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As you can see in recent years, the cryptocurrency market has witnessed an influx of institutional investors and asset management firms, ushering in a new era of legitimacy and stability for digital assets.
At the forefront stands BlackRock, the world’s largest and most influential asset management company.
As BlackRock inches closer to obtaining regulatory approval for a Bitcoin Exchange-Traded Fund (ETF), questions and speculations have arisen about the firm’s true intentions and its potential impact on the market.
And I am sure you have seen the crypto community ablaze this past two weeks with Bitcoin (BTC) spiking due to news of spot ETF approval which turned out to be fake, Grayscale winning the legal battle against the United States (US) Securities Exchange and Commission (SEC) in the spot BTC ETF case, and the SEC issuing BlackRock with a $2.5 million fine.
At the time of writing, BTC is over $34,500.
As one of the world’s most influential asset managers, overseeing over $9 trillion in assets, BlackRock’s decisions carry significant weight in the financial world.
Over the past year, the firm has openly expressed its interest in cryptocurrencies, culminating in a formal application for a Bitcoin ETF.
Source: The Thinking Ahead Institute
According to new research from WTW’s Thinking Ahead Institute, the total assets under management (AuM) at the world’s 500 largest asset managers amounted to $113.7 trillion at the end of 2022.
And since 2009, BlackRock has been the largest asset manager in the ranking.
A financial juggernaut, BlackRock serves a diverse clientele, including wealth management, pension funds, insurance companies, and governments.
With a reach that extends to both seasoned investors and everyday individuals, approximately 35 million people trust their investments in BlackRock’s extensive portfolio of 1,300 ETFs.
The company also offers Aladdin, a portfolio management software that has become a backbone of Wall Street’s operations, and it manages a substantial $320 billion in alternative assets, notably private credit investments.
While BlackRock was once a relatively low-profile name, recognised primarily on Wall Street, it has since gained notoriety for two distinct aspects: its sheer scale and its commitment to Environmental, Social, and Governance (ESG) investing.
This transformation from a Wall Street insider to a mainstream figure has attracted significant attention, often manifesting in viral conspiracy theories about BlackRock’s holdings and its influence over corporate decision-making.
The firm’s CEO, Larry Fink, has found himself the subject of personal attacks, and critics, primarily from the political right, have been quick to lambast BlackRock’s ESG initiatives.
A concern emerging within the crypto community is the potential for BlackRock to establish a monopoly within the market.
The company’s sheer size and influence could lead to a situation where they control a significant portion of Bitcoin assets.
This concentration of power might have adverse effects on market dynamics and individual investors.
And once the Bitcoin ETF is granted approval, given the firm’s immense financial clout and ability to influence markets, it is natural to question whether they might manipulate the market dynamics, including Bitcoin’s price.
BlackRock has also announced the impending closure of its inaugural hedge fund, Obsidian, with the majority of its capital set to be returned to investors by the end of the upcoming month.
This decision, confirmed on 24 October by a representative of BlackRock, marks the conclusion of a chapter in the firm’s financial history, dating back to Obsidian’s inception in July 1996, rendering it one of BlackRock’s most enduring financial products.
While the representative refrained from disclosing the exact figure of Obsidian’s assets under management (AUM), some estimates from the previous year suggest that it stood at approximately $1.4 billion.
The genesis of this decision unfolded as Obsidian’s venerable Chief Investment Officer, Managing Director Stu Spodek, expressed his aspiration to “step back from day-to-day portfolio management.”
This significant development was conveyed to BlackRock’s internal community through a memo composed by Rich Kushel, Senior Managing Director and Head of the Portfolio Management Group.
In response to this transition, Rich Kushel, alongside the firm, deliberated to embark on the process of winding down Obsidian and allocating the capital back to the fund’s valued investors.
BlackRock was quoted on an internal memo:
“After careful deliberation, we agreed the best course of action was to wind down Obsidian, return capital to investors and provide them with an opportunity to re-invest in other BlackRock strategies.”
Notably, the wind-down initiative is to be led by Stu Spodek himself, with the aim of returning a “majority of the capital to clients at the end of November 2023, with the remaining amount to follow expeditiously.”
Following the completion of the Obsidian wind-down, Stu will continue his journey with BlackRock, albeit in an undisclosed capacity.
BlackRock’s growing presence in the cryptocurrency space raises essential questions about the market’s future.
While concerns about market manipulation and monopoly are legitimate, it is crucial to remember that any form of illegal activity could tarnish the firm’s reputation and trigger legal consequences.
But given BlackRock’s dominance, who can step up and be a worthy opponent?
*Disclaimer: Cryptocurrency investment is subject to high market risk. The statements made in this article are for educational purposes only and should not be considered financial advice or an investment recommendation. Always DYOR. Never invest more than you can lose — you alone are responsible for your investment.