The Bitcoin Spot ETFs that were last approved on the 10th of January have been an explosive success with Bitcoin closing above $60,000 in the month of February. $IBIT, BlackRock’s Bitcoin Spot ETF, has been bringing in billions of inflows towards Bitcoin for the last few weeks. This has been a hot topic in the crypto community with large speculations around the future price of bitcoin and other cryptocurrencies. In this analysis, we’ll have a deep dive on what it takes for BlackRock to make bitcoin even bigger than gold.

Bitcoin vs Gold

The Bitcoin spot ETFs have been a game changer for the cryptocurrency market. Besides Grayscale, the Bitcoin spot ETFs have been bringing in massive amounts of inflows that has rocked the Bitcoin charts by being close to its previous all-time high before the bitcoin halving. IBIT alone has brought in more than $7 Billion of positive net inflows since its launch and continues to break barriers along with other ETFs. This demand for the bitcoin ETFs has prompted large institutions to rapidly accumulate scarce bitcoin by draining over-the-counter bitcoin from exchanges.

Comparing Bitcoin ETFs to Gold ETFs, Gold ETFs still currently dwarf Bitcoin ETFs in terms of total assets accumulated by large institutions with $93 billion of aggregated AUM from its launch back in 2004. Despite the large difference, it took Gold 20 years to achieve this amount while Bitcoin ETFs reached a total AUM of $37 billion within the first 25 trading days since its launch. Bitcoin ETFs have achieved a third of Gold ETFs’ total assets under management in a flash.

This growth has prompted speculation on whether Bitcoin will replace Gold as the number one asset in the world and its feasibility. As nobody has a crystal ball predicting Bitcoin overtaking Gold soon, Bitcoin continues to climb and triumph over other assets with large market caps.

And if you’re wondering what would happen to Bitcoin if it replaces Gold as the number one asset, one Bitcoin would be equivalent to a whopping $700,000!

Private Bitcoin Event

With Bitcoin competing against top assets such as gold, we need to understand the possible catalysts that push Bitcoin into higher prices. BlackRock, the $9 trillion asset management leader, currently holds up to nearly $10 billion dollars worth of bitcoin or around 151,000 bitcoins which continues to grow as they accumulate aggressively. 

In a recent private bitcoin event held by BlackRock, a paradigm shift of how traditional markets approach risk and diversification occurred when BlackRock suggested an allocation of 28% into a portfolio. While Fidelity and other ETFs are adamant on their 1%-3% allocation on Bitcoin spot ETFs, this suggestion solidifies the trust of BlackRock in Bitcoin which would prompt others to follow.

While 28% is a large amount, a study conducted by BlackRock managing directors on optimal asset allocation pertaining to Bitcoin suggests something even greater. The study suggested a total allocation of cryptocurrencies, specifically Bitcoin, of 84.9% for portfolios looking to have an adequate risk exposure while the remaining 15.1% of allocation is to be a 60-40 split between equities and bonds.

As the study was done in February 2022, this would be long before BlackRock applies for a Bitcoin Spot ETF. What conclusions are we able to form from both recent and old news from BlackRock? We speculate that SEC has held strict adherence to cryptocurrency regulation which prompted BlackRock to approach their Bitcoin spot ETF conservatively. Though it is apparent that BlackRock is looking to increase Bitcoin allocation to their client portfolios, they simply are not able to do that for retail customers. Instead of prompting a swift yet risky move to increase Bitcoin allocation to their retail customers, we speculate that BlackRock’s Private Bitcoin Event serves as a well needed push to a much higher cryptocurrency allocation for private investors.

As the price of Bitcoin surges higher and quicker after the Bitcoin spot ETFs, there are still many catalysts that need to be triggered in order for it to become an asset even bigger than gold. Mass adoption, reasonable regulation, and total acceptance of cryptocurrency are a few hurdles that even BlackRock is having a difficult time overcoming. However, BlackRock looks to be a major catalyst to changing the landscape of finance and economics with cryptocurrencies such as Bitcoin and making obsolete traditional investments a thing of the past.