On March 15 BlackRock (BLACK -0.04%) CEO Larry Fink has released his annual letter to shareholders. This annual letter from the world’s largest wealth manager may not garner as much attention as his own Berkshire Hathawaybut it’s especially worth reading this year, as Fink focuses specifically on the Silicon Valley bank crisis and the changing risk environment for investors worldwide.
BlackRock – which rose to prominence in the crypto space over the past year with its much-touted partnership with the cryptocurrency exchange Coinbase Global — also has something to say about the crypto sector. In a section of the letter titled “Digital Assets,” Larry Fink points to three major takeaways for crypto investors.
Bitcoin
as expected Bitcoin (BTC 3.93%) is currently the top priority for crypto investors. At a time when the entire banking system seems to be melting together, bitcoin has somehow emerged as a potential safe haven for investors trying to protect their savings.
Image source: Getty Images.
So it might not come as a surprise that Larry Fink mentions bitcoin in his annual letter — but it’s not for the reasons you might think. If you read between the lines, it’s almost as if he thinks that investors are paying too much attention to Bitcoin while there are many other exciting developments taking place in the crypto sector. For example, he specifically points to “the media obsession with bitcoin.”
That being said, a key theme going forward will obviously be institutional investor acceptance of the crypto asset class. Bitcoin will be a key focus of any new initiative for institutional investors as they increase their portfolio allocation of crypto. BlackRock was once skeptical about Bitcoin, but crypto seems to have finally proven itself as an asset class.
Asset Tokenization
Which leads me to what Larry Fink and BlackRock are really excited about: asset tokenization. Sure, asset tokenization might not be as sexy as Bitcoin for the average crypto investor, but for Wall Street titans, it’s a seismic shift in how the financial world works. Asset tokenization refers to the process of converting a real-world financial asset into a digital asset that can be traded and stored on a blockchain. For example, you can tokenize stocks and bonds. According to BlackRock, asset tokenization makes the job of wealth management much easier.
This could lead to many interesting investment ideas. For example, one of the world’s leading asset tokenization platforms today is tZERO, which is majority-owned by an internet retailer Overstock.com. So, investing in Overstock could be an indirect way to gain access to the crypto sector.
Or, if you are looking for direct access to the crypto sector, an investment target could include the Layer 1 blockchain avalanche, which is a leader in tokenizing financial assets and placing them on the Avalanche blockchain. A high-profile success story in 2022 was Avalanche’s tokenization of a $4 billion healthcare fund owned by a private equity giant KKR.
crypto payments
Finally, Fink touches on the topic of crypto payments, which he believes are gaining momentum around the world. Fink notes that the US currently appears to be lagging behind other nations in adopting crypto as a means of payment for online purchases. But BlackRock obviously seems to think there’s a world of opportunity here (particularly in India and Brazil), and that could be big for cryptocurrencies like bitcoin and bitcoin Litecoin which can be used for online transactions. According to a recent survey, more than 50% of online merchants worldwide could be accepting crypto payments within the next one to three years, so this is definitely an area to keep an eye on when pursuing long-term growth opportunities in crypto .
Where to invest in 2023
With the exception of Bitcoin and FTX, Fink does not mention a single other crypto in the almost 9,000-word letter to shareholders. So, as a simple reminder, each of the investment ideas above is simply reading between the lines of what Fink actually wrote.
But there are certainly some provocative and exciting ideas for 2023 and a number of interesting investment prospects to play with. For example, when it comes to asset tokenization, you can invest in the companies that are doing the actual tokenization, or in the blockchain platforms that those tokens will reside on. The same goes for digital payments. You can invest in the companies that provide the tools and services for digital payment providers, or in the actual cryptocurrencies used for those digital payments.
These are two areas I targeted for further research and analysis to find the best crypto investing options.
SVB Financial provides credit and banking services to The Motley Fool. Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Avalanche, Berkshire Hathaway, Bitcoin, Coinbase Global, KKR, and SVB Financial. The Motley Fool recommends Overstock.com. The Motley Fool has a disclosure policy.
