In a recent report, Bloomberg analyst Jamie Coutts reveals that the interest of asset managers in Bitcoin goes beyond exchange-traded funds (ETFs) and extends into the mining sector. This raises questions about the motivations and implications of such investments. It seems that major asset management firms, including BlackRock, Vanguard, and State Street, have been involved in the Bitcoin mining industry for over three years, despite their commitment to Environmental, Social, and Governance (ESG) investment principles.
Coutts describes BlackRock’s recent application with the US Securities and Exchange Commission (SEC) to offer a Bitcoin spot ETF as “unsurprising.” According to the analyst, BlackRock, along with other global asset managers like Vanguard and State Street, started investing in Bitcoin mining as early as 2020. BlackRock initially invested in Marathon Digital, the second-largest publicly traded mining company. This move took place during a period of intense criticism of the Bitcoin mining industry due to its reliance on fossil fuels.
It is interesting to note that BlackRock, Vanguard, and State Street are known for their commitment to ESG principles, including the reduction of fossil fuel use. However, investing in Bitcoin mining does not seem to contradict their ESG credentials. According to Daniel Batten, co-founder of CH4 Capital, Bitcoin mining currently derives 50% of its energy from sustainable sources. Moreover, Bitcoin mining has the unique ability to monetize stranded energy and stabilize energy grids, indicating potential for further sustainability.
Coutts reveals that BlackRock, Vanguard, and State Street are currently the top investors in the three largest publicly traded mining companies: Marathon Digital, Riot Platforms, and Cleanspark. Together, these mining companies control 8.9% of the global hash rate, which is quite significant considering that public miners only account for 15% of the global hash power. These asset managers have been steadily increasing their investments in Bitcoin mining companies, regardless of the market cycle.
Despite the involvement of major asset managers in Bitcoin mining, Coutts believes that it currently poses little challenge to the network’s decentralization. However, he cautions that there may be a future clash between the network’s values and ESG principles of asset managers like BlackRock, Vanguard, and State Street. Given their activist tendencies, it remains to be seen how these firms will reconcile any potential conflicts. Nonetheless, this does not seem to hinder the normal functioning of the Bitcoin network.
The growing interest of asset managers in Bitcoin mining opens up new discussions about the intersection of finance, technology, and sustainability. While it may seem surprising for companies known for their commitment to ESG principles to invest in Bitcoin mining, the industry’s potential for utilizing sustainable energy and contributing to the stability of energy grids is worth considering. As the involvement of major asset managers in Bitcoin mining continues to evolve, it will be important to monitor any potential clashes between network values and ESG principles.