Understanding BlackRock’s Bold Bitcoin Recommendation

Understanding BlackRock’s Bold Bitcoin Recommendation

Based on their own Bitcoin recommendation, a $165B move for the world’s largest asset manager could follow.

Beaver Bullets:

• BlackRock has recommended a 2% Bitcoin allocation for multi-asset portfolios.
• The State of Texas proposes Strategic Bitcoin Reserve legislation.
• The City of Vancouver aims to integrate Bitcoin into its financial reserves

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1. BlackRock has officially recommended a 2% allocation to Bitcoin for multi-asset portfolios. 

In a Blackrock Investment Institute paper released Thursday, the world’s largest asset manager said a 1-2% Bitcoin investment was a “reasonable range” with which to allocate, sharing a similar risk profile to the “Magnificent Seven” stocks in a traditional 60/40 portfolio.

Anything beyond that, they said, would sharply increase one’s portfolio risk. While BTC is uncorrelated to the price movements of other assets (a feature that helps de-risk a standard portfolio) Bitcoin’s sheer price volatility makes “its effect on total risk contribution similar overall” to alternatives, the paper’s authors claimed. 

We get it: for the average Beaver customer, 2% may sound like a pittance. In fact, Michael Saylor recently mocked Anthony Scaramucci’s idea of only allocating 2% to BTC, saying he “found it wanting.”

But in the broader financial world, this number is a massive step forward for Bitcoin, which is realistically coming from near-zero among professional money managers.

After all, asset managers, pension funds, and family offices are seismic pools of capital that could greatly impact BTC’s price with just a bit of spillover into the market.

BlackRock itself, for example, handles roughly $11 trillion in assets. 2% of $11 trillion is $220 billion – of which only $50 billion constitutes BTC right now through its iShares Bitcoin Trust (IBIT). 

If following its own advice, BlackRock could inject another $165 billion into BTC to balance its assets – more than any of the ETFs or MicroStrategy have collectively done this year. 

While the launch of Bitcoin ETFs in January excited the markets, institutions have barely dipped their toes into BTC – yet. An ocean of capital is coming for your coins, so you’d do well to get your share as quickly as you can.

“Looking ahead, should Bitcoin indeed achieve broad adoption, it could potentially also become less risky – but at that point it might no longer have a structural catalyst for further sizable price increases,” BlackRock added. 

2. Texas has become the next state to propose Strategic Bitcoin Reserve legislation after Pennsylvania. 

This follows numerous hints from Satoshi Action Fund CEO Dennis Porter that multiple states were working on such legislation. 

On Thursday, after announcing the new legislation, Porter said there is now a “near 100% chance” of passing SBR legislation into law at a state level.

“The legislation essentially allows for the establishment of a strategic reserve for Bitcoin, and allows for donations, taxes, and fees to be paid in bitcoin,” he said during an interview. That includes allowing the large fleet of corporate miners in Texas, who can directly pay their taxes with their freshly mined BTC.

This doesn’t yet mean that the bill would trigger Texas to begin purchasing BTC for its reserves actively – however, Porter says Satoshi Action fund will begin pushing for such legislation at a later time. 

“We believe the very best thing we can be doing is passing this legislation at the state level, providing political momentum for federal legislation,” he said.

Bitcoin momentum is strong for our southern neighbors – but what about here in Canada?

3. Vancouver City Council has passed a motion to study Bitcoin and integrate it into its financial reserves. 

Looks like Mayor Ken Sim’s efforts have quickly paid off since promoting the idea last week. He and other Bitcoiners including Julian Figueroa and Curtis Warren spoke to the city of Vancouver this week to support the motion, describing how Bitcoin has changed their personal lives. 

Figueroa explained how he invested his $3000 life savings into Bitcoin in 2016, inspired by how it could provide an alternative to the fiat system that caused the 2008 financial crisis. 

Warren, a local coffee bar owner, said he adopted a Bitcoin treasury to help his business survive against the inflation of coffee commodity prices. Both men’s businesses have flourished because of their choices.

“Bitcoin acts as a reliable long term savings tool,” said Warren in his speech.

“Bitcoin isn’t just about economics, it’s about hope,” said Figueroa.

We also got to hear more from the Mayor this week during an interview with Natalie Brunell, where we found out how much of a dedicated Bitcoiner he really is.

“I got orange pilled about five years ago by Jeff Booth,” he said. “We’re taking a big political risk here. What’s at stake is the future of the city that I love, and the people that are here, so it’s worth taking that risk.”

Stay humble,

Andrew