- BlackRock filed with the U.S. Securities and Exchange Commission to launch the iShares Blockchain and Tech ETF that would invest in companies involved in the “development, innovation and utilization of blockchain and crypto technologies.”
- If launched, the BlackRock product would be the first crypto-adjacent fund in the world’s largest ETF issuer’s substantial lineup.
Amidst the US$1 trillion crypto meltdown, the world’s biggest asset manager BlackRock (-3.10%) is pushing ahead with plans to offer investors cryptocurrency-flavored exchange-traded funds.
BlackRock, which manages some US$10 trillion in assets, filed with the U.S. Securities and Exchange Commission to launch the iShares Blockchain and Tech ETF that would invest in companies involved in the “development, innovation and utilization of blockchain and crypto technologies.”
If launched, the BlackRock product would be the first crypto-adjacent fund in the world’s largest ETF issuer’s substantial lineup.
With the U.S. Securities and Exchange Commission rejecting repeated applications to launch a physically-backed Bitcoin ETF, issuers have had to skirt around the regulator’s objections and launch products based on Bitcoin futures or thematic products such as BlackRock’s.
The number of crypto-linked equity ETFs has grown to 15 in recent years, but remains small relative to other asset classes.
Part of the reason of course that more products aren’t on offer is the SEC’s scrutiny over cryptocurrency ETFs which the regulator fears could be subject to manipulation.
But as the SEC and the Biden administration move to provide more regulation of the cryptocurrency sector, a comprehensive framework could see a surge in the number of ETFs on offer.
More conservative investors who want to gain at least some exposure to the cryptocurrency sector without necessarily being swept up in the volatility, may also prefer buying crypto-company ETFs, in what is widely known as the “picks and shovels” trade.
Presumably, since crypto exchanges and other service providers make profits regardless of the direction that broader crypto prices move, investors would benefit from the growth of the industry as a whole, without necessarily suffering the volatility inherent in cryptocurrencies themselves.
But in recent weeks, with the stocks of crypto-companies being hammered alongside other U.S. equities and with crypto prices in retreat, Coinbase Global (-13.38%), the only U.S.-listed crypto exchange, has seen its share price sink as well in close correlation with the price of Bitcoin.
It remains to be seen if crypto-company ETFs can offer the full flavor of crypto, with none of the fat.
Some analysts point to the unwinding of leveraged positions as a good opportunity to evaporate for some of the froth in cryptocurrency markets and consolidate to push fresh highs.
Last Friday, some US$1.1 billion in crypto futures positions were liquidated.
But the carnage does offer a silver lining – institutional investors.
Institutional investors are typically loathe to enter a market at its peak and once the crypto markets have entered into capitulation mode, could see them return in droves because many have recognized that the asset class isn’t going away.
Even as the dust settles, there are key technical indicators that show things could be about to look up for Bitcoin, with the fall in the benchmark cryptocurrency last Friday triggering a drop below the lower band of its trading envelope, which traditionally suggests that selling might be overdone.