The Role of Bitcoin

In 2017, I wrote a skeptical article about the skyrocketing price of Bitcoin and its speculative nature. At the time, everyone from Uber drivers to extended family was talking about crypto profits. As a financial advisor focused on long-term planning, I questioned Bitcoin’s usefulness and worried about its volatility.

Eight years later, I still have reservations, but my thinking has evolved.

Bitcoin has not fulfilled many of the lofty promises its early advocates envisioned. It’s not a widely accepted means of exchange. It's not an efficient payment system. And in terms of replacing traditional financial systems, progress has been incremental at best. Despite all that, Bitcoin may have matured into a legitimate (albeit highly volatile) asset class. It may now warrant a look as a potential diversifier in a balanced portfolio for risk-tolerant investors with a long time horizon.

It has been a volatile ride to the mainstream. Bitcoin rose from under $1,000 in early 2017 to nearly $20,000 by year-end, before crashing to $3,000 in 2018. It surged again in 2020, peaked near $69,000 in 2021 before dropping below $17,000 in the 2022 crypto winter. As of mid-2025, it rebounded to nearly $120,000, buoyed by several major developments.

A bit bumpy

Bitcoin price 2017 through October 15, 2025 1:59 PM ET

One of the major industry shifts was the approval of spot Bitcoin exchange-traded funds (ETFs) in early 2024 by the U.S. Securities and Exchange Commission (SEC). These ETFs made institutional access easier, and billions flowed in within weeks. This helped legitimize Bitcoin and deepen liquidity. The iShares Bitcoin Trust launched in January 2024 and amassed over $76 billion in assets under management by mid-2025, making it the most successful ETF launch in history.

With each additional quarter of regulatory clarity and broader adoption, Bitcoin takes another small step toward behaving more like other financial assets with longer track records.

In many ways, I think of Bitcoin somewhat like “digital gold.” The comparison isn’t perfect, but it’s instructive. Gold, like Bitcoin, has no cash flows and is not backed by earnings or dividends. Its value is driven largely by investor perception, scarcity, and its role as a store of value.

After the first gold ETF launched in 2004, gold tripled in value over the next decade, in part due to increased accessibility for investors. We’re seeing a similar dynamic unfold with Bitcoin today. The availability of spot Bitcoin ETFs makes allocation more practical for financial advisors and institutions.

Bitcoin’s core investment narrative has always centered around its fixed supply. A total of 21 million Bitcoins will ever be mined. This cap is hardcoded into Bitcoin’s protocol by its creator, Satoshi Nakamoto, to enforce digital scarcity and mimic the finite supply of gold. In a time of loose monetary policy and high debt, Bitcoin’s scarcity appeals to those concerned about inflation.

While inflation has eased since its 2022 peak, the structural issues remain. Governments continue to rely on loose fiscal and monetary policy, with debt levels near record highs. Bitcoin’s proponents argue that in such an environment, an asset that cannot be diluted by central bank decisions has long-term appeal.

There’s also the geopolitical dimension. The U.S. dollar’s dominance in global trade and reserves is being challenged. While it may be premature to call it 'de-dollarization,' demand for alternative stores of value is real. Gold has long served that function, but Bitcoin is increasingly seen as a digital complement.

So, does all this mean Bitcoin deserves a prominent place in your portfolio? Not quite. My stance today is similar to how I view gold: it can play a useful role, but it should remain a small slice of your overall allocation.

For most investors, a 1 to 3 percent exposure to Bitcoin is a reasonable upper bound. This allows participation in potential upside without undue exposure to its significant downside risk. Bitcoin is still extremely volatile—its 30-day volatility is often 3-4 times higher than the stock market. Investors should be emotionally and financially prepared for sharp drawdowns.

Interestingly, Bitcoin’s extreme volatility can also be a feature when incorporated into a diversified portfolio with a disciplined rebalancing strategy. Investors who commit to a consistent rebalancing policy—selling a portion when Bitcoin rallies and buying back when it falls—may be able to capture incremental returns over time. Of course, it takes discipline to stick with the plan through both euphoria and panic.

If you include Bitcoin, do so through a vehicle that provides secure custody, transparent pricing, and low costs—like a spot ETF from a reputable provider.

I’m still not sold on the utility of Bitcoin as a currency. But as an asset class, Bitcoin may have crossed the threshold of legitimacy with the approval of ETFs, rising institutional adoption, and persistent government deficits. As a light aside, I sometimes wonder if skeptical articles like mine in 2017 helped push Bitcoin into the public conversation.

Skepticism is still warranted. As a fiduciary, my role is not to invest based on ideology but on evidence, prudence, and evolving market dynamics. And the evidence suggests to me that Bitcoin now deserves a small but legitimate seat at the investment table for certain investors.

This article originally appeared in The Berkshire Eagle.