Bitwise: What happens if you allocate 10% Bitcoin?

Written by Matt Hougan, Chief Investment Officer, Bitwise

, Compiler: AIMan@ Gold Finance

Bitcoin is a highly volatile asset. By the most common measure of volatility, volatility is about three to four times higher than that of the S&P 500.

However, this does not mean that adding Bitcoin to your portfolio will significantly increase the volatility of your portfolio.

As Bitcoin proponents like to point out: Since Bitcoin has a low correlation with both stocks and bonds, adding it to a portfolio has historically boosted returns without significantly increasing risk.

The

typical way for researchers to demonstrate this is to take a traditional 60/40 portfolio (60% stocks, 40% bonds) and gradually transfer a small portion of the money into Bitcoin.

The

table below compares the risk and return metrics for portfolios with Bitcoin allocations of 0%, 1%, 2.5%, and 5% respectively from January 1, 2017 to December 31, 2024. I used the free portfolio simulation tool available in the Bitwise Expert Portal for my calculations.

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