The recent report by Bloomberg analyst Jamie Coutts sheds light on the growing interest of asset managers in Bitcoin. While the focus initially revolved around exchange-traded funds (ETFs), Coutts reveals that prominent global asset managers, including BlackRock, Vanguard, and State Street, have been actively involved in the Bitcoin mining industry for over three years. This development comes as no surprise to Coutts, who sees the asset manager’s application to offer a Bitcoin spot ETF as a logical extension of their existing involvement in the sector.
Coutts highlights that BlackRock’s entry into Bitcoin mining began in 2020 with an investment in Marathon Digital, the second-largest publicly traded mining company. Despite the industry facing criticism for its reliance on fossil fuels, BlackRock, Vanguard, and State Street have steadily increased their investments in Bitcoin mining companies over the past three years. This is particularly interesting considering that all three asset managers have a reputation for promoting Environmental, Social, and Governance (ESG) investment principles that aim to limit fossil fuel use.
Investing in Bitcoin mining seems contrary to the ESG credentials of these asset managers. However, research by Daniel Batten, co-founder of CH4 Capital, suggests that Bitcoin mining currently derives 50% of its energy from sustainable sources. This percentage is expected to rise further as the mining industry monetizes stranded energy and stabilizes grids. The data indicates that despite concerns about its environmental impact, Bitcoin mining may not be as damaging to ESG principles as previously assumed.
According to Coutts, BlackRock, Vanguard, and State Street are currently the top investors in the three largest publicly traded mining companies: Marathon Digital, Riot Platforms, and Cleanspark. These three mining companies collectively hold a significant 8.9% of the global hash rate. While public miners contribute only 15% of the global hash power, the involvement of these asset managers creates an undeniable influence on the mining sector.
Coutts believes that the current involvement of asset managers in Bitcoin mining does not pose a significant threat to the network’s decentralization. However, he raises concerns about the potential clash between the network’s principles and ESG values in the future. Given the activist tendencies of BlackRock, Vanguard, and State Street, it remains to be seen how they can reconcile their investments in Bitcoin mining with their commitment to ESG principles. Despite this, Coutts suggests that any conflicts are unlikely to hinder the expected operation of the Bitcoin network.
Asset managers such as BlackRock, Vanguard, and State Street have demonstrated a growing interest in Bitcoin mining, expanding beyond their involvement in ETFs. While initially surprising, the data shows that these asset managers have been investing in the sector for several years. It is noteworthy that their investments in Bitcoin mining do not appear to undermine their commitment to ESG principles. As the industry continues to evolve, the potential clash between network values and asset managers’ environmental commitments remains an area of interest. However, for now, the Bitcoin network continues to operate as expected, benefiting from the support and involvement of these influential asset managers.
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