The head of global fixed income investment at Blackrock, the world’s largest asset manager, says bitcoin and cryptocurrencies are durable assets. “I think there’s a healthy recalibration going on,” he said, noting that “if you look two or three years from now, they’re going to be higher than today.”
Blackrock’s Bitcoin and Crypto Executive
Rick Rieder, Chief Investment Officer (CIO) of Global Fixed Income at Blackrock, shared his thoughts on bitcoin and cryptocurrencies in an interview with Yahoo Finance Live on Thursday. On the same topic: Top 3 Bitcoin, Ethereum, Ripple Price Forecasts: Cryptocurrencies Bracing for Recovery After Punishing Early Buyers† Blackrock is the world’s largest asset manager with approximately $10 trillion in assets under management (AUM).
Mr. Rieder was asked how the cryptocurrency market will react if the Federal Reserve begins to tighten rates aggressively. The Fed raised its benchmark interest rate by 75 basis points this week, the largest increase since 1994.
The CIO explains: “I think people underestimate. If you leave interest rates at such a low level for so long… if you keep the policy too easy, it builds leverage in the slash system ‘how can I get the yield quick on’ – and you’ll see a lot of the leverage built up around the crypto unraveling pretty quickly.”
I still think bitcoin and crypto are sustainable assets. It’s a sustainable business, but there’s so much excess built around it.
Rieder describes: “It’s not much different from the internet bubble… if you go back to the years 99 and 2000, was the internet a bad idea? No, it wasn’t a bad idea. But you’ve created so much excess around him and you just have to turn that dynamic off, and I think that’s what we’re seeing today. He noted: “Markets fall five times faster than they rise… That’s why you’ve seen this incredible relaxation. †
Reiterating that he still believes bitcoin and crypto are sustainable assets that “will continue”, the Blackrock executive opined:
I think a healthy recalibration is underway. The question is how far this recalibration will go.
When asked about the prices of major cryptocurrencies, he admitted that for crypto, “It’s pretty hard when there’s no real intrinsic value. So what’s it worth? It’s worth what the next person will pay. †
He continues: “My feeling is that you go over the edge in all of these situations, and my view is that you’re probably at a disadvantage from there. But it’s hard to say what the fair value is.” Blackrock’s Chief Investment Officer added:
My feeling is that, like many assets, if you look in two or three years, they will be higher than they are today.
“But on the other hand it could be surplus. It’s hard to understand, like gold, because I can’t figure out the multiple of my free cash flow and what my security is underneath it,” he concludes.
Rieder has made a few pro-bitcoin comments in the past. In November 2020, he said cryptocurrencies are here to stay, noting that bitcoin could replace gold. He also said that BTC is “so much more functional than circulating a gold bar”. In September last year, he revealed that he had “a small piece of bitcoin”, noting, “I like assets that are volatile and have upward convexity. I saw bitcoin rise significantly.”
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