Geopolitical shocks are terrifying global markets, but the answer for investors remains unchanged – diversify. Yet, how do you diversify your portfolio? And what’s the best way to diversify your portfolio? BlackRock has a simple answer: Bitcoin.
Banks worldwide often tout diversification as the key to building a resilient and profitable portfolio. Yet the idea is much older than that—as I’m sure you’ve all heard the age-old saying, ‘Don’t put all your eggs in the same basket.’
It was true 500 years ago, and it’s true today: spreading your money between different investment types is the best way to reduce the overall impact of risk when investing.
For many, this has often meant shielding capital from US-dollar-tied stock markets using traditional means such as gold – and this isn’t a bad option. Indeed, gold prices are up 34.14% year-to-date, yet, if we’re honest, this does little to interest the modern investor.
Per @NYDIG #Bitcoin is the best-performing asset so far this year at 49.2% YTD return.
Silver has also overtaken Gold YTD.
Someone check on @PeterSchiff pic.twitter.com/iVQkIGnXI9
— CryptoHotep.base.eth 🛡️ (@CryptoHotep) October 7, 2024
Beyond Digital Gold: BlackRock Says Bitcoin Is The Ultimate Diversification Tool
Reporting from the Digital Assets Conference co-hosted by Mercado Bitcoin, CME Group, Deribit, and Fireblocks, Journalist Cassio Gusson takes you to the heart of the action.
In critical comments at the event, Jay Jacobs, Head of Thematics and Active Equity ETFs at BlackRock, tackled conversations around risk management head-on, especially addressing the demand for diversification in today’s environment of rising interest rates.
“The hunt for alternatives is driven by the significant rise in the correlation between stocks and bonds in recent years, making effective diversification harder to achieve,” he explained.
Diversification is reasonable when you have lots of single points of failure as mutual funds, stocks and real estate do.
Bitcoin is decentralized. You don’t need diversification into centralized crap.
— Jimmy Song (송재준) (@jimmysong) October 27, 2023
While private markets like private equity and credit have seen significant growth, many investors prefer liquid assets like Bitcoin
Price Trading volume in 24h Last 7d price movement . Liquidity offers the flexibility to quickly enter and exit positions, making it particularly attractive to sophisticated investors looking for diverse portfolio options.
“Bitcoin behaves differently from stocks and bonds, which in itself is a benefit for portfolios seeking diversification,” Jacobs noted.
Yet, Jacobs also warned that Bitcoin isn’t for the faint-hearted, noting that Bitcoin is best suited for investors with aggressive or moderately aggressive profiles and further recommending an allocation of 1% to 3% of portfolios to the asset.
“The volatility and correlation of Bitcoin with other assets are constantly evolving,” Jacobs warned.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.