Big Players Jumping into the Foray of Cryptos and Digital Assets
While cryptocurrencies have taken a beating since the beginning of the year, allowing sceptics to finally get their chance of saying, “I told you so”, the powerhouse asset managers of Blackrock, Fidelity, and Schroders, amongst others, have recently thrown their hats into the crypto ring. We said the “new era” was dawning already in 2020, and the big players, after their initial, public misgivings, have taken notice and are racing to catch up.
It was a mere 5 years ago when Larry Fink, head of Blackrock, the world’s largest asset management firm, was quoted as saying, “Bitcoin just shows you how much demand for money laundering there is in the world. That’s all it is.” This came not long after JPMorgan Chase CEO Jamie Dimon labelled those owning cryptocurrency at that time as “stupid.”
Back to the present: Blackrock Inc. announced in August that it was launching its own spot bitcoin trust for institutional investors, while also linking its Aladdin technology platform to the crypto exchange, Coinbase, paving the way for Aladdin’s users, including banks, insurers, and asset managers, to offer more client access to cryptos.
Centuries old UK wealth manager, Schroders, announced in July that it bought a stake in the blockchain technology firm, Forteus, showing a commitment to further research and education into the digital assets sector and blockchain technology. Charles Schwab, the US investments group, launched an ETF focused on granting investors exposure to crypto without having to buy currencies directly.
And just yesterday, we catch wind from a Wall Street Journal article that Fidelity, with more than 34 million individual brokerage accounts, is looking into offering crypto trading to their brokerage customers. Earlier this year, they had already announced plans to allow their corporate clients to add bitcoin to their 401(k) pension plans.
Blackrock responded to their own about face by stating, “Despite the steep downturn in the digital-asset market, we are still seeing substantial interest from some institutions clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities.”
As our own AltAlpha Digital team mentioned in their latest Performance Update for July, “It’s almost as if standing on the sidelines is riskier than being in the middle of the scrum. The appropriately adjusted proverb ‘do as I do and not as I say’ comes to mind.”
This summer’s activity has proved that there is now a broader acceptance of digital assets. Some analysts said this late arrival was done on purpose, as it would have meant a swift death knell for a Bitcoin fund to have started at the height of its prices late in 2021, only to be crushed by major losses. Others believe the timing makes sense from the standpoint that we are following the usual progression of technology adoption: first enthusiasts or innovators, then early adopters, then the early majority, and now…the large firms.
In our Special Report, The Emerging World of Digital Assets – Why and How to Participate, a report we put together during the fall of 2021 and published that December, and prior to cryptos run of bad luck this year, we had noted at the time that more corporations, banks and entrepreneurs were taking a keen note of digital assets, the blockchain technology behind them, and the growing list of ways they can all be applied in the future. And the Blackrock’s of the world have complied.
In regard to our own efforts in the digital assets sphere, we at BFI had already started investing in cryptocurrencies in 2020 and have since put our own team together to research, investigate and implement the latest technological developments. The trees continue to bear fruit, as BFI Consulting’s AltAlpha Strategies team are continually working on ways to access the world of digital assets in a smart, convenient, and diversified manner.
All this excitement on digital assets aside…
It is important to note that despite this excitement that exists, and the fact that the largest-of-the-large asset managers are now diving in, digital assets still comprise yet a small part of the larger investment pie when it comes to how we advise our clients. Investing today requires an open mind and looking outside of the box of the traditional way of doing things. Technology is exciting, but 30 years in the wealth management and wealth preservation environment have taught us much.
You’ve heard us mention frequently in the past two years about this “new era” that we find ourselves in: we’ve written two Special Reports on the subject and covered it in different Series of our popular Fireside Conversations. These are times of considerable technological, economic, social, and geo-political change. And while change can be scary, feel unsafe, and bring lots of questions, it can also bring loads of opportunity… including energy and commodities, alternatives, precious metals, hedge funds, real estate, and yes, digital assets.
We invite you to have a look into our world of opportunity…