How Much Crypto Should Be a Part of Your Retirement Portfolio?

With the resurgence of the price of Bitcoin — partly driven by the January approval of spot Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) — there has been renewed interest in the crypto space as of late.

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This has also brought not only institutional legitimacy to the space but easier access to cryptocurrencies, as proven by the numbers. As of April 9, Bitcoin spot ETFs held $56.35 billion in assets under management, according to The Block data.

“Many investors consider allocating to crypto in their retirement or tax advantaged accounts given the historical tendency of crypto assets to provide outsized returns,” said Rayhaneh Sharif-Askary, Grayscale‘s head of product and research. “When making this decision, investors should consider their crypto allocation in the context of their broader investment portfolio, risk appetite and income needs.”

Grayscale is one of the firms which launched a spot Bitcoin ETF in January. As of April 9, it had $23.1 billion in assets under management.

Underscoring the growing interest, an Unchained survey found that 23% of U.S. investors who don’t own Bitcoin would consider investing in the asset via their 401(k), IRA or other retirement plan in 2024.

Now, while experts recommend diversification as a cornerstone of a safe and well-rounded retirement portfolio, advice varies when it comes to including crypto in said portfolios.

So how much crypto should be included in retirement portfolios?

Less Than 5%

Several experts argue that due to their inherent volatility, investors should allocate no more than 5% to crypto.

“The allocation of crypto in a retirement portfolio can vary depending on an individual’s risk tolerance and financial goals,” said Michael Collins, CFA and founder/CEO of WinCap Financial. “However, our general guideline would be to allocate less than 5% of the portfolio towards crypto assets. For transparency our clients do not own crypto inside their retirement portfolios as we believe we can get a better risk-reward profile out of small cap stocks.”

Grayscale’s Sharif-Askary echoed the above sentiment, saying that research suggests that approximately 5% of a…