BlackRock "supports" Bitcoin: Although risky, it is still a safe-haven asset!
BlackRock's digital asset manager, Robbie Mitchnick, stated that Bitcoin should not be seen as a risky asset, but rather as an emerging global alternative to traditional currencies. He pointed out that Bitcoin's long-term drivers are different from other risky assets, and it performs well during times of economic uncertainty. Mitchnick believes that Bitcoin's scarcity and decentralized nature make it an ideal choice for investors concerned about currency depreciation and political risks. Despite Bitcoin's short-term correlation with the US stock market increasing, its long-term correlation is close to zero
Despite the recent correlation between the price trend of Bitcoin and the US stock market, Robbie Mitchnick, the head of digital assets at BlackRock, stated that calling this cryptocurrency a "risky asset" may be a misnomer.
Stocks, commodities, and bulk bonds are typically considered risky assets because they tend to perform well during optimistic market and economic expansion periods. In uncertain times, "safe-haven assets" like gold are usually favored by investors because they can hold or even increase in value during economic downturns.
Mitchnick pointed out that some cryptocurrency research publications and articles consider Bitcoin to be a risky asset, inferring that it is a risk-preference asset and should be traded like stocks. However, he explained that Bitcoin behaves fundamentally differently from stocks and other risk-preference assets. Mitchnick added that the long-term driving factors of Bitcoin are "fundamentally different" from other risk-preference assets and may even perform oppositely in certain situations. Additionally, Bitcoin does not possess the risks typically associated with other risk-preference assets.
He said, "When we consider Bitcoin, we primarily view it as an emerging global currency alternative—a scarce, global, decentralized, non-sovereign asset. It is an asset unaffected by specific country risks and has no counterparty risk."
Mitchnick believes that these characteristics make Bitcoin an attractive alternative for investors concerned about currency printing risks, currency devaluation, and political and fiscal sustainability challenges.
Furthermore, its attributes are fundamentally different from other risk-preference assets, which is why labeling Bitcoin as a risk-preference asset would only confuse investors.
Mitchnick also noted that similar to gold, Bitcoin is not correlated with US stocks in the long term. While correlations may spike in the short term, on average, it remains "very close to zero," similar to the pattern followed by gold.
He further pointed out that only three to four events in a year truly have a significant impact on Bitcoin's price, and journalists often instinctively link Bitcoin price fluctuations to unemployment rates, the stock market, or manufacturing. However, these events are not related to Bitcoin.
BlackRock operates exchange-traded funds that invest in Bitcoin and Ethereum. However, Mitchnick stated that while many investors see Bitcoin as "digital gold," many institutional clients are "not quite clear" on the narrative surrounding Ethereum. Within the crypto community, Ethereum is used for various applications on the Ethereum blockchain.
Bitcoin has risen by 49% year-to-date, while Ethereum has risen by 15%, largely benefiting from the approval of ETFs holding these two tokens earlier this year