TechFlow reports that on April 7, according to CoinDesk, financial giant Charles Schwab released a research report warning that allocating even just 1%–3% of a portfolio to Bitcoin or Ethereum could significantly alter the portfolio’s overall risk profile. Historically, both Bitcoin and Ethereum have experienced drawdowns exceeding 70%, far surpassing the volatility levels of stocks or bonds—meaning even small allocations can exert a notable impact during market turbulence.
Charles Schwab proposes two approaches to allocating crypto assets: first, the traditional portfolio theory method, which allocates based on expected returns, volatility, and correlations; and second, the risk-budgeting method, which determines the crypto allocation based on the investor’s willingness to bear risk—shifting the focus from returns to risk tolerance.
