The value of Bitcoin (BTCUSD) has skyrocketed this year, reaching over $100,000, and according to certain predictions, it will continue its meteoric rise in 2019. Despite the allure, financial experts are wary of recommending the cryptocurrency to their customers and advise putting a tiny percentage of their portfolio into it.
The bitcoin price has dropped due to the Federal Reserve’s (Fed) recent predictions of fewer rate cuts next year, although it has increased by more than 100% this year. Treasury rates will stay high and appeal to a larger investor base than riskier assets like bitcoin. If the Federal Reserve slows down, the pace of the rate decreases.
Blackrock on Bitcoin Portfolio Exposure
According to Blackrock, asset management, a reasonable range for bitcoin exposure in a portfolio is between one and two per cent.1 Even though Blackrock’s iShares Bitcoin Trust (IBIT) is the biggest spot Bitcoin ETF, some financial gurus still think including a little bitcoin in your portfolio is a good idea.
If the price does appreciate…it will still add meaningful outperformance to the portfolio, stated Malcolm Ethridge, a certified financial planner (CFP) and managing partner at Capital Area Planning Group. Even if it fails to deliver as expected and the price drops to zero, it still wouldn’t eradicate them.
Risks and Rewards of Investing in Bitcoin
A small Bitcoin Investment and Strategies could limit its downsides because it is an incredibly volatile asset. David Rosenstrock, CFP, founder of Wharton Wealth Planning, stated that this should be considered an ancillary investment because of how risky it is and how much money may be lost.
Bitcoin investor Scott Sturgeon (CFP, founder of Oread Wealth Partners) says potential buyers should ask themselves why they want to buy Bitcoin. Sturgeon suggested that one may justify investing in it if they saw it as a hedge against inflation or an uncorrelated asset. However I would caution you from buying it because of its 120% year-to-date increase; you are more concerned with speculation than investment.
Choosing How to Invest in Bitcoin
If you are confident that investing your Bitcoin funds is right, you must determine how to do it. You can buy bitcoin outright, put your money into exchange-traded funds (ETFs) or funds, or invest in bitcoin-related businesses by purchasing shares in such organizations.
Although he does not actively seek cryptocurrencies, such as Bitcoin Investment and Strategies, CFP Douglas Boneparth of Bone Fide Wealth informs his clients. After first investing in bitcoin in 2024, he now favours purchasing bitcoin directly rather than an ETF or shares of bitcoin holding companies like MicroStrategy (MSTR), which are seen as alternatives to bitcoin.
Best Ways to Own and Invest in Bitcoin
The best way to own Bitcoin is to own the cryptocurrency itself and store it in a hardware wallet. He described himself as a purist who believed in this method. If you invest in Microstrategy, you’re essentially purchasing leveraged bitcoin. They have a large debt and buy bitcoin on the open market You are purchasing an even riskier asset. Nevertheless, experts suggest that spot ETFs would be more suitable for novice Crypto investors. In this approach, you can hold the cryptocurrency in your brokerage account and trade ETFs without using a separate wallet. You should, however, pay close attention to the costs.
FAQs
How much Bitcoin should be included in a portfolio?
Blackrock recommends a range of 1-2% Bitcoin exposure in a portfolio to balance risk and potential gains.
What are the risks of investing in Bitcoin?
Bitcoin is volatile and risky, and experts suggest a small percentage of your portfolio should be invested in it. Its value can fluctuate dramatically, and there is a chance of losing the entire investment.
How should you invest in Bitcoin?
You can buy Bitcoin directly, invest in ETFs, or purchase shares in Bitcoin-related companies. Each option has its own level of risk and complexity.
What is the best way to own Bitcoin?
The safest method is to own Bitcoin outright and store it on a hardware wallet. For beginners, spot ETFs are recommended, though costs should be considered.
