BlackRock Advocates For 2% Bitcoin Allocation In Multi-Asset Portfolios

by Murtuza Merchant Benzinga Staff Writer

Zinger Key Points

Institutional adoption and U.S. spot Bitcoin ETFs have driven Bitcoin’s 140% rise this year, amassing $113 billion in assets.
BlackRock notes broader adoption could stabilize Bitcoin’s risk profile but potentially curtail its dramatic price gains.
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The world's largest asset manager, BlackRock Inc. (NASDAQ; BLK), suggests that Bitcoin BTC/USD could hold a place in multi-asset portfolios, albeit within a narrow range.

Quoting a report from the BlackRock Investment Institute, Bloomberg reported that allocating 1% to 2% of a portfolio to Bitcoin would produce a risk profile comparable to investing in the “Magnificent Seven” technology stocks within a traditional 60/40 portfolio of equities and bonds.

Exceeding the 2% threshold, however, could disproportionately increase the portfolio’s risk.

The report provides guidance for investors seeking to balance exposure to Bitcoin, especially as the cryptocurrency continues to trade at record highs above $100,000.

President-elect Donald Trump‘s crypto-friendly policies, coupled with his pro-crypto leadership appointments, have contributed to a surge in Bitcoin exchange-traded funds (ETFs), including BlackRock's IBIT.

These developments have fueled billions in inflows and intensified interest in integrating Bitcoin into mainstream investment strategies.

Also Read: Hacker Exploits Dogecoin Vulnerability, Crashes 69% Of Nodes—But DOGE Still Spikes 1.8%

"Even though Bitcoin's correlation with other assets is relatively low, its inherent volatility makes its impact on total portfolio risk similar to that of highly concentrated tech stocks," stated Samara Cohen, BlackRock’s Chief Investment Officer of ETF and Index Investments, in the paper.

A small allocation to Bitcoin could add diversification, whereas an overweight position in high-risk tech equities might exacerbate concentration risks, the report noted.

Despite Bitcoin’s 140% rise this year, its path to historic highs has been marked by extreme volatility, with historical drawdowns ranging between 70% and 80%, the paper highlighted.

However, the introduction of U.S. spot Bitcoin ETFs earlier this year has played a pivotal role in its rally.

Since their January launch, these ETFs have attracted over $113 billion in assets, with nearly $10 billion flowing in since November, according to Bloomberg data.

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