Coinbase (Nasdaq: COIN) thinks allocating only 5% of your portfolio to Bitcoin could do wonders.
Coinbase Asset Management published a report on Aug. 12 in which it recommended five investing strategies to diversify into cryptocurrency.
The simplest way forward is adding Bitcoin to a portfolio, Coinbase said, and recommended a 5% allocation to Bitcoin, as it greatly enhances returns and capitalizes on its 73% compound annual growth rate (CAGR) from January 2017 to June 2025. The king coin has generated a return of 14.28% during the same period.
The report argued that a 5% allocation to Bitcoin instead of bonds outperformed the standard 60/40 equity-bond benchmark from 2018 onwards.
Coinbase also recommended allocating 10% of a portfolio to Bitcoin and gold. Bitcoin is called the “digital gold,” which, following the bullion’s footsteps, has become a store of value.
With gold’s market cap at $20 trillion and Bitcoin’s market cap at $2 trillion, the assets are among the most valued in the world. Coinbase created a store of value index composed of Bitcoin and gold in which the former’s weight increases as its volatility decreases.
Data suggests that the index outperformed the 60/40 equity-bond benchmark from 2020 onwards.
Coinbase recommended another way for investors to gain exposure to cryptocurrency. It created a “MAG7 Crypto Basket” composed of equally weighted stocks of companies that are dedicated to crypto or exploring crypto technologies.
The basket is composed of the following stocks: (i) the world’s leading asset manager, BlackRock (NYSE: BLK), which issues crypto ETFs, (ii) Jack Dorsey’s Bitcoin-centric fintech company, Block Inc. (NYSE: XYZ), (iii) Coinbase (Nasdaq: COIN) itself, which is the largest crypto exchange in the U.S., (iv) Circle (NYSE: CRCL), the crypto firm behind the second-largest stablecoin USDC, (v) the Bitcoin mining giant MARA Holdings (Nasdaq: MARA), (vi) the leading Bitcoin treasury firm, MicroStrategy (Nasdaq: MSTR), and (vii) the fintech firm PayPal (Nasdaq: PYPL), which also issues a stablecoin.
While the risk-adjusted results of MAG7 outperform Bitcoin as a standalone asset, the drawdown is much more severe.
“Bitcoin’s fixed supply and decentralized nature position it as a hedge against higher inflation, enhancing portfolio resilience,” the report said.
