Big-money investors: A trader works at the post where BlackRock is traded at the New York Stock Exchange. The asset management firm is aiming to make it easier for institutional investors to manage and trade bitcoin. — Reuters
NEW YORK: An old adage is making the rounds once again in the crypto sphere – institutional investors are back.
BlackRock Inc’s partnership with Coinbase Global Inc to make it easier for institutional investors to manage and trade bitcoin was followed by another announcement that the asset manager is offering its first-ever investment product directly in the token.
Meanwhile, Brevan Howard, a hedge-fund firm, raised more than US$1bil (RM4.45bil) for a crypto fund.
Thus, the return of the narrative – big-money investors are besotted by the space and are finding ways to be involved. And it’s all happening as crypto prices show some signs of recovery, with bitcoin adding 20% over the past month and ether advancing 80%.
Bitcoin’s rally “may be attributed to the recent optimistic headlines on continued institutional adoption of crypto,” wrote analysts at BlockFi in a note.
Another by Coinbase, citing the BlackRock news, said “major multinational firms are making moves amid the crypto downturn.”
Yet, retail investors, the lifeblood of the cryptosphere, have been more hesitant to jump back in. Wounds from bitcoin’s 70% plunge since its November highs of around US$69,000 (RM306,740) are still fresh.
Coinbase said as part of its second-quarter earnings announcement that its core retail customer has been less active and is sitting on the sidelines. For the quarter, the exchange lost a record US$1.25bil (RM4.9 billion).
“That’s part of the issue – for it to succeed or to succeed further, I think it’s got to have more of a networking effect,” Marc Chandler, chief market strategist at Bannockburn Global Forex, said of crypto. “It’s got to have more people participate in it.”
Institutional investment in the digital-asset space has always been a complex topic.
That’s because it didn’t materialise for a long time – during crypto’s early days, most institutions steered clear – and was then, also for a long time, marketed as something that would help bring legitimacy and maturity to the industry.
Still, a slew of big-money firms did enter during the pandemic, with many going all-in on blockchain technology and others looking to profit off the stellar gains cryptos booked during that stretch.
The BlackRock-Coinbase deal has been described as consequential by many, though it hasn’t acted as a catalyst to push prices higher more meaningfully.
The BlackRock announcement shows a major institution linking up with a crypto firm to provide all manner of services to their institutional investors, though it will take more than one or two announcements to show real institutional engagement, according to James Malcolm, head of foreign exchange and crypto research at UBS.
Small on-chain transactions, meaning those of less than US$1,000 (RM4,446), are hovering around their year-to-date average, though the mean-transaction size has been increasing, according to Noelle Acheson, head of market insights at Genesis, who compiled Coin Metrics data. — Bloomberg
