Bitcoin went up in 2024. How much – if any – should you own?

Bitcoin prices will rise in 2024. But you may want to be careful before euphoria takes you on a quick buying spree.

Bitcoin and other crypto should usually be accounted for just a slice of investors' portfolios – usually no more than 5% – due to its volatility, according to financial experts.

Some investors may be wise to stay away from it altogether, they said.

“You don't get the same amount of satisfaction in bitcoin as you used to Nasdaq or the S&P 500,” said Ivory Johnson, certified financial planner and founder of Delancey Wealth Management, based in Washington, D.C.

“When you have a truly volatile asset class, you need less of it in the portfolio to have the same impact” as traditional assets like stocks and bonds, said CNBC's Johnson. Financial Adviser Council.

Bitcoin was the largest cryptocurrency the best investment of 2024, with a long view. Prices were up about 125%, ending the year around $94,000 after starting in the $40,000 range.

In contrast, the S&P 500, the US stock index, increased by 23%. The Nasdaq, a tech-heavy stock index, rose 29%.

Prices rose after Donald Trump's US presidential election victory. His administration is expected to adopt deregulation policies that would boost crypto demand.

Last year, the Securities and Exchange Commission also approved – for the first time – exchange-traded funds that invest directly in bitcoin and ether, the second largest cryptocurrency, making it easier for retail investors to buy crypto.

But experts warned that high profits could pose a fundamental risk.

“With high returns comes high risk, and crypto is no exception,” said Amy Arnott, portfolio strategist for Morningstar Research Services. write in June.

Bitcoin has been nearly five times as volatile as US stocks since September 2015, while ether has been nearly 10 times as volatile, Arnott wrote.

“A portfolio weighting of 5% or less seems sensible, and many investors may want to skip cryptocurrency altogether,” she said.

Bitcoin 64% and 74% lost of its value 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 its added risk — but that's not because that pattern will continue, Arnott said.

There are several reasons for this: Crypto has become less valuable as a portfolio diversifier as it has become more mainstream, Arnott wrote. Its popularity among speculative buyers also “makes it likely to eventually burst price bubbles,” she said.

BlackRock, a money manager, believes there is a case for owning bitcoin in a diversified portfolio, for investors who are comfortable with the “risk of rapid price falls” and believe that wider acceptance, experts at the BlackRock Investment Institute write early December.

(BlackRock offers a Bitcoin ETF, the iShares Bitcoin Trust, He will go.)

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A 1% to 2% allocation to bitcoin is a “reasonable range,” BlackRock experts wrote.

Going further would “significantly increase” bitcoin's share of overall portfolio risk, they said.

For example, a 2% bitcoin allocation accounts for about 5% of the risk of a traditional 60/40 portfolio, which BlackRock estimated. But an allocation of 4% increases that number to 14% of total portfolio risk, he said.

“In Vanguard's view, crypto is more of a speculation than an investment,” Janel Jackson, Vanguard's former global head of ETF Capital Markets and Broker & Index Relations, write in January 2024.

Stock investors own shares of companies that produce goods or services, and many investors receive shares; bond investors receive regular interest payments; and goods are real assets that meet consumption needs, wrote Jackson.

“Although crypto is classified as a commodity, it is an immature asset class with little history, no intrinsic economic value, no cash flow, and potentially damaging inside a portfolio,” wrote Jackson, who is now an executive in the company's Financial Advisory Services unit.