Is Bitcoin a risky asset? BlackRock gives Bitcoin the title of "unique diversification tool"

Bitcoin is widely known for its digital gold positioning, but its price correlation with traditional finance has led many to classify it as a risk asset similar to tech stocks or growth stocks. However, the world's largest asset management company, BlackRock, recently countered this view in their presentation, positioning Bitcoin as a "unique diversification tool" due to its potential for hedging currency policies and geopolitical risks.

Is Bitcoin Positioned as Digital Gold? Or a Hedge Asset?

We typically classify government bonds, the U.S. dollar, defensive stocks, and precious metals like gold as hedge assets because they tend to maintain relatively stable prices when the overall market performs poorly. In contrast, stocks and corporate bonds are usually considered risk assets. By observing the trends of Bitcoin and the S&P 500 index, we can see a considerable degree of similarity between the two. Therefore, from a price perspective, it may be challenging to categorize Bitcoin as a hedge asset, or even equate it with gold.

However, BlackRock's Head of Digital Assets Robbie Mitchnick may disagree with this view. In a interview, he refuted the notion propagated by some cryptocurrency media that "Bitcoin is considered a risk asset and should be traded like stocks."

"When you look at it fundamentally, the long-term drivers of Bitcoin are very different from the factors driving stocks and other risk assets. In some cases, they are even opposite," said Robbie Mitchnick.

However, academic reports may present different arguments. In August, we shared a report from Uniswap, Circle, and the Copenhagen Business School, which showed that traditional finance still has a significant impact on the performance of cryptocurrencies. The U.S. dollar is recognized as the hedge asset in the cryptocurrency market.

Is Bitcoin a Hedge Asset? Uniswap, Circle, and Academic Institutions Discuss the Main Drivers of Cryptocurrency Prices

Bitcoin Outperformed the S&P 500 in Geopolitical Events Over the Past Four Years

In a recent presentation, BlackRock referred to Bitcoin as a "unique diversification tool" rather than a simple hedge tool. Robbie Mitchnick stated, "When we think about Bitcoin, we primarily see it as an emerging global currency alternative," and added, "It is a scarce, global, decentralized non-sovereign asset that has no specific country risk or traditional counterparty risk."

BlackRock compiled a table showing the impact of geopolitical risks since 2020 on the S&P 500 index, gold, and Bitcoin to illustrate Bitcoin's outperformance over the S&P 500 index in these events. This indicates that compared to indices like the S&P 500, Bitcoin has hedge attributes, but its decentralized nature makes it more than just a hedge asset.