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- BlackRock, the world’s largest asset manager, holds significant amounts of Bitcoin, more than Michael Saylor’s MicroStrategy.
- Initially sceptical, CEO Larry Fink changed his stance after a deep dive into Bitcoin, recognising its legitimacy and potential as an investment.
- A new BlackRock report touts Bitcoin as a unique diversifier, uncorrelated with traditional investment risks and capable of offering significant returns.
- Despite Bitcoin’s promising aspects, the report acknowledges its high risk and volatility, suggesting cautious portfolio integration to manage potential impacts.
BlackRock is the largest asset manager globally and now also one of the largest holders of Bitcoin, with around 50% more BTC than Michael Saylor’s MicroStrategy.
And while they are now staunch supporters, it wasn’t always like that. BlackRock CEO Larry Fink said in an interview a few months ago, that he had been wrong about the largest crypto:
I was a skeptic. As you know, I was a proud skeptic, and I studied it and learned about it. And I came away saying, ‘Okay, you know, my opinion five years ago was wrong’. Here’s my opinion: This is what I believe today. I believe the opportunity is here today. I believe Bitcoin is legitimate.
Larry Fink, BlackRock CEO
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Now, Fink and his company have come full circle issuing a report titled ‘Bitcoin: A Unique Diversifier. Why bitcoin’s appeal to investors lies in its detachment from traditional risk and return drivers’.
Why Does Bitcoin Matter? BlackRock Here to Explain
The report is very clear in saying that BTC is still very risky and in its nascent stages. However, it also highlights that the asset is “fundamentally uncorrelated with other sources of portfolio returns”.
Bitcoin, which addresses longstanding issues of monetary systems with features like a fixed supply cap, ensuring it cannot be debased, and a digital, borderless nature that allows near-instant, cost-effective global transactions, established itself as the “world’s first truly open-access monetary system”.
Its technological innovation was the creation of a form of currency that was digitally native, global, scarce, decentralized and permissionless. Because of these attributes, it produced major breakthroughs to multiple centuries-old problems that other forms of money have struggled with.
BlackRock
Bitcoin’s fixed supply of 21 million units, global digital accessibility, and decentralised, permissionless structure make it a unique, robust monetary system that moves beyond traditional financial barriers, the report added.
The report also highlights that Bitcoin has “outperformed all major asset classes in 7 out of the last 10 years”, while simultaneously also being the worst performer in three of these 10 years.
Seasoned Bitcoin veterans will of course know this, but BTC did experience drawdowns in excess of 50%.
BlackRock Says Bitcoin Can Grow, Protect from US Debt Risk
The report also sees room for Bitcoin to grow and serve as a hedge against uncertainty in today’s world. BlackRock specifically highlights the growing US debt as one factor driving investors towards Bitcoin.
They believe that despite its potential to become a global payment system and store of value, Bitcoin is still a risky and volatile asset in the early stages of adoption, facing regulatory challenges and a developing ecosystem.
Related: Hong Kong Government to Issue First AI Finance Policy, Set to Transform Trading and Crypto Sectors
However, these unique risks mean that Bitcoin can diversify an investment portfolio at smaller allocations, but larger holdings might increase overall portfolio risk, BlackRock wrote.
As the global investment community grapples with rising geopolitical tensions, concerns over the state of U.S. debt and deficits, and increased political instability around the world, bitcoin may be seen as an increasingly unique diversifier against some of these fiscal, monetary and geopolitical risk factors investors may face elsewhere in their portfolios.
BlackRock
BlackRock on the growing US debt (with no end in sight), which it says Bitcoin can offer protection from. This is why some have called bitcoin the 2nd amendment of money. pic.twitter.com/r3nEUG6Lk6
— Eric Balchunas (@EricBalchunas) September 18, 2024
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