While both the stock and crypto markets have been on the decline, institutions are increasingly adopting crypto. Most recently, the world’s largest asset management firm, BlackRock, has included a 1-2% Bitcoin allocation in its portfolio.
On Friday, February 28, BlackRock added a 1% to 2% allocation of iShares Bitcoin Trust ETF (IBIT) to its allocation portfolios that allow for alternative asset classes. This move exposes Bitcoin to more institutional adoption, gaining entry to BlackRock’s model portfolio ecosystem.
“We believe Bitcoin possesses long-term investment merit and has the potential to offer unique and additive sources of diversification to portfolios,” explained Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF.
Model portfolios have gained popularity as ready-made strategies for financial advisors. They enable advisors to offer their services to customers at scale as more small investors enter the market.
This implies that even small adjustments in these portfolios can have a significant impact. While alternative asset classes make up a small subset of the model portfolio ecosystem, it signals institutional acceptance for Bitcoin.
BlackRock Adds Bitcoin As Markets Tumble
BlackRock’s addition of ETFs to its model portfolios comes amid the declining trends in both crypto and stock markets. Bitcoin has recently fallen to a low of $78,000, down from its all-time high of $109,114 in January.
During this period of price declines, crypto ETFs have experienced significant capital outflows. On Tuesday, Bitcoin ETFs saw daily outflows of $1 billion, signaling investors are becoming less risk averse. Fidelity Wise Origin Bitcoin Fund (ticker FBTC) saw the biggest outflows, followed by BlackRock’s iShares Bitcoin Trust ETF.
The main reason for market declines is investor worries over a coming trade war. As the US gears up for tariffs on Mexico, Canada, and other countries, investors fear significant market disruptions. In this environment, investors are de-risking their portfolios, investing in dollars and gold. At the same time, they are divesting from stocks and cryptocurrencies.
Nevertheless, crypto adoption is on the rise, and with a more crypto-friendly administration, this trend is anticipated to continue.
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