BlackRock has reinforced the view that Bitcoin may be the future of the financial sector, as the $9 trillion asset management company has selected Bitcoin as a protection against a sudden Federal Reserve dollar crisis.
BlackRock Turns To Bitcoin For Safety
Fears concerning the collapse of the United States Dollar (USD) have resurfaced, with BlackRock, the world’s largest Bitcoin fund and asset manager, warning of the potential economic fallouts from the rising $35 trillion US debt pile.
BlackRock wrote in a recent paper that the growing concerns about the US federal deficits and skyrocketing debts are leading numerous investors to explore other alternatives to the US dollar. This new shift not only applies to the US but also to other countries with struggling economic conditions and significant debt accumulation.
Bitcoin, in this context, is being viewed as a safety net for a potential $35 trillion federal reserve dollar crisis. With the US debt growth accelerating in trillions over the years, BlackRock has highlighted the importance of Bitcoin in this dire economic environment.
As investors’ worries grow about the stability of fiat currencies, like the dollar, many are increasingly showing interest in Bitcoin as a hedge against these risks. BlackRock, which currently has accumulated over $10 trillion in Assets Under Management (AUM), also underscored the difference between Bitcoin and typical “risk assets.”
The asset manager revealed that despite Bitcoin’s short-term price correlation with equities and other risk assets, its fundamental drivers are starkly different from most traditional assets over the long term. To provide more clarity, Bitcoin is seen as a hedge against geopolitical tensions, fiscal instability and monetary risks.
BlackRock also stated that Bitcoin is positioned as a unique investment go that could offer protection from economic risks in a world that faces increasing financial uncertainty and political instability. Its decentralized and non-sovereign monetary structure has fueled widespread global adoption, leading investors to view it as a “flight to safety” during periods of fear amid disruptive global events over the last five years.
Bitcoin Remains A Risky Asset
While emphasizing the potential for Bitcoin to become a protective net against the Fed dollar crisis, BlackRock has also warned that it remains an incredibly risky asset. The asset manager disclosed that Bitcoin is an emerging technology in the financial sector that is still in its early stages of global adoption.
Moreover, the cryptocurrency is seen as highly volatile and subject to a diverse range of risks due to regulatory challenges, immature systems and challenges in global adoption. Although these risks can be detrimental to investors, BlackRock has revealed that they are unique to Bitcoin and not shared by other traditional assets.
For instance, Bitcoin recently faced challenging market conditions after trading sideways over the past few months and experiencing periods of volatility and price declines that brought it below $60,000. Now the cryptocurrency’s price has increased by 4.75% over the past week and is currently trading at $63,002, according to CoinMarketCap.
Featured image from TheStreet, chart from TradingView