he head of Digital assets at Blackrock, Robbie Mitchnick, has recently stated that people that label Bitcoin, the biggest cryptocurrency by market cap in the category of Risk On financial assets, are wrong. However, Robbie does acknowledge the risks associated in Bitcoin, such as the volatility, but argues that the risk related to Bitcoin is different than risky assets in tradFi.
Uncommon Characteristics Associated with Bitcoin
Mitchnick argues that Bitcoin is a unique and new asset class that cannot be compared to stocks. It is the first global, digital and decentralized asset which makes it extremely unique. And more importantly it is out of control from any government. Moreover, Bitcoin’s qualities makes it a hedge against monetary policies, Political instability such as wars and inflation in cases of currency devaluation.
Correlation with Equities
Mitchnick highlights the fact that although Bitcoin is reactive to the performance of gold and the stock market in the short-term, it is really not correlated in the long term as they are two very different asset class for different purposes.
Bitcoin Risky Yet 'Risk-Off' Asset
Blackrock’s understanding of Bitcoin could be looked at being controversial for the majority of investors in traditional finance. In the report, Mitchnick proposes a new method of understanding Bitcoin’s function in investment portfolios and its possible benefits in unstable economic landscapes by characterizing it as a 'risk-off' asset despite its volatility.
