BlackRock Limits Redemptions in Private Credit Fund… “Credit Squeeze Could Spill Over Into Bitcoin”

BlackRock, the world’s largest asset manager, has moved to sharply limit redemptions in a major private credit fund after facing large-scale withdrawal demands from clients. As concerns grow over the health of the fast-expanding private credit market—now having surged to $1.8 trillion—warnings are emerging that a credit squeeze in traditional finance could spread across the broader crypto-asset ecosystem, including Bitcoin (BTC).

According to Bloomberg on the 6th (local time), BlackRock’s $26 billion “HPS Corporate Loan Fund (HLEND)” recently received redemption requests totaling 9.3% of outstanding interests (about $1.2 billion), but decided to cap payouts at 5% (about $620 million).

This is the first time since late last year that such redemption limits have been triggered at the fund, the largest among business development company (BDC) funds. As market jitters intensified, BlackRock shares plunged as much as 8.3% intraday in New York trading. Shares of major alternative-asset managers such as KKR and Ares Management also fell.

BlackRock said the move is a standard liquidity-management step under the fund’s structure. Without a redemption cap, it argued, a structural mismatch could arise between investor outflows and the maturities of the private-loan assets held by the fund. Glenn Schorr, an analyst at Evercore ISI, likewise said, “Maintaining the 5% cap is a rational decision to prevent forced asset sales and preserve the stability of non-listed investment vehicles.”

The problem is that redemption pressure in the private credit market could trigger “deleveraging” in the crypto market. Andrej(a) Kobellic, head of derivatives trading at Swiss crypto bank AMINA, warned that “as of mid-last year, U.S. banks had extended $300 billion in loans to private-credit providers and $285 billion to private-equity funds,” adding that “if position unwinds begin in private credit amid an energy shock and fading expectations for rate cuts, it would deliver a significant second-round blow to risk assets such as Bitcoin.”

“Tokenized private credit (RWA·real-world assets)” issued on blockchain is also being cited as a direct channel for risk transmission. Data show the on-chain private credit market is worth about $5 billion. While that is small compared with the overall private credit market (estimated at about $3.5 trillion), the structure has taken shape in which real-economy credit products are bundled as collateral within the decentralized finance (DeFi) ecosystem—meaning stress in traditional finance can feed straight into on-chain markets.

In fact, cases of traditional credit stress spilling into DeFi have been mounting. During the bankruptcy of auto-parts maker First Brands Group last year, the net asset value (NAV) of “mF-ONE,” a tokenized asset tied to a related private-credit strategy, fell by about 2%. As a result, highly leveraged borrowers on DeFi platforms that had posted the token as collateral were pushed toward a cascade of liquidations, sharply tightening liquidity.

Teddy Fonprinya, co-founder of Plume, said, “Institutional money is flowing into crypto markets, but investors do not fully understand the complex risks and volatility embedded in real-economy credit products,” adding that “they should be wary of what lies behind superficially high yields.”