Bitcoin Is ‘Far' From Going Mainstream: BlackRock

As bitcoin hovers above the $10,000 mark after surging close to $20,000 in December and crashing to $6,000 early this year, the media has largely cooled off on coverage of the world's largest cryptocurrency (by market capitalization). Yet while the bull and bear dispute rages on among some of the most prominent names in tech and finance, one $5.7 trillion investment company has offered its view, in which it sees the potential for "wide use" of digital currencies in the future but warns that the market is currently far from being mature enough to earn a place in a mainstream investment portfolio. (See also: Crypto, Cannabis, FOMO Drive New Investor Inflow.)

BlackRock Global Chief Investment Strategist Richard Turnill wrote a note Monday suggesting that trading cryptocurrencies "should only be considered by those who can stomach potentially complete losses." Despite similar concerns on the Street regarding the extreme volatility and uncertainty regarding digital coins, and doubts on its potential to serve as a means of exchange or store of value, millions of people around the world have poured their money into digital coin exchanges such as Coinbase and trading apps like Robinhood. 

"Crypto markets are highly volatile, fragmented, largely unregulated, and come with unique liquidity and operational risks," wrote Turnill. "The volatility of the cryptocurrencies makes the gyrations in the U.S. equity market during the global financial crisis almost look placid." He added that more mainstream companies could be attracted to bitcoin if it was addressed by more regulators. Turnhill sees the G-20 meeting next month as a possible starting point for a global regulatory framework to take shape for the crypto space. 

Bitcoin's Anti-Correlation Advantage

BlackRock, the world's largest money manager, owns iShares ETFs, but has showed no signs of entering the bitcoin ETF space. BlackRockChief Executive Officer Larry Fink has called bitcoin an "index of money laundering." 

Crypto-bulls suggest that investing in coins like bitcoin makes sense for a diversified portfolio as long as they constitute just a fraction of its assets. Given that bitcoin has not generally been viewed as correlated to other assets, some suggest that it can actually lower portfolio risk. (See also: 5 Stocks to Outperform in 2018’s Volatile Market.)

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does own cryptocurrency.