Despite being hailed as ‘digital gold', price volatility continues to be a concern.
The conversation around cryptoassets is moving beyond the bilateral ‘believer versus sceptic’ debate to one of pragmatic implementation, according to industry players.
The change in mindset comes amid growing national-level adoption and the rollout of regulatory frameworks.
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US regulators recently relaunched ‘Project Crypto' – a rulebook for how the US could manage cryptoasset markets in the future – while, in the UK, the Financial Conduct Authority and the Bank of England have opened multiple consultations on stablecoins and other digital assets, with regulation set to come into force from 2027.
The BoE's executive director of financial market infrastructure, Sasha Mills, described the work it is undertaking as "an opportunity to build truly holistic digital financial markets in the UK".
Such signals mean crypto is becoming "just another asset class" in an investor's toolkit, according to Max Gokhman, deputy CIO at Franklin Templeton Investment Solutions.
"Already, surveys show that 20% of Americans own some digital assets, and that number increases to over 50% among younger demographics," Gokhman explained, meaning that being able to integrate the asset class into portfolios is "crucial" for wealth managers who want to remain relevant.
Yet despite being hailed as ‘digital gold', price volatility continues to be a concern.
In October, bitcoin was trading at over $126,000 but has since deflated to just over $66,000 at the time of reporting, according to data from MarketWatch.
As such, the more recent discussions have been centred around what a reasonable exposure in a portfolio could look like.
Gokhman said that for most diversified portfolios, an allocation of between 3-6% is appropriate, given that digital assets can be over four times more volatile than global equities.
But that is materially higher than the market-cap neutral point of between 1-3% cited by James Butterfill, head of research at Coinshares. He emphasised the importance of regular rebalancing and said that bitcoin's most interesting characteristic is not its returns in isolation but "how those returns interact with traditional assets".
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"Bitcoin is volatile, but that volatility is driven by liquidity conditions, real yields and adoption dynamics, rather than earnings or credit cycles. That distinction matters because it has historically resulted in low correlations to equities and bonds over full cycles, even if correlations spike during periods of acute stress," he added.
Dovile Silenskyte, director of digital assets research at WisdomTree, said the firm found that small, disciplined allocations to bitcoin have improved portfolios' risk-adjusted returns and improved Sharpe and Information ratios when rebalanced regularly.
Coinshares' Butterfill followed suit: "Long-run data shows a traditional 60/40 portfolio delivers a Sharpe ratio around 0.5-0.6. Introducing a small bitcoin allocation, typically 1-3%, has historically lifted that ratio meaningfully. In our analysis, a 2% bitcoin allocation raised the Sharpe ratio from 0.59 to 0.8."
Bitcoin can also act as a short-term diversifier for gold, according to Dhaval Joshi, chief strategist at BCA Research's Counterpoint service, meaning investors should own both.
"If you own gold, then diversify a quarter of your holding into crypto, split equally between bitcoin and ethereum. For example, an allocation of 1.25% to bitcoin, 1.25% to ethereum, plus 7.5% to gold will provide strong long-term gains with natural short-term diversification," he asserted.
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Once investors decide how much crypto to own, the next decision will be how to own it, as the product universe has expanded rapidly and quality varies widely.
It is crucial not to treat digital assets as a monolith or as simply a speculative vehicle, said Franklin Templeton's Gokhman, as there is significant diversification within the asset class.
"Aside from the behemoths of bitcoin and ethereum, there are viable tokens across sectors like cryptocurrencies, smart contract platforms, decentralised finance, consumer and utilities," he explained, adding that products that operate within established regulatory frameworks with clear disclosures, known custody arrangements and defined liquidity terms are generally more appropriate for adviser-led portfolios.
For most investors, however, exchange-traded products offer the cleanest solution, said WisdomTree's Silenskyte, as they provide familiar access, integrate seamlessly into portfolio and risk systems, and remove the operational burden of wallets, keys and on-chain security.
"Crypto has crossed the threshold from optional to accessible," she noted. "The real risk today is ignoring an asset class that is already reshaping diversified portfolios."
