A Roadmap to Crypto Portfolio Allocation

By Nick Marshall


There’s a compelling reason why serious investors are increasingly looking to add crypto assets to their portfolio. The potential returns are off the scale. While the S&P 500 delivered a creditable 277% ROI over a 10-year period, Bitcoin posted a 437,171% increase. That kind of performance is unlikely to go unnoticed and it’s why national treasuries, big banks and respected institutions are now placing their assets in crypto. The caveat is that crypto is considerably more volatile as an investment and does not carry the same level of regulatory support that stocks and bonds enjoy. The solution? Diversify your portfolio allocation. Here’s how to spread your crypto assets. 

What Is Portfolio Allocation in Investing?

Any prudent investor will aim to limit their overall exposure by diversifying their investments across a broad range of assets. That way, rapid growth in some will balance out losses in others. The goal is to match your assets to your risk appetite. Pension and life insurance funds, for example, tend to find a home in stable, long-term bonds and blue chip stocks, whereas day traders hunt in packs for the high-risk assets that can yield sensational returns. 

A 2019 study by Yale recommended investors place between 4% and 6% of their overall portfolio in crypto, alongside the conventional mix of stocks and bonds. That’s faithful to the conventional Five Percent Rule which dictates that investors should place no more than 5% of their portfolio in risky assets. For now, cryptocurrency falls into the risky asset category, given that Bitcoin and other types of cryptocurrency are famously volatile and do not carry the backing of a central bank. 

How Does Crypto Portfolio Allocation Work?

The first step in portfolio allocation is learning how to read crypto charts. These give a picture of current market trends — whether it’s a bull or bear market, for example — and vital clues as to whether it’s time to buy, sell or “hold on for dear life” (HODL). On that note, it’s also worth familiarizing yourself with some common crypto-trading slang to avoid finding your portfolio “rekt.” Beyond the crypto-specific lingo, if you can read a stock chart, you will be able to track a crypto chart without difficulty. It’s a market like any other, with long-term trends, sudden crashes and spikes, and gradual consolidation of capital around currencies that consistently deliver returns. 

Value of Crypto Allocation

The overall value of the cryptocurrency market briefly topped $3 trillion in 2021, with Bitcoin accounting for $1 trillion of that value. While Bitcoin, Dogecoin and Ethereum tend to grab the headlines, it’s easy to forget that there are more than 10,000 cryptocurrencies in use, giving investors an almost infinite range of portfolio allocation opportunities. Instead of putting all their financial “eggs in one basket”, prudent investors typically spread their assets across a broad range of cryptocurrencies:

  • Blue chips – Those with a market capitalization of $10 billion+, such as Bitcoin, Ethereum, Cardano etc.
  • Mid caps – Those with a market capitalization between $1 billion and $10 billion. They offer a higher reward at a higher risk.
  • Small caps – The cryptocurrencies below $1 billion in market capitalization. Many of them have a single defining feature or purpose, but a common thread is a risk level that would best be described as extreme. 

How To Properly Allocate Portfolios

The same principles in crypto portfolio building apply as in conventional stocks and bonds. The bulk of assets will be allocated to blue chip currencies, such as Bitcoin and Ethereum, which have a sizable investment following and track record (even if it is volatile). A smaller part of the portfolio can be saved for the unicorns, getting ahead of the curve to spot an emerging cryptocurrency on the rise. In between, there are the stablecoins such as USD Coin and Tether, which are pegged to a fiat currency and (in theory at least) offer greater stability for the wary investor. Each currency has its own features and benefits. Knowing whether a currency is capped (eg. Bitcoin) or unlimited (eg. Dogecoin) is an important factor to consider, for example, when planning future portfolio allocation. 

The fundamentals of portfolio management:

  • Know the values – keep a track of current market prices from a single dashboard using a platform such as Live Coin Watch
  • Do your research – before diving in, pore over the historical values, research reports, and currency roadmap as you would with any major investment. 
  • Follow the news – a single Tweet can move markets, and it happens fast. Being off the pace in crypto can be an expensive weakness. 
  • Stop losses – if your risk appetite is minimal, consider placing stop-loss orders to limit your losses if the market goes wild. 

Whatever the size and allocation of your portfolio, the risk is unacceptable if you can’t establish title to your assets. Find out how TransitNet created the first offchain title registry in cryptocurrency and how you can secure your assets across your portfolio.

Disclaimer: This article does not constitute financial advice and may not be applicable to certain situations. Please seek advice from a licensed financial advisor regarding investing and crypto portfolio allocation.


Nasdaq – Bitcoin Vastly Outperformed Gold and S&P 500 Over the Past Decade

Forbes – National Governments Around The Globe Look To Embrace Blockchain

Analytics Insight – 10 Banks That Have Invested in Cryptocurrencies and Blockchain

Coindesk – How Much Crypto Should Be in a Portfolio?

Investopedia – Five Percent Rule

CNBC – From bitcoin hitting $1 trillion in market value to Elon Musk’s dogecoin tweets: 12 key crypto moments from 2021

Live Coin Watch – Cryptocurrency Prices Live

Reuters – How tweets by Tesla’s Elon Musk have moved markets

NextAdvisor – How Much to Invest in Cryptocurrency, According to 5 Experts