As BlackRock, a $9 trillion firm, has highlighted, Bitcoin has become a key player in the financial sector.
BlackRock noted in a recent publication that Bitcoin’s value stems from several key attributes that distinguish it from traditional currencies.
These features offer solutions to long-standing problems in monetary systems. Notably, Bitcoin’s supply is capped at 21 million units, ensuring that it will not easily depreciate, providing a degree of stability in a world prone to inflation.
In addition, its digital and global nature makes cross-border transfers almost instant and cost-effective, solving the problem of inefficiency in cross-border value transfer.
In addition, Bitcoin's decentralized structure and permissionless access give it unique advantages, making it the world's first open access currency system. BlackRock emphasizes that unlike other financial systems, Bitcoin does not rely on central institutions, which provides financial inclusion to a wider global population.
Bitcoin's place in crypto assets
The report said that although the use cases of other assets in the broader crypto space have also changed, Bitcoin remains the most prominent. The analysis emphasized that due to Bitcoin’s unique properties, it has consolidated its position as a global currency alternative.
The $9 trillion company also noted that Bitcoin’s growth trajectory over the past decade has been impressive, with its market cap exceeding $1 trillion despite fluctuations in its value.
Bitcoin’s growth and correction cycles
For example, Bitcoin has historically demonstrated resilience, rebounding and reaching new highs after multiple market corrections. BlackRock went on to share snapshots of different growth and correction phases.
From 2010 to 2011, Bitcoin experienced a 592-fold increase, followed by another 555-fold increase from 2012 to 2014, and continued to rise from 2016 to 2018 and 2019 to 2021, pushing the value of Bitcoin to new highs.
However, each price rally has been followed by a significant correction. For example, the 2019/2022 rally was followed by a 77% decline. The most significant correction recorded in the cycle was in 2011/2012, when Bitcoin plunged 93% after surging 592 times.
Meanwhile, Bitcoin has delivered a cumulative return of 807,000x in 169 months.
Low correlation with stocks
BlackRock’s report also highlights that Bitcoin has a low correlation with other macroeconomic factors, unlike traditional financial assets. Although there will be short-term spikes in correlation during market volatility, Bitcoin remains largely independent of stocks and other risky assets.
Recall that the U.S. Department of Justice issued a subpoena to Nvidia in early September, causing its stock price to plummet by 10% and triggering a 2.16% drop in the S&P 500 index.
It was one of the worst trading days of 2024, with big tech giants falling. However, Bitcoin's decline was better than during last month's market crash.
