What Is Larry Fink Up To?

In a bizarre interview, BlackRock CEO Larry Fink called bitcoin an "international asset" and compared it to "digital gold", even going so far as to implicitly recommend people bought BTC instead of gold as a hedge against inflation.

It's bizarre because Fink has, in the past, heavily criticized Bitcoin. As recently as 2017, Fink was calling Bitcoin an "index of money laundering".

"Bitcoin just shows you how much demand for money laundering there is in the world," he said at an Institute of International Finance meeting. “That’s all it is.”

This was at a time of intense TradFi hatred towards crypto. Jamie Dimon, CEO of JPMorgan Chase, called the crypto a "fraud", and people who owned BTC “stupid”. He continued until at least 2021, when he described it as "worthless".

Then there are Warren Buffett and Charlie Munger of Berkshire Hathaway, who have long been critical of crypto. Buffett called bitcoin "a gambling token... rat poison squared" in 2018. Munger agrees, and isn't open to correction. “I think the people who oppose my position are idiots, so I don’t think there is a rational argument against my position,” Munger recently said.

BlackRock Sees The Light

In the context of such giants of TradFi being so critical of crypto (understandably; their model is built on the premise of intermediation and clipping the ticket at every opportunity), is it odd that BlackRock have led the charge for a Bitcoin ETF, swiftly followed by Fidelity and so many other trillion-dollar asset managers?

Well, not really.

Firstly, credit where it's due. BlackRock is not Fink and Fink is not BlackRock, and people are in any case allowed (even encouraged) to change their minds. BlackRock has been dipping its toes into bitcoin since 2021.

More to the point, as an asset manager, BlackRock's job is to make money and give its customers what they want (which makes them money). Its customers want crypto and, let's face it, there are minimal opportunities for ROI in the current investment landscape.

A Struggling Economy

Inflation is sticky, interest rates are at a 15-year high, and the banking sector is in real trouble.

The Fed views interest rate rises as a better option than allowing runaway inflation—even if it means some smaller banks go under. According to the FT, banks hold half a trillion dollars of unrealized losses. Bank of America alone holds $100 billion of that. The long-dated bonds that banks bought with QE money are not going to be yielding anything for years, and they're going to be holding back banks from becoming profitable until they can get them off their books.

The long and the short of it is that there aren't many asset classes right now that look attractive. But Bitcoin—which is showing promising signs of life after a year-long bear market, has a clear regulatory status, and is not yet easily accessible either to institutional capital or regular "mom and pop" retail investors—is one of them. It doesn't hurt that the narrative for bitcoin is similar to that of gold, offering a potential hedge against inflation and diversification.

Bitcoin has come of age, but it still has the potential for 500-1,000% growth from here in the near term. Fink's comment about Bitcoin being better than gold is interesting. Bitcoin's market cap is $600 billion. Gold's is $12 trillion: 20 times that of BTC. Capturing even a fraction of gold's market would send bitcoin well into six figures, with BlackRock collecting fees on every trade they process.

Why wouldn't the world's largest asset manager not only want to get in on that action, but to drive it?

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