Blackrock makes its case for Bitcoin as its price stalls

Blackrock, the largest asset manager in the world, has published a comprehensive report on Bitcoin. 

In a report, BlackRock executives Samara Cohen, Robert Mitchnick, and Russell Brownback noted that Bitcoin (BTC) was a unique asset for diversification purposes.

Bitcoin solves core money problems

This report is notable because of the roles of the authors at BlackRock. Cohen is the Chief Investment Officer of ETF and index investments, Mitchnick is the company’s head of assets, and Brownback heads global positioning for fixed income.

First, they noted that Bitcoin is a limited asset with a supply cap of 21 million coins, unlike other forms of money. For example, there is an unlimited supply of U.S. dollars since the Federal Reserve has the final say on how much to print. During its last quantitative easing program, the Fed boosted its balance sheet from less than $5 trillion to $8.9 trillion.

Second, BlackRock believes that Bitcoin makes it easier for people to move money across borders. While this is true, Bitcoin transactions tend to be more expensive than sending fiat currencies. As a result, stablecoins like Tether (USDT) and USD Coin (USDC) have emerged as the most popular digital currencies for cross-border payments.

Additionally, they noted that Bitcoin is a truly decentralized global monetary system not controlled by a central authority.

BTC is uncorrelated with stocks and gold

According to BlackRock, Bitcoin is also a highly uncorrelated asset and has a long track record of strong performance. It has risen by over 807,000x since its inception. The coin often outperforms traditional assets like the S&P 500 and gold when global risks rise.

For example, its 60-day return during the U.S. and Iran tensions in January 2020 was 20%, while the S&P 500 dropped by 7% and gold rose by 6%. Bitcoin also rose by 21% after the Covid outbreak in March 2020, while the S&P 500 and gold increased by 2% and 3%, respectively.

Additionally, Blackrock believes that Bitccoin is a good asset as the US public debt rises. The latest data by the National Debt Clock shows that the country has over $35.2 trillion in debt and is now spending $1 trillion to service it. In an opinion piece, the Wall Street Journal warned that a national debt crisis was coming.

Bitcoin also outperformed traditional assets during other major events like the Russia’s invasion of Ukraine and the recent yen carry trade unwinding. 

BlackRock’s views on Bitcoin are important because of its role in the global economy. In its latest financial results, the company revealed that it had over $10.7 trillion in assets, representing 41% of the American gross domestic product. It is also the biggest player in the spot Bitcoin ETF industry, with over $21 billion in assets.

Bitcoin is stuck in a range

BlackRock’s statement came as Bitcoin continued consolidating around the $60,000 mark as traders awaited the Federal Reserve’s decision.

Bitcoin is consolidating at the 50-day and 200-day moving averages and has formed a series of lower lows and lower highs. Therefore, the short-term outlook for Bitcoin is neutral. A bullish breakout will be confirmed if it moves above the upper descending trendline, while further downside could occur if it drops below $52,000.