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Based on a recent report by Bloomberg analyst Jamie Coutts, asset managers’ interest in Bitcoin stretches beyond exchange-traded funds (ETF) into the mining sector. In particular, Coutts speaks about BlackRock, describing the asset manager’s application with the US Securities and Exchange Commission (SEC) to offer a Bitcoin spot ETF as “unsurprising.”
The analyst stated that BlackRock and other prominent global asset managers, namely Vanguard and State Street, have been involved in the Bitcoin mining industry for over three years.
In hindsight, #BlackRock's massive #Bitcoin spot ETF play shouldn't have been that surprising. Along with other behemoths (Vanguard, StateStreet) who espouse #ESG-driven investing principles, they started scooping up public mining stock back in 2020
ESG, Institutionalization🧵 pic.twitter.com/VcKX8TrgZ2
— Jamie Coutts CMT (@Jamie1Coutts) September 26, 2023
BlackRock And Other ESG-Driven Companies Investing In Bitcoin Mining, Analyst Says
James Coutts stated that BlackRock began its venture into Bitcoin mining in 2020 by investing in Marathon Digital, the second-largest publicly traded mining company.
Notably, this development occurred when the Bitcoin mining industry faced high criticism, likely due to the substantial reliance on fossil fuels.
Over the last three years, Coutts reports that BlackRock, Vanguard, and State Street have increased their respective investments in Bitcoin mining companies, regardless of the market cycle.
Interestingly, all three asset managers are known to promote Environmental, Social, and Governance (ESG) investment principles, part of which is limiting fossil fuel use. However, it appears that investing in Bitcoin mining may not damage the ESG credentials of these companies.
According to a report by Daniel Batten, co-founder of CH4 Capital, James Coutt notes that Bitcoin mining currently derives 50% of its energy from sustainable sources. And this percentage is likely to increase as Bitcoin mining has the unique ability to monetize stranded energy and stabilize energy grids.
Potential Effect Of Bitcoin Mining Institutionalization
Based on James Coutts’s report, BlackRock and the two other asset managers in the discussion are currently the top investors in the three largest publicly traded mining companies, namely Marathon Digital, Riot Platforms, and Cleanspark.
Together, these mining companies collectively own 8.9% of the global hash rate, which is significant as public miners only account for 15% of the global hash power.
Source: Bloomberg Intelligence
For now, James Coutts believes that the involvement of these asset managers in Bitcoin mining poses little challenge to the network’s decentralization.
However, the analyst notes that there may be a future clash of network and ESG values, especially given the activist tendencies of BlackRock, Vanguard, and State Street.
However, this would not prevent the Bitcoin network from operating as expected. But it may lead other miners whose operations still rely on fossil fuels to start processing “censored transactions.”
At the time of writing, Bitcoin trades at $26,198.48, with a 0.57% gain in the last month, according to data from Tradingview.
BTC trading at $26,198.48 on the hourly chart | Source: BTCUSDT chart on Tradingview.com
