BlackRock predicts Bitcoin as the “new diversifier” in 2025
Traditional portfolio construction is evolving.
black rock (NYSE:BLK) recently released its 2025 outlook for the markets and economy, and Bitcoin was a key topic.
In particular, experts from the world’s largest asset management companies discussed the need for ‘new diversification’, one of which is Bitcoin.
Bonds, a proven diversification tool over the years, could use some competition, BlackRock said in its outlook.
“The erratic correlation between stock and bond yields has defined the new regime, with the result that Treasuries have become an unreliable buffer against stock selling,” the experts wrote in their outlook. “We see potential for other diversifications to step in, both old like gold and new like Bitcoin.”
It is not a replacement for long-term bonds in search of diversification. Rather, they said, it is about finding new and different sources of risk and return.
Bitcoin ETF Growth: “I’ve Never Seen Anything Like It”
BlackRock said Bitcoin’s potential as a “new diversifier” comes from its potential to increase in value over time due to increased demand, which is based in part on the potential for Bitcoin to become more widely used as a payment technology. I said there is.
“Bitcoin’s role as a store of value and payment system makes it a potentially diversifying entity,” said Samara Cohen, chief investment officer for ETFs and index investments at BlackRock.
BlackRock is clearly aware of the growing demand for Bitcoin, as the iShares Bitcoin Trust ETF (NASDAQ:IBIT) is the fastest-growing ETF of all time. In less than a year, it has amassed more than $53 billion in assets under management, surpassing the $50 billion barrier faster than any other ETF.
“I wasn’t sure if we would ever see that, but I’ve never seen anything in my career like going from $0 billion to $50 billion in basically six months,” BlackRock CFO Martin Small said at a conference earlier this month. . Goldman Sachs U.S. Financial Services Conference.
Additionally, the election of Donald Trump as US President has increased the likelihood of adoption as he is expected to become a champion of Bitcoin and cryptocurrencies.
“These distinct drivers should reduce correlation with stocks and other risky assets over the long term. The correlation between Bitcoin and stock returns has generally been low over its short history. Even if there are occasional spikes.” BlackRock officials wrote in their 2025 outlook:
And if it is widely adopted, Bitcoin’s risk and return profile will change, perhaps making it more suitable as a tactical hedge against some equity risks, similar to gold.
A different approach to portfolio building
Blackrock officials also discussed how portfolio construction is evolving, moving away from neutral benchmark compositions such as 60% stocks and 40% bonds.
“Financial markets themselves are being reshaped as the composition of benchmark indices changes, with some sectors growing rapidly and others declining,” BlackRock experts wrote. “The S&P 500 looks very different and much more concentrated than it did just five years ago.”
Therefore, they believe investors should rely less on broad asset classes and look for thematic opportunities that are transforming the economy, such as AI, or look to international stocks or private markets.
However, this more tactical approach requires investors to look for actively managed strategies, which should provide an advantage in this environment.
AI is another big topic in the outlook. BlackRock experts explain the three stages of AI: Deploy, Adopt, and Transform. Currently we are still in the construction phase. They estimate that spending on AI infrastructure could exceed $700 billion by 2030, equivalent to 2% of U.S. GDP.
“AI has the potential to become a bigger revenue source than search.”
Raffaele Savi, Global Head of Systematic Investments at BlackRock, said:
