Bitcoin's Growing Role in Portfolios: A Risky 5% Allocation?
Bitcoin has become increasingly accepted as a legitimate asset class in portfolios, thanks to the launch of spot Bitcoin ETFs. These funds allow investors to gain exposure to cryptocurrency without needing to open separate crypto wallets.
The iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund are examples of these spot Bitcoin ETFs, which now manage roughly $100 billion collectively.
While some experts suggest that a 5% allocation to Bitcoin is a good starting point for investors, the numbers show that this decision may not be as simple as it seems. Historically, the iShares Bitcoin ETF has been around 2.5 times more volatile than the Vanguard S&P 500 ETF.
However, the correlation between the two funds is only 0.4, which means that adding Bitcoin to stocks can actually make the combination of the two less volatile overall.