The interest of asset managers in Bitcoin goes beyond just exchange-traded funds (ETFs). According to a recent report by Bloomberg analyst Jamie Coutts, asset managers like BlackRock, Vanguard, and State Street have been actively involved in the Bitcoin mining industry for over three years. This involvement, contrary to expectations, does not seem to damage their Environmental, Social, and Governance (ESG) credentials. While there may be concerns regarding the clash between network and ESG values in the future, for now, the participation of these asset managers in Bitcoin mining poses little challenge to the network’s decentralization.
BlackRock, the world’s largest asset manager, began its venture into Bitcoin mining in 2020 by investing in Marathon Digital, the second-largest publicly traded mining company. This move was made at a time when the Bitcoin mining industry faced significant criticism due to its reliance on fossil fuels. Over the last three years, BlackRock, along with Vanguard and State Street, has continued to increase its investments in Bitcoin mining companies, regardless of the market cycle. Despite their commitment to ESG-driven investing principles, these asset managers seem to have found a way to reconcile their involvement in Bitcoin mining with their environmental goals.
Contrary to popular belief, Bitcoin mining is not solely reliant on fossil fuels. According to Daniel Batten, co-founder of CH4 Capital, Bitcoin mining currently derives 50% of its energy from sustainable sources, and this percentage is expected to rise in the future. Bitcoin mining has the unique ability to monetize stranded energy and stabilize energy grids, which makes it appealing from an ESG perspective. This may explain why asset managers like BlackRock, Vanguard, and State Street have not faced significant backlash for their involvement in the Bitcoin mining sector.
Based on Coutts’ report, BlackRock, Vanguard, and State Street are currently the top investors in the three largest publicly traded mining companies: Marathon Digital, Riot Platforms, and Cleanspark. These mining companies collectively own 8.9% of the global hash rate, which is significant given that public miners only account for 15% of the global hash power. The involvement of these asset managers demonstrates their confidence in the potential profitability and sustainability of Bitcoin mining.
While the current participation of asset managers in Bitcoin mining does not pose a threat to the network’s decentralization, there may be future challenges. BlackRock, Vanguard, and State Street are known for their activist tendencies and commitment to ESG principles. As Bitcoin mining continues to evolve, there may be clashes between the network’s operations and ESG values. However, these potential conflicts are not expected to prevent the Bitcoin network from functioning as intended.
It is evident that asset managers’ interest in Bitcoin extends beyond ETFs and into the mining sector. BlackRock, Vanguard, and State Street have been actively investing in Bitcoin mining companies for over three years, despite their commitment to ESG principles. The sustainability of Bitcoin mining, with its ability to utilize renewable energy sources and stabilize energy grids, seems to align with the ESG goals of these asset managers. While future challenges may arise, for now, the involvement of these asset managers in Bitcoin mining does not pose a significant risk to the network’s decentralization or their ESG credentials.