Publications and reports from BlackRock Investment Institute

BlackRock Suggests 2% Bitcoin Allocation for Portfolio Diversification

Dec 12, 2024, 02:18 PM

BlackRock, the world's largest asset manager with $11.5 trillion in assets under management, has recommended that investors consider allocating up to 2% of their portfolio to Bitcoin, drawing comparisons to the risk profile of the 'Magnificent Seven' technology stocks like Apple, Amazon, and Nvidia. This recommendation comes from a report titled 'Sizing Bitcoin In Portfolios' by BlackRock Investment Institute, authored by Samara Cohen, Chief Investment Officer of ETF and Index products, which argues that Bitcoin offers unique benefits as a portfolio diversifier despite its volatility. The report highlights that Bitcoin's market capitalization is around $2 trillion, and its low correlation to traditional markets makes it an attractive option for diversification in a standard 60/40 investment portfolio. However, BlackRock cautions that due to Bitcoin's volatility, higher allocations would significantly increase portfolio risk. The firm's analysis suggests that a 1-2% allocation would yield a risk profile similar to holding one of the tech giants, with a 1% allocation contributing 2% of risk and a 2% allocation increasing the risk weighting to 5%. BlackRock operates the world's largest Bitcoin ETF, the iShares Bitcoin Trust (IBIT), with $50.8 billion in assets under management.