I don't understand, how do you add crypto currencies to a 60/40 stocks/bond portfolio? Isn't it already at a 100, where do we get the 84.9% for Bitcoins from?
By reducing the positions held in stocks and bonds:
Starting with a 60-40 equity-bond portfolio, which is produced with a risk aversion of 𝛾 = 1.50, the optimal BTC allocation is a large 84.9%! The remainder of the portfolio, 15.1% is split 60-40 between equities and bonds.
To me this number seems really high.
It is, and if you look at the paper itself you'll see it's just one particular way of modelling optimal exposure. Another model that they use in the paper comes to a more conventional conclusion of 9.5%.
Blackrock is the largest ETF company in the world and the main selling point of ETFs is to buy the index as it's cheap and offers a high level of diversification. Putting now almost everything into one investment seems very risky.
While BlackRock's ETFs offer diversification, it's still up to the individual investors themselves to stay reasonably diversified. If their filing for a Bitcoin ETF succeeds, it won't matter for BlackRock how your portfolio structured, as long as it contains ETFs on which they make money.
