Coinbase Global, Inc. (NASDAQ: COIN) announced yesterday that it was partnering with the world’s largest asset manager, BlackRock, Inc. (NYSE: BLK), to provide institutional clients with access to crypto trading and custody services. Blackrock’s clients will have direct access to crypto trading once Coinbase connects with its investment technology platform — Aladdin.
How will the deal impact Coinbase investors?
Investors in Coinbase have already seen the value of their holdings increase by 7.11% after the deal was announced. This follows a year-to-date decline of roughly 65% as a result of collapsing crypto prices and falling trading volumes, which the company relies on for revenue. The deal should add much-needed liquidity to the company, as, in June, it cut one-fifth of its workforce and lowered its full-year outlook. According to a BlackRock spokesperson:
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets.”
This increased demand and trading on Coinbase’s platform should help lift the company’s revenues at a time when crypto companies are collapsing all around it. Blackrock is the largest asset manager in the world, which should result in a significant supply of cash on the platform and make the deal relatively long-lasting.
How will the deal impact BlackRock investors?
The impact on BlackRock’s share price has been much lower, with the company’s shares increasing by only 0.06% after the deal was announced. This is because the deal represents a bonus to BlackRock’s product offering while representing a lifeline for Coinbase. The asset manager was once completely against investing in digital assets, instead preferring to invest in the public and private markets — physical companies and assets. However, the company is adapting to changing client tastes as institutional investors seek to add digital assets to their portfolios.
BlackRock’s Aladdin platform is one of the most widely used technology systems in the financial sector, linking investors to markets and measuring risk. The platform is used by asset managers, banks, insurers, pension funds, and corporations. The benefit for BlackRock is that the deal gives it another product it can offer clients, further differentiating it from competitors. As the markets are in turmoil, investors are looking for anything that could generate some sort of return. With digital asset prices so low, some institutional investors believe now is the time to invest to secure long-term returns for clients. By teaming up with Coinbase, BlackRock is solidifying its position as a one-stop shop for institutional investors’ needs.
Shane Vigna, Author at MyWallSt Blog