Bitcoin and cryptocurrencies have rebounded this week, riding a wave of good news for the crypto market.
The bitcoin price jumped to over $45,000 per bitcoin after a senior Russian official said the country would accept bitcoin as payment for its energy exports. Meanwhile, the ethereum price has continued to climb as “enthusiasm” builds ahead of a long-awaited upgrade.
Now, Larry Fink, the chief executive of BlackRock, the world’s largest asset manager with around $10 trillion in assets under management, has said his company is “studying” digital currencies due to climbing client demand.
“As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients,” Fink wrote this week in a letter to BlackRock shareholders.
Fink has previously dismissed bitcoin and crypto, saying in a CNBC interview last year that he doesn’t see much demand for crypto. In February, Coindesk reported BlackRock was gearing up to follow other Wall Street giants including Goldman Sachs, Morgan Stanley and Citi, into crypto services, and is planning to let clients borrow from BlackRock by pledging crypto assets as collateral.
This week, Goldman became the first major U.S. bank to trade crypto over the counter, working with crypto merchant bank Galaxy Digital to offer a bitcoin-linked instrument called a non-deliverable option.
Fink, who branded bitcoin an “index of money laundering” five years ago, pointed to Russia’s invasion of Ukraine and wide-ranging financial sanctions placed on the country as a catalyst for mainstream crypto adoption.
“The war will prompt countries to re-evaluate their currency dependencies,” Fink wrote. “Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate.”
The war in Ukraine has also upended the world order that had been in place since the end of the Cold War, according to Fink, who predicted it will “put an end to the globalization we have experienced over the last three decades.”
“It has left many communities and people feeling isolated and looking inward,” he wrote. “I believe this has exacerbated the polarization and extremist behavior we are seeing across society today.”
Fink’s comments chime with others in the financial world who see strict Russia sanctions, which have included the country’s banks being excluded from the SWIFT interbank messaging service and restrictions put on the central bank’s foreign exchange reserves, as a shake-up of the system.
In March, a Credit Suisse analyst said the Russian war in Ukrainian will create a new world financial order that could boost the price of bitcoin and other cryptocurrencies.
“We are witnessing the birth of Bretton Woods III—a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West,” Zoltan Pozsar, global head of short-term interest rate strategy at the giant investment bank, wrote in a report.
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The Federal Reserve’s surprisingly hawkish policy turn has had a surprise beneficiary: Cryptocurrencies. Digital coins extended gains on Thursday after the Fed stepped up its taper, and laid the foundation for a tightening cycle that could bring as many as three rate hikes in 2022. Normally, cryptocurrency benefits from loose monetary policy and its inflationary side-effects; but at least for now, investors are taking the longer view.
Bitcoin (BTC-USD), barely a week removed from an ugly selloff that dragged it below $50,000, rallied by over 2% on the day. Other digital coins that power smart contract layer-1 blockchains like Ethereum (ETH-USD) — which helps power the blockchain for the majority of decentralized finance (DeFi), non-fungible tokens (NFTs) and other smart-contract applications like Decentralized Autonomous Organizations (DAOs) — Solana (SOL1-USD), Terra (LUNA1-USD) and Avalanche (AVAX-USD) are also posting big gains.
It’s been a rough fall for cryptocurrencies, even as the introduction of Bitcoin exchange-traded funds (ETFs) lure in smaller investors. In recent weeks, the value of the asset class has plummeted by more than $700 billion from almost $3 trillion to $2.15 according to Coinmarketcap.
Fears over the Fed’s policy and the Omicron variant of COVID-19 have contributed to a volatile tone in markets, with crypto trading in tandem with risk-sensitive stocks. Louis LaValle, a managing director with crypto investment firm 3iQ Digital Assets U.S., told Yahoo Finance that crypto’s whipsawing is linked to the sheer volume of new investors, especially institutions, who purchased digital coins for the first time this year.
That includes billions that have flooded into crypto derivatives. Open interest on BTC futures is down by $10 billion since October, but still more than twice as high as the $8 billion it saw a year ago, according to data from The Block.