BlackRock ‘dabbles into’ Bitcoin as MicroStrategy plans to buy another $900M

  • BlackRock’s Rick Rieder confirmed an investment in Bitcoin in response to increased demand for yielding assets.
  • MicroStrategy will issue $900 million in debt to buy more Bitcoin (BTC).

The world’s largest investment firm with $7.4 trillion in assets under management (AUM), BlackRock, is now among the Bitcoin hodlers, as Chief Investment Officer (CIO) Rick Rieder hinted in an interview for CNBC’s Squawk Box. Although he did not disclose any numbers, Rieder said that they have begun to “dabble” into Bitcoin.

Rieder talked about the rise in U.S. 10-year bonds, which have climbed to a new high in one year. As recently as March 2020, this investment instrument had a significant decline, when there was the massive market crash due to the COVID-19 pandemic.

BlackRock’s CIO attributes the current bond rally to “an increase in demand” for high-yielding assets. Rieder believes that over the next few years, the global economy will see “significant growth” and added:

(…) the demand for safe assets is something that explains why people are going to certain parts of the market (…) The liquidity in the system is so immense and the need for yield is (…) demographically driven. There are not enough assets being created versus the financial crisis, there are not enough income-producing assets (…).

Bitcoin fills that “gap” that, as Rieder put it, many people are looking for. Investors looking for assets that will rise in price will put money into Bitcoin as a hedge against a possible uptick in inflation, as Rieder stated:

We’ve started to dabble in it (Bitcoin) I wouldn’t put a number on the percentage allocation someone should make, it depends on your portfolio (…) The technology has evolved and the regulations have evolved to the point where a lot of people think it should be part of a portfolio. That’s what’s pushing the price.

MicroStrategy keeps on adding Bitcoin to its wallet

Separately, MicroStrategy will be placing a new bet on Bitcoin. The software company led by Michael Saylor is “hungry for Bitcoin”. Therefore, they have announced a new issue of convertible notes for the sole purpose of increasing their holdings in the cryptocurrency.

In a press release, the Nasdaq-listed company announced that they will issue another $900 million in convertible notes with 0% interest. The notes will mature in February 2027 and will be sold in a private offering to be held on February 19, 2021.

Previously, the company made a similar sale with a high stake in what some analysts describe as an investment product close to a Bitcoin ETF. Regarding the high demand for this kind of investment, Ellie Frost said:

MSTR remains the only public company on the market continuing to take out debt to acquire more Bitcoin. Their pricing of these bonds and rising stock price have shown their success in this strategy. They won’t be stopping anytime soon.

An investigation by Messari has determined that the Saylor led software company holds 70,784 BTC, worth $3.5 billion. Since its initial investment, MicroStrategy has made $2.3 billion in profits just by holding the cryptocurrency in its reserves. Its shares are up 608%, according to Ecoinometrics.

Bitcoin better that gold

Senior Editor of the “Die Welt, Holger Zschäpitz, made a comparison between the performance of Bitcoin and gold. As seen in the graph below, the precious metal has underperformed compared to the cryptocurrency. Despite both being considered safe havens assets under equal economic conditions, BTC could be “eating” gold.

In response to Zschäpitz’s assertion, Michael Saylor responded:

Gold peaked in August 2020 at the same time MicroStrategy chose Bitcoin as the superior asset.

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