Bitcoin at the Tipping Point

Does bitcoin belong in asset allocation considerations? Key takeaways:

  • Among an increasing number of investors and portfolio managers, bitcoin is considered a legitimate and distinct asset class.
  • Bitcoin, by design, is a finite asset, with both a unique supply and a unique demand dimension, and as its network increases, bitcoin’s value and durability could increase even faster.
  • Seen as a form of “digital gold,” bitcoin may act as a stable store of value and potentially offer protection against inflation—and even hyperinflation.
  • Bitcoin, however, faces risks from volatility, competitors, substitutes, regulation, and other factors; further, bitcoin may not be an appropriate or prudent diversifier for all portfolios.
  • In my view, some investors may wish to consider bitcoin, alongside other alternatives, as one component of the bond side of a 60/40 stock/bond portfolio.