BlackRock Bought $1B Worth of BTC on the Eve of the Dip

BlackRock, the world’s leading asset management company, reportedly spent $1 billion on Bitcoin on the eve of the sharp decline in BTC price. The second was triggered by the Fed Chairman’s announcement that the pace of interest rate cuts would be changed. The announcement was accompanied by statements casting doubt on strategic Bitcoin reserve plans.

📉 Bitcoin’s price correction continues until Friday, December 20! 🇺🇸 The leading cryptocurrency has fallen over 13% in just 48 hours from its all-time high of $108,364.💔 This significant market shift is largely due to the US Federal Reserve’s recent “hawkish” 0.25% rate hike. It is due to the interest rate reduction and…

— Bitcoin.com News (@BTCTN) December 20, 2024

December 18, 2024 will be remembered as the day when US Federal Reserve Chairman Jerome Powell set the crypto market on fire with a few sentences. To the surprise of many, the Fed proposed reducing interest rate cuts for 2025: There will be two interest rate cuts next year instead of four, as previously expected.

Low interest rates generally fuel the crypto market. Therefore, interest rate reduction is a downward signal. Moreover, Powell said that the central bank is not allowed and is not even interested in holding any Bitcoin (BTC).

Many experts call the 25 basis point cut in the federal funds rate “hawkish” or even “aggressive.” The move caused panic selling in the crypto market. Bitcoin fell 13% in 48 hours. Many altcoins saw an even steeper price drop: Dogecoin fell 26%, Ether fell 16%, and XRP fell 18%. CoinGlass data shows more than $1.4 billion in leveraged long positions were liquidated in a single day. Stock markets also saw a significant decline.

Was a billion-dollar BlackRock investment in Bitcoin a fatal mistake?

One would think that buying $1 billion worth of BTC the day before the crash would be a disaster. But we can take the example of BlackRock and see how such unfortunate timing for a major acquisition may not be fatal in the long run.

According to Arkham, BlackRock spent $1.5 billion on Bitcoins during the week. A $1 billion investment in Bitcoin was made just before the price drop between $103,000 and $107,000, meaning the company purchased approximately 10,000 BTC.

As of December 20, BlackRock owns 553,000 BTC, which is approximately 2.6% of the total Bitcoin supply. This investment represented a 1.8% increase in total IBIT (BlackRock’s iShares Bitcoin Trust) BTC holdings.

According to Fintel’s latest data, BlackRock’s total assets are worth $4.7 trillion. But other sources estimate BlackRock assets at over $11 trillion. Bitcoin’s share of these assets is quite small, which is in line with BlackRock’s recent recommendation to allocate up to 2% of Bitcoin into a multi-asset portfolio to hedge against market turbulence.

It is clear that it is unfortunate to miss a better buying opportunity that arose the day after BTC price fell below $93,000. But the overall value of BlackRock’s portfolio is high enough to absorb this decline in value without too much drama. Considering how many times Bitcoin has “crashed” to reach a higher value, this price drop can be ignored. More important is the fact of acquiring more bitcoins, which continue to increase in value and become scarce over time.

BlackRock and Bitcoin shortage controversy

It looks like BlackRock is the biggest beneficiary of Bitcoin’s scarcity. Interestingly, it was BlackRock that sparked the online debate about the immutability of the famous Bitcoin 21 million hardcap.

On December 18, BlackRock released a 3-minute educational video explaining the basics of Bitcoin. At one point in the video, we can see the subtitle that reads “There is no guarantee that Bitcoin’s 21 million supply limit will not change.”

This little statement did not go unnoticed by crypto enthusiasts and professionals. Bitcoin historian and Gorilla Pool founder Kurt Wuckert Jr. approached

It is not impossible to lift the 21 million supply limit. The Bitcoin community can do this through a hard fork. But the consequences of such a move could shake the future sustainability of the first cryptocurrency. Bitcoin security generally owes to the incentivization of miners. However, if Bitcoin scarcity is no longer a concern, the reward value could decrease, causing the network to become less protected and more vulnerable.

Several users told Wuckert that they viewed the mention of the potential removal of the hard cap as a formal disclaimer to avoid lawsuits should Bitcoin become inflationary. Others expressed the opinion that the forked Bitcoin without the 21 million limit will not be Bitcoin but something else, while the hardcore community will stick to the original version.

Solution

BlackRock is willing to experiment with the relatively new asset. No matter how much of the entire BTC supply is owned by this company, it’s not going to risk investing more than it can afford to lose, and its latest purchase is yet another acquisition by a company that definitely sees this company’s acquisition as an asset. The value in Bitcoin itself. After all, 1 bitcoin is worth 1 bitcoin.