Larry Fink: bitcoin is a 'fear asset' different from other investments

Source: Exame
Original Title: Larry Fink: bitcoin is a ‘fear asset’ different from other investments
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Larry Fink, CEO of BlackRock, stated that bitcoin is a “fear asset.” In practice, the head of the world’s largest asset manager believes that the cryptocurrency has a price logic distinct from most market investments, which do not have the same demand catalysts.

Fink explained that, traditionally, stocks and other conventional market investments are “hope assets.” In other words, investments are motivated by the expectation that these assets will rise and that the global economic outlook will be positive and favorable.

But the scenario is exactly the opposite in the case of bitcoin. “Bitcoin is a fear asset. You have bitcoin because you are scared about your physical security. You have it because you are scared about your financial security.”

The CEO of BlackRock said that investors with higher demand for cryptocurrency are exactly those who have concerns about global financial stability, the international geopolitical situation, and the rising debt of countries, especially large economies.

Because of this dynamic, Fink believes that bitcoin tends to hit record prices when uncertainty spikes in the market. In scenarios with little fear, the cryptocurrency tends to decline, with no significant demand from investors.

The future of bitcoin

For the CEO of BlackRock, “the fundamental long-term reason for you to have bitcoin is the debasement thesis.” The executive refers to the so-called “debasement trade,” a concept that has gained traction in the market and refers to the rising public debt in various countries.

The theory is based on this scenario to project a gradual devaluation of fiat currencies. If this trend is confirmed, assets like cryptocurrencies could be the biggest beneficiaries, since they are not directly tied to countries and their currencies.

Bitcoin’s relationship with the “debasement trade” was also highlighted by JPMorgan in a report in October, stating that the cryptocurrency would be a good bet for those who believe in governments’ inability to reduce their public debts.

Despite the optimism, Fink also shared a warning about the cryptocurrency: “One of the main problems with bitcoin is that it is still highly influenced by leveraged investors. If you invest in it for trading, it’s a very volatile asset. You need to be very good at timing the market, and most people are not.”