A recent analysis by Citi found that a small share of Bitcoin in a traditional 60/40 portfolio (60% stocks and 40% bonds) can significantly increase returns.

The study, based on a 1-year analysis dating back to 2014, found that a U.S. portfolio 60% devoted to stocks and 40% to bonds would yield a return of 6.5%. However, when a 1% share is added to BTC, the yield rises to 7.42%.

Citi analyst Alex Saunders stated in his report that the yield could be as high as 9.3% if 5% of the portfolio is allocated to BTC. "Historically speaking, an expenditure on Bitcoin would increase portfolio returns," Saunders said.

For a 5% Bitcoin share of a 60/40 portfolio to be reasonable, BTC would need to generate annual returns of between 12% and 16%. A smaller 1% share requires an annual return of 8% to 10%.

However, Saunders also highlighted the risks associated with adding BTC to an otherwise balanced portfolio. According to the analyst, Bitcoin's correlation with other asset classes has increased over time, and the asset tends to rise when the US dollar weakens. Moreover, challenging periods for stocks tend to coincide with falling returns for BTC.

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