Asset manager BlackRock said bitcoin remains viable as an alternative global currency.

On Aug. 18, blockchain outlet Bitcoin Magazine reported that BlackRock said bitcoin still has significance as a supply-capped asset that can respond to expanding government debt and the risk of currency debasement.

BlackRock said government debt and fiscal deficits in the United States and other countries continue to expand, while there is no clear path to restore fiscal soundness. The longer this environment persists, it said, the strategic need to include supply-limited assets in portfolios could grow.

It compared gold, whose supply is limited by geological constraints, with bitcoin, whose supply is limited by mathematics and code. It said that when concerns over rising government debt and a falling currency value persist, assets with structurally guaranteed scarcity could become relatively more attractive.

BlackRock maintained the existing view of bitcoin as a hedge against inflation or currency weakness. It said the current fiscal structure makes it difficult for governments to avoid long-term currency debasement, and that this environment supports the investment rationale for bitcoin. That aligns with a view of bitcoin not as a simple risk asset but as a separate asset class with characteristics different from traditional assets.

On high volatility, it acknowledged it as an inherent feature of bitcoin while pointing to long-term changes. BlackRock said bitcoin has shown high volatility over the past 17 years, but volatility has gradually declined over the past 10 years as market structure has matured and derivatives markets and exchange-traded products have expanded.

It also maintained a positive view of bitcoin's role in portfolios. BlackRock said bitcoin can provide a source of returns with low correlation to existing assets, meaning it can take a certain weight in investors' asset allocation. It said the investment rationale can lie in characteristics that distinguish it from other assets rather than in expectations of a simple price rebound.

This view also dovetails with BlackRock's spot bitcoin exchange-traded fund business. The U.S. Securities and Exchange Commission approved BlackRock's iShares Bitcoin Trust (IBIT) in January 2024, and the product has since attracted large-scale funds in the spot bitcoin ETF market. BlackRock previously said investors are buying bitcoin as a way to prepare for a potential debt crisis.

Ultimately, BlackRock focused on structural conditions surrounding bitcoin rather than short-term price swings. As long as government debt and fiscal deficits expand and concerns over currency weakness continue, the investment rationale supporting supply-capped bitcoin is unlikely to weaken easily.