"Any allocation to cryptocurrency is likely to increase a portfolio's volatility, pointing to historical drawdowns that have exceeded 70% for both Bitcoin and Ethereum in past cycles."
"The core message is not a warning to avoid crypto, but a reminder that its role changes depending on how it is used."
"Instead of forecasting returns, investors set a 'risk budget,' deciding how much total volatility they are willing to let crypto contribute."
Charles Schwab's research emphasizes that cryptocurrency allocation in portfolios should be based on an investor's ability to handle volatility. Bitcoin and Ethereum, while often small satellite positions, can significantly impact portfolio behavior, especially during market stress. Even minimal allocations of 1% to 3% can increase volatility and reshape performance. The report suggests using a 'risk budget' approach, focusing on acceptable volatility rather than predicting returns, highlighting that there is no universally correct allocation for cryptocurrencies.
Read at Bitcoin Magazine
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