BlackRock, the world’s largest asset manager, is incorporating Bitcoin into its $150 billion model-portfolio universe.
The firm is adding a 1% to 2% allocation of the iShares Bitcoin Trust ETF (IBIT) to its target allocation portfolios that allow for alternatives, as per a Bloomberg report.
While this represents a small subset of BlackRock’s overall model-portfolio business, it marks a significant step in integrating Bitcoin into mainstream investment strategies.
Model portfolios, which bundle funds into ready-made investment strategies for financial advisers, have grown in prominence in recent years.
Changes to these portfolios can trigger substantial capital flows, making BlackRock’s decision noteworthy at a time when cryptocurrency sentiment remains weak.
“We believe Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios,” wrote Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF model suite, in investment commentary dated February 27.
BTC price continues slide
The move comes amid declining Bitcoin prices and broader market uncertainty.
Bitcoin’s decline extended into Thursday night and Friday, dropping over 7% in a matter of hours from above $84,000 to below $79,000.
This comes after the cryptocurrency entered a technical bear market earlier in the week.
For the week, Bitcoin has fallen more than 18%, sliding from Monday’s high of $96,500 to a low of $78,258 on Friday—its steepest weekly drop in three years. The token has now corrected nearly 30% from its all-time high of $109,588, reached on January 20.
Bitcoin’s well-documented volatility was a key consideration in BlackRock’s decision to limit the portfolio weighting to a range of 1% to 2%, as outlined in a December paper from the BlackRock Investment Institute.
The firm warned that exceeding a 2% allocation would significantly raise crypto’s share of overall portfolio risk.
Despite recent outflows, IBIT remains one of the most successful ETF launches in history.
Since its debut in January 2024, the fund has attracted more than $37 billion in inflows.
According to BlackRock, demand for Bitcoin exposure within model portfolios remains strong, providing a potential source of future inflows.
Alongside the IBIT allocation, BlackRock made several other portfolio adjustments.
Cooling earnings expectations prompted the firm to trim its equity overweight to 3% from 4%, while bringing its tilt toward growth strategies closer in line with value trades.
In fixed income, BlackRock reduced its long-duration exposure, shifting billions of dollars between its products.
One of the most notable moves was a record $2.3 billion inflow into the iShares 10-20 Year Treasury Bond ETF (TLH), while $1.8 billion exited the iShares 20+ Year Treasury Bond ETF (TLT).
BTC ETF outflows
Bitcoin ETFs, however, faced significant outflows. On Thursday, BlackRock’s IBIT saw $189 million in net redemptions, the largest among spot Bitcoin ETFs.
WisdomTree’s BTCW and Valkyrie’s BRRR recorded the second and third highest outflows at $53.7 million and $12.8 million, respectively.
Meanwhile, Ark & 21Shares, Invesco, and Hashdex saw no notable fund movements, while Bitwise’s BITB was the only spot BTC ETF in the US to record net inflows, adding $17.6 million.
Over the past eight days, total outflows from spot Bitcoin ETFs—including those from BlackRock, Fidelity, and Grayscale—have surpassed $3.2 billion.
The heaviest redemptions occurred earlier in the week, with net outflows of $1.1 billion on February 25 and $754 million on February 26.
Bloomberg senior ETF analyst Eric Balchunas noted that Bitcoin ETFs were “feeling the pinch” but emphasized that the outflows represent less than 2% of total assets, suggesting that most investors are holding their positions.
Despite the recent withdrawals, Bitcoin ETFs have performed strongly in 2024, with net inflows reaching $36.85 billion.
Total net assets across all spot Bitcoin ETFs currently stand at over $94.3 billion, representing approximately 5.69% of Bitcoin’s total market capitalization.
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