Federal Reserve Gets Bitcoin Exposure Through MicroStrategy Junk Bonds


The US central bank may not be crypto-friendly, calling digital currencies very speculative and volatile, but it surely has some Bitcoin exposure although indirectly.

The Federal Reserve is reportedly an early adopter of the first Bitcoin-linked junk bond.

Last year, the Fed bought bond exchange-traded funds to get things moving after the pandemic froze credit markets.

This bond ETF purchase made the Fed the fourth-biggest owner, as of late March, of the SPDR Bloomberg Barclays High Yield Bond ETF, reported Bloomberg.

0.01% of this ETF, which is commonly known by its JNK ticker, is dedicated to the junk bonds MicroStrategy Inc. issued this week to buy Bitcoin.

Besides JNK, the Fed also holds the iShares Broad USD High Yield Corporate Bond ETF (ticker USHY), which also owns a tiny bit of MicroStrategy debt.

“It’s a pretty small amount, but to be honest I’m surprised to see it in there so soon,” said Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence.

“Fixed-income portfolio managers have a bit of discretion of which bonds they can have in the portfolio, so they could be adding a small portion ahead of a possible index inclusion.”

Assuming the Fed still holds the Fund, the central bank is exposed to the crypto space although in a very small amount, for now.

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