BlackRock Incorporates Bitcoin ETF into Model Portfolios

BlackRock, recognized as the world’s largest asset manager, has officially announced its inclusion of the iShares Bitcoin Trust (IBIT) in its model portfolio offerings. This decision was confirmed to various media outlets on Friday.

The new strategy involves adding a 1% to 2% allocation of IBIT to its Target Allocation with Alternatives portfolios. These portfolios are specifically designed for investors with a higher risk tolerance and aim to diversify investments.

According to a BlackRock spokesperson, the Target Allocation with Alternatives models invest across a full spectrum of risk. They typically include a core allocation of stocks and bonds alongside liquid alternative investments. The spokesperson stated, "The addition of IBIT as a diversifier aligns with the investment objectives of this model, catering to investors with a higher risk budget and growth target." This is viewed as a minor change in BlackRock's overall portfolio strategy.

Despite its modest impact on the portfolios, the fund could potentially boost demand for the ETF and signifies a broader acceptance of cryptocurrency assets among traditional finance sectors. There has been a noticeable increase in demand for model portfolios, which provide ready-made strategies for financial advisors. Notably, BlackRock's CEO, Larry Fink, who once expressed skepticism about cryptocurrency, has shifted to a more positive stance on Bitcoin.

An analyst from ETF.com, Sumit Roy, remarked, "It’s another step towards mainstreaming Bitcoin in the investment arena. IBIT has already achieved remarkable success, and this move might further increase interest in the fund." IBIT, which launched in January 2024 alongside nine other Bitcoin-tracking funds, quickly amassed $60 million in assets under management, breaking records in the history of ETFs.

However, IBIT has recently encountered challenges, losing over $1 billion in assets within just a week due to market fluctuations influenced by inflation and economic uncertainties. It still maintains roughly three times the assets under management compared to its largest competitors in the industry.

Overall, spot Bitcoin funds currently hold about $90 billion in assets, despite experiencing a significant outflow of more than $2.4 billion in the past week.

As for Bitcoin itself, it was recently trading above $84,000, up approximately 8% from an overnight low, but considerably lower than its record high exceeding $108,000 earlier this year. Over the past month, Bitcoin has seen a decline of around 13%.

Roy mentioned that the impact of BlackRock's model portfolio changes on IBIT's demand remains unpredictable, stating, "The actual incremental inflows for IBIT might only be in the millions, not billions." This indicates that the recent adjustment may hold more symbolic significance rather than substantially affecting cash flow in the immediate future.

BlackRock, Bitcoin, ETF