BlackRock, the world’s largest asset manager, is set to incorporate Bitcoin into its model portfolio, allocating 1% to 2% of its Bitcoin exchange-traded fund (ETF) to target model investment portfolios.

Model Portfolios and Bitcoin Allocation

In the investment world, model portfolios are pre-structured funds designed to offer ready-made strategies. They provide managed investment strategies that invest in fund shares and are marketed to financial advisors. BlackRock’s model portfolios, which include alternative investments, will now allocate a portion of its $150 billion portfolio to the BlackRock iShares Bitcoin Trust ETF (IBIT).

IBIT, currently a $48 billion spot Bitcoin ETF, holds 576,046 bitcoins, accounting for about 2.9% of the total Bitcoin market share. Although this $150 billion pool represents a small portion of BlackRock’s overall model portfolio business, the inclusion of IBIT could significantly boost demand for the spot Bitcoin ETF.

BlackRock’s Confidence in Bitcoin

Michael Gates, lead portfolio manager for target allocation ETF models at BlackRock, expressed the company’s confidence in Bitcoin as an investment. “We believe Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios,” Gates said in a note to investors.

Regulatory Approval and Market Impact

The U.S. Securities and Exchange Commission approved IBIT and several other spot Bitcoin ETFs in January 2024. The regulatory approval led to increased investor demand, pushing Bitcoin’s price above $69,000 in March 2024. Later, heightened interest amid the U.S. election cycle propelled Bitcoin to an all-time high above $109,000.

However, a recent sell-off has driven BTC down to $79,000, with significant outflows from spot ETFs, including IBIT, in the past week.

Key benefits of Bitcoin ETFs include:

  • Diversification of investment portfolios
  • Exposure to the Bitcoin market without directly holding the asset
  • Regulatory compliance and oversight

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