Bitcoin gets BlackRock's approval
New guidance from the asset giant suggests cautious crypto exposure for risk-tolerant investors
The world’s largest asset manager now recommends that interested investors allocate up to 2% of their portfolio to Bitcoin (BTC).
$11.5-trillion BlackRock shared its new recommendations in a report titled Sizing Bitcoin in Portfolios, advising investors interested in BTC. According to the authors, including Samara Cohen, BlackRock’s Chief Investment Officer for Index Investments and ETFs, “we see a case for investors with suitable governance and risk tolerance to include Bitcoin in a mix of different investments, like stocks and bonds.”
The report also highlighted that the period leading up to widespread adoption “could be where the biggest future return potential lies.”
The ups and downs of Bitcoin
While BlackRock sees potential in Bitcoin, the report cautions investors to remain mindful of its risks, noting that “it remains highly volatile and vulnerable to sharp selloffs.” To put this into perspective, Bitcoin’s price history shows dramatic swings.
In 2021, it crashed from $67,000 to $17,000, while this year alone, it surged from $43,000 to an all-time high of $104,000. These sharp movements show why Bitcoin should only be a small part of a portfolio.
BlackRock recommends keeping Bitcoin investments between 1-2% of a portfolio. This range is designed to limit risk while still providing exposure to potential gains. They explain that a small amount of Bitcoin adds about the same level of risk as investing in big tech stocks like Alphabet, Amazon, or Apple within a portfolio balanced with 40% bonds and 60% stocks. However, BlackRock warned that investing more than this could make your portfolio much riskier.
BlackRock’s recommendation is a significant milestone for Bitcoin’s acceptance among major financial institutions. Prominent Bitcoin advocate Mike Novogratz, CEO of digital asset platform Galaxy, shared his reaction on X, stating, “Slowly and then all at once... @BlackRock recommending up to a 2% Bitcoin allocation is massive. The world’s largest asset manager now sees $BTC alongside tech giants like Apple and Tesla. Institutions are here.”
Slowly and then all at once... @BlackRock recommending up to a 2% Bitcoin allocation is massive. The world's largest asset manager now sees $BTC alongside tech giants like Apple and Tesla. Institutions are here.
— Mike Novogratz (@novogratz) December 12, 2024
BlackRock’s move could pave the way for other large companies to take Bitcoin more seriously as an investment. This shift might even help make Bitcoin less volatile over time as more institutions enter the market.
