The landscape of wealth management has shifted dramatically in the past year, as spot bitcoin exchange-traded funds (ETFs) gained regulatory approval and rapidly entered mainstream investing. With the U.S. Securities and Exchange Commission greenlighting the first spot bitcoin ETFs nearly 12 months ago, financial advisors are now reevaluating how digital assets fit into long-term client portfolios.
Among the most notable developments: BlackRock’s iShares Bitcoin Trust (IBIT) has surged to $50 billion in assets under management—a milestone that Bloomberg Intelligence analyst James Seyffart described as unprecedented. “It’s the fastest ETF to reach most milestones, faster than any other ETF in any asset class,” he said.
This explosive growth has prompted major institutions like the BlackRock Investment Institute to suggest a 1% to 2% allocation to bitcoin may be a “reasonable range” for moderate-risk investors. As adoption spreads, financial advisors across the country are weighing in on how—and whether—to integrate crypto into diversified portfolios.
Bitcoin as a Strategic Portfolio Component
Ryan A. Hughes, founder and portfolio manager at a San Diego-based firm, supports the idea of limited but intentional exposure to bitcoin. Given its extreme volatility—where 75% drawdowns are not anomalies but norms—he emphasizes client education.
“It is such a volatile asset,” Hughes said. “If an advisor truly believes in bitcoin, it is best to prepare your clients for the long winters that come with this asset.”
T.J. van Gerven, a financial advisor from Woburn, Massachusetts, shares this perspective. After years of skepticism since first observing bitcoin in 2011, he now views it as a legitimate store of value—a decentralized alternative resistant to central bank manipulation.
“I believe that the chances of bitcoin going to zero are very low,” van Gerven said, citing growing institutional adoption and consistent network functionality since its 2009 inception.
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Tailoring Allocations to Risk Profiles
Allocation decisions ultimately depend on individual client profiles—risk tolerance, investment horizon, and emotional resilience during market swings.
Jirayr Kembikian, co-founder and managing director of a San Francisco advisory firm, has included bitcoin in client portfolios since 2020. Interest spiked after ETF approval, and many clients have expressed gratitude for early inclusion.
“Bitcoin has become a pivotal component of a well-diversified portfolio,” Kembikian said. “Its unique characteristics make it highly attractive for both risk reduction and return enhancement.”
His firm has recently increased target allocations where appropriate, reflecting growing confidence in bitcoin’s role as a non-correlated asset.
Bryan Courchesne, CEO of a Newport Beach-based crypto-focused advisory, expects crypto strategies—starting with bitcoin—to become even more prominent in 2025.
“Bitcoin has consistently demonstrated strong performance as an investment and it cannot be denied in portfolios,” Courchesne said. He warns against speculative investments like meme coins but believes experienced guidance can unlock outperformance.
For younger clients with long time horizons and high risk tolerance, Hughes finds bitcoin allocations particularly suitable.
“If a client is normally skittish and always tends to call during any market turn, perhaps it is best to avoid a bitcoin allocation,” he noted. “But we have some younger clients with a long time horizon and an iron stomach—these clients are probably best suited for a crypto allocation.”
Determining the Right Allocation Size
So, what’s an appropriate percentage?
Van Gerven recommends at least a 5% allocation depending on risk capacity, stressing the importance of client conviction during inevitable downturns.
“It’s incredibly important that clients understand the reasons behind adding an allocation,” he said. “It’s also important to separate bitcoin from cryptocurrency at large, as the majority of cryptocurrencies are Ponzi schemes where the supply can be manipulated and can very easily experience permanent loss of capital.”
Andy Cole, a financial advisor from Huntsville, Alabama, notes that advisors who exclude assets without dividends—like gold—may similarly resist bitcoin.
“Therefore, I think it isn’t likely that advisors that are only currently using 60% stock and 40% bonds will jump straight to adding bitcoin,” Cole said. “The advisors that are comfortable with adding bitcoin are probably the same advisors already using other alternatives beyond stocks and bonds.”
Using volatility comparisons, Cole aligns with BlackRock’s 1%–2% recommendation. Assuming bitcoin is roughly five times more volatile than gold over five years, replacing part of a 10% gold allocation with 1%–2% in bitcoin balances risk appropriately.
How the Game Changed: ETFs and Institutional Adoption
The approval of spot bitcoin ETFs marked a turning point.
“The use cases for bitcoin are expanding, and adoption continues to rise,” Kembikian said. “Most notably, discussions around bitcoin being considered as a potential reserve asset for governments—including the United States—reflect a profound shift in sentiment.”
Hughes agrees: “Having a spot bitcoin ETF sure makes it a lot easier to allocate to this space.” He’s now waiting for a broad-market crypto index ETF covering the top 10 cryptocurrencies—an innovation he believes is still years away.
Christopher Haigh, CEO of a Rochester-based firm and a personal crypto investor since 2013, added a 1% to 4% allocation to the Bitwise Bitcoin ETF (BITB) for all clients in February 2024. After July 2024 approval of Ethereum ETFs, he expanded into the Bitwise Ethereum ETF (ETHW).
While supportive of BlackRock’s cautious stance, Haigh sees it as overly conservative. “That seems like a bailout statement from them and a way to cover themselves instead of actual conviction,” he said.
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Managing Volatility with Technology and Discipline
Haigh’s firm uses Altruist’s model portfolio technology to identify buying opportunities and optimize tax-loss harvesting. The ability to trade between different bitcoin ETFs—such as switching BITB for Fidelity Wise Origin Bitcoin Fund (FBTC) or ARK 21Shares Bitcoin ETF (ARKB)—offers tactical flexibility.
“Overall, I believe dollar-cost averaging and consistent investing principles reign supreme,” Haigh said. “It makes me apprehensive to invest lump sums at all-time highs, which is a more common conversation now as clients are trying to chase the wave.”
Frequently Asked Questions
Q: Why should financial advisors consider bitcoin in client portfolios?
A: Bitcoin offers low correlation with traditional assets like stocks and bonds, potentially enhancing diversification. Its growing adoption and fixed supply make it an appealing hedge against inflation and monetary policy risks.
Q: What’s a safe allocation percentage for bitcoin?
A: Most advisors recommend between 1% and 5%, depending on risk tolerance. Conservative portfolios may stick to 1%–2%, while aggressive investors might go higher—especially if they already hold alternative assets.
Q: Are all cryptocurrencies equally viable for portfolios?
A: No. Experts stress distinguishing bitcoin from other cryptos. Many altcoins lack utility and transparency, with some resembling Ponzi schemes. Bitcoin remains the most established and trusted digital asset.
Q: How do spot bitcoin ETFs simplify investing?
A: They allow advisors to access bitcoin through traditional brokerage accounts without custody challenges. This regulatory approval has increased legitimacy and ease of integration into standard portfolio models.
Q: Should clients time the market when investing in bitcoin?
A: Most professionals advise against timing. Instead, dollar-cost averaging helps mitigate volatility risk and avoids the pitfalls of emotional decision-making during price surges.
Q: What role does volatility play in crypto investing?
A: High volatility demands discipline and proper risk management. Tools like tax-loss harvesting and ETF arbitrage can turn volatility into opportunity—but only when paired with robust portfolio infrastructure.
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