Crypto’s limp BlackRock response is a clear tell

YOU would think the news that Coinbase Global Inc had entered into a partnership with BlackRock Inc to help institutional investors manage and trade Bitcoin would energise the slumping cryptocurrency market. After all, if the world’s largest asset manager is interested in transacting in Bitcoin, it would mean Bitcoin and crypto in general had just been given its imprimatur. That is what the crypto folks have been looking for all along, which is some recognition that crypto is a legitimate asset class to go along with equities, fixed income, commodities and currencies.

Although Coinbase’s shares rose some 30 per cent last week on the news, Bitcoin fell. If the partnership had happened during the crypto mania of 2019-2021, you can be sure that Bitcoin would have soared and all the crypto evangelists on Twitter would have been out proselytising in full force, preaching to all non-believers to “have fun staying poor”. Bitcoin’s disappointing reaction is especially concerning when you consider that this was just the latest in a string of what should have been a positive development that turned out not to be a catalyst. Recall that just a few months ago Fidelity Investments said it would begin to offer Bitcoin in retirement plans for customers, and the bear market in crypto kept on going.

This year has been awful for crypto, with a couple trillion of dollars of value wiped out and the liquidation of several large hedge funds and exchanges, not to mention the resultant collateral damage in the non-fungible token, or NFT, space. The Bloomberg Galaxy Crypto Index’s 57 per cent plunge in 2022 has dwarfed the 13 per cent drop in the S&P 500 Index. More people are now questioning the viability and usefulness of the blockchain technology that underpins crypto.