Before I get into the details of this partnership, I want to recount the dominant narratives from the previous era, i.e. 2017. At the time, the popular idea was that “the institutions are coming” and “the flood gates are opening.” We all believed it, but the reality could not have been further from the truth. We were a full market cycle away from any meaningful institutional interest. Fast-forward 5 years and the biggest institution in the world is here.
I will save my thoughts on whether we should cheer this adoption or not for another day. Many view BlackRock like the Empire in Star Wars - they are not exactly a benevolent operation. Cheering their entry into the space makes sense for widespread adoption and the number going up, but requires a bit of cognitive dissonance for those looking to opt out of broken and oppressive systems. Bitcoin was created to rage against this very machine.
But I digress.
BlackRock’s clients clearly want access to the asset class.
Here’s what we know about BlackRock in the crypto space:
2017 - “Bitcoin just shows you how much demand for money laundering there is in the world. That’s all it is.” - BlackRock CEO, Larry Fink
2021 - BlackRock earns $360,000 trading Bitcoin futures by holding $6.5 million in CME contracts. The holdings represented 0.03% of the firm’s AUM and the gains represented just 0.0014%.
2022 - BlackRock is reportedly studying digital currencies, stablecoins, and the underlying technologies to understand how they can help serve their clients.
Today - BlackRock opens the floodgates for institutions by partnering with Coinbase.
So why Coinbase? And what exactly is Aladdin? Well, if you have paid attention to Coinbase’s growth over the past year, you may have noticed that they have become far more institution-focused and friendly. Once just a speculative casino for newcomers, Coinbase has greatly improved as a full-service platform for the largest market participants. Just this week, Coinbase Prime added Ethereum as a staking option for institutions. Custody, financing, data, and advanced trading have also improved tremendously. Like an Olympian who has trained for a lifetime for their 10 seconds of fame, Coinbase has been preparing for this moment since inception.
As for Aladdin, it was developed in 1988, and is known as BlackRock’s market ‘advantage,’ bringing clarity to institutional investors. In 2020, Aladdin handled $21.6 trillion worth of assets, which is over 4% of the world’s wealth. It is connected to over 55,000 investment professionals. In this deal with Coinbase, Aladdin is providing the clients and Coinbase is providing the tools.
BlackRock’s head of strategic partnerships said this - “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.”
Considering the shit storm of bad news that I am accustomed to writing about, I think today is a definitive win. Institutions clearly share our vision, and so do their clients, even if they are only here because they think there is a greater fool who will buy the assets for more money down the road. BlackRock is going to force the hand of every competitor and the world’s money will trickle into crypto.
This will take time.
We thought the institutions were coming back in 2017. Then we thought they were coming in mid-2021 after Saylor’s conference. And after 5 years, we are still incredibly early…
To read the official announcement, click HERE
REMINDER - THERE WILL BE NO NEWSLETTER NEXT WEEK. SEE YOU ON THE 15TH!