Bitcoin is no longer the uncorrelated hedge it was marketed as in 2017. After two halving cycles and the launch of spot ETFs, it trades like a high-beta tech stock most of the time and like a macro hedge during dollar-stress events. Understanding which regime is active is the entire trade.
Correlation has shifted — and it depends on the regime
On a rolling 90-day basis, Bitcoin's correlation to the Nasdaq has spent most of the post-ETF era between 0.4 and 0.7 — high enough that it doesn't diversify a tech-heavy portfolio. The exceptions are dollar-debasement episodes (2020, 2024 banking stress) when Bitcoin decouples and rallies on its own. Treat it as a tech beta most of the time and a hedge only in specific macro setups.
Spot ETFs changed the marginal buyer
The 2024 spot ETF approvals brought structural inflows from RIAs, pensions, and 60/40 rebalancers. That flow has dampened drawdowns and stretched cycle tops higher than prior halvings would suggest. The downside: it has also tied Bitcoin closer to traditional risk assets — when stocks sell off, ETF outflows now amplify the Bitcoin drawdown.
How much to allocate
A 1–5% portfolio allocation is the consensus answer from mainstream advisors who recommend any Bitcoin exposure at all. At 1%, it's a call option on adoption with negligible portfolio risk. At 5%, it materially raises portfolio volatility but adds meaningful upside in bullish cycles. Above 5%, you're making a concentrated bet, not diversifying — size accordingly.
What would change the thesis
Two scenarios would force a re-rate: (1) a major sovereign adopts Bitcoin as a reserve asset — bullish, decoupling from tech beta, (2) a regulatory clampdown on spot ETF custody or on stablecoin issuers — bearish, forced unwinds. Neither is the base case, but both are tail risks worth sizing for.