Something colossal happened in the crypto industry the other day. It might just be the biggest update since El Salvador decided to accept Bitcoin as legal tender. Interestingly, this update came and went with relatively little fanfare. Why isn’t anyone talking about it? We’re talking about Coinbase’s (NASDAQ: $COIN) partnership with BlackRock.
Coinbase’s abysmal earnings
Coinbase reported earnings on August 9th and it wasn’t pretty…
- Loss of $4.98 per share
- Revenue of $808.3 million vs. $832.2 million expected by analysts
- Total loss of $1.1 billion net loss
Coinbase’s stock slumped about 10% on the report. Granted, Coinbase stock is up 100% since its all-time low in July. But, it’s still down over 70% all-time.
Hidden in Coinbase’s earnings report was a quiet announcement that Coinbase was “selected by BlackRock to provide Aladdin clients access to crypto trading and custody via Coinbase Prime.”
This announcement was only given one line in the nearly 30-page report.
Honestly, investors probably glossed over this announcement and chose to focus on Coinbase’s poor Q2 performance. That’s fair since Coinbase didn’t have a good quarter at all. But, that doesn’t mean that this partnership doesn’t still have game-changing potential. To understand the full scope of this partnership, let’s take a closer look at what BlackRock is.
What is Blackrock?
If you’re not plugged into the financial world then there’s a chance that you have never heard of BlackRock before. BlackRock is one of the biggest investment funds in the world. Popular YouTuber Jack Tran has a few nicknames for BlackRock, including “The Company That Owns The World” and “The Most Powerful Company That You’ve Never Heard Of.”
Back in March, BlackRock announced that it was interested in getting into crypto but didn’t offer too many details. Now, it looks like they’ve made a more detailed plan to get into crypto. So, why is this a big deal?
Mainly because BlackRock manages over $10 trillion in assets. On top of that, it’s one of the most influential organizations in the world:
- BlackRock is a major shareholder in almost every single major U.S. corporation: This includes voting positions in corporations like Apple, Microsoft, Google, Amazon, and all the biggies.
- BlackRock is a revolving door with the federal government: Many former BlackRock employees go on to work in the federal government, and vice versa.
- BlackRock and The Federal Reserve have a close relationship: In 2020, The Federal Reserve selected BlackRock to help clean up the economy.
BlackRock is Big Money. Its success is mainly due to its Aladdin investing software.
What is Aladdin?
Aladdin is BlackRock’s investment and risk management software that is used by 55,000 investment professionals to manage over $22 trillion in assets. TRILLION. With a T. And not just $1 trillion. $22 trillion.
Aladdin has more than 240 customers and is used to manage the wealth of some of the biggest organizations in the world. This includes insurers, pensions, corporations, asset managers, banks, and official institutions. Now, all of these investment managers will have direct access to crypto investing through the same tool that they use to manage the rest of their money.
Is Big Money coming to crypto?
The partnership between Coinbase and Aladdin is a massive, gigantic testament to Bitcoin’s legitimacy as an asset. It’s also a huge turnaround for the management at BlackRock, who used to be anti-Bitcoin. 5 years ago, Larry Fink (CEO of BlackRock) called Bitcoin an “index of money laundering”. Now, he is opening up cryptocurrency to his own clients.
5 years from now, it’s easy to see BlackRock recommending that each client needs to invest a percentage of their portfolio in crypto. If this happens, money will come pouring into crypto, unlike anything we’ve ever seen so far.
An analyst at Ark Invest estimates that just a 2.5% BTC allocation by Aladdin users could drive BTC’s price up to $200,000. Usually, the predictions that “Bitcoin will reach X price by X date” are 100% speculation. But, this BlackRock partnership could realistically be the catalyst that ushers in trillions of dollars in institutional money over the next few years.
The partnership will provide Aladdin clients with crypto trading, custody, prime brokerage, and reporting capabilities.
Do Not Save Money’s Take: Is Coinbase a buy?
The elephant in the room is that we are in the midst of a crypto winter and Coinbase just got crushed on earnings. During times like these, it seems insane to be loading up on volatile assets like BTC or Coinbase stock. The short-term picture is still bleak.
However, based on this partnership, the long-term adoption of BTC and cryptocurrency has never looked stronger. Once this crypto winter is over, there’s a good chance that Coinbase will skyrocket back to profitability.
Here’s the deal: institutional investors are going to start buying BTC and other crypto assets. That’s the direction that the industry is trending. You can either buy Bitcoin now and enjoy the ride upward. Or you can buy Bitcoin a few years from now after financial advisors start recommending that you should buy it.
With that said, crypto prices are still volatile in the short term. We are not financial advisors this should not be construed as financial advice. You should only ever invest with money that you can afford to lose.
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