BlackRock, the world’s largest asset manager, is currently generating significant interest within the investment community with its latest report, “Bitcoin: a unique diversification.” This paper highlights Bitcoin’s potential as a unique asset class that can enhance portfolio diversification.
BlackRock manages assets worth over $10 trillion, which is why their advice is quite important. The company claims that Bitcoin’s distinguishing features, such as its distributed nature and landline number, set it apart from other conventional financial assets.
BlackRock’s effectively launched Bitcoin exchange-traded fund (ETF) currently has assets of approximately $21 billion.
The iShares Bitcoin Trust (IBIT) ETF, originally launched earlier this year, has attracted a lot of interest from investors. In fact, the fund has amassed more than $14 billion in assets, demonstrating a growing belief in Bitcoin as a lucrative investment choice.
A new perspective on risk
BlackRock’s research shows this Bitcoin behaves very differently from traditional risk assets. The company notes that Bitcoin has shown significant volatility, but emphasizes that its long-term performance is largely unaffected by other financial markets.
Bitcoin, for example, is up 22% since August 5, when the carry trade in the Yen was unwound, while gold and the S&P 500 are up only modestly at around 11%.
This could indicate that bitcoin has the ability to operate independently of regular market changes, which therefore makes it a rather attractive choice for investors looking to achieve certainty in their investments.
The report also highlights the fact that a significant number of Bitcoin holders are making profits. According to data, the majority of investors who have held on to their Bitcoin investments for three years or more are currently profitable.
This trend indicates that there is a growing consensus among investors that Bitcoin can function as a safe haven during periods of economic instability. More and more people are turning to Bitcoin as a potential store of value as geopolitical tensions rise and trust in traditional financial institutions declines.
BlackRock: the institutional shift
What’s notable is how BlackRock’s stance in general reflects the shift of institutional investors toward cryptocurrencies in general. BlackRock CEO Larry Fink was once skeptical about digital assets, but has since realized that his skepticism toward Bitcoin was actually “misplaced.”
This is indicative of the growing acceptance of cryptocurrencies by mainstream financial organizations. As institutions increase their adoption of Bitcoin, its credibility and adoption rate will increase with the arrival of institutions like BlackRock, which will push Bitcoin into the mainstream.
Another interesting question is whether Bitcoin is a risk-on or risk-off asset. Short-term trading patterns appear to be trending toward risky behavior, but long-term data paints a different story.
Featured image of Fortune, chart from TradingView