BlackRock and Others Gaining Influence Over Bitcoin Miners

Jamie Coutts, a crypto market analyst at Bloomberg, has voiced concerns over Bitcoin’s potential vulnerability to the heavyweights of traditional finance.

On platform X, he informed his audience of a noteworthy development. BlackRock, known globally as the preeminent asset manager, initiated an indirect approach to Bitcoin in 2020. They did so by investing in shares of Marathon Digital, a formidable player in the mining sector.

A key observation by Coutts is that BlackRock’s decision to venture into the Bitcoin space wasn’t a sporadic move. It was merely a prelude to their more significant stride – applying for a Bitcoin spot exchange-traded fund (ETF).

Interestingly, the past saw BlackRock, Vanguard, and StateStreet, all stalwarts who emphasize ESG (environmental, social, and governance) criteria, venture into public mining stocks as early as 2020. BlackRock’s foray into Marathon Digital occurred during a period marked by pronounced skepticism of mining, possibly due to the sector’s substantial fossil fuel dependency.

Today, the landscape is shifting. The world’s most formidable asset managers are carving out a niche for themselves. Coutts points out they have risen to command a dominant stake in the three major publicly-traded Bitcoin miners, holding sway over approximately 8.9% of total hash power.

This increasing influence by giant asset managers is reshaping the dynamics of the Bitcoin network. Coutts highlights the potential misalignment of intentions. Large-scale players might not always resonate with the aspirations of smaller participants.

The idea of a “51% attack,” wherein an actor controls a majority of the hash rate, seems unlikely. The underlying economic and logical grounds don’t support it. Nonetheless, a gradual sway, deviating from the network’s core principles, cannot be entirely ruled out.

Areas of contention might involve divergent ESG goals or even selective transaction censorship. While such hiccups wouldn’t halt the chain’s operation – other miners could take up the slack and benefit from the associated fees – questions remain. Given the proactive stance of these titan asset managers, will they stay passive with Bitcoin miners? Only time will tell.