio allocations. Gates wrote “Our conviction is still in stocks over bonds, US over international, growth over value and tech over the rest of the market. But the magnitude of each of those directional views is something we look to reduce.”
