BlackRock adds BTC ETF to $150B model portfolio product

BlackRock, a global investment firm with $11.5 trillion in assets under management, has added its Bitcoin exchange-traded fund (ETF) to its model portfolio product, according to a Feb. 28 report from Bloomberg. Portfolios that allow for alternative assets will be able to put a 1%–2% allocation into the firm’s iShares Bitcoin ETF Trust (IBIT), potentially creating new demand for the exchange-traded fund.

The 1%–2% allocation is due to Bitcoin’s (BTC) volatility, which the firm called a “reasonable range” in a paper authored by the BlackRock Investment Institute. Anything more would significantly increase the crypto’s share of the total portfolio risk.

BlackRock’s $150-billion model portfolio product contains a range of investment portfolios that are sold to financial advisers who manage assets for their clients. The portfolios contain different balances of investments, with some targeted for growth, income generation or capital preservation.

The firm said in 2023 that it expects the model portfolio sector of money management to grow to a $ 10-trillion business over the next five years, up from around $4.2 trillion at the time of the statement. Changes in model portfolio allocations can often have dramatic effects on money flow to certain investments.

Other financial services firms have weighed in on the allocation of Bitcoin to the alternatives category of traditional portfolios like the 60/40 portfolio. Fidelity noted in 2024 that Bitcoin could “offer some return-enhancing properties, but small allocations could contribute exponential risk to a 60/40 portfolio.” JPMorgan wrote in December 2024: “While Bitcoin’s returns have been impressive, they’ve come with extraordinary volatility.”

Bitcoin volatility on display as BlackRock’s BTC ETF sees outflows

The volatility of Bitcoin was on full display on Feb. 28, with the coin seeing a high of $85,122 and a low of $78,215. The largest cryptocurrency by market capitalization has not been immune to the macroclimate that has spooked investors, including the threat of a global trade war and US economic uncertainty.

BlackRock’s Bitcoin ETF has felt the effects as well, with investors pulling out $420 million on Feb. 26 alone, the largest outflow since the iShares Bitcoin ETF Trust launched in January 2024. Other Bitcoin ETFs saw outflows on Feb. 26 as well, with preliminary figures from CoinGlass showing $756 million leaving the funds.

Despite the outflows, Michael Gates, lead portfolio manager for the firm’s Target Allocation ETF model suite, wrote in an investment commentary dated Feb. 27, “We believe Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios.”

On Feb. 26, the Crypto Fear & Greed Index, a key tracker of Bitcoin and crypto sentiment, had slipped to “extreme fear” or a score of “10.” That level had not been seen since June 2022, when Three Arrows Capital (3AC) started to see its downfall.

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