Will cryptocurrencies ‘come of age’ and become an everyday store of wealth, like traditional bonds, equities and gold?
In May 2025, the market capitalisation of Bitcoin, the best-known digital currency, reached a new milestone of USD 2 trillion. To put that figure into perspective, the entire stock of physical US cash money - dollars and cents - in circulation today is also about USD 2 trillion.
That said, Bitcoin - which we will refer to here as the representative cryptocurrency - and dollars are not interchangeable. Everyday purchases by households, businesses, and government in the USA are still made in dollars, not Bitcoin. But all currencies have uses beyond simply being a method of payment.
So, the question is: are Bitcoin and other digital currencies also a good store of wealth? And is Bitcoin an asset that investors can use in their portfolios to achieve better returns, while lowering portfolio volatility?
Although Bitcoin was the first cryptocurrency, it is a relative newcomer among global currencies. However, we believe it's becoming a legitimate store of wealth that can and should be included in asset allocation analysis.
Of course, there are plenty of caveats. Bitcoin and other crypto assets are not appropriate allocations for every investor, and their inclusion will always depend on an investor's risk tolerance within a diversified portfolio.
A beneficial source of wealth can take many forms. For simplicity, we divide all assets into two groups: those that generate cash flow through dividends or interest payments, and those that do not. Bitcoin, physical currency, and gold do not yield any form of payment, while bonds and equities can do so.
In investment analysis, well-established mathematical models are used to determine the theoretical fair value of assets that pay an income. Non-cash-generating assets do not offer investors the same convenience. While fair value calculations are often subject to debate, they still form an anchor for determining what an asset is worth, which is the first step in establishing a store of wealth.
Too early to rely on, too relevant to ignore.
In our view, Bitcoin has started to meet the definition of a store of wealth. This shift has only occurred recently, thanks to new laws and regulations in key financial jurisdictions such as the USA. This has helped to bring Bitcoin out of the shadows and into the mainstream.
That said, investors need to be aware of the historical volatility of Bitcoin, which has seen large price swings and drawdowns (falls in value from the previous peak). Recently though, the price oscillations have become narrower, which arguably makes this asset more attractive to own as part of a diversified portfolio. This may be a result of larger institutional investors entering the market for Bitcoin, plus the launch of exchange-traded funds on Bitcoin, which make it easier to invest in this asset.
It is also worth noting that Bitcoin is now sufficiently widely used for traditional investment analysis to be applied to portfolios that include it. One such study found that the return on a diversified portfolio would be enhanced by a small allocation to Bitcoin.
Digital assets like Bitcoin aren’t likely to form the backbone of investor portfolios any time soon. Still, the crypto asset class is developing quickly and may offer interesting opportunities to investors for whom the risk profile is appropriate.
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