March 5, 2024

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BlackRock to Integrate Bitcoin Exposure into $36.5 Billion Strategic Income Fund, Embracing Digital Assets

BlackRock has filed an amendment with the SEC to include Bitcoin exposure in its Strategic Income Opportunities Fund (BSIIX), marking a significant move towards integrating cryptocurrencies into traditional investment portfolios. As of March 1, BSIIX's total fund size was $36.5 billion, with plans to invest in fixed-income securities and potentially in spot Bitcoin ETFs, including its own iShares Bitcoin Trust (IBIT) among others. This strategic decision reflects a growing trend among traditional financial institutions to embrace digital assets, highlighting an increasing acceptance of cryptocurrencies like Bitcoin as viable investment options. The inclusion aims to enhance the fund's appeal by offering a mix of contemporary and traditional assets, aligning with the financial sector's cautious yet optimistic engagement with digital currencies. This development underscores the rising institutional demand for Bitcoin, propelled by the success of IBIT, which has rapidly grown to $10 billion in assets under management, further evidencing the sector's shifting stance towards more innovative investment avenues amidst regulatory and market challenges.

BRICS Nations Forge Ahead with Blockchain-Based Payment System to Reduce Dollar Dependence

The BRICS nations, comprising Brazil, Russia, India, China, and South Africa, are collaborating to develop an independent payment system leveraging blockchain and digital technologies, aiming to enhance their autonomy within the global financial ecosystem. This initiative, highlighted by Kremlin aide Yury Ushakov in a TASS interview, seeks to create a platform that is accessible, efficient, and politically neutral for governments, businesses, and the general populace. The move is part of the broader BRICS agenda to diminish reliance on the US dollar and foster a more diversified international monetary system, including efforts to develop the Contingent Reserve Arrangement with non-US dollar currencies. Additionally, efforts are underway to establish the BRICS Bridge payment platform, furthering the group's ambition to reform global monetary dynamics and reflecting a shared interest in prioritizing advancements in crypto assets, tokenization, and artificial intelligence as stated by Klaas Knot of the Financial Stability Board to the G20.

MicroStrategy Plans $600M Bitcoin Investment

MicroStrategy's stock surged over 23% as Bitcoin's value exceeded $67,000, reflecting the firm's significant investment in the cryptocurrency. Despite closing at $1,334.01, its share price dropped about $100 after announcing plans for a $600 million convertible notes offering for acquiring more Bitcoin and general purposes. This move, detailed in a press release and echoed by co-founder Michael Saylor on X, underscores MicroStrategy's strategy to bolster its substantial Bitcoin portfolio, now valued over $13 billion. Since embarking on Bitcoin investments in 2020, MicroStrategy's market cap has soared, with its Bitcoin holdings reaching 193,000 by February 26, after recent acquisitions. This financial strategy and the company's growth highlight its robust commitment to Bitcoin amidst Saylor's transition to Executive Chairman, a significant pivot since the 2000 SEC settlement over financial misstatements.

Trading Desk Insights

Bitcoin has surged to a historic high of $69,350, with ETFs being just one factor propelling this recent rally. Notably, trading volumes in Korea have skyrocketed to $8 billion per day for five consecutive days, compared to less than $1 billion previously. Additionally, leveraged bets on crypto futures have soared to over $66 billion in the past week, while funding rates on certain tokens have surged to over 100% annualized.

In the realm of BTC ETFs, yesterday marked the second-highest volume day at $5.5 billion, accompanied by net inflows of $562.7 million, with BlackRock and Fidelity contributing a total of $825 million. However, Grayscale continues to witness elevated outflows, totaling $368 million.

The Deribit DVOL index, which gauges expected price volatility over the next 30 days, has surged to an annualized rate of 76%, the highest since November 2022. In response to the escalating volatility, some traders are engaging in "overwriting calls" to generate additional income.

Meanwhile, memecoin traders are shifting their focus away from large and medium-cap memecoins like DOGE (+3%) and PEPE (+5%), towards smaller-cap coins such as WIF (+10%), MYRO (+90%), and FTT (+19%). Some analysts view the unusually large movements in memecoins as a bearish signal, as their outperformance has historically signaled local tops on BTC due to speculative fervor. Notably, Shiba Inu experienced a brief 50% drop on Coinbase, despite recording over $1.7 billion in trading volumes, typically indicative of sell orders exceeding available market depth.

In the equities market, stock futures slipped following a retreat in the Nasdaq Composite from record highs. Microstrategy, the Bitcoin development company, saw a decline of over 3% after announcing a private offering for $600 million in convertible senior notes. The firm intends to utilize the proceeds to acquire more BTC and for general corporate purposes.

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Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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