Key Insights:
Blackrock's Bitcoin ETF approval deadline is on 15 January 2023. Experts are hoping for approval this coming Wednesday.
Around the same time, it plans to lay off 600 staff, or 3% of its workforce, as reported by Fox Business. After approval, BlackRock is rumoured to buy $2 billion worth of Bitcoin for its ETF.
At the end, we will also gauge the impact of these news events on the price of Bitcoin.
Fox News shared on 6 January 2024, that BlackRock is going to lay off over 3% of its workforce, or 600 personnel. The official explanation seems to be based on performance metrics. Such layoffs were also seen in the previous financial year, this year, the need to trim staff arises due to another reason.
Though officially unrelated, the layoff news seems to make sense when we see it in combination with two more events.
BlackRock has witnessed a wild growth, which took its net assets under management to more than $9 trillion. However, that kind of growth has slowed down as the business enters a more mature phase. Such situations demand trimming of staff because now the company wants to decrease its cost.
Further, as the company enters a slow-growth phase, it needs to control costs to have more money for new products.
Therefore, it seems that the launch of Bitcoin ETF could have a direct or indirect impact on the laying off.
Lately, there has been a need for reduced ESG compliance for portfolio management companies in the USA. This is because of the weaker asset performance of "green investments". CEO Larry Fink also claimed that such terms have now stirred political controversy in recent times.
The staff trims could be seen with reduced ESG compliance but we do not think that it would amount to a layoff in such great numbers. This is because ESG-related funds account for about $1 trillion of assets in Blackrock, which is more than 10% of their AUM value.
Fox also reported sources confirming that the layoffs were indeed aimed at reducing business costs and saving money to enter new businesses such as technology investing.
Matthew Segel, Research Head of VanEck disclosed that he recently heard from a well-placed source inside BlackRock that the company has lined up $2 billion in incremental funds to purchase Bitcoin.
VanEck has also launched his spot Bitcoin ETF and is lined up for approval alongside BlackRock's spot Bitcoin ETF.
At the time of writing, Bitcoin had a market cap of $845 billion. A purchase of $2 billion will not be enough to make any significant difference. However, when the purchaser is BlackRock it might be followed by retail buying.
As of 7 January 2023, Bitcoin had a support of $40,000 and a resistance near $46k. If the news of BlackRock generates a rally, it is expected to take Bitcoin above $48.2k.
A rally higher than this isn't easy because of an on-chain metric. Bitcoin has been continuing a nice rally since June 2023 when the news of Bitcoin ETFs first came in the markets.
However, once the approval comes in, there could be a profit booking. Around 86% of Bitcoin holders are holding their Bitcoins in profit. These holders might be tempted to sell their holdings partially to book profits.
We expect the prices to fall back to $40,000 (support level) once the profit booking starts.
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