A slice of Bitcoin gives a big portfolio boost

^{By Maximiliaan Michielsen}

One of the most common questions investors ask is: What happens if I add Bitcoin to my portfolio, and how much should I allocate to it?

Here’s what our analysis shows.

Correlation: Where crypto stands apart

Understanding how assets move in relation to one another is central to portfolio construction. Correlation analysis helps reveal whether a new asset amplifies existing risks or introduces meaningful diversification. To assess crypto’s fit, we examined a broad set of assets:

_{Figure 1: Correlation Analysis Asset Universe}

^{Source: 21Shares, Bloomberg, Yahoo Finance, Coingecko} 

From July 1, 2022, to June 30, 2025, Bitcoin, Ethereum, and the broader crypto market maintained consistently low correlations with traditional asset classes. Bitcoin averaged 30%, Ethereum 34%, and the broader crypto market just under 35%. In contrast, traditional assets often clustered above 50%. 

This makes crypto one of the few assets that can move differently from traditional investments like stocks or bonds. For investors, that’s a big deal as it means crypto can help diversify a portfolio and reduce overall risk.

_{Figure 2: Correlation of Returns Across Asset Classes: July 1, 2022 - June 30, 2025}

^{Source: 21Shares, Data from Bloomberg and Yahoo Finance. Correlation calculated on a 10D rolling return window from July 1, 2022, to June 30, 2025. Color Description: Yellow denotes high correlation across assets, grey denotes low or negative correlation across assets.}

What happens if you add 5% Bitcoin to your portfolio?

Correlation is one thing, but how does crypto actually affect portfolio outcomes? To answer that, we built a balanced, multi-asset model portfolio designed to reflect the complexity of today’s investor allocations. Rather than relying on the traditional 60/40 split, we used a more modern framework:

_{Figure 3: Model Portfolio}

^{Source: 21Shares, Bloomberg, Yahoo Finance, Coingecko.} 

To understand how crypto might fit in, we tested a 5% allocation in Bitcoin. The weight was sourced from US equities (2%), gold (2%), and real estate (1%) to reflect Bitcoin’s hybrid nature: part asymmetric growth potential, part emerging store of value, and potentially viewed as part of an alternatives sleeve.

Stronger risk-adjusted returns: As shown in Figure 4, introducing a 5% Bitcoin allocation led to a clear uplift in both returns and efficiency. Cumulative returns rose to 65.34%, a gain of more than 20% over the benchmark. 

Sharpe ratios improved even more dramatically, reinforcing that expanding exposure beyond a minimal allocation can strengthen overall performance.

Volatility remains manageable: Furthermore, annualized volatility remained stable. Across all strategies, it ranged from 10.74% to 11.76%, only slightly above the benchmark’s 10.34%, and still well within traditional risk tolerances. 

This echoes a key finding: Bitcoin’s historical volatility doesn’t scale linearly at the portfolio level, especially when it’s a modest allocation within a diversified mix.

_{Figure 4: Simple Growth Portfolio with a 5% BTC Allocation Across Different Rebalancing Strategies}

‍Well-contained downside risk: A common concern with crypto exposure is increased drawdown risk. Yet even at 5%, drawdowns remained tightly clustered. The worst-case scenario saw a max drawdown increase by just 0.52% at -15.43% versus the benchmark’s -14.91%. Most rebalanced strategies stayed even closer. 

The key takeaway? Adding a small amount of Bitcoin to your portfolio doesn’t significantly increase risk. Historically, it boosted your returns while still staying within the safety limits of a typical investment strategy.

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_{Figure 5: Simple Growth Portfolio with a 5% BTC Allocation Across Different Rebalancing Strategies}

The Real risk? Missing the opportunity

Crypto is still growing, and any investment should match your goals and risk comfort. But two things stand out: Bitcoin is getting less volatile, and its price trend is moving up.

Want to see the full analysis? Check out our Q2 Portfolio Allocation Report for detailed backtests and examples.

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