Texas Invests $5M in BlackRock Bitcoin ETF, Eyes Self-Custody

Texas Takes a Bold Step into Bitcoin with Strategic Investment

The Texas state government has made a significant foray into the world of cryptocurrency, investing $5 million in shares of BlackRock’s spot Bitcoin exchange-traded fund (ETF). This initial investment is accompanied by plans to allocate an additional $5 million for a self-custodied Bitcoin purchase, marking a noteworthy development in the state's approach to digital assets.

Investment Details and Future Plans

The purchase was executed on November 20th, a move highlighted by Lee Bratcher, president of the Texas Blockchain Council, via a post on X. Bratcher elaborated that while the ultimate goal is for the Texas government to “self-custody Bitcoin,” the initial $5 million was allocated to BlackRock's IBIT ETF as the self-custody process is still being finalized.

Bratcher further clarified that “$10M is allocated from general revenue but not all $10M has been allocated.”

Shifting Perspectives on Bitcoin

Pierre Rochard, CEO of The Bitcoin Bond Company, commented on Texas’s purchase, underscoring the profound shift in perspective towards Bitcoin within a short span of time. He noted: “In five years we went from ‘governments will ban bitcoin’ to ‘governments are only buying a small amount of bitcoin’. Hyperbitcoinization has happened, is happening, and will continue to happen.”

Texas's Strategic Bitcoin Reserve Plan

The connection between this investment and the state's proposed strategic Bitcoin (BTC) reserve remains unclear. In June, Governor Gregg Abbot officially authorized the establishment of a state-managed fund to hold BTC as part of the state’s long-term financial assets, utilizing public funds to build the treasury.

The initial bill approved by Abbot stipulates that only assets with a market capitalization exceeding $500 billion are eligible for inclusion in the reserve. Bitcoin meets this criterion, while BlackRock's IBIT does not.

Potential Expansion to Ethereum

Beyond Bitcoin, Texas may also be considering other digital assets. In mid-October, Texas State Senator Charles Schwertner, a key legislator behind the state’s strategic Bitcoin reserve bill, suggested that Ether (ETH) could be a future addition, provided its market cap sustains above $500 billion.

“If Ethereum maintains its market cap over 24 months, I think it’s reasonable and prudent to give direction that Ethereum could be added to the cryptocurrency [reserve],” he stated.

Wisconsin's Earlier Investment in IBIT

Despite claims that Texas is the first state to invest in BTC through IBIT, records indicate that Wisconsin's investment board actually oversaw the acquisition of nearly $100 million worth of IBIT shares in May of the previous year.

Market Impact and ETF Ownership

Bloomberg Senior ETF analyst Eric Balachunas highlighted on X that Texas joins “Harvard and Abu Dhabi” as recent purchasers of IBIT. “Pretty sure that’s the only ETF to ever be owned by all three. More wild stuff for a not-yet-even-two-years-old fund.”

IBIT is currently down approximately 10% year-to-date, despite the increasing acceptance of Bitcoin by the US government under the current administration. As of this writing, IBIT is trading at $49.56, showing a marginal increase of 0.22% in after-hours trading.