For many investors, cryptocurrencies are still relatively unfamiliar, and it is easy to dismiss them as this “new and untested” asset. However, with growing adoption, high-growth potential, high diversification potential and investment vehicles available worldwide, it is now virtually impossible for investors to dismiss this asset class.
Like any other asset class, investors and portfolio managers must now develop their views and assign cryptocurrencies an “underweight” or “overweight” rating. Cryptocurrencies such as bitcoin have existed for over 15 years and have stood up to the test of time and multiple boom-and-bust cycles. They are now a fully established asset class that warrants a place in multi-asset portfolios.
“Not allocating to crypto is no longer the default decision and the potential cost of actively underweighting it is high”
A good assessment of an asset's neutral positioning in a multi-asset portfolio is to look at the market portfolio, i.e., the portfolio that simulates the totality of all listed, investable assets accessible to investors. Figure 1 showcases the current market portfolio.
The total market capitalisation of listed, investable assets is over $200 trillion. With a market cap of over $3 trillion, cryptocurrencies represent around 1.5% of the market portfolio. This means the crypto asset class is now similar in size to high-yield bonds, Inflation-linked bonds, and emerging markets small-cap equities.
A good assessment of an asset's neutral positioning in a multi-asset portfolio is to look at the market portfolio, i.e., the portfolio that simulates the totality of all listed, investable assets accessible to investors. Figure 1 showcases the current market portfolio.
The total market capitalisation of listed, investable assets is over $200 trillion. With a market cap of over $3 trillion, cryptocurrencies represent around 1.5% of the market portfolio. This means the crypto asset class is now similar in size to high-yield bonds, Inflation-linked bonds, and emerging markets small-cap equities.
The market portfolio
Source: Bloomberg, WisdomTree. Data as of 31 December 2024. Market caps are shown in USD billion. Historical performance is not an indication of future performance, and any investment may go down in value.
In other words, the neutral position for multi-asset portfolios is to invest roughly 1.5% in cryptocurrencies. 1.5% is the rational choice for investors without a strong, supported investment thesis against cryptocurrencies. It has also been shown that integrating cryptocurrencies into diversified multi-asset portfolios offers potential benefits in enhancing their risk/return profile.
A 0% allocation in cryptocurrencies is a strong underweight, and investors who decide to express such a bearish view in this new asset class should have a strong case to back it up.
Even a small allocation to bitcoin in a 60/40 portfolio (60% in global equities and 40% in global government and corporate bonds) would have yielded very strong results historically. With 1% of bitcoin, the performance would have increased by 0.68% per year (since 2013) at the cost of only 0.07% of higher volatility. Read our research paper for more details.
*Source: Bloomberg, WisdomTree. From 31 December 2013 to 31 December 2024.
A correlation heatmap on USD monthly returns between bitcoin and other asset classes
Une stratégie d’actions diversifiées investissant dans un portefeuille filtré selon les critères ESG d’entreprises de haute qualité et à haut profit payant des dividendes cotées sur les marchés mondiaux développés.
BTCW/WBTC
WisdomTree Physical Bitcoin is a physically backed Exchange-Traded Product designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Bitcoin. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
ETHW/WETH
WisdomTree Physical Ethereum is a physically backed Exchange Traded Product designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Ethereum. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
DOTW
WisdomTree Physical Polkadot is a physically backed Exchange Traded Product designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Polkadot. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
SOLW
WisdomTree Physical Solana is a physically backed Exchange Traded Product designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Solana. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
ADAW
WisdomTree Physical Cardano is a physically backed Exchange Traded Product designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Cardano. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
XRPW/WXRP
WisdomTree Physical XRP is a physically backed ETP designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of XRP. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure.
XLMW
WisdomTree Physical Stellar Lumens is a physically backed Exchange Traded Product (ETP) designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Lumens. The ETP provides for easy investor access, tradability, transparency and institutional custody solutions within a robust physically backed structure. This ETP does not currently stake assets.
List
WisdomTree Physical Lido Staked Ether is a physically backed Exchange Traded Product (ETP) designed to offer shareholders a simple, secure and cost-efficient way to gain exposure to the price of Lido Staked Ether (stETH). The ETP also generates a staking yield via stETH’s daily rebase mechanism which participates in the incentives that help secure the Ethereum network.
Source: Bloomberg, WisdomTree. From 31 December 2013 to 31 December 2024. In USD. Based on Weekly Returns. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
The impact of adding 1% of bitcoin to a 60/40 portfolio
Even a small allocation to bitcoin in a 60/40 portfolio (60% in global equities and 40% in global government and corporate bonds) would have yielded very strong results historically. With 1% of bitcoin, the performance would have increased by 0.68% per year (since 2013) at the cost of only 0.07% of higher volatility. Read our research paper for more details.
