Financial Advisors Must Evolve and Allocate to Bitcoin

A 3-part series to help Financial Advisors understand how bitcoin offers substantial benefits to a modern portfolio

article-image
share

key takeaways

  • A considerable rise in inflation may cause equities & bonds to fall together
  • Defensive assets like volatility, gold and now Bitcoin must be considered to diversify portfolios

Part 1: The Macro

The rise of Bitcoin from a misunderstood asset on the fringe of finance to a Global Macro Asset that has earned a role on corporate balance sheets and investor portfolios was one of the top stories in 2020. 

This has forced investors and wealth managers to understand how Bitcoin works and establish what role it should play as an allocation moving forward. As part of this process, it’s important to take a step back and consider why Bitcoin has evolved as a macro asset and why it’s being included as an allocation in the modern portfolio.

For the past 40 years, we’ve experienced the greatest bull market in financial history. Stocks, bonds, and real estate have enjoyed unprecedented performance as a direct result of central bankers aggressively cutting rates from 19% in 1981 to 0% by the end of the financial crisis.

Since March 2009, we’ve witnessed the longest bull market in history with stock prices, valuations and corporate debt to GDP levels all at record highs. Bonds have had nearly an uninterrupted run thanks to easy money central bank policy and QE. 

Bailouts and an explosion of the supply of the monetary base at a rate of over 22% a year, caused cattle prodding investors to over allocate to risk assets like stocks, bonds, and real estate. As a direct result, our interpretation of a Modern Portfolio has lulled into treating this as the norm.  

In an environment where monetary and fiscal policy is anything BUT the norm, we need to begin thinking differently. As financial advisors, our job is to provide comprehensive investment management and financial planning to clients by considering all of the information available. This includes helping clients construct portfolios that include assets that will perform well when stocks and bonds don’t. 

We are in an environment where central bankers are intentionally trying to create inflation through the debasement of our currency and politicians are trying to stimulate the economy through debt funded stimulus to create growth.

The overall increased risk exposure to stocks and chasing yield creates a systemic form of risk that also puts one’s savings and investments at risk. Historically speaking, portfolios built primarily around stocks and bonds struggle in periods where interest rates are close to zero (1930s U.S., post 1990 Japan, Europe today) as well as when inflation is rapidly rising (the U.S. in the 1970s). In these scenarios, bonds can become correlated to risk assets like stocks and real estate causing them to all decline at the same time.

Any meaningful uptick in inflation and growth will result in a backup in treasury yields that will have a knock on effect in all risk assets. Defensive assets like volatility, gold and now Bitcoin must be considered to diversify portfolios, smooth out returns and provide dry powder in periods of volatility.

The rise of Bitcoin as a legitimate macro asset over the past 12 years is no coincidence. Launched on Jan 3, 2009 as a direct response and solution to central banks bailing out Wall Street, it’s evolution from magic internet money to a non-sovereign, hard capped fixed supply, decentralized form of money gives it the potential to compete and capture a share of some of the largest markets in the world (Store­ of­ Value – Gold, Global Bonds, Real Estate and Broad Money). 

It is improving the efficiency and accessibility of our global financial system. Not only does it solve real world problems but its ability to preserve wealth and take power from the state benefits individuals in the process.

In part 2 of this series publishing on Monday, we will quantitatively discuss the right allocation to bitcoin for a portfolio.

For the other articles in this series please see:

Part 2: What Is The Right Allocation to Bitcoin?

Part 3: How Do Financial Advisors Get Compliant to Buy Digital Assets?

Tags

    Decoding crypto and the markets. Daily, with Byron Gilliam.

    Upcoming Events

    Old Billingsgate

    Mon - Wed, October 13 - 15, 2025

    Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

    recent research

    Unlocked by Template (10).png

    Research

    Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

    article-image

    The Stripe-acquired firm has big plans for a streamlined, multi-wallet future

    article-image

    Both founders of the former crypto lender have now landed in new crypto industry roles

    article-image

    Bitcoin’s recent peak is a victory lap for curvers left and right

    article-image

    Securitize CEO Carlos Domingo says institutions are eager to get exposure to tokenization

    article-image

    Trade isn’t war and prosperity isn’t a contest