BlackRock On Bitcoin ETF As A Hedge Against Economic Turmoil

In its report, BlackRock highlights Bitcoin's potential as a diversifier for the portfolio of investors. The asset manager noted that its limited correlation to traditional financial assets makes it really attractive in times of market uncertainty.

World’s largest asset manager proposes spot Bitcoin ETFs as a hedge against surging U.S. debt

BlackRock highlights BTC’s potential as a diversifier for investors’ portfolios.

The asset manager highlights Bitcoin’s distinct characteristics as a global, decentralized asset that operates outside monetary or political influences. This attribute has led some investors to consider BTC as a flight to safety option during periods of fear and geopolitically disruptive events.

As reported by CNF, the move comes amid increasing investor interest in alternative assets due to concerns about U.S. economic health. Notably, U.S. debt levels have been rising, sparking担忧s about the value of the dollar (USD).

BlackRock’s argument for Bitcoin as a hedge is not merely theoretical. According to the report, the flagship crypto has shown resilience during periods of economic turmoil.

Despite short-term volatility, BTC has recovered from drawdowns even with market stress, the report noted. This resilience was recently seen in August 2024 when Bitcoin saw a one-day drop of 7% during a global market sell-off, but it recovered within three days.

“We view this pattern as instances of fundamentals eventually prevailing over short-term leveraged trading reactions,” BlackRock states.

BTC's $1 Trillion Market Cap, Performance in Perspective

Another key aspect of BlackRock’s proposal is its focus on Bitcoin’s market capitalization, which has crossed the $1 trillion threshold after years of outperforming traditional assets.

According to the report, BTC outperformed all major asset classes in seven of the past ten years, with an annualized return of over 100% in the last decade. However, the report also notes that Bitcoin remains a risky asset due to its volatility and the uncertain path of global adoption.

Meanwhile, rising U.S. debt, which now exceeds $33 trillion, has led investors to seek alternative store-of-value assets, CNF reported.

BlackRock’s report also highlights BTC’s fixed supply of 21 million units that cannot be debased, positioning the crypto as a hedge against inflation and currency devaluation.

“Over the long term, Bitcoin's adoption trajectory is likely to be driven by the intensity of concerns over global monetary stability, geopolitical stability, U.S. fiscal sustainability, and U.S. political stability,” the report states.

In related news, BlackRock’s IBIT Bitcoin ETF has seen strong performance since its launch. As of early October 2024, IBIT has seen a total of $20.92 million in net inflows since its launch in early January 2024.

Collectively, U.S. BTC ETFs have seen $17.44 million in inflows so far this year, despite the massive outflows from Grayscale's GBTC. Some market analysts believe that Bitcoin is gearing up for a new record high next month in October, CNF reported.

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