Bitcoin will rise in 2024. How much – if any – should you own?

Bitcoin In the year Price increase in 2024. But before excitement leads you on a rash purchase, you may want to watch carefully.

Bitcoin and other cryptos should generally only hold a sliver of investors’ portfolios – generally no more than 5% – due to its high volatility, according to financial experts.

Some investors may be wise to avoid it altogether, he said.

“You don’t have the same amount allocation as you do in Bitcoin. Nasdaq or the S&P 500said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, DC.

“When you have a truly dynamic asset class, you need less of that in the portfolio to have the same impact as traditional assets like stocks and bonds,” said Johnson, a member of CNBC’s Financial Advisory Council.

Bitcoin was the biggest cryptocurrency A high performing 2024 investment, in the long run. Prices rose 125%, ending the year at $94,000 after starting in the $40,000 range.

“With high returns comes high risk, and crypto is no exception,” said Amy Arnott, portfolio strategist at Morningstar Research Services. He wrote In June.

As of September 2015, bitcoin was about five times more volatile than U.S. stocks, and ether about 10 times more volatile, Arnott wrote.

“A portfolio weight of 5% or less seems prudent, and many investors may want to skip cryptocurrencies altogether,” she says.

Bitcoin 64% and 74% off The price in 2022 and 2018, respectively.

Mathematically, investors need a 100% return to recover from a 50% loss.

So far, crypto returns have been high enough to offset the added risk — but it’s not a given that the pattern will continue, Arnott said.

There are a few reasons for this: As crypto has become more mainstream, its value as a portfolio diversifier has declined, Arnott writes. Its popularity among speculators also “makes it worth the bubbles that eventually burst,” she added.

BlackRock, a money manager, thinks there is a case for holding bitcoin in a diversified portfolio, for investors who are comfortable with “the risk of rapid price falls” and believe it will be widely accepted, according to BlackRock Investment Institute experts. He wrote In early December.

(BlackRock offers bitcoin ETF, iShares Bitcoin Trust, IBIT.)

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BlackRock experts wrote that an allocation of 1% to 2% is a “reasonable range.”

Going abroad will “increase exponentially” the overall risk of the portfolio, he said.

For example, a 2% bitcoin allocation covers about 5% of the risk of a traditional 60/40 portfolio, BlackRock estimates. But a 4% allocation swells that to 14% of the total portfolio risk, he said.

“In Vanguard’s view, crypto is more of a speculation than an investment,” said Janelle Jackson, Vanguard’s former head of ETF capital markets and broker and index relations. He wrote In January 2024.

Stock investors own shares in companies that produce goods or services, and many investors receive a dividend. Bond investors receive regular interest payments; And commodities are real assets that satisfy consumption needs, Jackson writes.

“Crypto is classified as a commodity, but it is an immature asset class with little history, no economic value, no cash flow, and can wreak havoc on a portfolio,” wrote Jackson, who is now the firm’s executive director of financial advisory services. Room.