- Bitcoin: Risky or Safe Asset?
- Why Bitcoin Benefits from U.S. Instability
- Technological Breakthrough and International Reserve Currency
BlackRock has released a positive report on bitcoin, considering its potential transformation into an international reserve currency.
Bitcoin: Risky or Safe Asset?
BlackRock believes that due to its nature as a global, decentralized, fixed-supply, and stateless asset, bitcoin presents risk and return factors distinct from traditional asset classes. The report suggests that in the long term, bitcoin will be fundamentally uncorrelated with other assets. While bitcoin often suffers when the stock market abruptly falls, the authors point out that bitcoin’s price *“generally rebounds within three days.”* Renowned sources suggest that *“fundamentals eventually outweigh the short-term reactions of traders using leverage. As Warren Buffett says, the stock market is a device for transferring money from the impatient to the patient. This adage also seems to apply to bitcoin.”*
Why Bitcoin Benefits from U.S. Instability
BlackRock notes that bitcoin’s nature prompts some investors to view it as a safe haven during periods of stress, particularly during disruptive geopolitical events. The reason being that *“bitcoin, the first fixed, decentralized, and stateless monetary alternative to be widely adopted globally, presents no counterparty risk, does not depend on any centralized system, and is not contingent on the fate of any particular country.”* These properties make it an asset largely detached (in fundamental terms) from certain critical macroeconomic risk factors, including banking system crises, sovereign debt crises, currency depreciation, geopolitical disruptions, and other political and economic risks specific to each country.
Technological Breakthrough and International Reserve Currency
Another highlight of the report is the technological description of bitcoin. It is appreciable that large institutions openly admit that bitcoin is a major technological breakthrough. We can read that *“the technological innovation lies in the creation of a form of digital, global, fixed-supply, decentralized, and censorship-resistant currency.”* Thanks to these characteristics, bitcoin has solved many issues that other forms of money have encountered: its supply is fixed at 21 million units; its global and digital nature means it can be transported anywhere in the world in near real-time at near-zero cost; its decentralized and censorship-resistant nature has made it the world’s first truly accessible monetary system. The world’s largest investment fund estimates that bitcoin is *“an emerging technology that is only at the beginning of its adoption journey and could become an international payment currency as well as a store of value.”*
BlackRock sees bitcoin as a potential international reserve currency due to its unique characteristics and technological advancements. This could significantly change the global economic system and create new opportunities for investors.
