Crypto analyst Benjamin Cowen warns against the common mistake of going “all-in” on crypto investments, recommending an 81% Bitcoin (CRYPTO: BTC), 19% Ethereum (CRYPTO: ETH) portfolio allocation for optimal risk-adjusted returns.
What Happened: In a podcast episode on Tuesday, Cowen said the ideal crypto portfolio isn't based on opinion, but hard data.
He recommended an 81% BTC, 19% ETH allocation, determined using modern portfolio theory and the Sharpe ratio from historical performance since 2015.
He emphasized that this shift leans more toward Bitcoin than previous years, where Ethereum played a larger role.
The model, Cowen stressed, is purely quantitative: "This has nothing to do with my opinion. You can throw it out the window, it's just based on data."
When XRP is added to the mix, the optimized breakdown adjusts to 76% Bitcoin, 17% Ethereum, and 7% XRP (CRYPTO: XRP).
Despite XRP still trading far below its 2017–2018 highs, Cowen noted its historical volatility makes it a noteworthy addition.
Cowen suggests a 93% BTC, 7% ETH portfolio for those who prefer low volatility, such as Bitcoin maximalists using mean reversion to accumulate more satoshis over time.
"Cash Is Trash" Mentality?
Cowen took aim at crypto influencers who discourage holding cash. He called the "cash is trash" narrative misleading, especially when influencers claim to be buying dips after being fully invested near market tops:
"If you were 100% allocated at the top, what are you buying the dip with?"
Instead, Cowen recommends holding cash, even up to one-third of a portfolio, to deploy during crashes.
He used Ethereum's previous bottom as a prime example of an opportunity that required liquidity.
Also Read: Bitcoin, Ethereum, XRP Slide Despite US-Japan Trade Deal
Why It Matters: Cowen’s analysis revealed that investors seeking higher returns than the baseline 65% annualized expectation would need to increase Ethereum allocation, but cautioned this approach backfired for years.
He warns that many investors seeking outsized returns increase Ethereum exposure expecting it to outperform BTC. This often leads to underperformance. "In 2021, one BTC was worth 11 ETH. In April, it hit 56 ETH. Today, it's 31 ETH," he noted.
Those who rotated ETH into BTC in late 2021 and back again at the right time could've multiplied their holdings dramatically: "You could've gotten 5x more ETH by just rotating."
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