BlackRock says 1-2% a ‘reasonable’ Bitcoin portfolio allocation

2024-12-14 09:54:22 Primitive Reading

From cointelegraph by Alex O'Donnell

BlackRock, the world’s largest asset manager, said an up to 2% portfolio allocation is “reasonable” for investors who wish to hold Bitcoin BTC$100,083, 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.”

Disclaimer: This specification is preliminary and is subject to change at any time without notice. Amazon Finance assumes no responsibility for any errors contained herein.