Scared? Then buy Bitcoin.

That’s what BlackRock CEO Larry Fink said on stage during a press event in New York City on Tuesday.

“Bitcoin is an asset of fear,” Fink said, sharing the stage with Coinbase CEO Brian Armstrong.

“You own Bitcoin because you’re frightened of your physical security. You own it because you’re frightened of your financial security.”

Fink’s thesis frames Bitcoin as fundamentally different from traditional investments such as equities and bonds.

While most of BlackRock’s $13.5 trillion in assets represents “hope,” said Fink during the DealBook Summit, Bitcoin sits in an uneasy category of investors who are fearful of government debasement, financial instability, and geopolitical chaos.

That fear drives Bitcoin higher when uncertainty spikes and lower when fear subsides, the 72-year-old executive said.

Fink’s comments mark a dramatic evolution from 2017, when he called Bitcoin “an index for money laundering and thieves.”

Today, BlackRock manages the world’s largest Bitcoin ETF with more than 780,000 Bitcoin worth about $80 billion.

The debasement trade

A lot of Bitcoin’s main allure rests on a simple premise: governments can’t print more of it, while they can of their domestic currencies.

“The long-term fundamental reason you own [Bitcoin] is because of debasement.” Fink said.

Back in October, JPMorgan analysts coined the term “debasement trade” to describe a bet on the government’s inability to manage its finances properly.

In essence, investors retreat from sovereign debt and fiat currencies, afraid that their purchasing power will erode as governments try to lower their massive debt burden by printing more money.

Countries that have faced severe currency debasement have turned to Bitcoin for survival.

In Argentina, for instance, where the peso has collapsed repeatedly, citizens use Bitcoin en masse. Venezuela and Lebanon also show similar patterns — Bitcoin adoption spikes where government monetary policy fails. The three land in the top 20 for crypto adoption, according to Chainalysis.

And it’s not just individual investors. Fink revealed sovereign wealth funds are now accumulating Bitcoin as a hedge.

“There are a number of sovereign funds that are standing by,” he said during the panel. “They’re adding incrementally at $120,000, at $100,000. I know they bought more at $80,000.”

Too much leverage

But for all that fear, there’s a frightening characteristic that’s also embedded into Bitcoin itself: volatility.

Just a few months ago, on October 10, more than $19 billion in leveraged positions were wiped out, unmasking the ugly side of the leverage boom.

“The bigger problem of Bitcoin is it is still heavily influenced by leveraged players,” Fink warned.

BlackRock’s IBIT has experienced three drawdowns of up to 25% since launching.

“If you bought it for a trade, it’s a very volatile asset,” Fink said. “You’re going to have to be really good at market timing, which most people aren’t.”

Pedro Solimano is DL News’ Buenos Aires-based markets correspondent. Got a tip? Email him at psolimano@dlnews.com.