How bitcoin is redefining financial services and portfolios

Bitcoin sits at a cross-current of social, financial and technological trends propelling its rapid rise in popularity.

As the world’s first widely adopted internet currency, borderless in nature and with in-built codes governing its supply, bitcoin can be seen as a safe haven from political instability and a beneficiary of growing distrust of governments and traditional institutions worldwide.

These themes may be particularly relevant in the current environment of ongoing trade uncertainty, geopolitical conflicts on multiple fronts, and fiscal concerns raising questions around the US dollar’s historic status as the world’s reserve currency.

Like other traditional safe havens such as gold, it has also shown generally low correlation with shares, with some brief periods where performance of the two asset classes moved together.³

Bitcoin compared to other global money alternatives

Source: BlackRock analysis, March 2025. 10-year U.S. Treasuries represented as bonds bought through a broker-dealer/bank and held at a custodian; gold represented as physical gold bars held at a bank or in self-custody in a physical vault; bitcoin represented as crypto assets held at a third-party exchange or in a self-custody wallet. 3. Supply of U.S. Treasuries is uncapped; gold supply is constrained by the total amount of gold deposits available on earth and potential additional deposits that may be found in space; bitcoin supply is fixed at 21M. 4. Based on 1-year trailing standard deviation measuring dispersion of daily returns from the mean over the 10-year period from March 2015 to March 2025. Low indicates <10%, Medium indicates 10-40%, and High indicates>40%. 5. Short indicates <100-year track-record, medium indicates 100–250-year track-record,long indicates >250-year track-record. 6. Cost to move and store reflects the average fees investors must pay to move and store the asset at a third-party or in self-custody. U.S. Treasuries and bitcoin can be stored digitally and at low cost, while physical gold storage in a secure vault can carry high fees estimated at 0.5% of the value of gold per year. Source: International Depository Services Group. 7. Figures are rounded. Market cap of gold is approximated by multiplying the estimated total above-ground stock of gold by the price of gold.

Bitcoin is also a long-term beneficiary of one of the key mega forces BlackRock believes will transform the global economy in the coming years – the future of finance. Changes in financial architecture and technological innovation are disrupting traditional business models in financial services, bringing in a wave of competition and innovation as consumers and businesses turn to new sources for their financial needs.

A key part of this is the blockchain technology leveraged by bitcoin, which enables secure peer-to-peer transactions without the need for central intermediaries like banks. The simplicity of this technology sets bitcoin apart from other cryptocurrencies like Ethereum, where designs are more complex to allow for additional software development and has helped to drive take-up.

Ultimately, bitcoin is viewed as a bet on the increased use of blockchain and greater digital asset adoption as the financial system evolves.

The pace of digital asset adoption exceeds other breakthrough technologies

Source: Crypto.com (“Crypto Market Sizing Report 2023”), as ofJan. 2024; Boston Consulting Group (“What doesthe future hold for crypto exchanges”) and United Nations, as ofJuly 2022.Crypto users measured by analyzing on-chain data from bitcoin, ethereum, and other blockchains and assuming all on-chain users own some crypto. 4. Crypto.com Market Sizing Report as of July 2025. Crypto users measured by analysing on-chain data from bitcoin, ethereal and other blockchains assuming all on-chain users own some crypto. 5 For illustrative purposes only, log scale used for both axes

Additionally, bitcoin has benefited from increasing adoption by digitally native younger generations of investors. In the US, around 20% of Millennial and Gen Z investors own cryptocurrency, while this number increases to over 80% for Millennials who are millionaires.⁴ In Australia, data indicates that over 50% of investors aged 25-34 own cryptocurrency, with bitcoin being the most commonly held.⁵

Given the tens of trillions of dollars expected to be transferred to these younger generations in the next two decades,⁶ bitcoin’s take-up may continue to be fuelled by demographic preferences.

Bitcoin has benefited from adoption by younger investors, who are skeptical of traditional asset classes

Source: 2024 Bank of America Private Bank Study of Wealthy Americans

As bitcoin continues to evolve its prospects as the digital currency of the future, ETFs are helping investors to tap into this evolution through a simple investment structure they can hold alongside shares and other listed products. Direct investment through a cryptocurrency wallet, on the other hand, may be costly, complex and subject the holder to a heightened risk of hacking.

Unlike indirect cryptocurrency investments such as crypto mining stocks, crypto equity funds or crypto futures, ETFs provide pure access to the spot price of bitcoin, which has consistently outperformed these other options.⁷

For investors considering making an allocation to bitcoin, it’s essential to consider the currency’s volatility – after some of its most severe drawdowns, the price of bitcoin has taken years to recover. While bitcoin’s long-term tailwinds may make a compelling investment case, some simply won’t be comfortable bearing the risk of potentially rapid price plunges.

For investors with a longer time horizon, the fast-growing Magnificent 7 stocks⁸ may make a useful comparison when sizing potential a bitcoin allocation. The level of volatility displayed by bitcoin today, as it becomes an increasingly mainstream part of the financial system, is similar to mega-cap tech names such as NVIDIA, Meta and Tesla.⁹

BlackRock analysis indicates that a typical 60-40 stock-bond portfolio with a slight overweight to the Magnificent 7 would generate a similar level of, portfolio risk to a 1-2% allocation to bitcoin.¹⁰ The chart below illustrates this point – an investor with a balanced portfolio and 4% weighting to a single US megacap tech stock such as NVIDIA may only experience slightly less volatility than an investor with a balanced portfolio and a 2% allocation to bitcoin. However, if the bitcoin allocation is increased to 4% within that balanced portfolio, the level of risk increases considerably.

Sizing bitcoin in portfolios

Estimated contribution to risk in a 60/40 portfolio

Past performance is not a reliable indicator of current or future results. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise - or even estimate - of future performance. Source: BlackRock Investment Institute with data from Bloomberg, December 2024. Notes: The chart shows what share of the portfolio’s total risk a 1% allocation to bitcoin in a hypothetical traditional 60-40 stock-bond portfolio would add over two-year rolling windows through different periods. It also shows the same for what share a 1% overweight to the “magnificent 7” stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) on average would contribute to the overall risk in a hypothetical 60-40 stock-bond portfolio. Indexes used: Bloomberg Developed Markets Large and Mid Cap Index for equities, Bloomberg Global Aggregate index for bond, Bloomberg Bitcoin Spot Price for bitcoin, with weekly return data from May 2012 to July 2024.

The increasing popularity of bitcoin ETFs – which allow investors convenient access to bitcoin through their local exchange, eliminating many of the operational concerns associated with holding it directly – has also helped the cryptocurrency to grow. Globally, bitcoin ETFs hold about US$160 billion in assets under management, with around half of those managed by iShares.¹¹

More broadly, demand for cryptocurrency ETFs continues to rise, with iShares ETFs in this category gathering almost US$40 billion of flows this year¹² – placing them in our top three product categories worldwide, despite the first iShares cryptocurrency ETF only launching in early 2024.

Overall, as investors face into risks including rising geopolitical tensions, government debt concerns, and increased political instability around the world, we believe bitcoin’s unique risk and return drivers are worthy of pause for consideration by investors.