BlackRock recommends 1-2% Bitcoin allocation for investors

BlackRock, the world's largest asset manager, has formally recommended that investors consider allocating a small portion of their portfolios to Bitcoin, suggesting a position of 1% to 2% as a complementary diversifier. The guidance, issued on Tuesday, June 23, frames the cryptocurrency not as a speculative bet but as a risk-management tool that can improve a portfolio's efficiency due to its historically low correlation with traditional stocks and bonds.

According to the firm's analysis, a modest Bitcoin allocation within this range could enhance return potential while keeping overall portfolio risk within acceptable limits. The logic is that Bitcoin's price movements are largely disconnected from those of equities and fixed income, meaning a small slice can contribute returns without significantly increasing day-to-day volatility. BlackRock illustrated that in a classic 60/40 portfolio, a 1% Bitcoin allocation would adjust the mix to roughly 59% stocks, 40% bonds, and 1% Bitcoin. The firm warned that allocations above 2% could disproportionately raise portfolio volatility, given Bitcoin's history of severe price drawdowns.

Michael Gates of BlackRock described the approach,...