How Much Bitcoin Belongs in Your Portfolio?

Article by Mat DiSalvo

BlackRock’s iShares Bitcoin Trust ETF has been a roaring success, smashing records and now managing $53.8 billion in assets.

But the world’s biggest asset manager still has a conservative view of the cryptocurrency—and recommends investors only put a maximum of 2% of the orange coin in their portfolio.

In a Thursday report, the Wall Street titan said that putting Bitcoin in a portfolio was like investing in top tech stocks: potentially beneficial, but also risky.

“Over its short history, Bitcoin has seen both major surges and selloffs,” the report notes. “This volatility, plus Bitcoin’s unique characteristics, raises the question of what role it should play in portfolios.”

It added that “a reasonable range for Bitcoin exposure” was 1-2% of a portfolio’s total value. It added that the asset was still risky, and with no underlying cash flows, adoption was the only thing driving its price.

The report—authored by Samara Cohen, Paul Henderson, Robert Mitchnick, and Vivek Paul—noted that more adoption in the future could lead Bitcoin to be less risky. But if this were to happen, it could “no longer have a structural catalyst for further sizable price increases.”

BlackRock sent shockwaves through the markets last year when it filed to launch a Bitcoin exchange-traded fund with the Securities and Exchange Commission.

Then, in January, Wall Street’s top regulator approved the BlackRock iShares Bitcoin Trust—along with 10 other ETFs—and it started trading.

Of all the crypto ETFs, BlackRock’s has been the most successful, attracting the most investment and trading volume.

BlackRock has previously said that Bitcoin is in an asset class of its own, and that investors are buying it to hedge against any potential debt crises.

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