Bitrabo Editorial
BlackRock is enhancing its involvement in the cryptocurrency market by introducing Bitcoin and Ethereum exchange-traded funds (ETFs). The firm has published an in-depth Bitcoin report that discusses the significance of BTC and its effects on the financial sector.
The Rationale for Bitcoin
The report, written by leading figures such as Samara Cohen (Chief Investment Officer for ETF and index investments), Robert Mitchnick (Head of Digital Assets), and Russell Brownback (Head of Global Macro Positioning for Fixed Income), argues that Bitcoin, launched in 2009, is the first digital form of currency to gain widespread acceptance globally.
The authors highlight the technological advancements of Bitcoin, which created a digital currency that is global, limited in supply, decentralized, and allows open participation. They assert that these features enable BTC to tackle “long-standing problems” tied to conventional money.
The paper identifies three primary reasons why Bitcoin is vital:
- Fixed Supply Limit: Bitcoin’s total supply is capped at 21 million coins, which prevents devaluation and ensures its scarcity.
- Global and Digital Accessibility: Bitcoin can be transferred almost instantaneously and at low costs internationally, overcoming traditional barriers in value transfer.
- Decentralization: Bitcoin serves as the first truly open-access monetary system, allowing anyone to engage without central authority interference.
BlackRock points out that despite the emergence of many cryptocurrencies since BTC’s launch, none have achieved its level of significance in the market. This allows Bitcoin to function as a trusted alternative currency with a characteristic of scarcity.
Additionally, the report emphasizes that BTC is the first decentralized, non-nation-based form of money to make a notable global impact. It avoids traditional risks associated with counterparties and doesn’t depend on any singular country’s economic health.
These attributes, according to BlackRock, help protect BTC from major macroeconomic challenges like banking crises, sovereign debt problems, currency depreciation, and geopolitical conflicts.
BTC’s Future as a Global Payment System
Looking to the future, BlackRock believes that the adoption of BTC is likely to increase due to global anxieties over monetary stability, geopolitical unrest, and the dependability of U.S. fiscal and political systems.
The asset manager notes that Bitcoin has gained recognition as a “safe haven” during crises, although it may initially respond unfavorably before recovering.
They argue that such short-term reactions are largely due to Bitcoin’s continuous trading capability, facilitating immediate cash transactions and making it a liquid asset during turbulent market conditions, especially on weekends.
Nevertheless, BlackRock warns that these attributes don’t eliminate the inherent risks tied to BTC. The firm maintains that BTC is still progressing on its path to becoming a mainstream payment option and a dependable store of value.
As of now, Bitcoin is priced at $60,200, reflecting a minor increase of 0.2% over a 24-hour period.
Image credit: DALL-E, chart sourced from TradingView.com