Bitcoin portfolio diversification is gaining traction as a strategic move for investors worldwide. The largest private bank in Latin America, Itaú Unibanco, is advocating for a Bitcoin allocation of 1% to 3% in investment portfolios. This recommendation stems from the dual benefits of asset diversification and protection against currency fluctuations.
Renato Eid, head of beta strategies and responsible investment at Itaú Asset Management, recently issued a research note underscoring the importance of a calibrated Bitcoin allocation. He emphasizes that investors should not attempt to time the market but rather maintain a long-term investment perspective.
Understanding the Role of Bitcoin in Portfolio Diversification
The concept is not to make Bitcoin the core of any portfolio but to use it as a complementary component. The aim is to achieve returns that are uncorrelated with domestic economic cycles while offering partial protection against currency devaluation. Such an approach adds significant potential for long-term appreciation.
The BITI11 fund, a Brazilian-listed ETF that offers Bitcoin exposure, is highlighted in the research note. This ETF, a collaboration between Galaxy Digital and Itaú Asset, started trading on Brazil’s B3 exchange in 2022 and currently manages assets worth approximately $115.6 million.
Bitcoin as a Hedge Against Currency Volatility
Brazilian investors face unique challenges due to currency swings, making Bitcoin an attractive option. In December 2024, Brazil’s real plummeted to record lows, reaching 6.30 per U.S. dollar. Currently, it trades around 5.42 per U.S. dollar, reinforcing the argument for holding globally priced assets like Bitcoin as a buffer against foreign exchange shocks.
This strategy aligns with Itaú’s growing involvement in the crypto space. The bank launched Bitcoin and Ethereum trading in December 2023, with itself as the custodian. New regulations in Brazil now require digital asset firms to register with the central bank, adding a layer of security for investors.
Notably, other financial giants are also recommending similar strategies. Bank of America, for instance, suggests a crypto allocation of 1-4% for its wealth clients, signaling Wall Street’s increasing acceptance of cryptocurrencies.
As the cryptocurrency market continues to evolve, a Bitcoin portfolio offers a compelling case for real diversification. It presents a unique opportunity to protect against currency volatility while potentially benefiting from significant long-term gains.
