- 60-day returns for Bitcoin outperformed gold and US stocks following acute events.
- BlackRock says 'risk-on' and 'risk-off' narratives are too simplistic for the cryptocurrency.
Bitcoin has long been pitched as a digital gold, an alternative reserve asset, and a flight to safety for investors during major geopolitical events.
Now, BlackRock, the world’s biggest asset management firm, is again singing the same tune.
“Bitcoin has been seen by some investors as a ‘flight to safety’ in times of fear amid some of the most disruptive global events over the last five years,” the report reads.
To that effect, say authors including BlackRock’s head of digital assets Robert Mitchnick, a “modest allocation” can diversify — making multiple bets in the market instead of investing in just one asset — a portfolio.
BlackRock, which oversees $9 trillion in assets, has lured a broad swathe of new investors to Bitcoin.
In January, the Securities and Exchange Commission approved 11 spot Bitcoin exchange-traded funds, including the investment giant’s IBIT offering. The product has already raked in more than $17 billion, according to data from Farside.
Bitcoin backers — which now includes BlackRock — say its key selling points are that it has a capped supply, no country controls it, and it’s globally available.
These qualities also mean that Bitcoin reacts differently than other assets like gold or an S&P 500 Index, the BlackRock report says.
Like both assets, Bitcoin initially plummeted during acute geopolitical crises, including the Covid outbreak in 2020 and the US regional banking crisis in 2023.
Two months after each event, however, Bitcoin far outperformed both gold and the US benchmark.
Sixty days after the Covid outbreak, for example, Bitcoin rose 21%, while gold and the S&P 500 only rose 3% and 2%, respectively.
Bitcoin risk mounts
Make no mistake, BlackRock cautioned, Bitcoin is still risky.
“The key point, however, is that these risks are unique to Bitcoin and not specifically shared by other investment assets,” the BlackRock authors wrote. That’s “why simple ‘risk-on’ vs ‘risk-off’ frameworks can lack the nuance to be broadly useful.”
With just 15 years, Bitcoin is still a highly volatile, speculative asset, Adam McCarthy, a research analyst at crypto data firm Kaiko, told DL News.
“Gold is 15 times the size of Bitcoin and is owned by major central banks,” he said.
“It’s too soon to call it a flight-to-safety asset until we see Bitcoin grow more.”
Just yesterday, it behaved much more like a Nvidia stock than a digital gold.
Bitcoin soared after Federal Chair Jerome Powell announced that the central bank will cut interest rates by half a percentage point.
In 46 days, Bitcoin faces another test: the US elections.
Former president Donald Trump has emerged as a pro-crypto candidate, while Vice President Kamala Harris’s position is unclear.
Bernstein analysts say if Trump wins, Bitcoin will hit $90,000. If Harris gets into the White House, it may fall as low as $30,000.
Liam Kelly is a DeFi Correspondent for DL News. Got a tip? Email him at liam@dlnews.com.