As a seasoned researcher with a knack for deciphering financial trends and a soft spot for cryptocurrencies, I find BlackRock’s stance on Bitcoin intriguing. Managing trillions in assets and being the pioneer of the largest spot BTC ETF, they certainly have the expertise to understand the nuances of this digital asset.
According to a December 12th report, BlackRock – the world’s leading asset manager – considers it reasonable for investors to allocate up to 2% of their portfolio towards Bitcoin (BTC), implying a potential investment in this cryptocurrency.
According to the report, recently disseminated to CryptoMoon and initially reported by Bloomberg, it suggests that a Bitcoin investment between 1-2% could be considered reasonable. However, they advise that investing more than this would significantly boost Bitcoin’s impact on the total portfolio risk.
Meanwhile, a 1-2% BTC allocation poses “on average, about the same share of overall portfolio risk” as a typical allocation to “the ‘magnificent 7’ group of mostly mega-cap tech stocks” in a portfolio comprising 60% stocks and 40% fixed income assets, BlackRock said.
The “magnificent 7” includes companies such as Amazon, Microsoft, and Nvidia.
Approximately $11.5 trillion worth of assets are overseen by BlackRock, a company that is also behind the largest bitcoin exchange-traded fund available on the spot market, known as iShares Bitcoin Trust (IBIT). This fund has amassed close to $54 billion in net assets.
Unique return profile
As per BlackRock’s standpoint, when considering potential returns on Bitcoin, one should adopt a unique perspective since it lacks traditional sources of income (cash flows) for future return projections. Instead, the key factor to focus on is the level of its adoption.
In simpler terms, BlackRock stated that owning Bitcoin could offer a broader range of earnings potential. Furthermore, they emphasized that there’s no inherent reason for Bitcoin’s performance to mirror traditional risky assets in the long run because its value derives from unique factors.
Over the long term, Bitcoin “may potentially become less volatile, yet it might cease to possess a significant driver for substantial price growth,” according to the report. In such a scenario, investors might find it more advantageous to employ Bitcoin strategically as a risk hedge, much like they would use gold.
On December 12th, a report titled “Assessing Bitcoin’s Role in Portfolios” was published by the BlackRock Investment Institute.
Price catalysts
Initiated in January, Bitcoin Exchange-Traded Funds (ETFs) rose to become the top choice for investments in 2024, accumulating over $100 billion in total assets by November.
2025 might witness significant increases in demand for Bitcoin from institutional investors, potentially leading to sudden spikes in demand (referred to as “demand shocks”) and consequently raising the market value of Bitcoin, based on a report published by Sygnum Bank on December 12.
According to Sygnum’s findings, it appears that even small investments from this sector could significantly transform the overall landscape of the cryptocurrency market.
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2024-12-12 23:52