₿lackRock's Big Bet

They spent years FUD'ing your bags. Now their bags are packed, ETF applications filed, and ESG talking points memorized... TradFi is ready for takeoff

Aug 31, 2023

Larry Fink Bathing in BlackRock’s Bitcoin

The ol’ Dump-and-Pump

In the late 1800s, Jay Gould wanted control over Union Pacific Railroad, a major player in the transcontinental railroad industry. He spread rumors and negative news about the company's financial health to create fear among existing shareholders.

As the stock price dropped, Gould and his associates bought huge quantities of Union Pacific shares at the discounted price.

Gould's manipulation of the Union Pacific stock price allowed him to acquire a substantial stake in the company at a fraction of its real value, and then profit enormously as the rumors proved false and the stock rocketed back to its true value.

It’s a tale as old as financial time: greedy whales spreading FUD to push price down so they can get more exposure before it rips.

Today’s version of this playbook is the war on crypto (“Operation Choke Point 2.0“) where major institutions like BlackRock and the SEC have coordinated a relentless attack on Bitcoin using fear, uncertainty, doubt, and of course their preferred weapon of choice: the ESG shibboleth.

Now in August, we learn BlackRock may be behind the world’s 3rd largest Bitcoin wallet, purchasing 118,000 BTC (~$3.5bn) in the last few months while applying for regulatory approval to list America’s 1st Bitcoin ETF, all in the same month the ESG community, Gary Gensler, the SEC, and the U.S. Courts all reverse their anti-Bitcoin stance 180 degrees at exactly the same time... incredible coincidence, huh!

Jay Gould and his cronies have backed up the truck. We know what comes next…

ESG’s 180 on Bitcoin

In August, KPMG released “Bitcoin’s Role in the ESG Imperative”, and according to the report, BTC is now an environmentally friendly asset.

The “misunderstood technology and asset class […] can be a catalyst or market driver for new renewable energy projects”.

And my personal favorite quote from the report:

“Bitcoin consumes approximately 110 terawatt hours of energy per year, which is equivalent to the amount of energy required to run tumble dryers.
One would have expected much more electricity use given the years of criticism Bitcoin has received”
- KPMG Research (August 2023)

Yesterday Bitcoin was “on track to consume all of the world's energy by 2020”. Today it’s no worse than tumble dryers.

Did anything about Bitcoin’s code change? Nope. But that’s the ironic beauty of the world’s most “volatile” asset: It’s unchanging technical stability reflects our ever-changing social instability.

So now, members of the $50 Trillion (!) ESG cult have to justify *not* owning BTC, the ESG-friendly asset catalyzing renewable energy production for less than the cost of tumble dryers.

KPMG Report says Bitcoin is “ESG Friendly”

BlackRock’s 180 on Bitcoin

In August, CEO Larry Fink also changed his mind on Bitcoin. Speaking positively on Bitcoin’s potential to “revolutionize finance” while filing an application for a Spot Bitcoin ETF.

And those aren’t the only Bitcoin moves the world’s largest asset manager has made recently:

BlackRock filed an application for a Bitcoin ETF
BlackRock increased their stake in Microstrategy to 8.1%
BlackRock became the 2nd largest shareholder in the top 4 public BTC miners
BlackRock possibly the 3rd largest BTC wallet

I’m old enough to remember Fink calling BTC an “index of money laundering”. Now BlackRock is publishing research telling investors the optimal portfolio allocation to Bitcoin is 85%:

“Starting with a 60-40 equity-bond portfolio, which is produced with a risk aversion of 𝛾 = 1.50, the optimal BTC allocation is a large 84.9%. The remainder of the portfolio, 15.1%, is split 60-40 between equities and bonds.”
- BlackRock Research (August 2023)

Let me type that one out so it’s clear: BlackRock, the $10 Trillion TradFi asset manager, says the ideal portfolio structure for investors is:

Bitcoin: 84.9%
Stocks: 9.06%
Bonds: 6.04%

The SEC’s 180 on Bitcoin

In August, SEC Chair and longtime Bitcoin hater, Gary Gensler, announced he’s turning his focus away from crypto to focus on AI, saying “We can get to crypto later”.

Might this have something to do with the fact that also in August, the SEC lost a major court case against Grayscale? A loss which comes immediately after having lost another major court case against Ripple Labs (XRP) last month and immediately before a judge tossed out another frivolous case against Uniswap Labs (UNI) on the grounds that you can’t sue code.

A refreshing bit of common sense from the Judicial branch.

In the Grayscale case, the Court asked the SEC why they saw it appropriate to approve a speculative Bitcoin Futures ETF but not a fully-backed Bitcoin Spot ETF with no leverage… crickets.

The D.C. Circuit said the SEC failed to provide a single "reasonable and coherent explanation" for why the two products received such different treatments, calling the SEC’s behavior “unlawful."

A big win for team Truth.

The SEC routinely failed to protect consumers from bad actors like FTX, while it attacked the industry’s good actors like Coinbase, and actively hurt consumers by not supporting regulated legitimate products like a spot BTC ETF.

Now their war on crypto is falling apart in the courts so Chairman Gensler is giving up, hoping to score some points on AI instead.

Nation States’ 180 on Bitcoin

Governments around the world went from “we will never own BTC” to “we don’t own nearly enough BTC“ real quick. In the last 30 days:

Oman: The Government of Oman revealed a $1.1 billion plan to mine Bitcoin through a brand new Bitcoin mining facility and use the digital currency as a key component of their digital transformation strategy. (link)
Argentina: Javier Milei, a Libertarian, pro-Bitcoin candidate who advocated for the elimination of the Central Bank, won the primary presidential election. (link)
- “If printing money would end poverty, printing diplomas would end stupidity”
Bhutan: It was revealed that the Himalayan Kingdom has been buying Bitcoin for years and now plans to develop a 600 MW Bitcoin mining farm. (link)
Bulgaria: The government revealed Bitcoin holdings of more than 200,000 BTC (~$6.3bn), far more than the United States’ holdings. (link)
Hong Kong: The country re-opened for blockchain business, with users once again able to buy & trade crypto assets under the city’s supportive new regulatory framework. Hong Kong’s Financial Secretary stated the future of Hong Kong will be powered by Blockchain and Web3 technologies. (link)
El Salvador: The country’s bond returns are up +70% proving many skeptics of the country’s Bitcoin adoption plans wrong. El Salvador’s geothermal volcanic energy is providing energy to their grid and mining BTC for their reserves. (link)
Abu Dhabi: The desert city wants to be “King of Bitcoin Mining” after Marathon Digital enter into a partnership with Abu Dhabi’s sovereign wealth fund to create the Middle East's first large-scale immersion Bitcoin mining operation. (link)
BRICs: BRICs members welcomed several major new countries into the anti-USD alliance. Conversation centered around a new gold-backed currency for the group and reflects the shifting landscape of power that no longer has America or its currency at its center. (link)

Conclusion

BlackRock, Larry Fink, the ESG community, the SEC, and an increasing number of governments around the world…

The same people who told you it’s irresponsible to own Bitcoin because it’s a “money laundering index” that’s “boiling the oceans” and “too volatile” for your portfolio are now telling you it’s irresponsible *not* to own Bitcoin because it’s a human rights tool catalyzing sustainable energy innovation and the optimal portfolio allocation is 84.9%.

The truth is they’ve packed their Bitcoin bags. The FUD, Operation Choke Point 2.0, and the various court cases all kept prices low while BlackRock and the other modern dar Robber Barons backed up the truck, filed their BTC ETF applications, and became some of the largest Bitcoin owners on Earth.

Jay Gould would be proud.