Key Points
- BlackRock Inc., the world’s largest asset manager, recommends a 2% Bitcoin (BTC) portfolio allocation.
- The company likens Bitcoin to mega-cap tech stocks and warns against exceeding the 2% allocation due to volatility.
BlackRock Inc., the world’s leading asset manager with over $11.5 trillion in assets under management (AUM), has seen significant success with its Bitcoin (BTC) adoption strategy. The company has made a significant impact in the cryptocurrency industry through its iShares Bitcoin Trust (IBIT) and the iShares Ethereum Trust (ETHA).
The IBIT’s substantial growth to approximately $53.8 billion in net assets under management has garnered considerable attention. Furthermore, Ki Young Ju, the founder of CryptoQuant, recently highlighted that IBIT has surpassed BlackRock’s Gold ETF in less than a year of its existence.
BlackRock’s Perspective on Bitcoin in Portfolios
A recent BlackRock report suggests that investors should view Bitcoin in a multi-asset portfolio similarly to mega-cap tech stocks. The firm emphasized that Bitcoin cannot be compared to traditional assets but could be integrated into a conventional portfolio.
Top Federal Reserve officials view Bitcoin as digital gold, with a high probability of surpassing the market cap of the precious metals industry. Consequently, BlackRock suggested its clients allocate 1-2 percent of their traditional portfolios, consisting of a 60 percent stocks and 40 percent bonds mix, to Bitcoin.
BlackRock equates a 1-2 percent Bitcoin exposure for traditional portfolios to the risk of the ‘magnificent 7’ group, primarily consisting of large-cap tech stocks.
The authors of the report, including Samara Cohen, BlackRock’s CIO of ETF and index investments, cautioned against increasing the Bitcoin allocation beyond 2 percent due to the potential for increased overall portfolio risk. They noted that Bitcoin’s price has experienced up to 80 percent corrections in the past three major bear markets, leading to significant sustained losses.
Bitcoin’s Market Impact
The growing institutional adoption of Bitcoin has significantly influenced market dynamics. The supply on centralized exchanges has fallen below 2.23 million BTC as of December 12. US spot Bitcoin ETFs have already amassed more than Satoshi Nakamoto’s 1 million BTC stored in dormant wallets, underlining the unprecedented scale of institutional involvement in the cryptocurrency market.
As a result, the price of Bitcoin is expected to rally exponentially in the coming years, potentially reaching $1 million if the US government adopts a strategic BTC reserve.
