BlackRock Introduces Bitcoin ETF to $150 Billion Mannequin Portfolios for the First Time – Bloomberg

Key Takeaways:

• BlackRock’s strategic adjustment introduces limited cryptocurrency exposure within its structured portfolios.
• This move integrates traditional investment frameworks with emerging alternative assets.
• Careful incorporation reflects changing perspectives on risk and diversification in contemporary portfolios.

BlackRock Inc., the largest asset manager globally, is integrating Bitcoin into its model portfolios for the first time. It plans to allocate between 1% and 2% to the iShares Bitcoin Trust ETF (IBIT).

This initiative brings cryptocurrency into BlackRock’s $150 billion model-portfolio ecosystem, potentially generating new demand for IBIT at a time when interest in crypto markets is waning.

BlackRock’s Portfolio Adjustments Reflect Conservative Bitcoin Allocation

According to an investment outlook obtained by Bloomberg, this allocation specifically pertains to BlackRock’s target allocation portfolios that include alternative assets.

These model portfolios, which consolidate various funds into pre-defined investment strategies, have gained traction among financial advisors in recent times. Such adjustments often lead to significant changes in fund flows.

“We believe Bitcoin has long-term investment merit and could provide unique and additive sources of diversification to portfolios,” stated Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite, in a commentary dated February 27.

BlackRock is incorporating a 1% to 2% allocation to the $48 billion iShares Bitcoin Trust ETF in its target allocation portfolios that allow for alternatives https://t.co/IBaQ2cyhmJ

— Bloomberg Crypto (@crypto) February 28, 2025

BlackRock’s decision comes in the wake of recent volatility in Bitcoin’s price. After reaching a peak near $73,000 in March, Bitcoin is trading around $83,000 as of late February.

Price fluctuations of Bitcoin were a significant factor in the firm’s choice to limit its allocation to a range of 1% to 2%.

A December research paper from the BlackRock Investment Institute indicated that exceeding a 2% allocation would considerably heighten a portfolio’s exposure to crypto-related risk.

The iShares Bitcoin Trust ETF, which launched in January 2024, experienced rapid inflows, attracting over $37 billion last year.

However, investor sentiment has recently declined, with $900 million in outflows recorded over the past week.

Despite this, demand for Bitcoin exposure within BlackRock’s model portfolios remains robust, according to the firm.

“All of them want to allocate more to alternatives, but they require guidance on how to size, scale, and rebalance the allocation,” remarked Eve Cout, head of portfolio design and alternatives for US Wealth at BlackRock.

The Bitcoin allocation is part of BlackRock’s broader portfolio adjustments.

Due to declining earnings expectations, the firm’s investment team has reduced its overweight position in equities from 4% to 3%.

Within fixed-income strategies, it has decreased its exposure to long-duration bonds.

Bitcoin ETFs Experience Record Outflows Amid Market Correction Testing Investor Sentiment

The recent decline in Bitcoin’s price has triggered a wave of outflows from major spot Bitcoin ETFs.

BlackRock’s iShares Bitcoin Trust (IBIT) experienced a record $420 million exit in a single day.

The fund lost 5,000 BTC on February 26, marking its largest withdrawal to date, surpassing the $332 million outflow recorded on January 2.

This occurs amid a broader trend of decreasing demand for Bitcoin ETFs.

Over seven consecutive trading days, nearly $3 billion exited these products, with total outflows reaching $756 million on February 26 alone.

Fidelity’s Wise Origin Bitcoin Fund (FBTC) also experienced sustained outflows alongside smaller withdrawals from Bitwise, Ark 21Shares, Invesco, Franklin, and Grayscale.

Between February 24 and February 27, Bitcoin saw a 12.48% decline, coinciding with $2.4 billion in ETF outflows for the week.

Despite this, some analysts perceive this trend as a temporary correction rather than a lasting change.

Nate Geraci, president of ETF Store, suggested that these movements might be short-term fluctuations.

Still amazed how much traditional finance dislikes bitcoin & crypto…
Big victory laps with each downturn.
Hate to break it to you, but no matter how significant the drawdowns are, it’s not going away.
You can either resist it or educate yourself.
Most in traditional finance will resist it.

— Nate Geraci (@NateGeraci) February 26, 2025

Meanwhile, BlackRock continues to focus on expanding its Bitcoin investment options.

The asset manager is preparing to launch a Bitcoin exchange-traded product (ETP) in Europe to tap into global demand.

With over $35 billion in net inflows into U.S. Bitcoin ETFs in 2024, institutional interest remains strong, indicating a complex but evolving market environment.

BlackRock’s inclusion of Bitcoin in its $150 billion model portfolios signifies a shift in institutional investment strategies.

Despite recent market volatility and ETF outflows, the firm recognizes long-term value in Bitcoin as a portfolio diversifier.

With a cautious 1% to 2% allocation, this move may encourage broader adoption among traditional investors.

As BlackRock expands its cryptocurrency offerings, its approach is likely to influence the future of institutional Bitcoin investment.

Frequently Asked Questions (FAQs)

How might BlackRock’s move impact broader institutional crypto adoption?

This cautious step could encourage other institutions to gradually incorporate digital assets, normalizing cryptocurrency exposure in traditional portfolios.

What risks do institutions face when adding Bitcoin?

Bitcoin’s high volatility can increase portfolio risk, making robust risk controls and regular assessments essential to mitigate potential losses.

How does this integration reflect changing market dynamics?

It indicates a transition as traditional strategies embrace digital assets to enhance diversification and adapt to evolving risk profiles.

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