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Bitcoin: Reasons behind this analyst’s ‘no more than 3% in BTC’ claim

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Bitcoin: Reasons behind this analyst’s ‘no more than 3% in BTC’ claim


  • Bitcoin’s correlation with stocks witnessed a downtrend post-COVID era. 
  • BlackRock advised limiting the king coin’s exposure to 1% – 3% for risk management.

Bitcoin [BTC] has always been a bit of a mystery. Sometimes it acts like a risky tech stock and other times, it moves with a mind of its own.

In 2023, it seemed to follow the stock market, but that changed in November when its connection to stocks became weaker. Of late, though, BTC seemed to be getting more tied to stocks.

Remarking on the same, BlackRock’s digital assets lead, Robert Mitchnick, speaking at the Bitcoin Investor Day conference in New York City, noted,

“Historically bitcoin’s long-term average correlation [to stocks] has been close to zero — slightly positive, but close to zero.” 

He further added, 

“It’s had periods where it’s spiked, similar to gold …. Actually, if you put their correlation charts in a time series, they look remarkably similar.” 

Who’s behind Bitcoin’s surge? 

From 2020 to 2022, Bitcoin and U.S. stocks often moved together, with financial institutions treating the former more like growth stocks.

However, last year, this correlation decreased due to several bankruptcies in the crypto space, which discouraged speculators. 

Now, there’s a prediction that the correlation between stocks and crypto will increase again, especially with the introduction of Bitcoin Exchange-traded funds (ETFs) attracting more institutional investors. 

To this, Eric Chen, chief executive and co-founder at Injective Labs, remarked, 

“Once the overall crypto space reaches a certain level of value, it naturally becomes part of the portfolio of some large funds.” 

While some execs consider ETFs to be the driving force behind Bitcoins’s surge, others compare it to the broader macroeconomic-driven rally as seen in gold prices.

Highlighting the same, Mitchnick elaborated, 

“Bitcoin has one fundamental macro variable where it is highly correlated with equities: It is massively short real interest rates and it is long inflation expectations.” 

Amidst the growing speculations, BlackRock suggested limiting exposure to Bitcoin to 1% – 3% for effective risk management. 

The return of Bitcoin 

In conclusion, despite fluctuations in BlackRock’s Bitcoin ETF inflows, Bitcoin has surged past the $70,000 mark, reflecting ongoing market optimism.

The substantial accumulation of Bitcoin by key investors totaling over 51,959 BTC (according to Santiment) in a single day underscores this positive sentiment. 

However, it remains crucial to prioritize liquidity in stablecoins like Tether [USDT] and USD Coin [USDC] to sustain trading activity. 

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