BlackRock sees Bitcoin volatility continuing to decline

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At the Digital Assets Conference held today, BlackRock revealed the latest information on Bitcoin volatility and future performance, stating that Bitcoin volatility has decreased significantly and will continue to do so over time.

DEFINITION: BITCOINS VOLATILITY HAS DECLINED AND WILL CONTINUE TO DECLINE – BLACKROCK pic.twitter.com/iCWafcyLyD

— marty (@thinkingvols) October 3, 2024

BlackRock, the world’s largest asset manager, highlighted Bitcoin’s evolving role in the global financial ecosystem. According to BlackRock, Bitcoin’s volatility has steadily declined, a trend the firm expects to continue as adoption grows and the asset matures.

BlackRock data showed that adding Bitcoin to portfolios improved risk-adjusted returns over multiple time horizons. Portfolios with a Bitcoin allocation of 1%, 3%, or 5% posted higher returns over one-, two-, five-, and ten-year periods compared to traditional portfolios.

While Bitcoin slightly increased volatility in these hypothetical portfolios, the potential for higher returns often outweighed the added risk. For example, portfolios with a 5% Bitcoin allocation achieved a long-term return of 19.1%, significantly outperforming the 11% return of traditional portfolios with no Bitcoin exposure.

BlackRock’s analysis also highlighted the importance of holding for the long term when it comes to Bitcoin volatility. According to the company, Bitcoin’s lowest four-year trailing return is still an impressive 137%, and holding the asset for three or more years has consistently provided positive returns.

In addition, BlackRock compared Bitcoin to gold and the US Treasury, highlighting its fixed supply, decentralized governance and low correlation with traditional assets, positioning it as a hedge against declining trust in governments and fiat currencies.

Furthermore, BlackRock noted that while Bitcoin’s volatility remains high, it has decreased as the asset has matured. The analysis showed Bitcoin’s low correlation with gold (0.1) and the S&P 500 (0.2), highlighting its role as an independent asset class.

Finally, BlackRock pointed to Bitcoin as a hedge against the falling value of fiat currencies, particularly the US dollar. Highlighting the decline of the dollar since 1913, they positioned Bitcoin as a hedge against inflation. By offering Bitcoin ETFs, BlackRock shows its confidence in Bitcoin’s long-term value and growing role in financial markets.

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