BlackRock’s leader in digital assets describes Bitcoin as a risky investment, yet categorizes it as a ‘risk-off’ asset.

Robbie Mitchnick, the head of digital assets at BlackRock, asserts that the cryptocurrency sector has committed a marketing error regarding Bitcoin (BTC).

In an interview with Bloomberg, Mitchnick remarked that while Bitcoin is indeed a risky asset, labeling it as a “risk-on” asset is a misstep comparable to an “own goal.”

A risk-on asset, such as stocks, is typically purchased by investors when they are optimistic about market conditions and are prepared to embrace greater risk. Conversely, a “risk-off asset” is where investors allocate their funds when they are apprehensive about market fluctuations. Gold, for instance, is regarded as a risk-off asset because it tends to maintain or appreciate in value during economic downturns.

Mitchnick stated:

“Some of the crypto research type publications and daily commentaries have taken the fact that Bitcoin, which is obviously a risky asset, and extrapolated that to say that therefore it is a risk-on asset and should trade like equities.”

He elaborated that Bitcoin operates in a fundamentally distinct manner compared to equities and other risk-on assets. Mitchnick noted that the long-term factors influencing Bitcoin are “very different” from those affecting other risk-on assets and may, in some instances, even be “inverted.”

Moreover, Bitcoin does not possess the risks typically linked with other risk-on assets. Mitchnick remarked:

“When we think about Bitcoin, we think about it primarily as an emerging global monetary alternative—[a] scarce, global, decentralized, non-sovereign asset. And it’s an asset that has no country-specific risk, that has no counterparty risk.”

According to Mitchnick, these characteristics render Bitcoin an appealing option for investors who are wary of the risks associated with money printing, currency depreciation, and challenges related to political and fiscal sustainability.

Furthermore, its attributes are fundamentally different from those of other risk-on assets, which is why categorizing Bitcoin as a risk-on asset only serves to mislead investors.

Correlation with equities

Mitchnick also highlighted that, similar to gold, Bitcoin does not exhibit a long-term correlation with US stocks. Although short-term correlations may surge, on average, it remains “pretty close to zero,” mirroring the trend seen with gold.

He further indicated that there are only three or four factors in a year that significantly influence Bitcoin’s price. However, this limits the opportunities for publications to generate daily narratives.

As a result, Mitchnick believes that journalists often instinctively link changes in Bitcoin’s price with the unemployment rate, the stock market, or manufacturing. However, these events and occurrences have “no connection to Bitcoin.”

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