The investment interview around Crypto has been transferred from questioning the survival of cryptocurrencies to discussing effective allocation strategies. Most notably, institutional investors move on from testing the water with Bitcoin to seeking diversified exposure to the wide crypto market.
With a total market capital of over $ 3 trillion, Cryptocurrencies represent approx. 1.5% of the market portfolio of all listed, invested assets that are easily accessible to investors (Bloomberg, Wisdomtree, 1/31/2025).
You read Crypto Long & Short, our weekly newsletter with insight, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.
Figure 1: The market portfolio
Source: Bloomberg, Wisdomtree. Data per 31 December 2024. Market caps are shown on USD billions. Historical performance is not an indication of future performance and any investment can fall in value.
IN 2024, institutional investors began to recognize that market -neutral position for multi -assets with multiple assets involves investing about 1.5% in cryptocurrencies, as determined by the market portfolio. They also realized that including cryptocurrencies in diversified portfolios with multiple assets can also improve their risk/return profiles.
While awarding approx. 1.5% for Cryptocurrencies became a reasonable strategy for investors without a specific investment tense against the asset class, a question arose as to whether investors should award 1.5% to Bitcoin or diversify this allocation across multiple cryptocurrencies.
Figure 2: Cryptocurrency Market Coats
Source: Artemis Terminal, WisdomTree. Per. 31 January 2025 using US Dollar Market Hoods. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment can fall in value.
For background, Bitcoin dominates the cryptocurrency market and accounts for 55% of the total market value. The next 19 largest cryptocurrencies make up around 33%, while the remaining 12% are distributed between all other cryptocurrencies.
This distribution has given rise to a debate among institutional investors about the optimal approach to crypto investment. Attorneys for a focused strategy often advocate the idea of investing exclusively in Bitcoin. This preference is largely driven by Bitcoin’s established Track Record and its view as a digital store with value similar to gold. Bitcoin’s resilience and historical achievements have made it an attractive opportunity for those seeking a relatively secure entry into the world of crypto courses.
However, there are also strong proponents of diversification. These investors claim that spreading investments across a basket of cryptocurrencies can utilize the growth potential of new digital assets while reducing the risk of volatility in a single cryptocurrency. By diversifying, investors can potentially benefit from the increase in new innovative projects and technologies in space and adapt their portfolios with the broader development of the digital economy.
Ultimately, the decision to focus only on Bitcoin depends or by adopting a diversified investment strategy of individual investor preferences, risk tolerance and market prospects. Investors without a strong statement about the long -term crypto market winners seeking a long -term investment can find a market capital -weighted approach to diversification that is advantageous. As space matures, investors are likely to seek allocations that develop over time as the wider cryptocurrency market.
This material is prepared by Wisdomtree and its affiliated companies and is not intended to be dependent on as a forecast, research or investment advice and is not a recommendation, offer or request to buy or sell securities or adopt any investment strategy. The expressed statements are from the date of production and may change when subsequent conditions vary. The information and statements in this material are derived from proprietary and non-proprietary sources. As such, there is no guarantee of accuracy or reliability, and no responsibility that arises in any other way for errors and omissions (including responsibility to any person due to negligence) is accepted by Wisdomtree or any affiliated company or any of their officers, employees or agents. Dependence on information in this material is at the reader’s only estimate. Previous performance is not a reliable indicator of future performance.
