Explore why BlackRock, a top-tier global investment company, recently announced its recommendation of keeping some of your portfolio wrapped up in the cryptocurrency.
As cryptocurrencies continue to gain traction in the investing world, renowned asset manager BlackRock has recently chimed in on the topic. According to a recent report by the company, interested investors may want to consider allocating up to 2% of their portfolio to Bitcoin.
The report, which was published on BlackRock’s website, delved into the benefits and risks of including Bitcoin in a multi-asset portfolio. The authors of the report — a team of four senior executives at BlackRock — noted that the cryptocurrency’s unique characteristics could contribute to a portfolio’s total return and volatility.
“We see a case for investors with suitable governance and risk tolerance to include bitcoin in a multi-asset portfolio,” the report authors wrote, adding that the maximum recommended weight sits at 2% of a portfolio.
“Investors should also be alert to Bitcoin’s risk,” the report continued. “It may not ultimately achieve broader adoption. And it remains highly volatile and vulnerable to sharp selloffs.”
Bitcoin has been around for over a decade now, and during that time, it has certainly seen its fair share of ups and downs. From 2017 to 2018, the cryptocurrency experienced a massive bull run, which saw its price soar to nearly $20,000. However, Bitcoin’s price also crashed sharply in 2022, falling below $16,000 at one point.
Despite the volatility, some investors are still interested in gaining exposure to Bitcoin. According to the report, an allocation of up to 2% of a portfolio to the cryptocurrency “could be sufficient to capture a substantial portion of the upside from bitcoin’s potential to become a global digital currency.”
However, it’s important to note that the report also cautions against allocating too much of a portfolio to Bitcoin. The report authors stated that they do not expect the cryptocurrency to fully fail, but they also noted that it is possible for Bitcoin to lose value over time.
“We do not expect bitcoin to go to zero. Still, it remains a nascent asset class that may fail to achieve broader adoption or experience extended periods of price declines,” the report authors wrote.
Ultimately, whether or not to include Bitcoin in an investment portfolio is a personal decision. As with any investment, it’s important to weigh the potential benefits and risks involved and make a decision that aligns with your own financial goals and risk tolerance.