According to CNBC, nearly half of crypto investors — 45% — said diversification is their main reason for holding digital assets, according to an Urban Institute report published this month. The report said 27% believe crypto is the future, 11% expect to make more money in crypto than in other investments, and 5% do not trust the U.S. dollar.

Financial advisors and market analysts said cryptocurrency can play a diversification role in a portfolio, but only if investors understand its volatility and do not rely on it as their sole hedge. Veronica Willis of Wells Fargo Investment Institute said digital assets have a 0.2 correlation with the S&P 500 over the past decade, higher than bonds but still low, while Douglas Boneparth of Bone Fide Wealth said bitcoin can serve as a portfolio diversifier over long time horizons. Boneparth said allocations above 5% can cause bitcoin’s volatility to dominate portfolio risk, while other advisors cited suggested crypto weights of about 1% to 3%.