BlackRock Advises 2% Bitcoin Allocation as Vancouver Approves Municipal BTC Investment
- Bitcoin’s bullish trend continues, exceeding US$100k and supported by consistent inflows into US ETFs.
- Discussions in the US consider a Bitcoin reserve while Vancouver incorporates Bitcoin into its financial strategy.
- BlackRock suggests a 1-2% Bitcoin allocation can mirror the risk profile of traditional 60/40 investment portfolios.
- Bitcoin’s broad adoption could reduce its volatility but might also diminish its potential for large price increases.
Bitcoin’s bullish year continues, with BTC hovering over the US$100k mark (AU$156.9k) and the US Spot exchange-traded funds (ETFs) seeing 11 straight days with net inflows. On top of this are discussions in the United States about a Bitcoin reserve and cities like Vancouver already making moves to include the OG crypto in their investments.
Bitcoin Less Risky with Less Upside Potential
And according to BlackRock it’s a good idea to have a small portion of BTC in a portfolio.
A BlackRock Investment Institute paper claims that a 1% to 2% allocation in the digital asset would create a similar risk profile as the standard 60/40 stocks and bonds portfolio does – which includes the so-called magnificent seven, the largest tech stocks, Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla.
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In the paper, BlackRock’s CIO of ETF and index investments, Samara Cohen, said that allocating that amount to Bitcoin “would have the advantage of providing a diverse source of risk”.
Even though Bitcoin’s correlation to other assets is relatively low, it’s more volatile, making its effect on total risk contribution similar overall.
Samara Cohen, BlackRock
If institutional investors continue to pour funds into the asset class it could decrease Bitcoin’s volatility, but at the same time lower Bitcoin’s upside potential, the authors of the paper wrote.
Looking ahead, should Bitcoin indeed achieve broad adoption, it could potentially also become less risky – but at that point it might no longer have a structural catalyst for further sizable price increases.
BlackRock
City of Vancouver FOMOs In
Meanwhile in Canada, and the City of Vancouver has just adopted a pro-Bitcoin policy. The move, partly inspired by Donald Trump’s pro-crypto stance, could see the city use Bitcoin in its finances.
The city’s mayor, Ken Sim, told Bloomberg that he had pondered the idea for a while, but wasn’t sure people were ready for it.
I wanted to do it for a while. I didn’t think the public was ready to have the conversation.
Ken Sim, Mayor, City of Vancouver
Sim and his city are basically FOMOing into Bitcoin, driven by the developments in other jurisdictions, with discussions about various use cases for Bitcoin in official capacity in Brazil, the US, Switzerland and elsewhere. Commenting on this, Sim simply said that they “want to get ahead of it”.
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The mayor appears to be a true believer in Bitcoin, and although he doesn’t give investment advice, he thinks it’s “the greatest invention ever in human history”. Sim said he holds the firm belief that fiat currency ultimately will go to zero. In that scenario, holding a bit of Bitcoin might be a sensible idea.
