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BlackRock Recommends 2% Bitcoin (BTC) Portfolio Allocation
12/13/2024 02:59
The world’s largest asset manager, BlackRock, with over $11T in AUM now sees Bitcoin alongside tech giants such as Apple, and Tesla.
Key Notes
- BlackRock's iShares Bitcoin Trust (IBIT) has grown to $53.8 billion in net assets under management, surpassing their Gold ETF in less than a year of operation.
- The investment firm cautioned clients not to surpass 2% in Bitcoin allocation to traditional portfolios to avoid higher risks.
BlackRock Inc. (NYSE: BLK), the world’s largest asset manager with more than $11.5 trillion in assets under management (AUM), has had a huge success with its Bitcoin BTC $99 786 24h volatility: 1.5% Market cap: $1.98 T Vol. 24h: $102.04 B adoption strategy. The New York-based investment firm has made a name in the cryptocurrency industry through its iShares Bitcoin Trust (IBIT), and the iShares Ethereum Trust (ETHA).
However, it is the IBIT’s palpable growth to about $53.8 billion in net assets under management as of this writing, which has attracted significant attention. Moreover, Ki Young Ju, the founder of CryptoQuant, recently noted that IBIT has overtaken BlackRock’s Gold ETF in less than a year of its existence.
BlackRock on Sizing Bitcoin ln Portfolios
According to a BlackRock report to clients published on Thursday, December 12, investors should consider Bitcoin in a multi-asset portfolio from a similar perspective as mega-cap tech stocks. The mega investment firm highlighted that Bitcoin cannot be compared to traditional assets, but can be considered in a traditional portfolio.
Furthermore, top Fed officials believe that Bitcoin is a digital gold, with a high likelihood of overtaking the market cap of the precious metals industry. As a result, BlackRock recommended its clients to consider allocating 1-2 percent of their overall traditional portfolios, which consists of a mix of 60 percent stocks and 40 percent bonds, to Bitcoin.
According to BlackRock, a 1-2 percent Bitcoin exposure for traditional portfolios has a similar risk to the ‘magnificent 7’ group, which consists mostly of large-cap tech stocks.
“Even though Bitcoin’s correlation to other assets is relatively low, it’s more volatile, making its effect on total risk contribution similar overall,” authors including Samara Cohen, BlackRock’s CIO of ETF and index investments, wrote in the paper. “A Bitcoin allocation would have the advantage of providing a diverse source of risk, while an overweight to the Magnificent 7 would add to existing risk and to portfolio concentration.”
Meanwhile, BlackRock cautioned its clients not to increase their Bitcoin allocation beyond 2 percent, as it generally increases the overall portfolio risk. Furthermore, Bitcoin price has experienced corrections of up to 80 percent in the past three major bear markets, resulting in huge sustained losses.
However, the overall Bitcoin volatility has continued to decline over the years amid the rising correlation with equity returns.
Here are the main charts they discuss in the piece where they use a risk budgeting approach to Bitcoin allocation: pic.twitter.com/Ylrx1H9W7u
— James Seyffart (@JSeyff) December 12, 2024
Impact on BTC
The accelerating institutional adoption of Bitcoin has significantly impacted market dynamics, with the supply on centralized exchanges dropping below 2.23 million BTC as of December 12. Notably, US spot Bitcoin ETFs have already accumulated more than Satoshi Nakamoto’s 1 million BTC stored in dormant wallets, highlighting the unprecedented scale of institutional involvement in the cryptocurrency market.
As a result, Bitcoin price is expected to rally exponentially in the coming years, potentially hitting $1 million if the US government adopts a strategic BTC reserve.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
