Cryptocurrency's Role in Modern Portfolios: Strategies for Success

Cryptocurrencies like Bitcoin have hit unprecedented stock price levels since Election Day. The driving force behind the upward trend may be the incoming presidency’s pro-crypto policies. Before Election Day, the Bitcoin price tracker was hovering between $60,000-$70,000. Since the new administration's inauguration, stock prices have soared to over $100,000 and show no signs of slowing down.

Bitcoin has the most name recognition, so investors new to the crypto market feel safer investing in the digital currency. Market sentiment shows that some investors buy Bitcoin because of its upswing while others invest in it because of the risk factor, equaling high returns. Both sentiments affect the overall price, which has seen record highs recently.

Bitcoin has seen exceptional growth since 2009 and is expected to be a major player with its adoptability, decentralized properties, and underlying technology of blockchains. When Bitcoin came out in 2009, it was virtually worthless regarding investor risk. Now, a single coin is valued at over $100,000 and growing exponentially.

There are thousands of cryptocurrencies on the market, and those who invested in Bitcoin in the early days made significant gains off of the coin. When the Federal Reserve Bond raised interest rates, it lowered the present value of a risk asset. However, cryptocurrency saw a sharp rise in value when the inflation rate eased. Experts predict this is more than a trend; cryptocurrency will be a player in the stock market and not just an outlier.

High spikes in trading volume and low volume equally correspond to market volatility. Crypto markets are notoriously volatile and have always been considered a risky bet. While this can reap high returns, many investors are leery of the relatively new technology, and this hesitance affects crypto prices.

Bitcoin (BTC) has historically seen over eight 50% corrections in its 15-year existence. However, crypto is becoming mainstream faster than new technologies like the internet when it came out. Institutional crypto adoption is increasing, and prior derivatives were at an early development stage, constraining investors from adopting the currency. Supply and demand are huge factors in any market, and crypto is no different.

The pressure on digital currency is higher when large holders, called whales, buy or sell large amounts of an asset. Crypto markets are inefficient enough to absorb the supply and demand shocks, impacting their overall price significantly.

The overall institutional crypto adoption means it is no longer a niche asset. Portfolios with Bitcoin allocations are outperforming those that do not hold the digital currency. The US's launch of exchange-traded funds (ETFs) helped crypto cross into the mainstream in 2024. The trend looks to continue in 2025 under the new administration’s friendly regulatory environment.

Positive ETF momentum will continue as more countries will approve products for altcoins. Asset managers warn that investors risk falling behind in a rapidly evolving financial landscape if they do not adopt digital assets into their portfolios. Crypto is adding a unique layer to asset allocation and diversification, and it is soon to be the norm rather than a risky bet.

The cryptocurrency market is currently at a $2.66 trillion market cap, close to its 2021 benchmark. Its recent popularity, combined with an incoming presidential administration that is pro-crypto, ensures that this trend will continue in the foreseeable future. Crypto is in a bull market, largely thanks to ETF approval, and Bitcoin’s value has grown by over 150%.

Another attractive component for investors is that federal governments cannot alter the stock prices, which entices leery investors to buy into this trending asset.