An in-depth look at BlackRock, the $10 trillion asset management titan bridging the divide between traditional finance and crypto through Bitcoin ETFs and tokenization.
When BlackRock, the $10 trillion asset management giant, started seriously dabbling in crypto, it raised more than a few eyebrows. After all, this was the same Wall Street titan that once called Bitcoin an index of money laundering.
Yet BlackRock's wholehearted embrace of digital assets over the past year has been impossible to ignore. From launching a spot Bitcoin ETF to filing for a tokenized asset fund and even applying for a potential Ethereum ETF, the firm has rapidly evolved into crypto's gateway to institutional investment.
This bold move from the traditional finance heavyweight into the decentralized future hasn't just opened new markets for BlackRock. It's symbolic of a much wider philosophical shift - one where the old guard finally recognizes crypto and blockchain's revolutionary potential to change long-established systems and power structures.
BlackRock's efforts to unite these long-divided worlds of centralized and decentralized finance earned them CoinMarketCap's 2024 "Bridge Builder of the Year" award. But the road to becoming crypto's unlikely ambassador was anything but simple for the asset management giant. To understand BlackRock's crypto crossover, we first need to examine the towering presence it casts in the world of traditional finance.
Note: The Bridge Builder Of The Year Award is presented in partnership with Binance - the world’s leading blockchain ecosystem and digital asset exchange in terms of daily trading volume of cryptocurrencies.
BlackRock: The King of Asset Managers
In the asset management realm, BlackRock reigns supreme. Founded in 1988, the firm rapidly ascended to become the largest asset manager globally, serving clients in over 100 countries. In January 2024, BlackRock AUM went above $10 trillion.
BlackRock’s Business Model
At the core of BlackRock's multi-trillion dollar empire is a twin-pronged investment strategy - passive and active management that rake in revenue by the billions.
On the passive side, the firm rules the ETF kingdom with its famous iShares brand. As the ETF craze and index investing went mainstream, BlackRock capitalized by offering low-cost funds that simply track major market indexes. For buy-and-hold investors, it's set-it-and-forget-it simplicity.
But BlackRock doesn't just gather assets - it actively manages them too. The company oversees a vast array of equity, bond, real estate, and alternative funds buoyed by human stock-pickers and analysts. This higher-touch approach commands higher fees from investors seeking to outperform the markets.
In total, a whopping 84% of BlackRock's $5.1 billion in revenue comes from the percentage-based fees it charges on those $10+ trillion of assets it manages, both passive and active. The more money investors entrust them with, the bigger BlackRock's cut.
But the money printer doesn't stop there. Other business segments include technology services revenue, which involves investment management technology systems and risk management services for their clients, as well as advisory fees to financial institutions, regulators and governments. That said, these segments are much smaller, forming only 8% of their total revenue.
BlackRock in Crypto: Boon or Bane?
With BlackRock's landmark Bitcoin ETF offering, the crypto world has been forever transformed. But whether the asset management titan's entry is a blessing or a curse for the industry remains hotly debated.
The Good
For starters, BlackRock's Bitcoin ETF finally provides mainstream accessibility that could usher in a wave of new retail investors. Prior to this, gaining exposure to BTC meant grappling with the complexities of futures products, trusts holding Bitcoin equities or self-custody of the asset itself - daunting hurdles for the average investor. Now, they can simply buy into an ETF that directly tracks Bitcoin's price.
The competition between multiple Bitcoin ETF issuers has also driven down fees to as low as 0.19% annually, a fraction of the 1.5%+ charged by products like Grayscale's GBTC trust. This lowered cost of entry could prove pivotal for attracting bigger inflows.
Moreover, BlackRock's stature instantly lends credibility and legitimacy to crypto in the eyes of skeptical institutions after the FTX fallout. With a titan like BlackRock embracing digital assets as a bona fide investment vehicle, more financial giants and even governments may follow suit - aided by BlackRock's regulatory connections smoothing the path.
Finally, some hope the sheer size of players like BlackRock could inject much-needed liquidity into crypto's notoriously volatile markets. Higher liquidity could mean more efficient price discovery and reduced volatility overall.
The Bad
On the flip side, many Bitcoin purists have argued that BlackRock’s entrance into the space goes against the very ethos on which Bitcoin was built. After all, Bitcoin was created to circumvent centralized financial monoliths like...well, BlackRock itself. So having this titan of traditional finance profiting off Bitcoin feels paradoxical at best.
There are also fears that as more investors opt for institutional custody via ETFs rather than self-custody, it could gradually re-centralize Bitcoin ownership. This would totally undermine Bitcoin's core premise of wresting monetary control away from middlemen.
What’s Next?
The battle lines are drawn. On one side, BlackRock's entrance represents crypto's leap into mainstream credibility and acceptance. On the other, it's a slippery slope towards the very centralization and institutionalization that Bitcoin originally sought to upend.
One thing is clear - with BlackRock going all-in on crypto, helped by ambitious plans for tokenizing traditional assets on blockchains, we're likely to see accelerating convergence between TradFi and DeFi.
Whether you view that as a danger or an inevitability, BlackRock is locked in for the long haul. The asset management behemoth is hellbent on straddling both worlds, playing bridge-builder between Wall Street and the blockchain revolution it once derided.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap. CoinMarketCap is not responsible for the success or authenticity of any project, we aim to act as a neutral informational resource for end-users.
