BlackRock: Bitcoin’s Unique Drivers Set it Apart from Traditional Assets

• Bitcoin outperformed all major asset classes in seven of the last ten years.
• Bitcoin’s long-term return drivers do not correlate with other sources of portfolio returns.
• Analysts expect Bitcoin to respond to the Fed’s upcoming monetary policy announcement.

Bitcoin has outshined all major asset classes in seven of the last ten years, while also experiencing the worst performance in the remaining three. This highlights the digital asset’s unique nature as an investment. In a whitepaper , leading investment company BlackRock emphasized how Bitcoin’s long-term return drivers aren’t connected to other sources of portfolio returns.

What Drives Bitcoin’s Returns?

According to BlackRock’s publication, Bitcoin’s core features allowed it to tackle money-related problems that have persisted for centuries. Some issues BlackRock highlighted include inflation and debasement, since Bitcoin’s supply is capped at 21 million units. The investment firm also pointed out how Bitcoin introduced digitally native and borderless transactions, allowing for near-instant, global transfers of value.

BlackRock highlighted how Bitcoin addressed the limited access problem of localized money controlled by a central authority. Instead, the innovation brought about the first truly open-access global monetary system. The firm believes these drivers positioned Bitcoin as a global monetary alternative and an asset with verifiable scarcity.

The Unknowns of Bitcoin’s Development

However, BlackRock’s analysts believe Bitcoin’s potential evolution into a widespread store of value and/or global payment asset is uncertain. That’s because significant volatility and high uncertainty define the leading crypto’s developing market value, despite its remarkable rise and significant global adoption.

Bitcoin saw four drawdowns of over 50% in the past ten years, even though it has shown the ability to recover from these drops and reach new highs. Such a high level of uncertainty reflects the risk of adopting Bitcoin as an investment. But, it also reflects, in part, the changing prospects of Bitcoin gaining acceptance as a global monetary alternative.

Even though Bitcoin was trading for $60,486 at the time of writing, it has shown some notable volatility over the past year. The leading crypto rallied 200% between September 2023 and March 2024, hitting a new all-time high. However, true to form, it retraced 33% over the past six months.

Read also: Crypto Market Jitters: Bitcoin Dips as Investors Await Fed Decision

With the Federal Reserve set to cut interest rates, analysts expect a response from Bitcoin that could lead to a significant price movement. The flagship crypto already surged 6.33% in the past 24 hours, according to TradingView’s data . A further push could result in higher prices in the coming days, depending on how users think the new policy would affect the cryptocurrency’s potential.