BlackRock, the world’s largest asset manager, is currently generating a lot of interest among the investment community with its latest report, “Bitcoin: A Unique Diversifier.” This document emphasizes the potential of Bitcoin as a unique asset class that can improve portfolio diversification.
BlackRock manages more than $10 billion in assets, so their advice is invaluable. The company argues that Bitcoin’s unique features, such as its distributed nature and fixed number, set it apart from other traditional financial assets.
BlackRock’s successfully launched Bitcoin exchange-traded fund (ETF) currently has approximately $21 billion in assets.
Launched earlier this year, the ETF iShares Bitcoin Trust (IBIT) has attracted a lot of interest from investors. In fact, this fund has accumulated assets of more than 14 billion dollars, which shows the growing belief in Bitcoin as an investment option.
A New Perspective on Risk
BlackRock research shows that Bitcoin behaves very differently than traditional risk assets. The company notes that Bitcoin has shown significant volatility, but emphasizes that its long-term performance is not significantly affected by other financial markets.
For example, bitcoin is up 22% since August 5th when the yen carried trades untouched, while gold and the S&P 500 are up modestly at around 11%.
This may suggest that bitcoin has the ability to function independently of changes in the normal market, making it a compelling choice for investors who wish to achieve certainty in their investments.
This report also emphasizes the fact that a significant number of Bitcoin holders are making a profit. According to the data, the majority of investors who have kept their Bitcoin investments for three years or more are currently profitable.
This trend shows that there is a growing consensus among investors that Bitcoin can serve as a safe haven during times of economic volatility. More people are turning to Bitcoin as a potential store of value as political tensions increase and reliance on traditional financial institutions diminishes.
BlackRock: An Institutional Shift
What is notable is how institutional investors’ volatility in cryptocurrencies looks in general for BlackRock. BlackRock CEO Larry Fink was once skeptical of digital assets, but has since realized that his skepticism about Bitcoin was actually “misguided.”
This is a feature of the growing acceptance of cryptocurrencies by mainstream financial institutions. As institutions expand their use of Bitcoin, its credibility and adoption rate will increase with the entry of institutions like BlackRock, who will push it to the next level.
Another interesting question is whether Bitcoin is a risk-taking or risk-taking asset. Its near-term trading patterns appear to depend on risk-taking behavior, but long-term data paints a different story.
Featured image from Fortune, chart from TradingView