“In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio,” strategists including Joyce Chang and Amy Ho wrote in a note on Wednesday.
Academic papers began suggesting 1% in late 2018, but have since generally upped their recommendation to 10% for increased returns, some even going to 20%.
For Square it was just about 1%, with a number of institutional investors likewise sticking to this range.
Such allocation for diversification purposes, however, is still at perhaps even its pre-inception stage as there’s hardly more than a handful or a dozen public companies that have allocated to bitcoin.
Wedbush Securities expects less than 5% of publicly traded companies to allocate to bitcoin, that’s presumably initially with the tipping point being 10%.