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BlackRock Moves to Add Bitcoin Futures to 2 Funds 

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BlackRock, the world’s largest asset manager with $7.81 trillion under management, has given the green light for two of its mutual funds to invest in Bitcoin futures.

According to two recent SEC filings, the BlackRock Strategic Income Opportunities Portfolio and BlackRock Global Allocation Fund can each invest in cash-settled bitcoin futures trading on commodity exchanges registered with the Commodity Future Trading Commission.

The filings, known as statements of additional information, which provide information about mutual funds that are not included in their prospectuses, were filed Jan. 20.

Bitcoin remains an extremely volatile asset. After briefly reaching another record high at close to $42,000 in early January it is now trading about 25% lower.

BlackRock has not officially endorsed investments in Bitcoin or other cryptocurrencies but its chief investment officer of fixed income, Rick Rieder, told CNBC in late November that the cryptocurrency is “here to stay” due to interest from millennials and has the potential to “replace gold to a large extent.”

Growing Interest

Bitcoin and other cryptocurrencies have been slowly but gradually attracting the interest of major asset managers such as Fidelity Investments, which recently launched a bitcoin fund for wealthy investors; legendary investors, including Paul Tudor Jones and Stanley Druckenmiller; and even central banks.

The Boston Federal Reserve Bank is conducting research with MIT into a central bank digital currency and the ECB is “very seriously” looking at the creation of the digital euro, according to its president, Christine Lagarde.

On the flip side, Janet Yellen, the former chair of the Federal Reserve and President Joe Biden’s nominee for Treasury Secretary said in her confirmation hearing earlier this week that she is particularly concerned about cryptocurrencies which she believes are often used for “illicit “financing.”

The BlackRock filings explain that “the cash market in bitcoin has been the target of fraud and manipulation, which could affect the pricing of Bitcoin futures contracts” and that the “exchanges where bitcoin is traded …  have experienced technical and operational issues, making bitcoin prices unavailable at times.”

The Bitwise 10 Crypto Index Fund (BITW), which more than quintupled in price in its first week of trading in December, from $25 to nearly $140, is now trading near $52 and the Grayscale Bitcoin Trust, reached a $45 high in early January is currently trading 30% lower.

The growing popularity of Bitcoin may be contributing to its volatility. JPMorgan Chase & Co. cross-asset strategists John Normand and Federico Manicardi note in report published Thursday that Bitcoin is the “least reliable hedge during periods of acute market stress,” according to a Bloomberg report.

“The mainstreaming of crypto ownership” increases their correlations with cyclical cyclical assets, potentially converting them from insurance to leverage,” Normand and Manicardi explained.  

See: 11 Reasons Advisors Can No Longer Ignore Bitcoin