BlackRock releases its new asset exposure recommendation report and recommends that companies expose up to 2% of their portfolio to Bitcoin purchases.
BlackRock, the world's largest asset manager, has issued a recommendation which has generated a lot of interest in the investment world: allocate up to 2% of your portfolio to Bitcoin. This recommendation is not only relevant because of BlackRock’s size and prestige, but also because it opens up new perspectives on how investors can diversify their investments and protect themselves from inflation. In this article, we will explore in depth the reasons behind this recommendation and how you can apply it in your investment strategy.
BlackRock's recommendation: Why 2%?
BlackRock has recommended an allocation of between 1% and 2% of investment portfolios to Bitcoin. This recommendation is based on several factors. First, BlackRock compares the allocation to Bitcoin to that of the stocks of the seven largest technology companies on the market, known as the “Magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla).
These companies have a market capitalization similar to Bitcoin and represent a significant portion of the risk in investment portfolios. Allocating 1% to 2% to Bitcoin in a traditional portfolio of 60% stocks and 40% bonds produces a risk profile similar to that of one of these tech stocks.
Added to this is the fact that Bitcoin has a low correlation with traditional markets, making it a valuable tool for diversifying risk. During periods of volatility in the equity markets, Bitcoin has shown a tendency to move independently, which can help protect the portfolio from negative impacts.
Inflation Protection
Another important point is Bitcoin’s limited supply, a feature that makes it attractive as a hedge against inflation. As governments and central banks implement expansionary monetary policies, the value of fiat currencies can depreciate. Bitcoin, with its limited supply, offers an alternative that cannot be inflated.
Furthermore, the adoption of Bitcoin by financial institutions and reputable companies has increased significantly. BlackRock has been one of the pioneers in this adoption, launching Bitcoin investment products and allowing its institutional clients to access this asset. This has increased confidence in Bitcoin as a legitimate investment.
A clear sign of booming adoption
On the other hand, BlackRock’s recommendation to allocate up to 2% of investment portfolios to Bitcoin has the potential to generate a significant impact both globally and institutionally. As the largest asset manager in the world, with more than $11,5 trillion in assets under management, BlackRock’s opinions and recommendations are widely followed and respected in the financial world.
Increased institutional confidence
An example of this impact can be seen in BlackRock legitimizing Bitcoin as a serious and viable investment asset. Until now, many financial institutions have been reluctant to include cryptocurrencies in their portfolios due to volatility and lack of regulation. Approval from a reputable institution like BlackRock can help allay these concerns and foster trust in Bitcoin.
This can be seen, for example, in the “viral” adoption of Bitcoin by MicroStrategy, which has seen huge gains. On the other hand, we have Microsoft’s recent refusal to follow this strategy. It is at this point that BlackRock’s recommendation may begin to change everything.
And this situation can also be seen in other asset managers and investment funds that may follow BlackRock's example. If such a respected institution recommends an allocation to Bitcoin, it is likely that other institutions will also consider doing so, which may lead to a widespread increase in institutional adoption.
Rising demand and price of Bitcoin
Another relevant point is that a 1% to 2% allocation of investment portfolios to Bitcoin can result in significant demand. Given that BlackRock manages over $5.2 trillion in equities, a 1% allocation would equate to approximately $50 billion in additional demand for Bitcoin. This can have a noticeable impact on the asset’s price.
Add to this the rise in institutional demand, and the conditions would be ripe for a massive increase in liquidity in the Bitcoin market, which can reduce long-term volatility and increase the value of Bitcoin. Furthermore, the entry of institutional investors can attract more retail investors, creating a snowball effect that further drives demand and price.
Development of related financial products
The recommendation will also impact and accelerate the development of new Bitcoin-related financial products, such as mutual funds, ETFs, and other investment vehicles. BlackRock has already launched the iShares Bitcoin Trust (IBIT), and other institutions are likely to follow suit, making Bitcoin more accessible to a wider range of investors.
Institutional adoption of Bitcoin may also drive the development of safer and more regulated custodial and escrow services. These services are crucial for institutions to be able to store and manage their Bitcoin investments safely.
Added to this is the fact that increased institutional adoption of Bitcoin may lead to increased regulation and oversight by governments and regulatory bodies. This may help establish a more robust and transparent legal framework for cryptocurrencies, which in turn may attract more institutional and retail investors.
2025 is looking increasingly interesting for Bitcoin
It is clear at this point that BlackRock's recommendation to allocate up to 2% of investment portfolios to Bitcoin has the potential to generate a significant impact on the adoption of this digital asset both globally and institutionally, especially this year 2025. By legitimizing Bitcoin as a serious investment asset, this recommendation can increase confidence, demand and innovation in the cryptocurrency space.
Furthermore, it may lead to further financial product development, regulation, and oversight, which may make Bitcoin more accessible and attractive to a wider range of investors. Ultimately, this recommendation may contribute to the evolution and maturity of the cryptocurrency ecosystem, fostering a more diversified and resilient future for the global financial system.
