Bitcoin is the best performing asset of the last 10 years the absolute best the best and if you're watching this you probably knew that already but how well do you know why that is what makes BTC so valuable and why are institutions and governments taking it so seriously nowadays after all not that long ago it was just silly internet money if you still think the answer is pure speculation then this video is for you we've got a new report from Black Rock that lays be the real reason why Elites are accumulating BTC as fast as
they can so if you want to find out why you'd better lock in so the report we have today comes from BlackRock and it's entitled Bitcoin a unique diversifier now black Rock's thesis is contained in the subtitle why bitcoin's appeal to investors lies in its Detachment from traditional risk and return drivers we'll get to that in a moment but first black rock now we all know that since the spot ETFs launched back in January Black Rock has been bitcoin's biggest cheerleader on Wall Street but you may be surprised to learn that it's actually been dabbling
in crypto for more than 2 years now in the forward to this report the authors remind us that black rock began offering its institutional clients the ability to invest and trade in BTC back in August 2022 this was when it integrated coinbase Prime into its portfolio management platform and in the same month black rock also launched a private BTC trust for its institutional clients this is just something to keep in mind when we discussed the spot ETFs because they tend to be talked about as a watershed moment in institutional adoption of Bitcoin and this is
partly true but if you saw our last video about who is buying the ETFs you'll know that the inflows are mostly from retail investors institutions who wanted BTC have been able to get their hands on it through Black Rock for quite some time now anyway the authors also tell us that black rock spent years studying Bitcoin before any of this came to fruition and from the report it's clear that they've done their homework this report covers three or four main themes namely why Bitcoin matters its unique risk profile its low correlation to other assets and
why all of the above make it an excellent portfolio diversifier for tradire investors so let's start with why Bitcoin matters now if you're subscribed to this channel you probably don't need persuading but for what it's worth Black Rock sure knows how to Market this thing the report describes the basic properties of BTC as quote breakthroughs to multiple centuries old problems that other forms of money have struggled with specifically the these problems are inflation and debasement difficulty transacting across borders access limited by geography and control by a central Authority Bitcoin resolves these problems by being a
decentralized permissionless and truly Open Access monetary system nothing like this has ever existed before btc's hard-coded Supply cap of 21 million units means it can't be easily debased and its digitally native nature means it could be transported anywhere in the world in near real time at near zero cost for the first time ever we have a form of money that makes moving value across political borders completely frictionless now the authors include a slightly unsettling footnote though which reads quote there is no guarantee that the current 21 million Supply cap for outstanding Bitcoin which is estimated
to be reached by approxim Ely the year 2140 will never be changed it's safe to say that this is just black Rock's lawyers playing it extremely safe but sheesh it's enough to give you Goosebumps well good to see Black Rock won't be getting sued if an attack on the network ever succeeds or if they cause a fork via their influence on publicly traded Bitcoin miners anyway moving on the report turns to btc's historical performance this covers the 169 months between the launch of the first Bitcoin exchange Mount gox rip in July 2010 and the end
of July 2024 so who knows how many X's BTC gave us during this period drum roll please 87,000 X not too shabby now the report points out that BTC has outperformed all major asset classes in seven of the last 10 years leading to a return of more than 100% annualized over this period the other 3 years Bitcoin was famously the worst performing asset with draw Downs of more than 50% for volatility averse investors this could be unappealing but on the other hand it's pretty amazing to see your buying and selling Seasons penell into the calendar
so clearly the report then turns to the drivers of bitcoin's price action the authors point out that BTC has no traditional counterpart party risk depends on no centralized system and is not driven by any one country's fortunes this means it has little fundamental exposure to other macro risk factors like banking system crisis sovereign debt crises currency debasement geopolitical disruption and other country specific political and economic risks however it's not that BTC is unaffected by these macro risk factors it's just not so much to the downside because as the report explains these very risk factors are
actually drivers for bitcoin's adoption specifically concerns over global monetary instability geopolitical disharmony us fiscal sustainability and political stability are exactly what makes BTC so appealing as an example the report highlights the buildup of national debt in the US and elsewhere as a particularly powerful driver if you're not caught up on the mounting national debt crisis around the world you can get up to speed with our video on it over here but as Black Rock points out spiraling national debt is increasing the appeal of quote alternative Reserve assets as a potential hedge against possible future events
affecting the US dollar the authors cite their own experience with clients and claim that this driver quote explains a substantial portion of the recent broadening institutional interest in Bitcoin so perhaps you can see how trafi investors perception of BTC has evolved from wildcard to flight to Safety in times of macroeconomic stress or at least this is the case for investors who have a solid understanding of Bitcoin I say this because the market tends to show a mixed reaction when faced with macroeconomic shocks as the report explains BTC usually dumps pretty hard before quickly recovering and
proceeding to Rally this price action suggests a market divided between those who cons consider it a risk on asset and those who view it as a flight to safety the authors attribute this dump and pump reaction to two factors one being the immature nature of the crypto market and investors understanding of Bitcoin this makes sense but we find the other Factor more persuasive and that's the fact that Bitcoin trades 24/7 and settles to cash almost instantly because it is so sailable it functions as a kind of alarm Bell during periods of addess liquidity in traditional
markets especially over weekends although for what it's worth there's also a third factor that we can't leave out and that is just leverage Traders getting liquidated leverage degens are a huge part of why BTC tends to dip so hard whenever financial markets get spooked one liquidation tends to trigger another and this domino effect drags the price of BTC down more sharply than most people expect but unlike traditional risk on assets BTC tends to recover very quickly and continue outperforming everything else after macroeconomic shocks to demonstrate this the report compares the 10day and 60-day returns of
the S&P 500 gold and BTC during major geopolitical events in The Last 5 Years of these events the pandemic is the clearest example of BTC dumping in the shortterm before rallying hard here the authors take the 11th of March 2020 as as their reference point a day when the Dow Jones Industrial Average fell by 10% adid pandemic fears 10 days later the S&P 500 was down by 20% Gold by 9% and BTC by 25% in this case BTC suffered the worst sell-off but the 60-day returns show a reversal of Fortunes the S&P and gold just
about recovered from their losses printing gains of 2% and 3% respectively meanwhile BTC was up 21% however when you take these macro events in aggregate BTC outperforms over both the 10-day and 60-day periods this is not surprising because after a shock BTC rarely takes 10 days to recover it's usually much faster if we wanted to really show btc's dump then pump reaction to macros shcks we should probably look at the 3-day rather than the 10day returns case in point The Flash crash on the 5th of August as a reminder this was related to the bank
of Japan raising its interest rates and the consequent unwinding of the Japanese Yen carry trade if you're not sure what that was all about well you can check out our video about it here anyway on that day markets around the world dumped hard BTC dropped 7% in 24 hours and the S&P dropped 3% mind you this event coincided with crypto specific bearish catalysts including Mount Gau distributions and Genesis liquidating large amounts of crypto for creditor repayments around the same time yet despite the Confluence of bearish happenings in the crypto Market BTC recovered and overtook its
pre- dump level within 3 Days by contrast the S&P 500 took a week to do the same so at least in this case BTC dropped twice as sharply but still bounced back twice as hard as the S&P now let's go back to those 10day and 60-day returns for a minute at the time of making this video 60 days haven't yet passed since the 5th of August flash crash so we'll leave this one out that leaves us with five major macro shocks from 2020 to 2023 on three of these occasions BTC printed 10day returns in excess
of 10% by contrast gold was up 10% on just one occasion meanwhile the SNP never never saw a 10-day return of more than 7% it's a similar story for 60-day returns BTC was up between 15 and 131% on all five occasions the S&P managed to print 12% one time but less than 5% on the other four occasions similarly gold returned 11% once but sub 10% Returns on every other occasion so based on this data at least BTC bounces harder and run runs faster than gold and the S&P 500 what's not to like it dumps when
everything else does but over time frames even as short as 10 days this co- movement evaporates it doesn't amount to any statistically significant correlation in the long term Bitcoin just tends to do its own thing and doesn't take its marching orders from gold the S&P or any other major asset class as the reports authors put it BTC has quote risk and return drivers that are distinct from traditional asset classes and that are fundamentally uncorrelated on any long-term basis this is made clear on a graph showing the trailing sixth month correlation of BTC and gold with
the S&P 500 over the last 9 years and what a mess it is it looks like a careless application of mustard and ketchup on a hot dog the average correlation is 0.1 for gold and 0.2 for BTC and this is ultimately black Ro's pitch to its investors in this report btc's value to trafy investors is its weak correlation with other major asset classes if you're wondering why this matters the clue is in the report's title Bitcoin a unique diversifier all right let's rewind for a moment in the introduction the authors explained that one of the
most common questions black Rock's crypto curious clients ask is is Bitcoin a risk on or risk off and asset now the concept of risk off may be unfamiliar to you degens out there but the risk on riskof binary is a foundational principle for structuring portfolios in trafi you've probably heard of the traditional 60/40 portfolio where 60% consists of risk on assets typically stocks and 40% is risk off typically bonds heck plenty of us in crypto Ed this structure for our portfolios too it's just that barring stable coins the most risk off asset we have is
is BTC so a conservative crypto portfolio could be 60% BTC and 40% eth funny how risk is subjective like that oh and by the way if you want to know exactly how we at the coin Bureau are structuring our portfolios we share all of our crypto Holdings with members of the coin Bureau Club aside from getting the scoop on what we're buying and selling our members also vote on promising low cap cryptos and protocols for us to review each week in the classic format that we made on name with but that's not all the team
and I share regular Market updates insights and Alpha in the private coin Bureau Club Discord Channel where you'll find the most welcoming community in all of crypto shill free and packed with the high quality information that can help you get an edge in the market we'd love to see you there so if you're interested you can find out using the link in the description anyway Back to Black roog now the fact that their clients are asking in Earnest about bitcoin's risk profile is pretty remarkable just a few years ago BTC was dismissed as a gamble
rather than an investment and not something to be taken seriously by tradire types and now they want to know if it's a riskof asset well well well now we'd like to say this is a sign of how far crypto has come but to be honest it's more a symptom of bacation in other words there's Bitcoin and then there's everything else in crypto the Gap feels pretty wide at the moment will it get wider well that's a question for another video but let us know in the comments what you think anyway in response to this risk
on risk-off question BlackRock explains that the answer is actually neither the authors acknowledg that BTC is a relatively risky investment by itself but this is when you compare it to say bonds or whatever Warren Buffett is buying however bitcoin's unique properties make this a square peg in a round hole situation ation BTC just doesn't fit into the same traditional risk profiles as stocks bonds other Commodities real estate and so on this is because as we've seen its risk and return drivers are quote starkly different and in many cases inverted versus most traditional investment Assets Now
Rising geopolitical tensions spiraling government debt and deficits Relentless currency debasement and political instability all of the things that are considered risk factors for most traditional investment assets and generally very bad for us and the world well it looks like they're pretty good for BTC just look at the table we saw earlier in some of the hairiest situations the world has seen this decade BTC has outperformed other major assets to recap the US assassinates Iran's top military commander BTC rallies the world is terrified by a global pandemic BTC dips and then rallies there's turmoil over the
US presidential election BTC goes absolutely nuts Russia invades Ukraine BTC hiccups and then rallies there's a regional banking crisis in the US that affects Banks serving the crypto industry in particular BTC let's see here yeah it rallies now BTC may be a young asset compared to anything else that tradire investers are interested in but it has clearly passed many macroeconomic stress tests with flying colors however it's worth pointing out that there is a final boss that Bitcoin has yet to meet and that is a recession so the last recession happened in 2008 and real crypto
heads will know that the disastrous banking practices that caused it were satoshi's inspiration for creating Bitcoin in the first place the Genesis block was mined in January 2009 so it's kind of funny because for an asset so closely associated with Cycles BTC has never been cycle tested in the macroeconomic sense the global economy is guaranteed to fall into another recession at some point and some people are worried that one is overdue so this begs the question of how BTC will respond well that might depend on the Catalyst for example if spiraling government debt gets out
of hand and there's some kind of currency crisis maybe with say the Japanese Yen BTC will likely be in high demand then again theat currency crisis disaster is basically the Bitcoin Maxi's dream come true so this might be wishful thinking if the next recession is caused by something less obviously bullish for BTC well then it's harder to say black Rock's report shows us that BTC can't be pigeonholed as a typical risk on or off asset it tends to outperform in times of geopolitical tension and macroeconomic stress but it is also the most liquidity sensitive asset
there is if liquidity dries up for an extended period it's probably too much to us for BTC to go on some crazy tear but on the other hand in a recession liquidity will probably never dry up for an extended period That's because no matter what Catalyst kicks off the next recession central banks are likely to respond with more quantitative easing more QE means more fiat currency debasement in which case Bitcoin literally can't lose this is just our best guess though so let us know what you think in the comments how do you see BTC behaving
in a real recession what does max pain even look like as far as we and black rock can tell most of the bad stuff that can happen in geopolitics and the global economy only seems to make Bitcoin stronger I'm not sure if we should be happy about that but well I think I need to own more BTC all right folks we'll leave it there so if you got something out of this video don't forget to smash the like button and if you're not subscribed or you haven't yet turned on your bell notifications go on be
kind to yourself as always thank you for watching and I will see you next time this is Guy signing off [Music]
