The Optimal Gold and Bitcoin Allocations for Institutional Portfolios| Matrixport Research

The fifth Bitcoin bull market is unfolding with remarkable precision, aligning closely with projections 18 months ago. Bitcoin is now nearing the $100,000 mark, and it appears increasingly unlikely that the rally will peak at this level.

Gold is critical in institutional portfolios, a trend we expect to gain momentum in the coming years. Global central banks’ diversification away from the U.S. dollar will likely be a long-term endeavor spanning a decade or more.

While Bitcoin has outperformed gold in recent years, both assets deserve a place in institutional portfolios — not only for their uncorrelated returns but also for their promising return prospects, given our macroeconomic outlook. Today’s report takes a quantitative approach to analyzing institutional portfolio allocations while incorporating our 2025 asset allocation perspectives.

Gold experienced a sell-off following the U.S. election due to a strengthening U.S. dollar. However, this may present a compelling buying opportunity for gold investors, as the ongoing gold bull market is likely to persist alongside the continued momentum of the Bitcoin bull market. As our analysis demonstrates below, gold holds a critical position in institutional portfolios, a trend we expect to gain momentum in the coming years. Global central banks’ diversification away from the U.S. dollar will likely be a long-term endeavor, spanning a decade or more.

Numerous attempts have been made to justify Bitcoin’s inclusion in institutional multi-asset portfolios. These arguments often highlight Bitcoin’s long-term solid performance, high risk-adjusted returns, and tendency to be uncorrelated with traditional asset benchmarks like the S&P 500. While correlations between Bitcoin and other assets can spike temporarily, they remain unpredictable and inconsistent.

Frequent rebalancing could further enhance returns, but the real value lies not in fine-tuning rebalancing frequency but in making informed return assumptions across asset classes and constructing portfolios optimized for an acceptable level of risk. Bitcoin’s potential role in a portfolio depends on forward-looking expectations, not solely on past performance.

Hence, our task is to optimize portfolios incorporating views on future returns while managing risk. The Black-Litterman Asset Allocation Model offers a sophisticated solution. This widely used framework integrates the Capital Asset Pricing Model (CAPM) with subjective investor views to create robust and realistic portfolio allocations.

This portfolio allocation is designed for large multi-asset portfolio managers, such as endowments, pension funds, and sovereign wealth funds. The expected portfolio return is projected at +15.6%, based on a portfolio optimization with a Sharpe ratio 1.6x.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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