Bitcoin’s Reserve Asset Appeal Increased Due To State Of US Federal Deficit And Debt, Says BlackRock: A Hedge Against ‘Possible Future Events’ Affecting The Dollar
By Benzinga
In the face of a $35 trillion federal debt crisis, global asset manager BlackRock Inc. (NYSE:BLK) strategically advocated for Bitcoin (CRYPTO: BTC) as a safeguard, potentially raising the upside potential of the world’s largest cryptocurrency.
What Happened: BlackRock noted concerns about the spiraling $35 trillion U.S. fiscal deficit, attributing it as a significant driver of growing institutional interest in Bitcoin, according to a paper authored by some of the top executives from the asset management giant, including BlackRock’s ETF Chief Investment Officer Samara Cohen and Head Of Digital Assets Robert Mitchnick.
“The growing concerns in the U.S. and abroad over the state of U.S. federal deficits and debt have increased the appeal of potential alternative reserve assets as a potential hedge against possible future events affecting the U.S. dollar,” the paper outlined. “In our experience with clients to date, this explains a substantial portion of the recent broadening institutional interest in Bitcoin.”
BlackRock, which manages around $10 trillion in assets, also described Bitcoin as a “unique diversifier” to hedge against fiscal, monetary, and geopolitical risks.
Why It Matters: BlackRock’s bullish observations followed former U.S. President Donald Trump’s vision to use Bitcoin to offset the U.S.’s $35 trillion debt, a step that was heavily criticized by influential economists like Justin Wolfers and Paul Krugman.
Recall that Sen. Cynthia Lummis (R-Wyo.) proposed a landmark legislation in July to establish a strategic Bitcoin reserve, aimed at enhancing the dollar’s strength and addressing the country’s $35 trillion debt. The bill hinges on the expectations that a million Bitcoin 20 years from now would be worth $17 trillion.
BlackRock CEO Larry Fink is known for his Bitcoin advocacy, calling the digital currency a hedge against inflation given rising global tensions and threats of de-dollarization.
The firm’s successful campaign to launch a fully-fledged U.S. spot Bitcoin exchange-traded fund, iShares Bitcoin Trust ETF (NASDAQ:IBIT), has been a major driving force of the Bitcoin price in 2024.
Price Action: At the time of writing, Bitcoin was exchanging hands at $62,788.62, up 1.54% in the last 24 hours, according to data from Benzinga Pro. Shares of BlackRock closed 1.29% higher at $934.61 during Thursday’s regular trading session.
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