BlackRock, the global leader in asset management, reportedly spent $1 billion on Bitcoin on the eve of the sharp decline in the price of BTC. The final reason was the Federal Reserve Chairman's announcement of a change in the pace of interest rate cuts. This announcement was accompanied by statements that cast a shadow over Bitcoin's strategic reserve plans.
December 18, 2024 will be remembered as the day when US Federal Reserve Chairman Jerome Powell set the cryptocurrency market on fire with a few words. The Fed, to the surprise of many, has proposed a rate cut for 2025: there will be two rate cuts next year instead of four, as previously expected.
Low interest rates usually fuel the cryptocurrency market. Therefore, an interest rate cut is a bearish signal. Furthermore, Powell said that the central bank is not allowed and is not even interested in holding any bitcoin (Bitcoin).
Many experts Calls A 25 basis point cut in the federal funds rate is “hawkish” or even “aggressive.” This move caused panic in the cryptocurrency market. Bitcoin fell by 13% in 48 hours. Several altcoins saw sharp price drops: Dogecoin lost 26%, Ethereum fell 16%, while Ripple fell 18%. Coinglass data Pointing More than $1.4 billion worth of leveraged long positions were liquidated within a single day. Stock markets also saw a significant decline.
Was BlackRock's $1 Billion Investment in Bitcoin a Big Mistake?
One would think that buying $1 billion worth of BTC a day before the drop would be a disaster. However, we can take the example of BlackRock and see how such unfortunate timing of massive purchases may not be fatal in the long run.
According to Arkham, BlackRock Spent $1.5 billion on Bitcoin during the week. $1 billion was invested in Bitcoin just before the drop at a price between $103,000 and $107,000, meaning the company bought nearly 10,000 Bitcoin.
As of December 20, BlackRock He owns More than 553,000 Bitcoins, about 2.6% of the total Bitcoin supply. This investment represented a 1.8% increase in total BTC holdings from IBIT (BlackRock's iShares Bitcoin Trust).
According to the latest data from VintelBlackRock's total holdings are worth $4.7 trillion. However, other sources estimate BlackRock's holdings at more than $11 trillion. Bitcoin's share of these holdings is very small, which is in line with BlackRock's recent share recommendation To allocate up to 2% of Bitcoin in a multi-asset portfolio to hedge against market disruptions.
Obviously missing out on a better buying opportunity that occurred the next day, when Bitcoin fell below $93,000, was unfortunate. However, BlackRock's overall portfolio value is high enough to absorb this drop in value without too much drama. Considering the number of times Bitcoin has “crashed” only to recover at a higher value, this price drop is negligible. What matters most is the fact of obtaining more bitcoins, the value of which continues to grow and become more scarce as time goes on.
BlackRock and Bitcoin Scarcity Discussion
BlackRock appears to be the main beneficiary of Bitcoin's scarcity. Interestingly, it was BlackRock that sparked the online debate over the popular Bitcoin hard cap of 21 million.
On December 18, BlackRock released a 3-minute video tutorial explaining the basics of Bitcoin. At one point in the video, we can see a subtitle that says: “There is no guarantee that the maximum Bitcoin supply of 21 million will not change.”
This little observation did not go unnoticed by cryptocurrency enthusiasts and professionals. Bitcoin historian and Gorilla Pool founder Kurt Wuckert Jr. has moved on. To X Ask the question On the possible reasons why BlackRock "raised the idea of adding inflation."
Removing the supply cap of 21 million is not impossible. The Bitcoin community can do this through a hard fork. However, the implications of such a move could shake the future sustainability of the first cryptocurrency. In general, Bitcoin's security comes down to the motivation of miners. However, if Bitcoin scarcity is no longer a thing, the reward value may decrease, making the network less protected and more vulnerable.
Many users responded to Wuckert that they saw the reference to the potential removal of the hard cap as a formal disclaimer to avoid lawsuits if Bitcoin inflates. Others expressed the opinion that a Bitcoin fork that would not have a cap of 21 million would be something else and not Bitcoin, while the hardcore community would stick with the original version.
conclusion
BlackRock is willing to experiment with relatively new assets. No matter how much of the entire supply of BTC this company already owns, they will not risk investing more in it than they can afford to lose, and this latest purchase is just another purchase made by a company that definitely sees the value in Bitcoin itself. After all, 1 Bitcoin equals 1 Bitcoin.
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