In its report titled “Bitcoin as a Unique Diversifier,” investment giant BlackRock outlined Bitcoin’s distinct characteristics, highlighting its low correlation with U.S. equities and its potential role as a “risk-off” asset, particularly with the approval of physically settled options tied to the IBIT spot Bitcoin ETF.
BlackRock Highlights Bitcoin's Unique Role as IBIT Options Receive Approval
The report highlighted four key points. First, Bitcoin’s fundamental characteristics differ significantly from traditional financial assets, as it lacks elements such as quarterly earnings or a central authority.
Secondly, Bitcoin's volatility raises questions about its classification as a “risky” asset.
But BlackRock suggests that Bitcoin could be a flight to safety option due to its scarcity, decentralization and non-sovereign status. They argue that its long-term adoption could be hampered by global instability.
Bitcoin's Volatility Decreasing Over Time
BlackRock noted that Bitcoin's realized volatility has decreased over the years, indicating a maturing asset.
Historically, Bitcoin's volatility has exceeded 200%, but since 2018 it has remained below 100% and currently stands at 50%.
As volatility decreases and liquidity increases through financial instruments such as spot and futures markets, sophisticated investors, including options traders, may be more inclined to enter the market.
The market could soon see broader institutional participation, with the U.S. Securities and Exchange Commission (SEC) recently approving physically settled options tied to BlackRock’s Bitcoin ETF.
Bitcoin's Resilience After Major Events
Bitcoin tends to outperform other risky assets following major geopolitical events, according to BlackRock.
Following events such as the US-Iran tensions and the Russian invasion of Ukraine in 2020, Bitcoin has consistently outperformed both gold and the S&P 500.
For example, after the Yen Carry trade was unwound on August 5, 2024, Bitcoin rose 22% in the following 53 days, while gold and the S&P 500 only gained 11%.
As BlackRock continues to explore Bitcoin’s place in broader markets, the approval of options tied to the IBIT ETF could mark a pivotal moment in establishing the cryptocurrency’s role as a risk-off asset for institutional investors.
*This is not investment advice.