Author: Suzanne McGee, Reuters; Translated by: Deng Tong, Jinse Finance
Asset management giant BlackRock stated in a report on Thursday that it recommends interested investors consider allocating 2% of their portfolios to Bitcoin, the largest cryptocurrency in the world.
A team of four BlackRock executives, including ETF Chief Investment Officer Samara Cohen and Senior Portfolio Strategist Paul Henderson, stated: 'We believe that investors with appropriate governance and risk tolerance can incorporate Bitcoin into a multi-asset portfolio.' This was noted in a short-selling report.
Arguments supporting the inclusion of Bitcoin in asset allocation models include its potentially low correlation with other major asset classes and its ability to provide a diversified source of returns.
The report warns: 'Investors should also be wary of the risks associated with Bitcoin.' 'It may ultimately fail to achieve broader adoption. Moreover, it remains highly volatile and susceptible to sharp sell-offs.' Additionally, at times its returns are more closely tied to those of stocks and other risk assets, meaning investors might not be able to rely on it as a hedging tool.
According to data from VettaFi, BlackRock is one of the 10 companies that launched new exchange-traded products related to Bitcoin in January, marking the most successful ETF issuance in the history of these products, with assets exceeding $100 billion.
Most of these assets have flowed into BlackRock's iShares Bitcoin Trust, which currently holds $51.1 billion in assets.
BlackRock states that its allocation recommendations are based on measuring the extent to which adding Bitcoin to a portfolio would increase overall risk. While the authors of the report indicate that Bitcoin is a unique asset, it shares similarities with technology giants like Nvidia (NVDA.O) and Microsoft (MSFT.O) in some respects.
BlackRock noted that the significant rise of these companies on Wednesday played an important role in pushing the Nasdaq Composite Index to a new record above 20,000 points, with their average market capitalization close to $2.5 trillion, approaching Bitcoin's market cap of around $2 trillion. The firm stated that in terms of overall portfolio risk, substantial investments in these companies could be similar to holding Bitcoin.
However, BlackRock warns that if the maximum recommended weight exceeds 2%, 'the share of Bitcoin in portfolio risk becomes too large compared to an average of 7 stocks.'
BlackRock's report also notes that investors need to regularly review the 'evolving nature of Bitcoin,' including the pace at which institutional investors are adopting Bitcoin, its correlation with stocks, and its volatility.
