BlackRock, the world's leading asset management company, invested $1 billion in Bitcoin just before a significant price drop. The drop was related to the U.S. Federal Reserve Chair's statement about changing the pace of rate cuts.
Federal Reserve Decision and Its Consequences
On December 18, 2024, U.S. Federal Reserve Chair Jerome Powell set the crypto market on fire with his announcement of reducing rate cuts for 2025. Instead of four previously expected cuts, there will be only two next year. This caused a panic in the market, with Bitcoin dropping 13% in 48 hours and many altcoins falling even more. For instance, Dogecoin lost 26%, Ether declined by 16%, and XRP was down by 18%.
BlackRock's Bitcoin Investment: Risks and Perspectives
BlackRock invested $1 billion in Bitcoin just before its price dropped significantly, buying at between $103k and $107k per coin. Despite the unfortunate timing for such a large buy-in, this may not be catastrophic for the company in the long term. BlackRock's portfolio is large enough to absorb this dip without much drama.
BlackRock and the Bitcoin Scarcity Discussion
BlackRock released a 3-minute educational video on Bitcoin, mentioning that 'there is no guarantee that Bitcoin’s 21 million supply cap will not be changed.' This sparked debates about the potential removal of the cap, which could significantly affect the future sustainability of cryptocurrency.
BlackRock shows a willingness to experiment with Bitcoin. Regardless of current market fluctuations, the company sees long-term value in Bitcoin and considers it a sensible addition to a diversified investment portfolio.
