Is crypto back? Bitcoin surges as BlackRock weighs into the sector

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BlackRock’s plan to embrace bitcoin has helped the digital currency surge over the second half of June, sending it to levels not seen for a year.

Former bond trader and investment banking chief turned crypto adviser Nick Bishop said BlackRock has good relationships with US regulators. 

The world’s highest-profile cryptocurrency fetched $US30,164 a coin ($45,533) on Thursday morning and has surged around 26 per cent since June 15 when BlackRock, the world’s largest asset manager, applied to the Securities and Exchange Commission in the United States to launch an exchange-traded fund that will buy bitcoin and track its price for investors.

Other mainstream players with giant retail distribution networks jostling to launch bitcoin funds and bridge the gap between traditional finance and cryptocurrencies include Cathie Wood’s Ark Invest, Fidelity Investments, and Charles Schwab.

“What the big institutions bring is highly regulated architecture and deep connections with those regulators,” said institutional bond trader turned crypto apostle Nick Bishop. “They bring very mature tech stacks to manage customers and workflows for investments. That is their bread and butter.”

Bitcoin’s 87 per cent surge in 2023 has left it just shy of a 52-week high of $US31,411 hit on June 23 and seen it outpace other risk and liquidity benchmarks including the tech-heavy Nasdaq index’s 30.9 per cent return and 14.5 per cent return from the US S&P 500. The world’s second-largest cryptocurrency ethereum is up 57.8 per cent to $US1834 a coin.

Risk bellwethers

Mr Bishop, who worked as a managing director at Gresham Partners and head of fixed income at Aberdeen Standard Investments before founding crypto advisory group NotCentralised, said BlackRock’s bitcoin gambit shows it was not worried by the SEC’s track record of dismissing applications to offer the digital assets to retail investors.

He added the $US10 trillion asset manager’s application potentially fired the starting gun on a land grab among competing banks and asset managers to market and sell bitcoin to retail and institutional clients.

BlackRock’s regulatory filing shows it wants to offer its bitcoin fund on the Nasdaq exchange, with custody provided by SEC lawsuit target Coinbase, and Bank of New York Mellon.

“All the cryptocurrencies have become progressively more correlated with broader risk assets. That’s one downside I see of institutional involvement if a manager of BlackRock’s scale, balance sheet, or funds under management is treating this as another investible asset class,” Mr Bishop said.

“We think of bitcoin as digital gold and ethereum as digital oil. Bitcoin is not programmable like ethereum, but it’s exceptionally good at doing its job, which is value transfer in a hyper, hyper-secure way. But that’s it.”

The institutional adoption of bitcoin widens its divergence from its original conception as a decentralised, apolitical cryptocurrency first adopted in a counter-culture world, where value could be transferred free from political or commercial control, Mr Bishop added. “A lot of the decentralised maxis will be appalled by this [BlackRock’s] involvement, and we have conversations often with some early adopters, but it’s hypocritical to say this technology is the best in the world, and then to decry the involvement of these institutions. You can’t have it both ways,” he said.

Professional investors, asset managers and traders remain uncertain how to value bitcoin or predict its future direction. Some claim it is a Ponzi scheme as it has no intrinsic value, while others like Ms Wood boast their analysis shows it could reach $US1 million by 2030.

Mr Bishop said the correlation between bitcoin and other risk assets will be strengthened if BlackRock and other traditional finance powerhouses launch ETFs.

“Bitcoin doesn’t offer an equity ownership stake and when you buy bitcoin you’re not exposing yourself to any one operating or business model, or margin stream,” he said. “That’s one potential downside [from institutional promotion] that it gets cemented into a bucket of other digital risk assets.”

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Mark
Monfort

Mark drives innovation with his deep understanding of AI, blockchain, and data technologies. His experience spans over 15 years of contributions to finance, technology, and operational strategy across Australia, Europe, and North America.

In 2021, he transitioned from Head of Data and Technology at a leading Australian accounting firm to startups. Prior to this, he worked in equity and macroeconomic research in the capital markets space.

Mark brings a passion for data and insights to NotCentralised. His understanding of AI and blockchain technology is central to the development of workplace productivity and financial system modernisation products, including SIKE and Layer-C. Mark’s dynamic and solutions-focused methods enable the navigation of complex technological landscapes and new market potentials.

Mark holds an Executive Master’s and a Bachelor of Commerce. He led the creation of the Australian DeFi Association and serves on the advisory board for the Data Science and AI Association of Australia. His commitment to such communities demonstrates his enthusiasm for emerging technologies and vision of positive change through technology adoption.

Nick
Bishop

Nick spearheads product strategy and institutional business development, leveraging a rich background spanning 23 years in capital markets and financial services across the UK, the US, and APAC.

In 2020, Nick transitioned into startups, bringing extensive experience in asset management and corporate advisory from roles including Director, Head of Australian Fixed Income at Abrdn and Managing Director, Head of Corporate Credit at Gresham Partners. His expertise extends to client management across the government and private sectors.

With a First Class degree in Law and Criminology and Chartered Financial Analyst experience since 2002, Nick is known for his energetic and creative approach, quickly appraising business models and identifying market opportunities.

Beyond his role at NotCentralised, Nick actively contributes to multiple startups and SMEs, holding various Board and advisory positions and applying his institutional expertise to early-stage ventures. Nick is fascinated by emerging technologies with significant societal impact and loves to immerse himself in nature.

Arturo
Rodriguez

Arturo leads product development and software engineering, applying over two decades of experience in technology, capital markets, and data science. With his years of programming expertise, Arturo smoothly transitioned into blockchain, AI, and machine learning.

Arturo has built and sold technology startups across Europe, following quant derivatives roles in global investment banks. His prior experience includes data projects for the NHS in the UK, Strategic Technology Advisor at Land Insight, and Senior Advisor to OpenInsight, where he built predictive models for vessel usage in commodity markets.

A mathematics and statistics graduate from Stockholm University, Arturo’s early grounding in logic problems and data manipulation techniques is evident in his practical applications. His work building equity derivative pricing models for Merrill Lynch and Royal Bank of Scotland showcased Arturo’s highly specialised skillset.

Arturo relocated from London to Australia in 2020. Beyond NotCentralised, his passion for technology and industry involvement extends to the Australian DeFi Association, which he co-founded, and regular contributions to the Data Science and AI Association.