Should we hold bitcoin in our portfolios?

At its core, a multi-asset portfolio holds equities to generate returns, and diversifying assets to smooth the journey and protect in market drawdowns. So, the first question is whether bitcoin is a genuine diversifier for equity risk?

We don’t have anywhere near as much price history to analyse for cryptocurrencies as we do for bonds or gold, but if we examine the correlation between bitcoin returns and global equity returns over the past five years, it has been positive. This means that, usually, when equities go up or down, so does bitcoin. The relationship has been far from perfect though, with a correlation coefficient of between 0.1 and 0.5. Any asset with correlation less than 1 can have diversifying properties for a portfolio, so this doesn’t look terrible for bitcoin, even if it’s not a ringing endorsement.

However, a simpler approach of looking at a price chart might make you more cautious – bitcoin looks an awful lot like equities. So, while their mathematical correlation may not be that high, their peaks and troughs seem to coincide an uncomfortable number of times.

The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance. The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Source: Quilter and Bloomberg as at 25 September 2025. Price of Bitcoin and MSCI ACWI in US dollars over period 25 September 2020 to 25 September 2025.

So, really, bitcoin is a highly volatile risk asset rather than a diversifier to equity risk. This might change as adoption becomes more widespread, but at the moment its ‘digital gold’ moniker, insofar as it relates to real-world price movements, feels a little fanciful.

An important reason given for gold’s rally over the past two years links to how heavily indebted developed market governments are, and that they show no signs of reining in their spending. Many suggest the only politically feasible solution to the problem of an ever-growing interest burden stifling growth is to inflate away the debt, thus vastly devaluing existing fiat currencies. We have a lot of sympathy for this line of thinking, even if we wouldn’t necessarily take it to such extremes as the ‘tin-hat wearers’ do.

However, if this is your investment thesis, there are other ways to gain exposure to the theme. Buying inflation-linked bonds may be one such way, or investing in less indebted emerging markets. And, of course, buying gold. Even if bitcoin can be characterised as digital gold - which we aren’t quite sold on yet - for now, we are content with holding good old-fashioned physical gold instead.