BlackRock has emphasized the belief that Bitcoin may represent the future of the financial industry, as the $9 trillion asset management giant has identified Bitcoin as a safeguard against a sudden crisis of the Federal Reserve dollar.
BlackRock Looks to Bitcoin for Protection
Concerns regarding the potential decline of the United States Dollar (USD) have resurfaced, with BlackRock, the largest Bitcoin fund and asset manager globally, alerting about the possible economic repercussions from the surging $35 trillion US debt load.
In a recent report, BlackRock noted that the increasing worries regarding US federal deficit and soaring debts are prompting many investors to seek alternatives to the US dollar. This new trend is applicable not only in the US but also across other nations facing economic challenges and substantial debt accumulation.
Within this framework, Bitcoin is viewed as a safety measure against a potential $35 trillion Federal Reserve dollar crisis. As US debt continues to grow rapidly over the years, BlackRock has pointed out the significance of Bitcoin in this challenging economic climate.
As concerns mount regarding the stability of fiat currencies, such as the dollar, an increasing number of investors are turning to Bitcoin as a hedge against these risks. BlackRock, which has now amassed over $10 trillion in Assets Under Management (AUM), also highlighted the distinction between Bitcoin and typical “risk assets.”
The asset manager disclosed that, although Bitcoin’s price in the short term correlates with that of equities and other risk assets, its fundamental drivers are markedly different from most conventional assets in the long run. To clarify further, Bitcoin is regarded as a safeguard against geopolitical tensions, fiscal instability, and monetary risks.
BlackRock also indicated that Bitcoin is positioned as a distinctive investment option that could provide protection against economic dangers in a world increasingly rife with financial uncertainty and political strife. Its decentralized and non-sovereign monetary framework has spurred widespread global acceptance, leading investors to perceive it as a “flight to safety” during times of fear amid disruptive global events over the last five years.
Bitcoin Continues to be a Risky Investment
While underscoring the potential for Bitcoin to serve as a protective measure against the Fed dollar crisis, BlackRock has also cautioned that it remains an extremely risky asset. The asset manager revealed that Bitcoin is an emerging technology within the financial realm that is still in its nascent stages of global acceptance.
Additionally, the cryptocurrency is perceived as highly volatile and subject to a wide array of risks stemming from regulatory hurdles, underdeveloped infrastructure, and obstacles to worldwide adoption. Although these risks can pose challenges for investors, BlackRock has asserted that they are unique to Bitcoin and not applicable to other traditional assets.
For example, Bitcoin recently encountered difficult market conditions after fluctuating sideways for several months and experiencing bouts of volatility and price drops that pushed it below $60,000. Currently, the cryptocurrency’s value has risen by 4.75% in the last week and is trading at $63,002, as reported by CoinMarketCap.
Featured image from TheStreet, chart from TradingView
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