BlackRock, the world’s largest asset manager with almost $8 trillion in AUM, is allowing two of its biggest funds to invest in Bitcoin derivatives.
According to ‘additional information’ provided in prospectus documents filed with the SEC, BlackRock has added cash-settled bitcoin futures to derivatives products it can invest in. BlackRock Global Allocation Fund Inc. and BlackRock Funds V are cleared to invest in commodities, currencies, interest rates, credit events or indices.
The company cited several risks for its possible involvement in cryptocurrencies including regulatory changes, valuation issues and illiquidity risk as bitcoin futures are not as heavily traded as other futures and its “market is relatively new.”
What Does 2021 Hold for the Markets? HYCM CEO SpeaksGo to article >>
BlackRock also reminded its investors that Bitcoin exchanges have repeatedly experienced technical and operational issues, making bitcoin prices unavailable at many times. In addition, the asset manager further states that the No-1 cryptocurrency has been the target of fraud and manipulation, which “could adversely impact” the performance of its funds.
The Chicago Mercantile Exchange (CME) is the only regulated marketplace in the US that offers Bitcoin contracts for cash settlement. This allows investors to take cash instead of physical delivery of Bitcoin upon settlement of the contract. Cboe offered similar derivatives back in 2017, but discontinued the offering of new contracts in 2019.
Although Bakkt, a cryptocurrency platform owned by the New York Stock Exchange owner, is also offering Bitcoin futures on a highly scrutinized US exchange, but its product is for physical delivery.