The bitcoin price is stuck in the doldrums, having retreated from the $50,000 level that it saw last weekend. In this uncertain global economic environment, bitcoin is increasingly making its way into the investment conversation as a store-of-value asset that brings some competition to gold.
Bitcoin has gained a reputation as a hedge against higher consumer prices given its scarcity coupled with its nature as a non-sovereign currency. BlackRock’s CIO of global fixed income, Rick Rieder, sees it differently.
Rieder told CNBC he is not convinced that bitcoin serves as a great hedge against inflation, pointing to the cryptocurrency’s correlation to stocks and risk assets. The bulls have been in control in both markets, with the S&P 500 up 21% so far this year compared to bitcoin’s 50+% gains.
He pointed to bitcoin’s wild price swings, saying that when an asset moves 10-15% in a day, which the leading cryptocurrency has been known to do, “it’s really hard to hedge big, organic asset pools with that as a hedge.”
Bitcoin Price Potential
Rieder, who noted that BlackRock owns “a small piece of bitcoin,” believes greater bitcoin adoption is on the horizon and “more people are going to enter that fray over time.” BlackRock holds a “moderate position” in its portfolio. The BlackRock CIO of global fixed income is also a fan of volatile assets boasting “upside convexity.”
I own #Bitcoin.
I like assets that are volatile that have upside convexity.
I could see Bitcoin go up significantly.
– Rick Rieder, Blackrock pic.twitter.com/cDYP6qufQ1
— Blockworks (@Blockworks_) September 10, 2021
BlackRock’s Rieder would not be surprised to see bitcoin “go up significantly,” as it has been known to do. He does not see a volatile asset like bitcoin as a “core asset” comparable to equities or bonds, but says,
“I think to have a bit as more of a speculative tool in a portfolio, I think there’s some value in that.”
Bitcoin vs. Gold
BlackRock’s Rieder is not alone in his view that bitcoin is not the best hedge. Billionaire investor Leon Cooperman told CNBC that gold is the go-to asset during uncertain times, and if investors are looking for a safe haven they should flock to the precious metal.
Cooperman, who runs Omega Advisors, says he does not understand bitcoin and therefore he steers clear of the flagship cryptocurrency. He advises investors to do the same, especially if they’re old and are boggled by it.