The Bitcoin (CRYPTO: BTC) price is up 0.5% overnight, currently trading for US$65,168.
While that's a modest 24-hour move, the world's first and largest crypto by market cap remains notoriously volatile.
Here's what I mean.
It was only back on 7 October that the Bitcoin price soared to a new all-time high of US$126,198.
Now that was obviously good news to crypto investors who bought in at lower levels. In April 2025, for example, you could have bought the token for less than US$80,000.
But since that highwater mark, the Bitcoin price has crashed a painful 48.5%.
So, can the crypto still help you diversify your investment portfolio?
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With a volatile Bitcoin price, is the crypto still good for diversity?
According to a January survey conducted by the Urban Institute, 45% of US crypto owners said that they use cryptocurrency primarily to diversify their investment portfolios.
This was the number one reason investors gave for buying crypto.
Now, the idea behind a properly diversified portfolio is to help smooth your returns over time. So, if one particular set of investments hits a temporary downtrend, that will ideally be offset by other investments that are rising.
"Cryptocurrency tends to be a diversifier, so over the long-term it can be a good complement to more traditional investments," Jim Ferraioli, director of crypto research and strategy at the Schwab Center for Financial Research said (quoted by CNBC).
Which brings us back to the volatile Bitcoin price.
According to Douglas Boneparth, president of Bone Fide Wealth in New York, Bitcoin "earns its place in a portfolio on diversification grounds."
He noted the world's top crypto has "a return history that is genuinely distinct from stocks and bonds over long time horizons. For investors who are thinking about currency debasement, geopolitical instability or simply want an asset with different fundamental drivers, that is a meaningful addition."
But that's not to say that the Bitcoin price won't fall during broader market sell-downs.
According to Boneparth (quoted by CNBC):
Correlations between Bitcoin and equities tend to spike during periods of acute market stress, when investors sell whatever is liquid. So, the diversification benefit is real but not unconditional.
So, just how much Bitcoin should investors hold to help diversify their portfolios?
According to Boneparth, no more than 5%.
He noted:
Above 5%, Bitcoin's volatility can begin to dominate the portfolio's overall risk profile. At that point it stops functioning as a diversifier and starts functioning as the primary bet.
