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BlackRock is one of those asset management firms that often creates new exchange-traded funds (ETFs). However, the news of BlackRock’s latest filing has made a lot of excitement in the blockchain world.
The company announced its intention to open a fund to replicate the performance of the crypto sector. However, behind this statement, reported by many websites, some crucial nuances arise.
Our article will analyze the news in detail, adding no information regarding BlackRock’s position on cryptocurrencies.
BlackRock is pursuing technological innovation
To better understand the relevance of the news, it is essential to remember that BlackRock is the leading asset management company in the world. This statement derives from observing its asset under management (AUM), as the data show.
On January 21, the U.S. Securities and Exchange Commission (SEC) received the official BlackRock filing. The purpose of the new ETF will be to invest in the development, technological innovation, and use of crypto and blockchain technologies.
The iShares Blockchain and Tech ETF aim to provide an additional investment tool to the market. For those who don’t know, ETFs seek to replicate the performance of a benchmark index.
The benchmark of this ETF consists of the stock performances of companies exposed in the blockchain and innovation world. In other words, therefore, BlackRock will invest directly in the equities of these companies.
Avoiding direct or indirect investments in tokens
Before further reflections on the subject, we consider it worthwhile to devote a paragraph to a fundamental clarification. When BlackRock claims it wants to invest in the shares of companies exposed to the blockchain world, it says two things:
- No direct crypto investments: first of all, BlackRock will not buy any actual token. Do not think of the ETF as a group of crypto wallets because that is just not what it is
- No indirect crypto investments: while indirect investing in tokens through the derivative market is becoming a popular trend, the new ETF will not use this strategy.
A bullish opinion on cryptocurrencies
After a problematic bearish phase, the multi-trillion-dollar asset manager entered the blockchain market. This is not the first time BlackRock has looked at the industry with interest.
If you look at the primary holders of companies working in the crypto mining sector, you will easily find the name of a BlackRock ETF. For example, this is the case with Marathon Digital Holdings (MARA) companies.
Riot Blockchain (RIOT) is also part of BlackRock’s plans, as official data on major holders prove. The substantial change with the new ETF announcement is a shift in the investment target.
While one may argue that BlackRock may hold shares in a wide range of undervalued companies, the new ETF has a different purpose. The SEC filing expressly referred to the blockchain and cryptocurrency sector, which had never happened before.
Previously, the asset manager invested in undervalued companies that, sometimes, incidentally belonged to the blockchain industry. In the future, BlackRock may invest in undervalued companies because they belong to this sector.
BlackRock, crypto, and mining
Through the iShares Russel 2000 and iShares Expanded Tech-Software Sector ETFs, BlackRock made significant investments in 2021. As previously mentioned, the two funds have substantial stakes in MARA and RIOT.
Another change introduced by BlackRock is in the technical specifications of the new ETF in the filing SEC. The term “worldwide” indicates an international dimension of the new investment policy.
BlackRock’s existing ETFs had invested in the blockchain industry exclusively in the US until now. However, since the sector has substantial business volumes in other countries as well, the choice of the company should not surprise you.
If we consider the bans introduced on mining by China, it is clear that more liberal economies can benefit from higher revenues. Seeing growth in crypto-friendliness on a global scale, with a few exceptions, BlackRock has decided to adjust its strategy.
BlackRock ETF Crypto – Final thoughts
The entry of a player like BlackRock into the blockchain world can only attract the market’s attention. The asset manager has noted the presence of many undervalued companies in this sector and growing investment demand.
It is important to reiterate that its investment strategy will probably follow the equity channel. Claiming BlackRock will hold cryptocurrencies, studying the company’s SEC filing.
BlackRock can bring a considerable amount of capital into the blockchain industry. Also, companies like ARK Invest are increasingly competing in the market. It will be interesting to monitor the performance of the new ETF. Above all, it should be exciting to see the reaction of other asset management companies.