Advisors Wonder: How Does Bitcoin Fit Into a Portfolio?

Advisors Wonder: How Does Bitcoin Fit Into a Portfolio?

As a spot bitcoin ETF seems close to reality, traditional portfolio construction may be set for a remake.

Wealth Management Editor
Reviewed by: Staff
Edited by: Ron Day

As the first spot bitcoin ETF inches closer to reality, with a launch expected as early as January, the next issue likely confronting financial advisors is where a cryptocurrency investment fits in a diversified portfolio. 

While there remain vocal swaths of the wealth management industry that continue to stiff-arm crypto as risky, untested and obscure, the general expectation is that the tide will start turning when bitcoin is wrapped inside exchange traded funds, a preferred vehicle among financial advisors. 

Digital currencies are the first new asset class since oil became a traded commodity in the 1850s, as crypto expert Ric Edelman pointed out. With that in mind, even advisors willing to test the crypto waters need to first find a place for it in client portfolios. 

“Bitcoin fits in the alternative sleeve,” said Andrew Herzog, associate wealth advisor at The Watchman Group. 

“The fact remains that bitcoin has proven itself to be volatile, so an allocation of 1% to 5% could be appropriate for most people,” he added. “Bitcoin is still discovering what kind of asset it is exactly and arguments abound on how to value it properly.” 

Bitcoin: New Headaches for Financial Advisors 

While the price of bitcoin is up more than 27% over the past month and 118% over the past 12 months, the price just over half of where it was two years ago. That kind of volatility is what has advisors warning clients to stay away in no uncertain terms. 

“We don’t get involved with crypto at our shop,” said Chuck Failla, founder and chief executive of Sovereign Financial Group. 

“For me, at this stage, I see investing in crypto now would lead to a massive win, or a massive loss, and that’s just not a risk-return profile we’re interested in,” he added. “That said, I am actually up 38% on my personal position in crypto, which is valued at a whopping $185.13.” 

Along the same lines, Francisco Ayala, financial life planner at The Coleridge Group, said bitcoin “belongs in the greater-fool portion of a client’s portfolio along with gold and collectables.” 

“The value of these securities is based on what the next person is willing to pay for them, so if you want to profit from them, you’ll have to find a greater fool,” he said.

Meanwhile, Nick Rygiel, founder of Ironclad Financial, opts for a different tack when it comes to cryptocurrency investing. 

Fidelity Classifies Bitcoin Alongside Gold 

Citing research from Fidelity Investments, Rygiel said, “a mere 1% allocation to bitcoin has been equated to the impact of a 4% position in gold.” 

“This implies that for clients looking towards alternative investments, a small bitcoin allocation could play a significant role, akin to a larger gold investment,” Rygiel added. “Such a strategy highlights bitcoin's potential in diversification, while also underlining the importance of carefully balancing risk in line with individual client profiles and objectives.” 

Paul Schatz, president of Heritage Capital, describes himself as being “in the crypto camp for 2.5% to 10% of a client’s portfolio, depending on risk tolerance and time horizon.” 
“I put it in the extremely aggressive alternatives category,” he added. “I came into 2023 looking for a 100% rally in bitcoin, and when it did that so early in the year I was dumbfounded.” 

However advisors are using and allocating crypto exposure, Asher Rogovy, chief investment officer at Magnifina LLC, insists digital currencies should not be viewed as securities in the same way as stocks or bonds in a portfolio. 

“Stocks provide a share of dividends as well as shareholder votes, and bonds provide loan repayments with more senior creditor rights,” he said. “These intrinsic values are transparent which allows the market to put a fair price on them known as the risk premium.” 

By contrast, Rogovy puts crypto in a category alongside things like commodities and art that are “worth only what the next buyer is willing to pay for them.” 

“This allows better traders to profit from worse traders,” he added. “However, ultimately, there is no intrinsic value and market prices may be extremely volatile.” 

Contact Jeff Benjamin at [email protected] and find him on X at @BenJiWriter  

Jeff Benjamin is the wealth management editor at, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.