BlackRock, the world's largest asset manager, has published a detailed whitepaper highlighting Bitcoin's (BTC) unique qualities as a hedge against global risks.
Following the success of its spot Bitcoin ETF, which has amassed $21 billion in assets since its launch earlier this year, BlackRock has now outlined Bitcoin’s role as a “unique diversifier” in a new nine-page report.
Bitcoin, which has a market value of over $1 trillion, stands out in BlackRock’s analysis because of its low correlation with U.S. stocks and interest rates, which the firm argues makes it difficult to analyze with traditional financial models. “Bitcoin reflects little underlying exposure to the macroeconomic factors that affect most traditional asset classes,” the report said.
Despite its reputation as a volatile and “risky” asset, BlackRock notes that Bitcoin has outperformed all other major asset classes in seven of the last ten years. However, it has been the worst performing asset in the three years it has underperformed. This volatility reflects Bitcoin’s evolving journey toward potential global adoption as a monetary alternative, the report said.
BlackRock also highlights Bitcoin’s potential as a “flight to safety” during times of geopolitical uncertainty. The report suggests that Bitcoin’s relative isolation from global macroeconomic factors makes it attractive to investors seeking protection against events such as a weakening U.S. dollar due to rising federal deficits.
*This is not investment advice.