The world’s largest asset manager, BlackRock Inc. (NYSE:BLK), is entering the cryptocurrency market, which falling prices and regulatory probes have battered. The company is teaming with Coinbase Global Inc. (NASDAQ:COIN) to make it simpler for institutional investors to handle and trade Bitcoin.
Coinbase Shares Soared on the News
Coinbase shares jumped 31% to $106 at the start of trading in New York. The largest US cryptocurrency trading platform, whose stock had lost more than two-thirds of its value this year through Wednesday, is somewhat relieved by the relationship with BlackRock Inc.
According to a statement released on Thursday, elite BlackRock clients will be able to utilize its Aladdin investment-management system to monitor their exposure to Bitcoin along with other portfolio assets like stocks and bonds, as well as to facilitate financing and trading on Coinbase’s exchange. The relationship with Coinbase, the largest US cryptocurrency trading platform, “will initially be on Bitcoin,” according to BlackRock.
BlackRock Inc and Financial Player in Crypto
Even with this year’s collapse in such assets, BlackRock’s action extends the engagement of Wall Street’s traditional financial players in cryptocurrencies and associated technology. In addition to the collapse of the Terra ecosystem and the hedge firm Three Arrows Capital, which has spurred heightened regulatory investigation, Bitcoin has lost approximately half of its value in 2022.
The US Securities and Exchange Commission is looking into whether Coinbase allowed Americans to exchange digital assets that should have been registered as securities. Because of Coinbase’s size in the market and its role as a provider of trading, custody services, prime brokerage, and reporting capabilities, BlackRock Inc decided to work with it. Both companies’ customers will be able to use the services.
According to Oppenheimer & Co. analyst Owen Lau, who has the equivalent of a buy recommendation on Coinbase shares, the regulatory risks associated with the cooperation are manageable. The reason is that it starts with Bitcoin, which has a clearer regulatory standing in Washington than other digital assets.
The agreement “validates the future of blockchain and digital assets and also a validation of Coinbase’s trustworthiness,” according to Lau in a phone interview. It has a sizable positive impact on Coinbase and the industry.
Investors Are Getting More Comfortable With Crypto
The announcement demonstrates that knowledgeable investors are becoming more at ease with the cryptocurrency industry.
Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock, said that their institutional clients are increasingly interested in getting exposure to digital-asset markets and are focused on efficiently managing these assets’ operational life cycle.
The company said in May that about three-quarters of the $309 billion in trade volume on Coinbase in the first quarter came from institutional investors in May. Hedge funds, corporate treasuries, and asset managers are some of Coinbase’s clientele.
Hedge funds, corporate treasuries, and asset managers are some of Coinbase’s clientele.
According to a second statement from Brett Tejpaul, CEO of Coinbase Institutional, and Greg Tusar, vice president of institutional product, “The Coinbase partnership between BlackRock Inc and Aladdin is an exciting milestone for our firm. “We are committed to pushing the industry forward and creating new access points as institutional crypto adoption continues to rapidly accelerate.”
The agreement represents a further development in BlackRock Inc’s larger plan to diversify into digital assets. In March, Chief Executive Officer Larry Fink stated that the company was researching the rising significance of digital assets, stablecoins, and how to leverage them to benefit customers. The stablecoin’s cash reserves would be under the principal management of the corporation, which stated it will join a group of investors in Circle Internet Financial, the stablecoin’s issuer, the following month.
Featured Image: Megapixl © Michaelvi
