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Historical Bitcoin Move Came From BlackRock: Adding BTC to Model Portfolios! What Does It Mean?
The world's largest asset manager, BlackRock, has made an important milestone for the adoption of BTC in traditional finance by including Bitcoin in its $150 billion model portfolio ecosystem for the first time.
According to an investment outlook obtained by Bloomberg, BlackRock allocated 48 billion dollars of iShares Bitcoin Trust ETF, which allows alternative investments, in target allocation portfolios, (ticker: IBIT) %1 to %2. Although this is a small part of BlackRock's entire model portfolio business, this move could pave the way for new demand for IBIT at a time when overall cryptocurrency sensitivity is weakening.
Model portfolios that bring together various funds in investment strategies structured for financial advisors have gained popularity in recent years. Changes in these portfolios can trigger significant capital flows in both directions.
The lead portfolio manager of BlackRock's Target Allocation ETF model portfolio package, Michael gates, stated in his investment commentary, 'We believe that Bitcoin has long-term investment value and can potentially provide portfolios with unique and additional sources of diversification.'
The timing of BlackRock's decision coincides with the recent price drop in Bitcoin. Market uncertainty and economic concerns are putting pressure on risk appetite, while BTC is currently trading around $83,000, experiencing a sharp drop from last month's peak of $110,000.
BlackRock Investment Institute, in a report published in December, referred to the known volatility of Bitcoin, setting a "reasonable range" of 1% to 2%. The report warned that exceeding a 2% distribution could disproportionately increase the overall risk of a portfolio.
Launched in January 2024, IBIT quickly became one of the most successful ETF launches in history, attracting over $37 billion in inflows just last year. However, its appetite has waned recently, with investors withdrawing approximately $900 million last week. Nevertheless, BlackRock noted that demand from financial advisors looking to be exposure to Bitcoin in model portfolios continued.
BlackRock US Wealth portfolio design and solutions president Eve Cout said, “They all want to allocate more share to alternatives, but they need guidance on how the position will be sized, scaled, and rebalanced.”
Model portfolio means a pre-constructed investment strategy tool used by financial advisors for their clients. It brings together different assets such as stocks, bonds, ETFs, etc., structured to meet specific risk and return objectives. So, companies like BlackRock and MicroStrategy do not directly buy Bitcoin but offer exposure to BTC through investment strategies via IBIT.