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In a report published on December 12, BlackRock indicates that a Bitcoin allocation of 1% to 2% in multi-asset portfolios aligns with the risk levels associated with portfolios that include technology stocks.
The asset management firm, which manages trillions of dollars, presents this range as a strategic initial point for investors looking for varied risk sources. Bitcoin is suggested as an asset that does not completely replicate the movements of equities.
As reported by Bloomberg, BlackRock’s analysis reveals that while Bitcoin shows a lower correlation with other assets, its volatility increases overall risk in a manner similar to portfolios that are heavily invested in a few large technology companies.
Samara Cohen, BlackRock’s Chief Investment Officer for ETF and index investments, mentions that a modest Bitcoin allocation may serve as an independent risk factor within a balanced portfolio. The firm cautions that exceeding a 2% allocation could lead to Bitcoin’s inherent volatility contributing disproportionately to total risk, potentially overshadowing other elements.
According to Bloomberg, BlackRock views the 1% to 2% range as adequate to reflect the impact of major technology holdings, a familiar situation for investors dealing with top-heavy equity indices.
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This viewpoint emerges during a period of sustained Bitcoin gains following the US presidential election in November. Trump’s victory, along with public endorsements and continuous institutional investments, enabled Bitcoin to exceed $100,000 in December.
Market analysts attribute part of Bitcoin’s rise to interest from institutional investors, and BlackRock’s iShares Bitcoin Trust (IBIT) has garnered attention as a significant investment vehicle. The Bitcoin ETF has experienced rapid asset growth and attracted considerable inflows. Its development signifies a trend that has enhanced Bitcoin’s acceptance among traditional investors and altered discussions regarding appropriate exposure.
As noted by Forbes, BlackRock’s research aligns with the Magnificent Seven technology stocks that have captured a significant portion of the S&P 500’s value. The firm observes that Bitcoin’s market capitalization is smaller, its utility is distinct, and its fundamental drivers do not mirror corporate revenue streams.
Nonetheless, the overall risk contributions of this allocation resemble those of a portfolio that heavily favors a single leading equity holding. While previous cycles indicated a tightening correlation between Bitcoin and equities, recent trends have revealed more distinct patterns influenced by policy changes, macroeconomic developments, and shifting investor sentiment.
The report suggests that as Bitcoin becomes increasingly integrated into mainstream portfolios, its volatility characteristics may evolve. Widespread institutional adoption could eventually moderate price fluctuations, altering the asset’s returns.
BlackRock’s stance does not advocate for larger allocations at this time but rather highlights the importance of careful sizing to maintain stable portfolio risk parameters. Its analysis offers a framework for investors considering incremental Bitcoin exposure as the asset secures its role in long-term portfolio development.
The post BlackRock recommends 2% starting allocation to Bitcoin in investment portfolios appeared first on CryptoSlate.
