BlackRock's Inclusion of Bitcoin Fund in Model Portfolios

BlackRock, the largest asset management firm in the world, has announced that it will include the iShares Bitcoin Trust (IBIT) in its model portfolio offerings. This confirmation was made to Decrypt on Friday.

As part of this new strategy, BlackRock will allocate between 1% and 2% of the IBIT share to its target allotment for its Target Allocation with Alternatives portfolios. These portfolios are specially designed for investors who have a higher risk tolerance.

A spokesperson from BlackRock elaborated that, "Target Allocation with Alternatives models invest across a full risk spectrum, and allocate to a core allocation of stocks and bonds plus liquid alternative investments." The inclusion of IBIT is intended to serve as a diversifying asset in line with the investment objectives of these portfolios, which target investors seeking growth with a more aggressive approach to risk.

The integration of Bitcoin into a small portion of BlackRock's Target Allocation with Alternatives portfolios could lead to increased demand for the ETF. This step mirrors the growing acceptance of crypto assets within traditional finance, responding to market pressures and developing consumer demand for such products. Over the past few years, model portfolios offering prefabricated investment strategies for financial advisors have grown significantly.

Notably, Larry Fink, the CEO of BlackRock, has transformed from a previous skepticism regarding crypto to a more positive outlook on Bitcoin. According to ETF.com Analyst Sumit Roy, this development signifies another move towards making Bitcoin a mainstream investment option. Roy commented that the IBIT has already experienced notable success, and this recent decision could further boost its demand.

The IBIT was launched in January 2024, alongside nine other Bitcoin-tracking funds, marking a historical achievement by amassing $60 million in assets under management faster than any ETF in the last three decades.

However, the fund has faced some obstacles recently, shedding over $1 billion in assets during a downturn in the crypto markets, largely due to growing concerns about inflation and other macroeconomic factors. Despite these challenges, IBIT still holds about three times the assets compared to its largest competitors.

As it stands, the combined assets under management for spot Bitcoin funds are around $90 billion, even after a significant drop of more than $2.4 billion over the past week. Currently, Bitcoin is trading above $84,000, marking an increase of about 8% from a recent low but remaining below its all-time high of over $108,000 achieved in mid-January. The cryptocurrency has fallen about 13% in the past month.

Roy further stated that the actual impact regarding new inflows for IBIT from these model portfolio changes remains uncertain, predicting that any additional investments might be in the millions rather than billions. Consequently, in the near term, the significance of this move may be more symbolic than it is substantial in terms of asset flows.

BlackRock, Bitcoin, ETF