China May Shift from US Treasurys Toward Gold, Crypto BlackRock Exec

China could soon move away from holding the US Treasurys and lean more heavily into assets like gold and Bitcoin. According to BlackRock executive Jay Jacobs, this shift could dramatically change the global financial markets over the coming decades.

During a recent interview, Jacobs, head of thematics and active equity ETFs at BlackRock, the world’s largest asset manager, made this point. He emphasised that geopolitical fragmentation is one of the most powerful forces driving investment behaviour worldwide.

Geopolitical Fragmentation to Reshape Investment Strategies

“We really identified geopolitical fragmentation as a mega force that is driving the world forward over the next several decades,” Jacobs said.

This comes as global political alliances and economic dependencies are being reevaluated. With heightened tensions between the United States, China, Russia, and other major economies, countries are becoming increasingly wary of relying on assets heavily tied to any single nation's fiscal policies. This concerns the United States, whose debt levels and political volatility have raised alarms internationally.

Jacobs suggested that as China reduces its reliance on the US Treasuries, it may look more favorably toward alternative stores of value. Two standout options are gold and Bitcoin. These two assets have traditionally been seen as hedges against geopolitical and financial instability.

Rising Demand for Uncorrelated Assets

In this fragmented world, investors, both institutional and governmental, want uncorrelated assets. These are investments that don’t move in tandem with traditional markets like stocks and bonds.

“We’ve seen significant inflows into gold ETFs. We’ve seen significant inflows into Bitcoin. And this is all because people are looking for those assets that will behave differently,” Jacobs explained.

Historically, gold has been the go-to asset during times of global turmoil. However, Bitcoin’s rising profile as "digital gold" is starting to change the calculus. Unlike traditional assets, Bitcoin operates independently of any nation-state, making it an attractive alternative amid increasing uncertainty.

Notably, BlackRock itself has acknowledged Bitcoin's growing importance in diversified portfolios. The asset manager launched its iShares Bitcoin Trust (IBIT) earlier this year, which quickly became one of the fastest-growing Bitcoin ETFs in history.

Bitcoin’s Growing Independence from Equities

Jacobs’ comments show Bitcoin’s decoupling from US equities. Multiple analysts and investors have pointed out that Bitcoin is increasingly behaving like a safe-haven asset, more similar to gold than to tech stocks.

On April 22, Alex Svanevik, CEO of crypto analytics platform Nansen, noted that Bitcoin’s price movements are showing "growing maturity" as a global macro asset.

“Bitcoin is becoming less Nasdaq — more gold,” Svanevik observed, referring to Bitcoin’s decreasing correlation with the tech-heavy Nasdaq Composite Index.

This observation comes during a period of heightened market stress. U.S. stocks, including major indexes like the S&P 500, have been under pressure. Trade tensions, inflation concerns, and looming interest rate decisions from the Federal Reserve were the major causes of this. 

Despite this, Bitcoin has shown surprising resilience, compared to traditional risk-on assets, Svanevik noted. Still, he warned that Bitcoin remains vulnerable to economic recession fears.

Institutions Eye Bitcoin for Safety and Growth

Echoing Svanevik's sentiments, QCP Capital suggested that Bitcoin may be sharing some of gold’s traditional role as a hedge against macroeconomic instability.

“With equities finishing last week in the red and extending an April drawdown, the narrative of BTC as a safe haven or inflation hedge is once again gaining traction,” QCP Capital stated in a Telegram note.

They added that if Bitcoin’s safe-haven narrative persists, it could trigger a new wave of institutional Bitcoin adoption. This will be among asset managers and sovereign wealth funds looking to protect their portfolios against global uncertainty.

Indeed, Bitcoin's limited supply, decentralized nature, and growing liquidity are making it an increasingly credible option. It most appeals to large-scale investors who previously stuck to gold or high-grade government bonds for safety.

China’s Potential Pivot Carries Huge Implications

Should China decide to rebalance its foreign reserves toward gold, Bitcoin, or other alternative assets, it would affect the global financial system.

The US Treasurys have long been considered the world’s safest asset, indicating the dollar’s status as the global reserve currency. A major reduction in Chinese holdings could weaken demand for US debt. It could potentially push up yields and add further stress to the already fragile US fiscal situation.

Jacobs’ remarks suggest that we may be entering a new era where safe-haven assets are no longer limited to precious metals and sovereign bonds. Instead, the safe-haven category could expand to include crypto assets like Bitcoin, fundamentally changing portfolio construction principles across the investment world.

Currently, Bitcoin and gold stand ready to benefit. Hence, if China's strategic pivot is any indication, the world may soon be watching a historic financial transformation.