Bitcoin has lost almost half of its value since reaching an all-time high of over $123,000 in July 2025. Bitcoin has been rewarding those who held it through periods of volatility for years, and this selloff is just the latest test of investors’ mettle.
But Bitcoin’s recent decline doesn’t seem to reflect a fundamental shift in investing, said Daniel Sotiroff, associate director of ETF and passive strategies research at Morningstar.
“I think a lot of this is that cryptography is cryptography,” he says.
Bitcoin’s decline comes amid weakness across assets as investors reassess risk and where to put their money. Both the Nasdaq Composite and gold have fallen from recent highs, down about 4% and 8%, respectively. As of Friday, Bitcoin was trading around $63,900.
Sotilov said the recent decline likely reflects several factors, including investors taking profits after Bitcoin hit an all-time high. He said expectations that interest rates could remain high for an extended period of time may also be making investors more cautious about risky assets such as Bitcoin. Other investors may be moving their money to other opportunities with higher upside, such as investments related to artificial intelligence.
While previous Bitcoin declines have often been accompanied by large price rebounds, Sotiroff said this drop may prompt some investors to reconsider why they own Bitcoin in the first place. Here’s what he and other experts have to say about the case for holding cryptocurrencies and how much exposure is appropriate for the average investor.
The role of Bitcoin in investors’ portfolios
Bitcoin is frequently promoted as an investment that complements more traditional assets in a portfolio. Sotilov said Bitcoin doesn’t always move in tandem with stocks, bonds and real estate, so holding Bitcoin can increase returns when other assets are down.
“I’ve heard it said that it’s a diversification measure, and that seems to be the strongest argument,” Sotilov said.
Proponents also argue that Bitcoin can maintain value during times of economic uncertainty or protect investors from inflation.
Sotilov is more skeptical of these claims. He says the volatility of cryptocurrencies makes it difficult to view them as reliable stores of value, noting that investors already have other tools to hedge against inflation, such as Treasury Inflation Protection Securities (TIPS).
The recent selloff was a reminder that Bitcoin’s rise can be accompanied by an equally dramatic fall, he says. This uncertainty is one reason why many financial planners recommend limiting exposure to a small portion of a broader portfolio.
“In reality, we cannot determine what direction it will go in,” Sotilov says.
A “good rule of thumb” for Bitcoin exposure
For high-risk assets like Bitcoin, allocating 1% to 5% of an investor’s overall portfolio is “a good rule of thumb to get some upside exposure while mitigating risk,” says Andrew Herzog, a certified financial planner and registered agent with Watchman Group.
Herzog’s recommendation is broadly in line with what other financial planners have suggested for Bitcoin, but the appropriate amount will depend on an investor’s risk tolerance.
“We’re talking low single-digit percentage points,” Sotiroff said. “Beyond that, the volatility of your portfolio starts to increase.”
Even though Bitcoin has become easier to own for mainstream investors, including with the launch of the Spot Bitcoin ETF in 2024, its dramatic price fluctuations remain a hallmark of Bitcoin assets, highlighting why many financial planners continue to recommend conservative allocations.
For some investors, that risk is part of the bargain. They are willing to hold on to Bitcoin through large selloffs because they believe the cryptocurrency’s long-term upside potential outweighs its volatility.
“What the decline really does is reveal which investors were planning and which investors were riding the momentum,” said Matt Chancey, CFP at Tax Alpha Companies. “If you owned Bitcoin because Bitcoin was going up, the case was settled, but the case was never healthy.”
Not all financial experts agree that Bitcoin belongs in a portfolio.
Robert Johnson, a professor of finance at Creighton University, said this is because bitcoin, unlike stocks, bonds and real estate, does not generate returns, interest payments or rental income that investors can use to estimate its value. Instead, its price is primarily determined only by investor demand.
“You can’t invest in Bitcoin. All you can do is speculate,” he says.
Sotilov agrees that it is difficult to value Bitcoin using traditional financial metrics.
“The best analogy I’ve heard is that it’s almost like a collectible, because it’s basically worth something that other people would pay to buy,” he says.
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