BlackRock says bitcoin returns likely to come down now that it has been embraced by Wall Street

Published Tue, Mar 26 202411:31 AM EDTUpdated Tue, Mar 26 202412:26 PM EDT

If you're looking for your bitcoin to go to the moon, the window of opportunity may be slowly closing, according to BlackRock. That does not mean it has hit its ceiling or that there will not be rallies. However, as the cryptocurrency becomes more mature and institutionalized with the advent of exchange-traded funds, the days of its monster gains may become a thing of the past, according to Robert Mitchnick, BlackRock's head of digital assets. "Certainly, returns going forward will come down," he said at the Bitcoin Investor Day conference in New York City on Friday. "It's not going to return 124% a year over the next decade like it has the prior decade." He also pointed out that bitcoin's notorious volatility has fallen steadily over time and may continue to do so given the effect bitcoin ETFs have had on trading activity. This is a common view among investors. The idea is that by bringing more money and investors — particularly institutional types with portfolio rebalancing strategies — to the asset class, ETFs can enable more efficient price discovery as volumes increase. BTC.CM= .SPX,@GC.1 line 2014-03-26 Bitcoin is one of the top performing assets in the last 10 years This topic is part of the "education journey" BlackRock is on with its clients, whose demand for bitcoin exposure first spurred the firm's foray into this new asset class in 2021. That demand was "massive and clear" in 2023, when BlackRock filed to launch its iShares Bitcoin Trust. Mitchnick also said the firm is talking with clients about how bitcoin fits into their portfolio construction, and why the cryptocurrency will be a good diversifier despite its recent rally with stocks. "People need to be wary … we'll have bull markets, we'll have bear markets too, even in this post-institutional world," he said. "And then what becomes interesting is, how do you think about the direction of volatility." With long-term volatility expected to continue decreasing, some investors wonder if bitcoin's four-year cycles — roughly three years of an uptrend around the bitcoin halving followed by about a year of a downtrend — could change as well. "I don't think we've seen the end of cycles in bitcoin," Mitchnick said. "By [bitcoin's] nature, there's reflexivity in it, and that's hard for a lot of traditional investors to wrap their heads around." Reflexivity refers to the self-reinforcing effect of market sentiment on the asset's performance. "[With] bitcoin, when the price goes up, the probabilities of success and adoption in some senses, as digital gold, are also changing," he said. "And when bad things happen and the price goes down, those probabilities are also changing." "So you create reflexivity, and that just reinforces the idea that you're going to have these cycles. I think they're still here to stay," he added. — CNBC's Ganesh Rao contributed reporting.