BlackRock, the world’s largest asset manager with $9 trillion in assets under management (AUM), has invested in two Bitcoin mining companies based in the United States: Marathon Digital Holdings and Riot Blockchain.
According to a June 30 SEC filing, Blackrock now owns 6.71 percent of Marathon Digital Holdings and 6.61 percent of Riot Blockchain.
The announcement comes at a time when Bitcoin miners are experiencing a surge in popularity. According to data aggregator YCharts, firms based outside of China are benefiting from the recent crackdown on mining there, with profits totaling $44 million per day.
The new Bitcoin mining frenzy
According to some estimates, China was home to roughly 70% of all miners. Until recently, that is.
After mining bans were imposed in the industry’s most popular states, up to 90% of Chinese miners fled to more crypto-friendly climes, resulting in a 50% drop in Bitcoin hash rate.
The hash rate is now back on the rise, and daily revenue has increased by a whopping 256.4 percent over the previous year.
According to the Cambridge Centre for Alternative Finance, the United States now accounts for nearly 17% of the global Bitcoin hashrate rate. Meanwhile, Russia and Kazakhstan increased their mining capacity, reducing China’s dominance to less than 46%.
The countries where Bitcoin mining is thriving share two characteristics: “mining cost advantages and ready access to funds (made available with institutional support,” Nangeng Zhang, founder and CEO of mining equipment manufacturer Canaan, told us in April.
However, mining profits are still falling short of the $80 million-per-day average that miners enjoyed in April of this year, at the height of the Bitcoin boom, when the cryptocurrency’s value surpassed $63,000.
Marathon and Riot saw their shares rise and fall in tandem with the price of Bitcoin, but both have performed well this year.
According to TradingView, Marathon stock (MARA) has increased 939 percent in the last year, while Riot stock (RIOT) has increased 835 percent. Both stocks are listed on the Nasdaq.
In comparison, the value of Bitcoin has increased by only 288 percent over the same time period.
BlackRock is betting on Bitcoin mining.
BlackRock’s total investment in Marathon and Riot is estimated to be $382 million. However, it is not the only asset manager that has invested in these companies.
Fidelity Investments, the world’s largest mutual fund company, recently disclosed significant stakes in the two miners. Vanguard Group, a digital asset manager with approximately $7 trillion in AUM, is currently the largest shareholder in both companies.
Meanwhile, BlackRock has been venturing into the industry’s outskirts. The multinational, based in New York City, revealed in a March SEC filing that it had traded Bitcoin futures contracts from the Chicago Mercantile Exchange.
The asset manager also has a 14.56 percent stake in MicroStrategy, which is a major Bitcoin investor.
However, BlackRock was still researching the Bitcoin industry as recently as May, and its CEO Larry Fink warned investors about Bitcoin’s volatility.
He stated that it was too early to tell whether cryptocurrencies such as Bitcoin were “just a speculative trading tool,” with broker-dealers profiting the most from their volatility.
Bitcoin miners face an uncertain future.
However, Bitcoin mining profits are subject to the same volatility as the cryptocurrency itself, and the industry is not without its own issues.
This year, shortages of the chips required for mining threatened to halt the growth of the industry, sending equipment prices skyrocketing. And environmental concerns have tarnished its image, prompting anti-Bitcoin campaigners in New York to call for a three-year mining moratorium.
The good news is that Bitcoin mining has proven to be more than resilient in the face of China’s efforts to eradicate it. Nonetheless, data from analytics firm Glassnode suggests that, as hashrate increases, maintaining profits of $44 million per day will become increasingly difficult.