BlackRock Investment Institute Identifies Gold and Bitcoin as Diversifiers

Investing.com — BlackRock (NYSE:BLK) Investment Institute (BII) has identified gold and Bitcoin as potential diversifiers to hedge against equity sell-offs, noting that traditional diversification options like bonds have become less effective.

In an extensive "2025 Global Outlook," BII highlighted the distinct value drivers of Bitcoin, including its fixed supply and its potential for broader adoption as a payment system.

“Bitcoin’s role as a store of value and payments system make it a potential diversifier,” said Samara Cohen, Chief Investment Officer (CIO) of ETFs and Index Investments at BlackRock.

The asset’s limited historical correlation with equities further supports its diversification potential.

“Bitcoin’s correlation to global equities remains limited, even with the occasional spike. Given its unique value drivers, we see no intrinsic reason why bitcoin should be correlated with major risk assets over the long term,” BlackRock’s report states.

However, the firm warns that its risk-return profile could shift significantly if it achieves mainstream adoption, aligning its utility more closely with that of gold.

The precious metal continues to play a key role in portfolios, especially as central banks increase their reserves in the metal amid inflationary pressures.

BlackRock points out that gold’s performance as an inflation hedge has gained traction, particularly as traditional reserve currencies face challenges.

“Gold has surged as investors seek to bolster portfolios against higher inflation, and some central banks seek alternatives to major reserve currencies,” the report states.

“We think it is key to monitor how the performance of these alternatives changes relative to traditional asset classes – and be nimble in using them.”

More broadly, BII points out that structural shifts, not typical business cycles, are driving market dynamics, with US growth and easing inflation defying conventional expectations. Markets remain volatile as they misinterpret these changes.

For 2025, BlackRock expects inflation to stay above target due to geopolitical tensions, AI investment, and an aging workforce. Modest Fed rate cuts and rising Treasury yields highlight the need for dynamic, diversified portfolios.