BlackRock backs 2% Bitcoin portfolio allocation

• BlackRock said Bitcoin may serve as a portfolio diversifier when allocations remain around 1% to 2%.
• The asset manager warned that larger Bitcoin positions could significantly increase overall portfolio risk due to the asset's volatility.
• BlackRock continues expanding Bitcoin-related ETF products as institutional demand for regulated crypto exposure evolves.

BlackRock said Bitcoin (CRYPTO:BTC) may have a role as a portfolio diversifier, with the asset manager suggesting that allocations of around 1% to 2% could balance potential returns and risk.

The guidance comes as more investors assess Bitcoin's supply characteristics, adoption trends and relationship with traditional asset classes, while BlackRock noted that the cryptocurrency remains highly volatile and carries adoption-related risks.

“Bitcoin’s role in portfolios is evolving, and it could be considered a complementary diversifier,” said BlackRock.

The firm said its research uses a risk-budgeting approach, estimating that a 1% to 2% Bitcoin allocation in a traditional 60/40 portfolio contributes a level of risk comparable to a single large technology stock, while larger allocations may increase portfolio volatility.

BlackRock also warned that Bitcoin has experienced historical drawdowns of 70% to 80% from peak to trough, while BlackRock shares were unchanged following the commentary.

The asset manager continues to expand its cryptocurrency offerings through products including the iShares Bitcoin Trust and the recently launched iShares Bitcoin Premium Income ETF, which seeks to generate income through option premiums while maintaining Bitcoin exposure.

The comments follow a period of volatility for US spot Bitcoin ETFs, which recorded approximately US$4.37 billion in net outflows during a 13-day streak between May 15 and June 3, highlighting how investor demand for crypto-related investment products can shift rapidly.

At the time of reporting, Bitcoin price was $62,723.68.