Will Crypto Assets Make Money at BlackRock?
Asset management giant BlackRock Inc. (NYSE: BLK) is asking will crypto assets make money?
“We are a big student of blockchain,” BlackRock CEO Larry Fink tells Reuters. However, Fink does not think there is a “huge demand for cryptocurrencies.”
Instead of trading cryptocurrencies, BlackRock is studying blockchain and crypto assets. For instance, BlackRock is exploring crypto assets by hiring former Ripple (XRP) product manager Robbie Mitchnick for its “Digital Wealth Team,” Forbes staff writer Jeff Kauflin claims.
To clarify, the Digital Wealth Team is a working group that is studying blockchain, cryptocurrencies, crypto assets, and other emerging investment classes. Importantly, Fink does not reveal how BlackRock intends to use blockchain or what crypto assets BlackRock could invest in.
What Crypto Assets could BlackRock Invest in?
My guess is that BlackRock will invest in smart contract-based digital assets like stablecoins and blockchain platforms.
A stablecoin is a crypto asset that contains a smart contract or decentralized application (DApp). Stablecoin creators program the smart contract to release an asset held in a trust account.
For instance, the Winklevoss Twins’ Gemini Dollar (GUSD) stablecoin smart contract controls access to US dollars held by State Street Corp (NYSE: STT). In addition, the Paxos Standard Token (PAX) offers access to US dollars held by the Paxos Trust Company. Meanwhile, the GoldMint (GOLD), or GoldMint (MNTP) token controls access to trust accounts holding gold bullion.
To clarify, the stablecoin’s smart contract releases the assets when somebody spends a token. For example, the Paxos Trust Company releases a dollar to the recipient of a PAX Token.
Will BlackRock offer a Stablecoin?
Hence, there is a strong possibility BlackRock could offer its own Stablecoin. In addition, BlackRock could offer platform tokens that provide access to smart futures contracts.
Notably, smart contracts and blockchain contracts could be cheaper, faster, and more efficient ways for BlackRock to reach investors in developing markets. Theoretically, investors could access a blockchain investment platform via a smartphone DApp.
Hence, an investor in Kolkata could use the DApp to invest in futures contracts BlackRock trades on the Chicago Mercantile Exchange (CME). In theory, BlackRock could offer smart contracts that provide access to Exchange-Traded Funds (ETFs), stocks, futures, bonds, debt, and commodities.
Why BlackRock is investigating Blockchain
BlackRock is investigating blockchain because most of the future growth in investment markets will occur in developing nations.
For example, The Visual Capitalist projects Egypt’s gross domestic product (GDP) will grow from $1.2 trillion in 2017 to $8.2 trillion in 2030. Consequently, Visual Capitalist predicts Egypt’s GDP will be larger than Germany’s within 11 years.
Meanwhile, the GDP of both China and India will outstrip that of the United States in the coming decade, Visual Capitalist projects. In detail, India’s GDP could be $46.3 trillion in 2030 and China’s could be $64.2 trillion.
Theoretically, a blockchain platform or decentralized exchange could be the cheapest, and most secure method of serving investors all over the world. Therefore, a working blockchain platform could allow BlackRock to reach customers in Cairo, Jakarta, Bangalore, and Dongguan.
Why BlackRock will Make Direct Investments in Blockchain Platforms
Moreover, direct equity investments in blockchain platforms is a growing area of wealth management.
In fact, some of the US pension funds are investing in blockchain platforms through funds. For instance, two Fairfax County, Virginia, pension funds, are investing $40 million in the Morgan Creek Blockchain Opportunities Fund. The pension funds represent police officers and state employees, Forbes reports.
Morgan Creek is investing some Fairfax County money in Bakkt, Forbes reveals. Bakkt is a global decentralized crypto asset exchange backed by International Exchange (NYSE: ICE) and Starbucks (NASDAQ: SBUX). Importantly, International Exchange owns the New York Stock Exchange (NYSE) and other financial markets.
In addition, the University of Michigan’s pension fund is investing $3 billion in a blockchain investment fund owned by Silicon Valley venture capital firm, Andreesen Horowitz, a press release indicates. Interestingly, Andreesen Horowitz managers believe blockchain could replace traditional information technology (IT) infrastructure.
Are Blockchain Platforms an Investment at BlackRock?
Under these circumstances, I think BlackRock is planning big equity investments in blockchain platforms.
I think blockchain platforms in several fields could make a lot of money. Specifically, games platforms like Yumerium have a proven product with a huge market.
Yumerium’s business model is to create a marketplace and decentralized exchange for games that could provide venture capital for games developers. The hope at Yumerium is that gamers will invest in games through its blockchain marketplace.
Platforms like Yumerium could tap the fast-growing and lucrative multi-player game market. Notably, multi-player games like Fortnite attract tens of millions of players and generate billions in revenue.
How Blockchain platforms could make money
In addition, blockchains that connect traditional businesses like manufacturers to customers could generate a lot of money.
For example, SyncFab plans to sell manufacturing services to companies through its blockchain. In addition, Aitheon wants to sell a wide variety of automation, business, and artificial intelligence services to business on its blockchain.
Finally, many other platforms are offering a wide variety of financial services like lending and currency exchange on the blockchain. These platforms could make money by charging interest and fees on loans, lines of credit, and margin trading.
Is BlackRock Making Money?
BlackRock Inc. (NYSE: BLK) could become a major player in blockchain because it is making money.
For instance, Blackrock records a gross profit of $2.79 billion and revenues of $3.434 billion for 4th Quarter 2018. Moreover, Blackrock reports an operating income of $1.246 billion and a net income of $927 million for the same quarter. Plus, BlackRock generates cash in the form of a $427 million free cash flow and a $523 million operating cash flow for 4th Quarter 2018.
BlackRock has a lot of money it can invest in the blockchain. For example, BlackRock had $6.488 billion in cash and equivalents on December 31, 2018.
Is BlackRock a Good Investment
Hence, BlackRock could be a stock for people who want to invest in blockchains without taking big risks.
However, I think BlackRock is an interesting dividend stock that Mr. Market inflates. Specifically, I think the $467.49 a share BlackRock traded at on 17 April 2019 was too expensive.
On the other hand, BlackRock paid a $3.30 dividend on 21 March 2019. Additionally, that dividend was up from $3.13 on 26 December 2018, and 7.3₵ on October 31, 2018. Thus, BlackRock could be for you if your only interest is dividend income.
Notably BlackRock offered investors a dividend yield of 2.82%, an annualized payout of $13.20, and a payout ratio of 47.6% on 16 April 2019. Plus, BlackRock’s dividend has been growing for the past nine years, Dividend.com reports.
BlackRock shows that there are safe ways to invest in the blockchain. More importantly, BlackRock demonstrates that the future of the blockchain is the infrastructure they will build with it not cryptocurrency. All investors and speculators need to learn that lesson if they want to make money on the blockchain.