Bigger bitcoin HODL: Time for 10% to 40% of portfolio in crypto, say financial advisor Ric Edelman

• Influential financial advisor Ric Edelman this week issued a call to hold anywhere from 10% to 40% of an investor portfolio in cryptocurrencies.
• Edelman, who heads the Digital Assets Council of Financial Advisors, has been saying for some time the traditional 60-40 portfolio of stocks and bonds is outdated because people are living too long for it to work.
• Now, he says cryptos like bitcoin that have uncorrelated returns also need to factor to an even greater extent in portfolios of the future alongside much higher equity holdings later in life.

Four years ago, financial advisor Ric Edelman went out on a limb in saying everyone should hold cryptocurrencies. But how much? Low single-digits was his recommendation.

In his “The Truth about Crypto” book in 2021, Edelman said as low as a 1% allocation was reasonable.

A lot has changed.

This week, Edelman said financial advisors should be recommending anywhere from 10% to 40% allocations to cryptocurrencies, and he is aware it's quite a shift in his own thinking.

“Today I am saying 40%, that's astonishing,” he told CNBC's Crypto World in an interview. “No one has ever said such a thing.”

But the “why” is the more important thing.

For one, it's because of the massive change, “the evolution of crypto in the past four years,” he said.

Four years ago, Edelman says, we didn't know if governments would ban bitcoin, or if the technology would be obsolete, and if consumers and institutions would adopt it.

“Today, all those questions have been resolved,” said Edelman, who heads the Digital Assets Council of Financial Advisors. “It's radically changed and is now a mainstream asset,” Edelman added.

For sure, the more mainstream crypto becomes, the more it will feature across investment portfolios. Bitcoin ETFs have been taking in billions this year, among the top asset classes in ETF inflows this year, one sign of crypto's arrival on the radar of more financial advisors and long-term investors.

The other big shift Edelman sees longer-term, and just as important to his view of crypto allocation, is the end of the traditional 60/40 model of long-term investing, with 60% in stocks and 40% in bonds, which Edelman says is obsolete due to increased longevity, and life expectancy in the U.S., that has risen from 47 in the 1900s to 85 today, and is projected to potentially reach as high as 100 over the next 30 years if technological advances related to medicine proceed.

“If you're a financial advisor and you had a 30 year-old client who was saving for their long term future, you would tell them to put 100% of their money in stocks, because they have 50 years to go,” said Edelman. “Today's 60 year-old is kind of like yesterday's 30 year-old,” he added.

“You need to get better returns than you can get from bonds and you need to hold equities longer than ever before,” Edelman said. And as that allocation model shifts away from the classic 40% bond allocation, he said crypto needs to play a much bigger role in investing.

“Bitcoin prices don't move in sync with stocks or bonds or gold or oil or commodities,” Edelman said.

He added that investors are starting to recognize it as a “wonderful way to improve modern portfolio theory statistics. ”The crypto asset class offers the opportunity for higher returns that you're likely to get in virtually any other asset class. Edelman said.

Some analysts predict bitcoin will hit $150,000-$250,000 by the end of this year and $500,000 by the end of this decade. Edelman says, “that's a conservative estimate compared to what others are saying.”

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