I have heard a lot numbers being thrown out for how much someone should allocate to Bitcoin. Some claiming as much as 70% of there net worth or more, some claiming 5%, some 10%, however what is the right answer.
The truth is that it is up to you, however let me give you my opinion. Firstly Bitcoin is a long term play, not a get rich quick investment even though many may claim it is so, what I suggest to consider for many is how much Bitcoin could be worth in the next 5 to 10 years as a digital form of Gold, it is not outrageous to suggest a price of over $500,000 ( matching Golds market cap ) or even longer term 1 million, why is this, well because Bitcoin is digital scarcity and there is only 21 million coins that will ever exist ever.
It is hard to imagine a world where Bitcoin does not have a strong position, adoption is global and increasing everyday and so in turn it is easy to expect that adoption rate will increase over time. This does not mean Bitcoin is guaranteed as a strong asset in the long term, sometimes market share changes and another crypto may absorb a lot more money in the asset class, however what is likely probability wise is that it will continue to increase in value over time due to its current adoption rate.
A good example of this so far is looking at or observing the value of Bitcoin over time, once pennies, then dollars, then 10s of dollars, then 1000s of dollars, then 10s of thousands of dollars, what once could buy a coffee per Bitcoin could then buy a motorbike, then a car and now can buy a house in many countries around the world. There may even be a point where multiple houses could be bought for one single Bitcoin or a Mansion. The fact is that since Bitcoins inception all it has done so far is outperform all other asset classes.
With that said what should be the allocation to a volatile asset such as Bitcoin, in my opinion and it is just my opinion for most people is a good allocation is 3%, basically put working out your available investible available net worth in your local currency and multiplying it by 0.03.
Example – Someone with a 200k net worth ( 200k investing net worth ) could consider allocating $6000 dollars to Bitcoin.
Why 3%, well because it is a volatile asset class and this a small amount of money in relation to your overall portfolio, an amount that many can handle without it effecting you emotionally. In time after getting familiar with the asset class and its cycles you could consider adding more, however that is up to you, the truth is that 3% allocation is very likely to become 5% in time and then even 10% or more in time as Bitcoin so far has outperformed every other asset class.
A fair allocation, not too much, not too little, I have allocated around 7% to Bitcoin and it seems to be doing well for me.