A slice of Bitcoin is now well and truly on the investment menu

In 2010, a Florida programmer made history by buying two pizzas for 10,000 bitcoins, worth about $41 in total at the time. Today, those coins would be worth over $1 billion USD. That legendary purchase on May 22, 2010 – now commemorated annually as Bitcoin Pizza Day – illustrates just how far Bitcoin has come.

What started as a quirky exchange for pizza has evolved into a trillion-dollar asset class, now gaining serious attention from investors eyeing it as a tasty slice in a diversified portfolio.

Bitcoin’s dough just keeps rising

Not long ago, adding Bitcoin (BTC) to an investment portfolio seemed as odd as putting pineapple on a pizza. Yet, it’s hard to overstate Bitcoin’s journey since that first pizza transaction.

The global crypto user base has surged to an estimated 620-650 million people as of early 2025, and Bitcoin has proven its staying power through multiple boom-and-bust cycles. This month, the Bitcoin price is close to its all-time highs above USD $100,000.

Bitcoin’s growth has been propelled by rising mainstream and institutional acceptance. In recent years, institutional investors, hedge funds, and governments have warmed to Bitcoin’s potential.

Since the start of the year, BlackRock’s iShares BTC Trust – the largest Bitcoin ETF – has attracted a net $6.96 billion in new investor money, slightly more than the biggest gold ETF’s $6.5 billion. That’s remarkable considering gold’s price has been stronger this year, and shows Bitcoin is holding its own with investors.

What was once dismissed as “magic internet money” is increasingly viewed as a serious asset class – one that in 2024 turned out to be the top-performing asset, rising 125% for the year and outperforming traditional benchmarks like the Nasdaq (+30%), gold (+27%), and the S&P 500 (+24%).

Of course, past performance isn’t a guarantee of the future, but such data points explain why investors are giving Bitcoin a fresh out-of-the-oven look.

A slice of the investment pizza

All this leads to the idea of Bitcoin as a potential slice in a diversified portfolio – maybe a flavourful slice in a well-balanced pizza.

Diversification is the age-old recipe for managing risk. A portfolio can have slices of equities, bonds, real estate, gold, and now, possibly, crypto.

Each offers a unique flavour: some slices (like bonds) are mild and stable, others (like stocks) bring spice and growth. To roll with this analogy further, Bitcoin, with its unique profile, can be that topping with an extra kick.

Bitcoin’s role in a portfolio is best thought of as complementary. Not all investors would suggest devouring an all-Bitcoin diet, rather they might allocate a modest percentage (1-5%) as part of a broader strategy. This way, Bitcoin’s gains can boost performance during good times while minimising losses during downturns.

The case for including Bitcoin in a portfolio isn’t only about high returns – it’s about balance. Bitcoin often marches to a different beat than traditional assets. Over the past decade, its correlation with US stocks has been very low, around 0.15 (close to zero), similar to gold’s essentially zero correlation to stocks.

In early 2025 Bitcoin’s correlation with both equities and gold fell to roughly 0.0. In other words, Bitcoin’s price moves are largely independent of the stock market or precious metals. Modern portfolio theory tells us that adding a volatile asset can improve the portfolio’s risk/reward profile if that asset isn’t closely correlated with the rest.

Despite its notorious volatility, Bitcoin’s swings have been easing over time. By late 2023, Bitcoin was actually less volatile than 92 stocks in the S&P 500. As its market cap grows, each new dollar invested moves the price less, so Bitcoin’s swings have declined and could decline further with broader adoption.

Perhaps the compelling piece for giving Bitcoin a spot in a portfolio is that even a small allocation can make a difference. Major investment firms have even put numbers on it.

BlackRock’s analysis suggests about a 2% Bitcoin allocation as optimal, and Fidelity has floated allocations up to 5% for some investors.

Historical data backs this up.

Even a 5% Bitcoin stake in a classic 60/40 portfolio could have lifted annual return from roughly 8% to around 13%, while improving risk-adjusted performance. In short, a dash of Bitcoin can add some extra kick to performance without blowing up the risk level.

Spicing up the portfolio

While the case for including Bitcoin in a diversified portfolio is compelling, it comes with a healthy disclaimer: Bitcoin remains a highly volatile asset, and prudent investors must handle it with care. Price corrections of 30% or more are not uncommon in crypto-land.

As the old saying goes, there’s no such thing as a free lunch (or free pizza) in investing. One should size Bitcoin allocations appropriately and in line with one’s risk tolerance.

No single investment can guarantee success, but as of 2025, Bitcoin has clearly matured into a viable ingredient of many well-diversified investment strategies. It’s not the whole pie, but it’s a slice that may very well be worth having.

James Quinn-Kumar is the director of community engagement at Binance Australia & New Zealand.

The views, information, or opinions expressed in the interviews in this article are solely those of the contributing author and do not represent the views of Stockhead.

This article was developed in collaboration with Binance, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.