Client Memo: Is Bitcoin Becoming Mainstream?

In our previous memo What the Genius Act means for Investors we detailed the recently passed Genius Act, which gives cryptocurrency a regulatory backdrop. The largest ramifications of this legislation is that it enables the web3 economy – i.e. facilitating a completely digital transaction without intermediaries like a bank or government.

The Web3 economy refers to a new, decentralized digital economic system built on blockchain technology, where users own and control their data, assets, and identities, and participate in peer-to-peer value exchange—often without relying on traditional intermediaries like banks, platforms, or governments.

While this is not something we typically speculate on, I am going to detail below why I think bitcoin should be in portfolios and how.

Over the last 15 years, the world has become flush with liquidity. There is something called ‘M2’, which is a measure of how many US dollars exist and are circulating in the economy. It includes both highly liquid forms of money like cash and savings accounts, along with less liquid forms like CDs and money market accounts.

When you adjust the S&P 500s growth for the growth of the money supply, the returns are less than inspiring.

M2 has grown substantially as the Federal Reserve has injected liquidity (through FOMC operations), the fractional banking system (banks loaning money), and from direct payments to households (like stimulus checks, unemployment benefits, and workers comp). Thus, the artificial ability of a central government to print money impairs its currency as a store of long-term value. Accordingly, if there was a store of value which had a finite and determinable total supply, it would hold value over time better.

Bitcoin has such a finite supply. There will only ever be 21 million bitcoins in existence and nearly 20 million have already been produced. That leaves just over 1 million left to be ‘mined’ over the next few decades. It is expected that 99% of all bitcoins will be mined by 2035. This produces a scarcity of value, something dollars do not have as the Federal Reserve and Congress can just print away.

Two-thirds of Americans own stocks but only 14% own bitcoin, according to a recent Gallup poll. Pew Research had a 17% outcome. The acceptance of bitcoin is in the early innings.

Who owns these bitcoin?

The total market capitalization of all the bitcoin that has been mined totaled $2.3 trillion recently. That’s larger than the market capitalization of Google and Amazon.

Here is a breakdown of BTC ownership concentration as of mid-2025:

• Top 10 addresses: The 10 richest Bitcoin wallets (excluding Satoshi Nakamoto’s [inventor of bitcoin] dormant holdings) collectively hold roughly 1.1 million BTC, about 5.5% of the total supply.

• Top 100 addresses: The 100 largest wallets control approximately 2.9 million BTC, around 14–15% of the circulating supply.

• “Whale” wallets (>1,000 BTC): There are on the order of 2,000–2,100 addresses that each hold at least 1,000 BTC (worth $100+ million apiece). Collectively, these large holders own over 36% of all Bitcoin.

The US government has even started stockpiling bitcoin. On March 6, 2025, the White House announced that they would establish a strategic bitcoin reserve and US digital asset stockpile. The US government has begun to stockpile Bitcoin in the tens of billions of dollars, while 8 other countries including China have also started to build up their reserves to not be left behind. The top 9 countries hold $64.65 Billion in Bitcoin.

We are now witnessing the evolution of bitcoin into a broadly investable asset class. Major financial institutions are now embracing Bitcoin after years of skepticism. Blackrock, Fidelity, Grayscale, Bitwise, and ARK are the largest spot crypto ETFs today with nearly $200 billion in assets under management.

The SEC approval of these ETFs has allowed easy access to adding these into a highly diversified portfolio.

Is the Juice Worth the Squeeze?

I spend a ton of my day analyzing our client portfolios and how they react to certain market events. For example, countless hours were expended to the sell off in the markets back in April where the S&P 500 fell over 20% from peak-to-trough. Understanding what worked and what didn’t and how our clients performed during times of market stress is pivotal for understanding client portfolio outcomes years from now.

Stay with me here as we may get a little wonky. I’ll do my best to keep it high level.

One thing I also do is to model those outcomes before we introduce strategies into client portfolios. We look at how adding a certain asset will increase or decrease volatility and how much risk-adjusted returns will benefit.

One measure we use is the Sharpe ratio. I’ve discussed this before, but I typically refer to it as return per unit of risk. In a diversified portfolio, if a new asset has a strong risk-reward ratio but also is not very correlated with the other assets in the portfolio, it should improve the Sharpe Ratio of the portfolio as a whole.

Adding a 1% position to bitcoin into a traditional diversified portfolio improved the Sharpe Ratio nicely. For bitcoin, a little goes a long way given the high annualized returns, low correlation to other assets, and volatility. It is one of those rare instances where you actually get paid for the risk.

Recent studies show that the return per unit of risk continues to rise for a portfolio until the allocation to bitcoin reaches 5% of the assets. The data is on the table below. You can see that the total cumulative return over the last five years increases as you add more bitcoin to the mix. The Sharpe ratio (return per unit of risk) increases as well. It should be noted that the maximum drawdown of the portfolio also increases slightly.

When you add in gold, which most of our clients hold, the resultant portfolio shows significantly reduced volatility attributes and return characteristics. It also helps with my theme of debasement (i.e. money printing and fiscal recklessness). These are stores of value to hedge against the new paradigm of an inflationary environment, one we haven’t seen in nearly two decades.

Summing it all Up

For investors with a long-term horizon, we think a store-of-value allocation that protects against the debasement of fiat currencies will become a distinct theme in the coming years. To put it more simply, people will think of store-of-value positions in a portfolio akin to large cap stocks.

The space has advanced to the point where we no longer have to worry about cold storage and passwords to thumb drives housing bitcoin. You can invest in liquid, exchange-traded vehicles that buy the bitcoin on your behalf for a very low annual fee.

For our clients, we have access to other structures that help reduce the overall risk (and perhaps cap the upside) which may be more palatable. For example, and one that I will cover in our client commentary in the third week of September, has a set max loss at either 10% or 20%, meaning you cannot lose more than that. To pay for it, your annual gains are capped at 24% or 41%, which is still fantastic upside and better than a 2:1 skew between reward and risk.

This is not something we will place into your account without discussing with you first. We will discuss the advantages and disadvantages of adding this to your particular asset allocation and financial plan. For those who opt in after sufficient research and education we will add extremely limited initial exposure to Bitcoin.

At this point, we feel as a firm that not educating clients on this opportunity becomes akin to ignoring the internet in the 1990’s as crazy technology speculation. But if the curve below has any parallel, Bitcoin offers an asymmetric return profile (meaning a lot of upsides with limited downside given the small portfolio position).

Cryptocurrency today is like the internet in the early 1990s—full of promise, confusion, rapid evolution, and resistance from incumbents. Once abstract and experimental, both are destined to reshape the core of global systems as utility and trust follow infrastructure and adoption.

Stay tuned for an upcoming webinar we are hosting to cover this topic in more detail. As always, we appreciate the trust you place in us.

Sincerely,

Mark J Asaro,

CFA Noble Wealth Management, PBC