Times Change, Cryptocurrencies Gain Support

Summary BlackRock has entered the bitcoin exchange-traded funds market. The company is on track to become the largest bitcoin fund manager. This move reflects the changing landscape of financial markets and the growing popularity of cryptocurrencies. The time has changed. Markets move on. Firms move on. BlackRock moved into bitcoin exchange-traded funds just four months ago. Before the start of this year, BlackRock and many other "major" money players were not touching cryptocurrencies and were even speaking negatively about them and/or avoiding them altogether. Now, "BlackRock is closing in on the crown of running the world's largest bitcoin fund.... "The US group's spot bitcoin exchange-traded fund has gained $16.7 billion of assets since it launched four months ago, putting it at less than $1.0 billion behind market leader Grayscale, which enjoyed a 10-year and $28.0 billion head start." "Alongside that, BlackRock has launched the fastest-growing tokenized Treasury fund, which crypto hedge funds and market makers are beginning to use as collateral for trading coins and tokens." But, this is a "new" BlackRock. Larry Fink, who, earlier on, called bitcoin "an index of money-laundering." Mr. Fink was not alone. Many, including Jamie Dimon of JPMorgan Chase & Co., dismissed the space altogether. Given that the area was little understood, it was not surprising to have so many people dismiss the asset. What has changed? BlackRock's Chief Operating Officer Rob Goldstein is quoted as saying: "It's all coming together now, but I would hope that it's understood that it's been a multi-year, very deliberate journey about bringing the same institutional quality that differentiates BlackRock to this ecosystem, and to us, that's more important than rushing." The crypto world still has a ways to go...a lot of people to convince...and, accompanied by some stable financial times, with plenty of money around. So, the market appears to be building. More and more people...and managers...have become players. And, most important of all, more and more money is finding its way into the crypto-world. Cryptocurrencies are gaining acceptance in the real world of financial investment. And major players like BlackRock have taken notice of this fact. Cryptocurrencies are still not moving into the area that they, hopefully, were designed for. Cryptocurrencies are nowhere near to becoming a medium of exchange, something its originators wanted very badly. The originators wanted cryptocurrencies to eventually take the place of "money" and of digital currency. That is just not happening. Many still question whether it will ever become a real medium of exchange and whether it will ever replace other alternatives. But, cryptocurrencies are becoming more accepted as a "store of value." For one, the industry is still working hard to go speed up the settlement of deals and the transfer of funds. The move here is to make these assets "more attractive to investors who want to access their money immediately." The development and spread of blockchains throughout the financial system is a necessary advance that must be in place before things will pick up in this space. Blockchains will, eventually, allow individuals to settle deals in a matter of minutes. Then, lots of changes will evolve into the financial system. This, the true believers in the crypto world say, will happen in a matter of time. When the "current technology" ceases to keep up with the new advances, the technology will change. It has always been this way, and there is no reason to believe it won't happen in this case. The movement of BlackRock is part of the evidence that changes are taking place. Another piece of news presented in the article cited above states that "Fidelity has followed behind in third place (behind BlackRock and Grayscale), attracting $9.3 billion of assets." Competition is picking up. And, potential investors are listening. And, this is what the investor should listen to for the future. More and more "bigger players" will be moving into the market. The technology is changing. Marginal costs are falling. BlackRock is charging only a 0.25 percent fee on its product. Grayscale charges 1.5 percent. And, more and more information on the whole scene is growing, making people more comfortable with moving into the market. Furthermore, barring a major catastrophe, history shows that in innovative markets, the whole industry grows as people...investors...become more and more comfortable with what is being done. I still don't see the time when cryptocurrencies become a competitive medium of exchange. Other parts of the digital world will fill that space. I still continue to write a lot about the progress of digital currency throughout the world. People are not going to be lacking modern choices for building the structure of the money and financial world. To me, however, cryptocurrencies are going to have their little part of the world, but will not be a big part when it comes to providing a medium of exchange. As a potential investor in cryptocurrencies, be careful. Know what you are getting into. Certainly, with players like BlackRock and Fidelity joining the game and doing so well as to be numbers two and three in the field in terms of dollars invested, you, as an investor, would be participating in the market with some real creditable organizations. But, this market still is what it is. As much as the libertarians would like a "money" that was not governmentally created, managed, or, regulated, I just do not see this coming in the future. This means that cryptocurrencies will have to continue to justify their existence by being a store of value that has a market price. If that is the kind of asset that you, as an investor want, then go for it. So, let the market grow from here, and may those who want to "invest" in such a market be content with what evolves. As we are seeing, computer technology is changing the world...including the financial world...in many ways. This is the future. Investors must learn to live with new products and services coming to the marketplace at a very rapid pace. Some you will want to be a part of. Some you may not want to be a part of. Investors must do their homework...and then choose.