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BlackRock DUMPS Bonds for Bitcoin!? | Beyond Bitcoin · Simply Bitcoin

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  You may not know this, but if you're holding a traditional
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  financial portfolio through a traditional financial advisor,
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  you might be traditionally. Today we're going to breakdown
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  why your wealth is evaporating behind the scenes.
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  And if you stick around to the end of the video, you may just
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  find out how Bitcoin can fix it. Imotions.
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  This is beyond Bitcoin. Hop in, you curious Kangaroos.
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  Let's dive in. You are a smart investor, right?
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  You plan for your future. You watch this channel for your
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  daily dose of Bitcoin. Or maybe you've never heard or
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  seen a Bitcoin video, I don't know.
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  This video does count towards 40 hours of Bitcoin podcast per
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  week, just if you were curious. Anyway, let's assume you have a
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  financial advisor or a pension plan or any kind of traditional
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  financial product. What if I told you this entire
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  sector of our economy has been running the same exact formula
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  for 80 years? What if I told you that?
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  What would you do? That 80 year formula is called
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  modern portfolio theory. Not modern monetary theory, Not
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  modern economic theory. Modern portfolio theory, Modern
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  portfolio theory, or MPT for short, has been the cornerstone
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  of economic theory for executives, economists,
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  investors and institutions for 80 years.
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  That means we've been living with the same investment
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  strategy for almost a century. The big thought behind MPT is
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  the idea that there's such a thing as the risk free asset.
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  At some point in history, government backed bonds became
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  the idea of this risk free asset, meaning they were assumed
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  to stay incredibly stable. I mean, we're talking about the
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  base of the pyramid here, folks. According to MPT, the bonds or
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  the risk free assets are what hold the economy up.
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  And because of this, economists and financial engineers would
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  develo more and more sophisticated models that relied
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  on the same idea that there's such a thing as a riskfree
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  asset. I had a conversation with my
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  friend Fundamentals about it. Fundamentals has been an actuary
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  for publicly traded companies for over 30 years, and he just
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  so happens to be the author of a new book titled Bitcoin for
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  Institutions where he dives into the reasons why BlackRock
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  changed their tune about Bitcoin or why individuals will always
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  outbid institutions for Bitcoin. If you want to see a video about
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  those topics, you can click one of the links above wherever they
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  land. Here is a clip from that
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  conversation. Modern portfolio theory is if
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  there's a law of the land in finance, it's that it's very
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  well accepted. It came from a long lineage of
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  University of Chicago economists who won Nobel Prizes.
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  And it goes back to this. There's this notion of a risk
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  free asset that everything is benchmarked against.
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  So if you believe such a thing exists, which a lot of people
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  do, right, And at the time in like the 50s when this started
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  getting traction, the US Treasury, you know, the US bond,
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  US full, full faith and credit of the US was AAA, no question.
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  So this U.S. Treasury curve was considered
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  the risk free asset and it was the benchmark for which all of
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  the assets possible in the universe would be benchmarked
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  again. So you start with this notion of
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  the risk free asset and then what you do is then you have
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  another notion called the market portfolio, which is basically
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  like what's a port? What is if I could create a
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  portfolio of every asset that existed in the market, can I
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  abstract it into one thing and say I'm invested in that right
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  now this is before like the S&P existed this concept, right?
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  So the S&P index, you know, the Dow Jones, these indices were
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  created to try to try to construct something that would
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  essentially behave like this thing called the market
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  portfolio. So you have a risk free asset
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  and you have a market portfolio between these two things.
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  Yeah, you're looking for a portfolio that maximizes your
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  return on a risk adjusted basis. This is the most layman way I
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  can put it. The risk is nothing more than
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  like price volatility and return is returned.
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  So you just take those two things and then you try to
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  optimize within your risk tolerance.
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  So what you have is on one end of the spectrum, your risk free
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  asset. And then on the other end of the
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  spectrum is all of your money is in this market portfolio, right?
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  And so somewhere between your risk free asset and your all
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  equity asset is a risk spectrum that you're looking to optimize.
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  And modern portfolio theory gives a framework to do this
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  mathematically, to give yourself the impression that you can
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  actually optimize for this, and you can invest in the portfolio
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  that truly, truly gives you the optimal balance with between
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  risk and return. I got a question, yes, where,
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  where does BlackRock fit in modern portfolio theory and how,
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  how did it discover Bitcoin as its fix?
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  Good questions. Let's get to them.
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  As I mentioned earlier, BlackRock completely changed
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  their investment strategy at the end of 2023.
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  Beginning of 2024. That means that all financial
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  advisors, executives and institutions that you rely on to
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  keep your money and grow your money, they all look to
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  BlackRock for the direction of the market.
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  BlackRock has been running the MPT playbook for their entire
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  existence. Larry Fink grew up in the heyday
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  of MPT. The thought is as long as you
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  have a risk free asset in place, you can weight your portfolio.
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  60% stocks and 40% bonds. Government backed bonds.
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  Remember. The problem here is that when
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  Blackrock's balance sheet was hemorrhaging during the British
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  bailout of September of 2022, Think realized that not only
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  were bonds not risk free, they were risk E ha ha ha hey, they
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  had to find something to replace bonds for fear of being bailed
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  out by a government whose currency they were operating in,
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  just like in the UK. By that logic, that's 40% of
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  their treasury that they had to dump.
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  For a financial megalith like BlackRock, that is no easy task.
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  And what do they even dump it for?
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  In Travi, Bitcoin is somewhere in there trying to figure out
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  where to fit in. Whereas I'm saying, well, I'm
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  saying two things. I'm saying 1 Bitcoins actually
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  the risk free asset. More importantly, BlackRock
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  thinks bitcoins the risk free asset and that's a case I make
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  very strongly in the book. Here's what I think they
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  decided. OK, I don't know when their
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  Bitcoin journey started, but like, the boat decided it had to
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  leave the port after the UK Bank of England pension situation.
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  You're asking me to read the tea leaves of what BlackRock did.
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  And what I'd say is there's a couple of things that came out
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  like, OK, there was this report that suggested that they would
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  recommend an 85% allocation into Bitcoin.
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  At some point, this capitulation came together.
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  We don't normally read asset allocation reports from
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  companies like BlackRock. I've written many of them.
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  No one's ever seen them, right? They don't go out into the
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  public. We were meant to see this one.
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  We were meant to see that BlackRock had this
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  recommendation. If you're putting all these
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  pieces together, you're like, OK, well, first they don't want
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  to deal at the country level. They don't want to deal with any
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  country's central bank or government.
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  So selling their assets is a problem.
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  Selling Bitcoin is no problem. Liquidity managing bitcoins
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  price is much easier than bonds because you have the ETF from a
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  modern portfolio theory perspective, you end up with a
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  really strong case that Bitcoin crowds out everything.
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  These are the ingredients for BlackRock going all in on
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  something they had previously said was only for criminals.
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  So that told me for sure at the very least their kick that they
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  they would replace all the bonds with Bitcoin and that still
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  doesn't even cover it right. So when you think about it
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  further, if you look at the market portfolio, there's
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  nothing in there that can compete with Bitcoin in AMPT
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  framework. If you really do it, Bitcoin
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  would end up without with if you don't constrain it.
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  A lot of assets have very attractive like sharp ratios, a
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  very attractive risk adjusted returns and you have to
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  constrain them in this model. Otherwise the model will
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  allocate everything to a hedge fund or private equity or
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  Bitcoin. But if you really look at
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  Bitcoin against all of these, it just kicks end up, it ends up
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  kicking out all of these things. And so I think BlackRock thought
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  very deeply about Bitcoin in this modeling, looked at it in
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  an unconstrained way and saw that a yes, you can, you can use
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  it as a risk free asset, but I think it also takes over the
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  market portfolio from a risk adjusted return basis.
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  And it's like that's sort of mind blowing if you think about
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  it, because there's never, you know, you could work in finance
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  for 100 years and never see an asset that does anything like
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  that. So what are we doing?
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  Like what are we even really doing?
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  You have to imagine that they went through this process of
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  denial for a while. Like this can't be.
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  So like that was the that was the triggering event for
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  everything that basically has happened since September of
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  2022. I think when they go back and
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  rewind the tape on that, there's nothing they could have done to
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  have averted that other than don't ever be in bonds to begin
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  with and be in something simpler that's country less.
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  That is based on one thing that they can invent an ETF to track.
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  I believe going forward, BlackRock wants to kick out all
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  their bonds and replace them with Bitcoin.
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  They want to manage clients using Bitcoin, not bonds, right?
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  So the question is, how do you do you just kick out?
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  If bonds are the support beam for modern portfolio theory,
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  right? Do you just Kick It Out and let
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  the whole thing topple over? Is Bitcoin the new Mt?
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  These are the exact questions you should be asking your
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  financial advisors, your pension planners or your local taxman
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  that you text occasionally. The more Bitcoin's price
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  continues to rise, the more this 80 year old model thing doesn't
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  make sense. If bonds can fluctuate at such
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  dramatic rates with such diminishing returns, maybe we
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  need a new risk free asset. One that is scarce and supply
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  and can't be controlled by any one person.
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  One that is global and not national and has final
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  settlement built in. You know what I'm talking about,
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  Bitcoin, Yes, that's what I'm talking about.
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  of this junkie system today. Thank you so much for watching
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  if you like this content you want to see more you can give
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  exciting about Bitcoin imotions. This is beyond Bitcoin.
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  Until we meet again, we've. Only just begun.