BlackRock is urging investors to treat Bitcoin as a small, risk-budgeted sleeve rather than a core bet. This comes after a long run of experts in the finance sector debating what percentage of Bitcoin in a portfolio is ideal. The arguments have fluctuated over time, with some advocating for higher allocations and some advocating for lower allocations. BlackRock expert Michael Gates leans toward the latter, suggesting a smaller allocation.
BlackRock Says A Smaller Allocation Protects From Day-to-Day Risk
The message comes from BlackRock’s Investment Institute and its wider digital-assets team, led by Gates, who has reiterated that Bitcoin can function as a “complementary diversifier” for investors. In the video, Gates explained that moving with Bitcoin as part of a portfolio should be for only those who understand the asset’s volatility and can tolerate sharp drawdowns.
The BlackRock exec’s view matters because the firm sits at the center of the institutional ETF market. Its iShares Bitcoin Trust ETF (IBIT) is one of the largest spot Bitcoin products in the U.S., and the company has spent the last two years building a broader crypto product line for advisors and wealth managers. However, Gates reiterates that a 1% to 2% allocation may be the most practical way to gain exposure without putting a diversified portfolio at too much risk.
BlackRock’s latest research argues that Bitcoin should be sized by how much risk the investor is taking with such a portfolio, and not by how much potential gains they’re chasing. In the firm’s December 2024 paper, Sizing Bitcoin in Portfolios, the Investment Institute said that a 1% to 2% Bitcoin allocation can put a portfolio at risk in the same way as a single large-cap technology stock in a traditional 60/40 portfolio.
The reason for a small Bitcoin allocation is explained by the expert as being that it is very unstable compared to stocks and bonds. This difference drives home the reason behind the 1-2%, since Bitcoin is driven by adoption, supply constraints, and macro beliefs about monetary stability, not by cash flows or earnings like a company.
Bitcoin’s downside potential is higher than stocks and bonds, with bear markets seeing the cryptocurrency fall between 70% and 80% from all-time highs. While the digital asset has usually recovered, it has spent a long time doing so, and this could keep a portfolio in loss for longer than expected. That is why BlackRock’s framework caps the allocation at roughly 2% for many institutions to keep it from dominating risk in a portfolio.
Bitcoin ETF Outflows Suggest Investors Are De-Risking
According to data from the Farside Investors website, outflows continue to dominate the Bitcoin ETF net flows, and the new week has been no different. It shows that net flows came out to -$68.3 million for Monday, June 22, and -$113.8 million for Tuesday, June 23.
Interestingly, the bleeding seems to have slowed from the previous weeks, suggesting that selling pressure might be easing up. However, the Bitcoin price continues to struggle after losing the $60,000 psychological level, and the support has been broken.
So far this week, Bitwise’s BITB has attracted the most inflows, with $64 million on Monday and $31 million on Tuesday. Meanwhile, Fidelity’s FBTC has attracted $57.4 million and $23 million, respectively, but BlackRock continues to post the most outflows.
The data puts BlackRock’s outflow figures at $172 million on Monday, and an even higher $182 million on Tuesday. Nevertheless, it remains the largest Spot Bitcoin ETF issuer, boasting over 760,000 BTC in its coffers.
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