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October 3, 2022
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Two BlackRock funds will invest in Bitcoin

The world’s largest asset manager, BlackRock, has authorized two of its largest funds to invest in Bitcoin derivatives. The company manages assets worth more than $ 8 trillion.

SEC files reveal details

The company recently filed an application with the Securities and Exchange Commission (SEC). According to the prospectus, BlackRock added Bitcoin futures to derivatives products that two of its largest funds can invest in. Now, BlackRock Funds V and BlackRock Global Allocation Fund Inc. they can invest in indices, interest rates, credit events, commodities and currencies. The company wrote:

The only futures contracts the Funds may invest in are cash-settled bitcoin futures traded on CFTC-registered commodity exchanges.

The company also listed some risks related to exposure to the cryptocurrency sector. These included regulatory changes, a lack of liquidity and valuation problems. It also found that Bitcoin futures are relatively new and not as liquid as other futures markets.

Taking slow and careful steps

BlackRock also admitted that cryptocurrency exchanges have repeatedly experienced operational and technical issues that caused asset prices to skyrocket. In addition, Bitcoin has also been subject to manipulation and fraud that could have a negative impact on the performance of its funds.

The Chicago Mercantile Exchange (CME) is the only regulated market offering cash-settled Bitcoin futures. A similar offer of derivatives was also offered by Cboe in 2017-2019, but since then it has managed to terminate its operations on this market. Bakkt, which is owned by the Intercontinental Exchange, also trades Bitcoin futures, but its offer is physically settled.

Larry Fink, CEO of BlackRock, expressed a bullish sentiment towards Bitcoin about a month ago. He said at the time that Bitcoin could replace gold, but also added that the growing popularity of the cryptocurrency is having an impact on the US dollar.

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