Since reaching a high of over $123,000 in July 2025, Bitcoin has since declined by nearly half. Foreign media report that this downturn has reignited market discussions about “why hold Bitcoin”: Is it truly a portfolio diversification tool, or still primarily a highly volatile asset driven by sentiment and demand?
The pullback resembles a cooling in risk appetite.
Daniel Sotiroff, Deputy Head of ETF and Passive Strategy Research at Morningstar, said the recent pullback resembles a typical fluctuation inherent to the crypto market, rather than a clear shift in Bitcoin’s fundamentals.
The report noted that this downturn occurred amid broad-based weakness across multiple asset classes. Investors are reassessing their risk exposure and capital allocation. Both the Nasdaq Composite Index and gold have retreated from their previous highs, with Bitcoin trading at approximately $63,900 as of last Friday.
Sotiroff believes that recent price movements may be driven by multiple factors, including profit-taking after prior sharp gains and market expectations that interest rates will remain elevated for longer. With increased caution toward high-risk assets, some capital may also shift toward other high-resilience themes, such as artificial intelligence.
There remains a significant divergence in valuation.
Supporters often view Bitcoin as a diversification tool, while others believe it can preserve value during times of economic uncertainty or hedge against inflation. Sotiroff considers "diversification" to be the more compelling rationale among these.
However, he remains cautious about the claims of “stable value storage” and “inflation hedging.” This is because Bitcoin’s price is too volatile to be considered a stable store of value, and in terms of inflation hedging, the market already offers more mature options, such as Treasury Inflation-Protected Securities (TIPS).
The report notes that this round of correction once again highlights that Bitcoin’s potential for upside often coexists with its downside risk. For this reason, many financial advisors still prefer to allocate only a small portion of their clients’ broader portfolios to Bitcoin, rather than treating it as a core holding.
Financial advisors tend to hold small proportions.
Andrew Herzog, a registered financial planner at The Watchman Group, said that allocating 1% to 5% of an overall investment portfolio to high-risk assets like Bitcoin is a common approach to managing risk.
Sotiroff also provided a similar assessment, stating that allocation ratios should typically be maintained in the "low single digits." Exceeding this range could significantly increase the overall volatility of the portfolio.
The article also notes that although the launch of spot Bitcoin ETFs in 2024 has lowered the barrier for mainstream investors to buy Bitcoin, extreme volatility remains the asset’s most defining characteristic—why many financial advisors continue to recommend cautious allocation.
Whether it constitutes an "investment" remains controversial.
Some advisors believe the real issue isn't just the price decline, but whether investors had a clear plan when they initially bought in. Matt Chancey of Tax Alpha Companies says pullbacks often reveal who holds based on long-term judgment and who is simply chasing momentum.
However, not all financial professionals agree that Bitcoin should be included in an investment portfolio. Robert Johnson, a professor of finance at Creighton University, stated that Bitcoin differs from stocks, bonds, and real estate because it does not generate profits, interest, or rent, making it difficult to value using traditional methods; its price is largely determined by what the market is willing to pay.
Sotiroff also agrees with this point. He compares Bitcoin to a collectible, believing its price largely depends on how much the next buyer is willing to pay. Foreign media believe this is also why the market reevaluates its positioning logic whenever a sharp correction occurs.