BlackRock Integrates Bitcoin ETF into Model Portfolios

BlackRock has announced that it will include the iShares Bitcoin Trust (IBIT) in its model portfolio offerings. This move was confirmed in a statement made to Decrypt on Friday.

The world's largest asset manager is making a strategic addition of 1% to 2% of IBIT shares to its target allocation for the Target Allocation with Alternatives and the Target Allocation with Alternatives Tax-Aware portfolios. These particular portfolios are tailored for investors who are willing to take on higher risks.

A BlackRock spokesperson elaborated, stating, "Target Allocation with Alternatives models invest across a full risk spectrum, allocating to a core mixture of stocks and bonds as well as liquid alternative investments. The inclusion of IBIT in these portfolios serves as a diversifier and aligns with the investment goals of this model, which is specifically designed for those with a greater risk appetite and a target for growth."

While the proportion added is relatively small within BlackRock's Target Allocation with Alternatives portfolios, this development may create new demand for the ETF. It also indicates a growing acceptance of cryptocurrency assets among traditional financial institutions, driven by an increased market demand. Model portfolios, which offer pre-built strategies for financial advisors, have gained significant popularity in recent years. BlackRock's CEO, Larry Fink, who once had reservations about cryptocurrencies, has recently become more positive about Bitcoin.

Analyst Sumit Roy from ETF.com remarked, "It's another step towards bringing Bitcoin into the investment mainstream. IBIT has already achieved remarkable success, and this decision could further enhance the demand for the fund."

The IBIT ETF, which was launched in January 2024 along with nine other Bitcoin-tracking funds (with an 11th fund starting later), has amassed $60 million in assets under management in record time, setting a new benchmark in the history of the ETF industry, which spans 32 years.

However, the fund has faced challenges recently, losing over $1 billion in assets over a span of seven trading days due to a downturn in cryptocurrency markets prompted by inflation concerns and broader macroeconomic uncertainties. Despite this, the fund still holds approximately three times the assets compared to its largest competitors.

Collectively, spot Bitcoin funds have about $90 billion in assets under management, even after seeing a significant outflow of more than $2.4 billion in the last week.

As of late, Bitcoin was trading above $84,000, marking an 8% increase from a recent low below $79,000 but still falling short of its historic high of over $108,000 achieved in mid-January. Over the past month, Bitcoin has declined by 13%.

Roy stated that the impact of this model portfolio change on demand for IBIT remains uncertain, suggesting that any additional inflows might amount to millions rather than billions. This indicates that, at least in the short term, this addition may hold more symbolic value than significantly changing inflow patterns.

With growing interest in cryptocurrency investments within regulated frameworks, BlackRock's latest move could signal further shifts in how traditional finance approaches digital assets.

BlackRock, Bitcoin, ETF