BlackRock, the world’s largest asset manager, said an up to 2% portfolio allocation is “reasonable” for investors who wish to hold Bitcoin (BTC), according to a Dec. 12 report.
The report, which was shared with Cointelegraph and first reported by Bloomberg, says 1-2% is “a reasonable range for a Bitcoin exposure” but cautions that larger allocations “would sharply increase Bitcoin’s share of the overall portfolio risk.”
Meanwhile, a 1-2% BTC allocation poses “on average, about the same share of overall portfolio risk” as a typical allocation to “the ‘magnificent 7’ group of mostly mega-cap tech stocks” in a portfolio comprising 60% stocks and 40% fixed income assets, BlackRock said.
The “magnificent 7” includes companies such as Amazon, Microsoft, and Nvidia.
BlackRock manages approximately $11.5 trillion in assets. It also sponsors the largest spot BTC exchange-traded fund, iShares Bitcoin Trust (IBIT), which holds net assets of nearly $54 billion.
BlackRock’s IBIT is the largest spot BTC ETF. Source: BlackRock
Related: US Bitcoin ETF assets break $100 billion
Unique return profile
According to BlackRock, investors “need to think about Bitcoin’s expected returns in a different way: it has no underlying cash flows for estimating future returns. What matters: the extent of adoption.”
“Bitcoin may also provide a more diversified source of return,” BlackRock said, adding “We see no intrinsic reason why Bitcoin should be correlated with major risk assets over the long term given its value is driven by such distinct drivers.”
Longer term, BTC “could potentially also become less risky – but at that point it might no longer have a structural catalyst for further sizable price increases,” the report said. Instead, “investors may prefer to use it tactically to hedge against specific risks, similar to gold.”
The report, dubbed “Sizing Bitcoin in portfolios,” was released by BlackRock Investment Institute on Dec. 12.
Source: Sygnum Bank
Price catalysts
Launched in January, spot BTC ETFs emerged as 2024’s most popular investment vehicles, breaking $100 billion in net assets in November.
These surging inflows from institutional investors could cause “demand shocks” in 2025, driving up BTC’s spot price, according to a Dec. 12 report by Sygnum Bank.
“Our analysis shows how even relatively modest allocations from this segment can fundamentally alter the crypto asset ecosystem,” Sygnum said.
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