Global asset management giant BlackRock has suggested that a portfolio allocation of up to 2% in Bitcoin is a “reasonable” choice for investors seeking exposure to the cryptocurrency, according to a report released on December 12.
The report, advises that a 1-2% allocation offers a balanced approach to Bitcoin exposure. However, it warns that exceeding this range could significantly increase the contribution of Bitcoin to overall portfolio risk.
BlackRock noted that a 1-2% Bitcoin allocation contributes a comparable level of portfolio risk to a typical investment in the “magnificent 7” — a group of major technology firms such as Amazon, Microsoft, and Nvidia. These insights pertain to a conventional portfolio split between 60% equities and 40% fixed-income securities.
With $11.5 trillion in assets under management, BlackRock is the world’s largest asset manager. It also oversees the iShares Bitcoin Trust (IBIT), the most prominent spot Bitcoin exchange-traded fund (ETF), which has amassed nearly $54 billion in assets.
A Unique Asset with Distinct Dynamics
The report emphasizes the need to view Bitcoin differently from traditional assets due to its lack of underlying cash flows to project future returns. BlackRock stated that the cryptocurrency’s long-term value is driven primarily by adoption rates rather than traditional financial metrics.
“Bitcoin may also offer a diversified source of returns,” BlackRock commented. “Over the long term, we see no intrinsic reason for Bitcoin to maintain a consistent correlation with major risk assets, as its value is influenced by unique factors.”
The report suggests that Bitcoin might become less volatile in the future as adoption stabilizes. However, at that point, its potential for significant price appreciation may diminish, making it more suitable as a tactical hedge against specific risks, much like gold.
This analysis, titled Sizing Bitcoin in Portfolios, was published by the BlackRock Investment Institute on December 12.
Catalysts for Bitcoin’s Growth
Spot Bitcoin ETFs, introduced in January, have become some of the most sought-after investment vehicles of 2024, surpassing $100 billion in assets under management by November.
According to Sygnum Bank, institutional investor inflows into these ETFs could trigger “demand shocks” in 2025, potentially driving up Bitcoin prices. In a separate report released on December 12, Sygnum noted that even modest allocations from institutional players could significantly impact the broader cryptocurrency ecosystem.
The combination of growing institutional interest and Bitcoin’s unique characteristics could solidify its role as a strategic asset in modern portfolios.
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