Bitcoin's Institutional Adoption May Impact Volatility and Returns

According to Odaily, analysts including Samara Cohen, Chief Investment Officer of ETF and Index Investments at BlackRock, have highlighted the unique characteristics of Bitcoin in investment portfolios. Despite Bitcoin's relatively low correlation with other assets, its high volatility results in a similar impact on overall risk contribution. The inclusion of Bitcoin in portfolios offers a diversified source of risk, contrasting with the over-allocation to the 'Big Seven' U.S. tech stocks, which can increase existing risks and lead to portfolio concentration. The BlackRock Investment Institute suggests that broader institutional investment in Bitcoin could potentially dampen some of its volatility. While this might enable investors to increase their allocation size, it could also diminish the staggering returns Bitcoin has delivered since its inception. The analysts noted that looking ahead, if Bitcoin achieves widespread adoption, investing in it might become less risky. However, at that point, Bitcoin may no longer possess the structural catalysts for significant further price increases.