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BlackRock, the global asset management firm, has suggested
that investors allocate up to 2% of their portfolios to bitcoin. The
recommendation was included in a report, which highlights bitcoin’s potential
as a diversifying asset, given its historically lower correlation with other
major asset classes.
As of now, bitcoin (BTCUSD) is trading at an all-time high
of approximately $105,000. BlackRock emphasized that bitcoin could provide an
alternative source of returns within a portfolio. However, the firm warned of
significant risks associated with the cryptocurrency.
Bitcoin ETFs Attract $100 Billion
“Bitcoin remains highly volatile and vulnerable to
sharp selloffs,” the report noted. It also stated that bitcoin’s returns
have, at times, moved in tandem with risk assets like stocks, limiting its
effectiveness as a hedge.
The report follows the successful launch of bitcoin-related
exchange-traded products earlier this year. These products collectively
attracted over $100 billion in assets, according to data from VettaFi.
BlackRock’s iShares Bitcoin Trust accounted for $51.1 billion of these assets,
leading the market.
🇺🇸 $10 TRILLION BlackRock just suggested allocating 2% of the portfolio in #Bitcoin 🤯THIS IS MASSIVE! 🚀 pic.twitter.com/aAbhYKUVOp
— Vivek⚡️ (@Vivek4real_) December 12, 2024
Bitcoin Surges Toward $105K
BTCUSD
reached $100,000 and then consolidated for a while. The daily chart shows a
bullish breakout, with the price now heading toward $105,000, fuelled
by strong bullish momentum. As of writing, the cryptocurrency is trading
well above $100,000, even during the holiday season, approaching new highs.
Bitcoin Draws Comparisons to Tech
BlackRock based its recommendation on how bitcoin influences
overall portfolio risk. While bitcoin is viewed as a unique asset, BlackRock
compared its impact to that of large technology companies like Nvidia. The
report noted that these companies have an average market capitalization of $2.5
trillion, comparable to bitcoin’s $2 trillion valuation.
BlackRock cautioned against exceeding the 2% allocation
threshold, stating that bitcoin’s contribution to portfolio risk would become
disproportionately large beyond this level. The report also stressed the
importance of monitoring bitcoin’s evolving characteristics, including its
adoption rate, correlation with equities, and volatility.
This article was written by Tareq Sikder at www.financemagnates.com.
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