Bitcoin (BTC) held steady as President Donald Trump's trade war spurred a shift away from U.S. assets, leading to the so-called decoupling that could see the world's largest digital asset become a permanent low-beta play reflexively, according to BlackRock's Head of Digital Assets Robert Mitchnik.
"It makes no fundamental sense, and yet when it's repeated enough, it can actually become a little self-fulfilling, right?" Mitchnik said during a panel discussion at the Dubai Token2049 conference on Wednesday. "It is something that can happen reflexively because enough pundits and research outlets and other commentators have said that it would."
Investors aggressively dumped the U.S. assets, including the tech-heavy Nasdaq index and the S&P 500, earlier this month as the escalating U.S.-China trade tensions spurred recession fears. BTC, however, held relatively steady, so much so that on a seven-day basis, the cryptocurrency looked less volatile than the S&P 500.
That short decoupling reinforced the crypto community's belief in an asset known to be detached from the economic, political and monetary risk of a particular country, spurring renewed capital inflows into the U.S.-listed spot ETFs, Mitchnik explained.
At least $3 billion has been poured into the spot ETFs in the last ten trading days with the majority going into BlackRock's IBIT, according to data source Farside Investors.
Mitchnik added that part of the recent decoupling could be due to the transfer of BTC from the less stable hands to more long-term fundamental-driven holders. The shift is "definitely happening," he said.
The institutionalization of BTC after the Covid crash in 2020 and since the debut of ETFs earlier this year has led to the cryptocurrency developing correlations with tradfi assets, mainly the Nasdaq index. That has led to BTC losing its appeal as a portfolio diversifier.
As such, traders would be inclined to hold more BTC if the correlations weaken, according to Jan van Eck, CEO of VanEck, speaking at the same panel.
"What I would like to see is bitcoin go back to the pre-2020 period where it had no correlation," van Eck said.
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