Bitcoin Among Other Assets

For most of Bitcoin’s history, the framing has been either/or. Either you believe in Bitcoin or you believe in traditional assets. Either you’re a maximalist or you’re a sceptic.

The serious institutional thinking that has emerged over the past five years is considerably more nuanced.

Cash: holds purchasing power poorly over time due to inflation. Necessary for short-term expenses and emergencies. Appropriate in amounts that reflect immediate needs, not as a long-term store of value.

Stocks: ownership in productive businesses. Generate returns through earnings and growth. Exposed to economic cycles, management quality, and market sentiment. Long-term positive expected return based on business fundamentals.

Gold: store of value, monetary insurance, hedge against currency debasement. Low correlation to stocks in crisis periods. Low growth potential. High storage and custody costs.

Bitcoin: similar monetary insurance properties to gold with superior portability, divisibility, and verifiability. Higher volatility. Higher growth potential historically. Newer, less established, carries technology risk gold doesn’t.

The framework many institutional allocators have landed on: a small allocation to Bitcoin — typically in the range that serious firms discuss publicly, from 1% to 5% — can improve the risk-adjusted returns of a broader portfolio due to Bitcoin’s low correlation with other assets and its asymmetric upside potential.

This isn’t advice on how to allocate. It’s how the serious conversation is framed by the people having it professionally.

Tomorrow: what “only invest what you can afford to lose” actually means.

— The Daily Bit