In a groundbreaking asset allocation study, the world’s largest and most influential asset manager BlackRock suggests a game-changing Bitcoin revelation for investors seeking to maximize returns. The study, which tracks BTC as a standalone investable asset could be nothing short of transformative. While the study was written last year, it has gained newfound popularity across Twitter.
BlackRock Advises Massive Bitcoin Allocation
The study, conducted in April 2022, analyzed the performance of Bitcoin as an asset from July 2010 to December 2021 on a monthly basis. BlackRock’s findings indicate that for a 60-40 portfolio (60% equities and 40% bonds) with a fixed risk aversion of γ = 1.50, the optimal allocation to BTC is an astounding 84.9%. The remaining 15.1% is suggested to be split between equities and bonds, with a 60-40 ratio.
Commenting on the study, Joe Burnett from Blockware remarked, “Great chart published by BlackRock. Investors with long time horizons should hold overweight equity portfolios. However, now that Bitcoin exists as a superior form of money and savings technology, investors should consider an optimal BTC allocation of 80-100%.”
Burnett’s observation raises eyebrows as he believes that if all investors adopt BlackRock’s recommended BTC allocation, the value of BTC could soar to extraordinary heights. He suggests, “If total global wealth is ~ $800T today, Bitcoin would be $190M per coin.” This potential surge in BTC’s value would make it worth more than five times the total combined value of equities, real estate, and bonds.
The implications of such a move by investors would be far-reaching, as it could significantly impact the overall financial landscape. However, the idea of Bitcoin as a must-have asset in every portfolio is gaining traction, several banks have come out with a BTC price prediction above $120,000 over the past few weeks.
Notably, BlackRock’s report acknowledges the extreme volatility of BTC but highlights its pronounced positive skewness, which makes large allocations of the digital asset highly appealing and potentially dominating in utility functions.
The study is also interesting in that it could shed light on how heavily BlackRock could promote Bitcoin after the spot ETF is potentially approved by the US Securities and Exchange Commission (SEC). Here, it is important to remember the story of the first gold ETF which could repeat itself for Bitcoin. The gold price rose fivefold after the first ETF in 2004; a weighty reason for this was the global presence of BlackRock’s financial advisors, who promoted a 5% gold allocation in each portfolio as a must-have.
Bitcoin Spot ETF Race
Speaking of ETFs, the countdown for the first spot Bitcoin ETF approval is approaching fast. BlackRock filed for its spot ETF in mid-June, with the first deadline for the SEC response set for September 2. While the SEC has not yet approved a spot ETF, many analysts believe that BlackRock stands a strong chance of being the first.
However, the Ark and 21Shares Bitcoin ETF are first in line. After the refiling has passed the first deadline, the second one is on August 13. Moreover, Bitwise’s first deadline ends one day before BlackRock, on September 1.
— Jake Simmons (@realJakeSimmons) July 19, 2023
At press time, the BTC price stood at $29,256.
Featured image from Tekedia, chart from TradingView.com