In the world of investing, cryptocurrency is a particularly divisive topic. Some investors are bullish on crypto, while others steer clear of this relatively new asset class. But in recent years, cryptocurrency, especially Bitcoin, has gained recognition as a legitimate asset.
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Explore why BlackRock, a top-tier global investment company, recently announced its recommendation of keeping some of your portfolio wrapped up in the cryptocurrency.
BlackRock is a well-recognized investment company that manages over $10 trillion in assets. Not surprisingly, when BlackRock makes a statement about building an investment portfolio, many investors take notice. In a recent report, BlackRock indicated its recommendation that interested investors consider allocating up to 2% of their portfolio to Bitcoin.
“We see a case for investors with suitable governance and risk tolerance to include bitcoin in a multi-asset portfolio,” wrote the report authors, a team of four senior executives at BlackRock.
Although the report was positive about including Bitcoin in your portfolio, it cautioned that the maximum recommended weight sits at 2% of your portfolio. This relatively low percentage indicates that caution is still warranted when dealing with cryptocurrency. “Investors should also be alert to Bitcoin’s risk. It may not ultimately achieve broader adoption. And it remains highly volatile and vulnerable to sharp selloffs,” per the report.
But for folks looking to gain exposure to crypto, allocating up to 2% of your portfolio to Bitcoin could be enough to appreciate the potential rise in crypto’s value.
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Before you add Bitcoin to your portfolio, it’s important to weigh the benefits and risks involved.
As for the benefits, Bitcoin can offer enhanced returns and increased diversification. It’s possible Bitcoin’s value will continue to soar and push your overall returns higher. Plus, adding Bitcoin to your portfolio will increase your diversification across asset classes.
However, there are also risks to Bitcoin. The crypto is volatile, as the report mentioned. Because of that, its price may rise and fall without warning. It’s also possible that Bitcoin will lose value over time, which could negatively impact your portfolio.
While cryptocurrencies, especially Bitcoin, are becoming more widely accepted as an asset, not everyone agrees that Bitcoin deserves a place in your investment portfolio.
