Bitcoin has been mislabelled as a “risk-on” asset, according to BlackRock’s head of digital assets, Robbie Mitchnick.
“What’s happened a little bit in the crypto industry is a bit of an own goal,” said Mitchnick in an interview with Bloomberg on Sept. 24.
“Some of the crypto research type publications and daily commentaries have taken the fact that Bitcoin, which is obviously a risky asset and extrapolated it to say therefore it is a risk-on asset and should trade like equities,” he said.
Robbie Mitchnick suggests Bitcoin is closer to a risk-off asset. Source: Bloomberg
“When you look at it fundamentally, the drivers of Bitcoin long term are very different from what’s going to drive equities and other so-called risk assets, and in some cases, they may actually even be inverted,” Mitchnick continued.
In BlackRock’s recently released Bitcoin white paper, the asset manager labeled Bitcoin (BTC) as a “unique diversifier,” highlighting its potential to act as a hedge against monetary and geopolitical risks.
“When we think about Bitcoin, we think of it primarily as an emerging global money alternative right,” Mitchnick said. “It is a scarce, global, decentralized non-sovereign asset and it is an asset which has no country-specific risk, has no traditional counterparty risk.”
“It confuses investors when people talk about it as risk-on because based on the properties I just described, you would think of it as risk-off.”
A risk-on asset typically refers to assets that maximize returns during favorable economic conditions, including equities such as tech and growth stocks, certain commodities, and many cryptocurrencies.
On the other hand, risk-off assets are a category of investments that perform well during periods of heightened market uncertainty or economic downturns, such as gold, silver, government bonds, and the US dollar.
Bitcoin outperformed the S&P 500 during major geopolitical events. Source: BlackRock
“The reality is, there’s probably two or three things a year that happen typically that actually impact the fundamental value of Bitcoin,” he added.
BlackRock currently…
..
