BlackRock Head Says Bitcoin is a ‘Unique Diversifier,’ Not a ‘Risk-On’ Asset

Key Takeaways:

• BlackRock views Bitcoin as a risk-off asset, offering protection against global risks.
• Bitcoin’s classification as a risk-on asset is still debated within the industry.
• Wall Street heavyweights and analysts like PlanB have bullish forecasts for Bitcoin’s future, though opinions vary.

BlackRock's head of digital assets, Robbie Mitchnick, challenged the conventional labeling of Bitcoin as a “risk-on” asset in a September 24 interview with Bloomberg. Instead, Mitchnick suggested that Bitcoin behaves more like a “risk-off” asset.

Rethinking Bitcoin's Risk Profile

He argued that Bitcoin's value operates independently of traditional economic indicators such as job numbers and economic data, distinguishing it from stocks and other risk-on investments.

The BlackRock executive believes Bitcoin's unique characteristics make it a “risk-off” asset. He describes BTC as a “scarce, global, decentralized non-sovereign asset that offers unique protection against geopolitical risks.” Mitchnick notes that, unlike stocks or commodities, few global events influence Bitcoin's fundamental value each year.

Mitchnick's stance aligns with BlackRock CEO Larry Fink's evolving perspective. Once skeptical, Fink now refers to Bitcoin as “digital gold” and an alternative global currency. BlackRock's iShares Bitcoin Trust, a spot Bitcoin ETF, exemplifies this view, providing investors with a regulated investment option.

Experts Divided on Risk-On vs. Risk-Off Classification

Risk-on assets typically grow in value during economic prosperity, while risk-off assets perform better during economic instability or market uncertainty.

The debate over whether Bitcoin is a risk-on or risk-off asset continues to divide opinions with experts. 

Along with Mitchnick and Fink, Cathie Wood of Ark Invest is another expert who believes Bitcoin is more of a risk-off asset, although for slightly different reasons. Wood is convinced Bitcoin is a risk-off asset due to its role as a hedge against monetary devaluation, citing multiple adoptions in regions experiencing severe currency depreciation.

The wealth manager highlights examples like Nigeria’s naira depreciation, where Bitcoin gained traction as an alternative currency. Wood has called Bitcoin a “financial super highway,” highlighting its role in emerging markets and further solidifying its image as a risk-off asset.

CATHIE WOOD: There are currency devaluations around the world that people are not talking about:

Nigerian Naira down 60%
Egypt devalued 40%

“Bitcoin is a hedge against a loss of purchasing power.”

pic.twitter.com/0n3zPsd3rm

— Bitcoin Archive (@BTC_Archive) April 3, 2024

On the other hand, other market observers see BTC primarily as a risk-on asset. Critics like Kevin Davitt of Nasdaq point to the past historical volatility of the asset and its tendency to correlate with the Nasdaq 100 Index, suggesting alignment with high-growth equities. 

Despite its occasional decoupling from stocks, Bitcoin's dramatic price spikes in bullish markets suggest that it still carries the traits of a speculative, risk-on investment.

PlanB, the creator of the Bitcoin stock-to-flow model, has proposed a scenario in which the Bitcoin price could surpass $1 million per coin by 2025, contingent on favorable political changes, such as Donald Trump's victory in the November election. 

Just a scenario:
– Oct: classic pump month. BTC 70k
– Nov: Trump wins election, ends democrats Biden/Harris/Warren/Gensler war on crypto. BTC 100k
– Dec: massive ETF inflow. BTC 150k
– Jan: crypto people/companies return to US. BTC 200k
– Feb: Power Law crew sells. BTC 150k
-… pic.twitter.com/CbJLTi07Ob

— PlanB (@100trillionUSD) September 24, 2024

PlanB’s theory is based on speculative market behavior and is more reflective of Bitcoin’s risk-on potential.