The Bitcoin camel
🔸 Plus: It's possible to train a baboon to read a scatterplot chart 🔸 The under 40s own just 4% of the nation’s wealth 🔸 Gen-Z is pushing the boundaries in what they wear at work 🔸
Your 2-minute guide to demystifying money and making you richer
The markets, year-to-date
S&P 500: 6,101.24 ⬆️ 3.73%
FTSE 100: 8,502.35 ⬆️ 2.93%
Bitcoin: $105,163.90 ⬆️ 12.52%
GBP to USD: $1.2485 ⬇️ 0.27%
GBP to EUR: €1.1881 ⬇️ 1.75%
(As of Friday market close.)
The Bitcoin camel’s nose is now firmly inside the tent
Back in March 2024, we told you that professional investment managers recommend that no more than 3% of your savings should be in Bitcoin.
Since then, things have changed.
The price of Bitcoin was $67,000 when we wrote those words. It’s over $105,000 now. And we have a new U.S. president who has launched at least three crypto tokens of his own — $TRUMP, $MELANIA, and $WLFI. Collectively, the president’s future net worth on paper in crypto is already somewhere in the billions depending on whose estimate you go with. His administration has promised to be much more friendly to crypto.
Trump is guaranteed to be pro-crypto because his current crypto holdings are already worth $388 million.
With crypto prices heading north and the U.S. president personally invested in not spoiling the party, it turns out that the professionals have changed their mind. They’re lining up to sell crypto to investors who are trying to build retirement savings. Here is a list of more than 30 platforms who recently applied to offer Bitcoin ETFs to retail investors, for instance.
And that “under 3%” recommendation is now history. More investment managers are recommending that greater amounts of your savings go into crypto. The crypto camel’s nose is now well and truly inside the traditional finance tent.
This is a very bad idea, as we will explain
First some examples:
BlackRock is staying old school, recommending only 2%.
Fidelity is now recommending up to 5%, up from 2-3% last year.
Here is a study from Yale that recommends 6%.
And waaaaay out on a limb is Ark Invest, which in 2024 recommended that the ideal allocation should have been just under 20%.
This is madness
And there is one very good reason it’s madness: volatility.
Bitcoin — or any cryptocurrency — tends to experience wild price swings. Bitcoin has more than once lost more than 75% of its value. Under no circumstances should a significant chunk of your net worth be stored in an asset that can wipe out three-quarters of your savings in a few days.
But it gets worse than that
While Bitcoin has certainly gone up — making your annoying crypto friends very happy — its price swings wildly on a day-to-day basis, adding a ton of extra volatility risk into your portfolio. Morningstar did the maths to find out how much volatility you add to your savings the more Bitcoin you own, assuming you’re saving into a traditional 60/40 stock and bonds portfolio.
If you’re only holding 1% or 2%, it doesn’t make much difference, the numbers show. But once you go over 5%, your Bitcoin now generates over 20% of your risk:
“At 5%, the bitcoin allocation contributes over 20% of the portfolio’s total risk and produces a volatility that’s roughly 16% over the 60/40 portfolio. A 10% allocation increases volatility by 41%. With a 25% allocation, the contribution to risk leaps to 83%.”
Having 25% of your assets generate almost all the volatility in your savings is clearly bonkers. Bottom line: Do not to put any money into crypto that you wouldn’t be comfortable losing at a casino.
The Moneyin2 Guide to Wealth
The Moneyin2 Guide to Wealth will get you the biggest return on your savings by maximising cash matches from your employer, free cash from the government, and shielding your investment gains from tax. It takes you step-by-step through the world of pensions, SIPPs, ISAs and ETFs — all in plain English.
And for dessert …
Crypto industry insiders are worried that President Trump’s new crypto coin launches will make the industry look bad.
It is possible to train a baboon to identify a trend in a scatterplot. And some baboons are better at it than humans.
People aged under 40 now own just 4% of the nation’s wealth, according to the International Longevity Centre UK.
Gen-Z is pushing the boundaries in what they wear at work.
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