“But how much Bitcoin exposure makes sense in a portfolio? While there’s no one-size-fits-all answer, the BlackRock Investment Institute found that a modest allocation, typically around 1–2%, in a diversified portfolio can impact returns without dominating day-to-day risk,” points out the asset manager.
BlackRock, an asset manager with $14 trillion in assets under management, published a video on its social media on Tuesday (23) revealing its opinion on how much exposure to Bitcoin an investor should have in their portfolio.
The asset manager is responsible for IBIT, the world's largest Bitcoin ETF, and ETHA, the largest Ethereum ETF on the market.
More recently, BlackRock also launched a new Bitcoin ETF, BITA, but focused on offering monthly returns to its investors .
BlackRock states that Bitcoin has a diversification role in portfolios.
One of the best-known names in the global financial market, BlackRock launched its Bitcoin ETF in January 2024 and has been paying more attention to the cryptocurrency ever since.
In a tweet published this Tuesday (23), the manager reveals how much exposure to Bitcoin an investor should have.
“The role of Bitcoin in portfolios is evolving, and it can be considered a complementary diversifier. We believe that a modest allocation (generally around 1–2%) can impact a portfolio's potential return while maintaining an appropriate level of risk tolerance.”
“But how much Bitcoin exposure makes sense in a portfolio? While there’s no one-size-fits-all answer, the BlackRock Investment Institute found that a modest allocation, typically around 1–2%, in a diversified portfolio can impact returns without dominating day-to-day risk.”
In the full video, which can be accessed via the link in the tweet above, the fund manager demonstrates how much difference a 1% to 2% exposure to Bitcoin can make in a 60/40 portfolio.
“To put this in the context of a 60/40 portfolio: a 1% to 2% allocation to bitcoin contributed to the total portfolio risk at levels similar to the average risk contribution of one of the so-called 'Mag 7' stocks.”
BlackRock compares the risks of Bitcoin exposure to the stocks of the 'magnificent seven'. Source: BlackRock/Reproduction.
In 2022, years before BlackRock launched its Bitcoin ETF, a report published by members of the asset management firm revealed that the ideal exposure to cryptocurrency in a portfolio would be 84.9% .
However, as can be seen above, the asset manager maintains a more conservative approach to cryptocurrency.
Furthermore, it also points out that the investment may not be suitable for all investor profiles.
“The value of Bitcoin is rooted in the shared belief in and need for a decentralized, global digital monetary alternative. Thus, for investors who believe in the digital transformation of money, the growth of blockchain adoption, and who tolerate volatility, Bitcoin can be seen as an attractive addition and a unique portfolio diversifier.”
