China’s Possible Shift from US Treasuries Towards Gold and Bitcoin

BlackRock’s Jay Jacobs suggests China may shift its reserves from US Treasurys to gold and Bitcoin due to geopolitical tensions. This represents a broader trend among central banks to diversify away from dollar assets. Jacobs pointed to the freezing of Russian assets and noted significant inflows into gold and Bitcoin, both viewed as safe-haven investments. Analysts have observed Bitcoin’s decoupling from US equities, suggesting its growing maturity as a global asset.

In a recent interview with CNBC, Jay Jacobs, the head of thematics and active ETFs at BlackRock, discussed a potential pivot by China and other central banks from US Treasurys towards assets like gold and Bitcoin. Jacobs pointed out that rising geopolitical tensions and global uncertainty are driving a push for diversification in reserve strategies. He highlighted a growing trend where countries are increasingly reliant on non-dollar-based assets, especially over the past three to four years.

Jacobs explained the acceleration in the shift towards alternative stores of value is partly due to significant events like the freezing of $300 billion in Russian central bank assets after its invasion of Ukraine. Such actions have prompted countries, notably China, to rethink their reserve structures and reduce dependency on traditional dollar reserves in favour of gold and digital assets like Bitcoin, which are being viewed more seriously now.

During the conversation, Jacobs described geopolitical fragmentation as a major shaping force for global markets in the decades to come. He indicated that this evolving landscape is enhancing investor demand for uncorrelated assets, causing Bitcoin to be appreciated alongside gold as a safe haven investment. Jacobs noted inflows into both Bitcoin and gold ETFs have surged as people search for assets that behave differently from traditional holdings.

Moreover, he wasn’t the only one pointing out the changing dynamics; experts have observed that Bitcoin seems to be becoming less correlated with US stocks. Alex Svanevik, co-founder and CEO of the Nansen crypto intelligence platform, stated that Bitcoin’s pricing reflects its maturation as a global asset, distancing it from its previous tight correlation with markets like Nasdaq. He noted its relative strength during recent trade tensions.

Taking it a step further, QCP Capital recently mentioned in a note on Telegram that Bitcoin is starting to shine as a potential hedge against economic woes, akin to gold. The firm remarked on Bitcoin’s resilience amid market declines while noting that a sustained narrative around its role as a safe haven could bolster institutional investments in Bitcoin in forthcoming times. The evolving economic landscape continues to keep investors attentive to the potential of both Bitcoin and gold as strong defensive assets in uncertain times.