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The case against BlackRock’s foray into Bitcoin The case against BlackRock’s foray into Bitcoin

The case against BlackRock’s foray into Bitcoin

Institutional investors are generally seen as good for cryptocurrency, bringing benefits such as added legitimacy and capital inflow. But there is growing acknowledgment that this comes at a price.

The case against BlackRock’s foray into Bitcoin

Cover art/illustration via CryptoSlate

Bitcoin (BTC) received a much-needed boost when BlackRock, the world’s largest asset manager, announced its partnership with Coinbase to offer institutional clients access to BTC.

In a blog post, Coinbase said the tie-in offers users of BlackRock’s Aladdin investment management platform direct access to crypto, starting with Bitcoin. Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock, said:

“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets.”

On the whole, the news was well received by Bitcoin advocates. For example, the founder of 10T Holdings, Dan Tapiero, called this a significant “macro opportunity” for adoption. He also added that just a 5% shuffle in BlackRock’s $10 trillion assets under management would be worth more than the entire BTC market cap. Similarly, Anthony Pompliano said this moment is “the birth and scaling of a new multi-trillion dollar asset class.”

However, while institutional adoption has long been touted as a golden ticket for Bitcoin and cryptocurrency in general, there is a growing consensus that institutional involvement presents a double-edged sword.

Has Larry Fink changed his tune?

Like many legacy heads, BlackRock CEO Larry Fink has seemingly backpedaled his opinion of Bitcoin over time.

In October 2017, Fink said Bitcoin’s popularity showed the demand for money laundering on a global scale. Then in late 2020, the BlackRock CEO appeared to soften his stance by acknowledging Bitcoin is “here to stay.”

More recently, Fink voiced a positive sentiment towards the leading cryptocurrency, saying it has attracted the interest of prominent billionaires and Wall Street. Moreover, while it is “untested,” it is still “possible” that Bitcoin could develop into a “global market.”

Based on this sequence of events, it seems Fink has come full circle on his view of Bitcoin. But has he? In a CNBC interview broadcast in October 2021, Fink was asked if he sides more with JPMorgan CEO Jamie Dimon’s view that Bitcoin is worthless or whether he believes it has value. Finkย  answered, “I’m probably more in the Jamie Dimon camp.” This response suggests he has adopted a “can’t beat them, join them” attitude toward digital assets.

Author Saifedean Ammous recently posted a highly critical tweet on BlackRock’s foray into Bitcoin, calling the company parasitic and “responsible for the bloody ESG crime.” He signed off, warning his followers not to help BlackRock.

The ESG scam

Environmental, social, and governance (ESG) are billed as a vehicle to drive sustainability and build a more equitable world. It refers to criteria for assessing a company’s socially conscious behavior.

The origins of ESG stem from a 2006 United Nations report titled, Principles for Responsible Investment. However, BlackRock has been a significant proponent of ESG standards to foster what it calls “sustainable investing.” That was until recently.

In a BlackRock report released in late July, the firm said shareholder proposals on ESG issues had fallen by nearly half during its most recent annual meeting. It commented that shareholders’ ESG proposals “sought to dictate the pace” of green transition plans with scant consideration of other aspects, according to the FT.

“These factors made these proposals less supportable.”

Critics have long argued that ESG compliance standards are arbitrary and non-standard, meaning they have little bearing on whether a company operates socially responsibly. As Elon Musk put it, ESG has become “weaponized by phony social justice warriors.”

In short, ESG should not be a substitute for real sustainability. So, why was BlackRock a massive advocate for ESG, and why are they backtracking on it now?

Assessing Bitcoin’s ESG credentials, law firm Kennedys gave BTC a thumbs down, saying it “probably does not belong in an ESG compatible portfolio.” And that crypto investors damage “their ESG credibility and reputation.”

“Until Bitcoin cleans up its act, or less energy intensive coins become more mainstream, a company or investor engaging in crypto-related activities risks damaging their ESG credibility and reputation.”

Institutions favor profit above all else

As crypto writer T.C. Gunter pointed out, Wall Street has never championed Bitcoin and never will. After all, Bitcoin was born as a response to the financial chaos caused by institutional greed. Further, Gunter speculated that Bitcoin market manipulation is standard practice for the Wall Street crowd. According to Gunter:

“During the 2009 bubble, itโ€™s estimated nearly 10 million families lost homes, savings, and their futures while Wall Street bankers made billions. Thatโ€™s where trust dies.”

A recent Yahoo Finance article on the arrest of the former private hedge fund manager at Archegos Capital Management, Bill Hwang, gave insight into the Wall Street mindset.

Hwang was accused of fraudulently obtaining money to enable huge buy orders on particular stocks. He used paper profits from these trades to borrow more money to repeat the cycle. Using leverage meant Archegos owned as much as 45% of Tencent at one point โ€” a concentration way beyond what a bank would lend via normal channels. Gunter said:

“Bill Hwang may be a criminal, or he may have simply been playing the Wall Street game according to a set of unwritten but accepted rules โ€“ after all, in this day and age, cheating and lying are practically qualifications for working in high finance.”

Gunter added that Wall Street conducts similar shenanigans with Bitcoin. He explained that it works by institutions flooding the market with paper Bitcoin. Companies that buy this asset are encouraged to loan it to brokerages for leveraged shorting.

This process puts sell pressure on Bitcoin, leading to a fall in price. The intention is to shake BTC hodlers and motivate them to sell. Wall Street manipulators scoop up the offered tokens for cheap, and Bitcoin moves from retail hands to institutions.

Blackrock is not accused of manipulating Bitcoin. But as the king of Wall Street, it is not a stretch to imagine they also follow “unwritten but accepted rules.”

Posted In: , Adoption, Edge

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