Holding 0% in bitcoin in itself requires justification (equivalent to shorting this top-performing asset).
Bitcoin’s past 10-year returns and risk-adjusted returns have both been the highest among major asset classes.
Bitcoin $BTC — 20,224%
Gold $XAU — 297%
U.S. Stocks $SPY — 278%
Emerging Market Stocks — 124%
U.S. High-Yield Corp Bonds — 70%
U.S. Real Estate — 70%
Commodities — 62%
ST Treasury Bills (Three-Month) — 24%
U.S. Investment-Grade Bonds — 21%
LT Treasury Bonds (20+ Years) — -5%
Even a small allocation (1–3%) can clearly improve the risk-adjusted returns of a traditional 60/40 portfolio.
Note that the 10% allocation was chosen not as a recommendation
Under conservative assumptions (Bitcoin expected annualized return 25%, volatility 50%), mean-variance optimization results tend toward an allocation of about 10% to Bitcoin, with the bond allocation reduced to close to 30%.
Bitcoin as a currency inflation hedge, with low correlation to gold, and asymmetric return characteristics.