BlackRock has reinforced the view that Bitcoin could be the future of the financial sector as the $9 trillion asset management firm has chosen Bitcoin as a hedge against a sudden Federal Reserve dollar crisis.
BlackRock Chooses Bitcoin for Security
Fears about the collapse of the US dollar (USD) have resurfaced, with BlackRock, the world’s largest Bitcoin fund and asset manager, warning of the potential economic fallout from the soaring $35 trillion American debt mountain.
BlackRock wrote in a recent paper that growing concerns about US federal deficits and skyrocketing debt are causing many investors explore other alternatives to the US dollarThis new shift applies not only to the US, but also to other countries with struggling economic conditions and significant debt accumulation.
Bitcoin in this context is seen as a safety net for a potential $35 trillion Federal Reserve crisis. With US debt growth increasing by trillions over the years, BlackRock has placed emphasis on the importance of Bitcoin in this difficult economic environment.
As investor concerns grow over the stability of fiat currencies like the dollar, many are showing increasing interest in Bitcoin as collateral against these risks. BlackRock, which currently accumulated over $10 trillion in Assets Under Management (AUM), also underscored the difference between Bitcoin and typical “risky assets.”
The asset manager revealed that despite Bitcoin’s short-term price correlation with stocks and other risky assets, its long-term fundamental drivers are very different from most traditional assets. To add further clarity, Bitcoin is seen as a hedge against geopolitical tensions, budgetary instability and monetary risks.
BlackRock also stated that Bitcoin is positioned as a unique investment that can provide protection against economic risks in a world facing increasing financial uncertainty and political instability. Its decentralized and non-sovereign monetary structure has led to widespread global acceptance, with investors viewing it as a “flight to safety” during periods of fear amid disruptive global events over the past five years.
Bitcoin remains a risky asset
While BlackRock highlighted the potential for Bitcoin to become a protective net against the Fed’s dollar crisis, it also warned that it could be a incredibly risky assetsThe asset manager announced that Bitcoin is an emerging technology in the financial sector that is still in its infancy. early stages of global adoption.
Moreover, the cryptocurrency is seen as very volatile and subject to a wide range of risks due to regulatory challenges, immature systems, and challenges in global acceptance. While these risks can be detrimental to investors, BlackRock has revealed that they are unique to Bitcoin and not shared by other traditional assets.
For example, Bitcoin has recently faced challenging market conditions, after trading sideways in recent months and experiencing periods of volatility and price drops which took it below $60,000. Now, the cryptocurrency’s price has risen 4.75% over the past week and is currently trading at $63,002, according to CoinMarketCap.
Main image from TheStreet, chart from TradingView