A new report from BlackRock Inc., whose iShares unit is the world's biggest ETF issuer, sheds light on why bitcoin might be more than just a passing trend.

The report highlights bitcoin's properties as an uncorrelated asset whose performance is often unaffected by risk factors that traditionally unsettle other assets.

New York-based BlackRock, also the world's biggest asset manager, noted that bitcoin has frequently been out of sync with stocks. This independence will allow investors to diversify their portfolios to minimize downsides during turbulent times. The analysis suggested that bitcoin might actually benefit from uncertain times, indicating that bitcoin adoption could increase when there are worries about global monetary stability, geopolitical issues, and U.S. fiscal health.

For example, during the U.S.-Iran tensions in Jan. 2020, the S&P 500 increased by 2% over 10 days, while bitcoin surged 12%. Following the 2020 U.S. election, bitcoin increased a remarkable 131% increase over 60 days.

The report also highlighted that bitcoin has outperformed all major asset classes in seven out of the past 10 years, with returns exceeding 100% annually. It was the worst performer in the other three years, experiencing four drawdowns in excess of 50%, underscoring its volatility.

IBIT ytd flows

To be sure, the report also noted that bitcoin remains a high-risk asset with a volatile price history and serious regulatory question marks. The SEC has expressed deep concerns about the transparency of cryptocurrencies and investor protections.

Bitcoin’s Unique Behavior

But BlackRock also highlighted that bitcoin has “no traditional counterparty risk, depends on no centralized system, and is not driven by any one country’s fortunes.” While it’s not without risks, bitcoin’s unique properties might appeal to investors looking for alternatives in an increasingly complex global financial landscape.

The report concluded that as global tensions increase and concerns about U.S. debt grow, some investors might view bitcoin as a potential hedge against various economic and political risks.

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