Good morning!

Today we’re venturing into a territory that excites some investors…and spooks others. 🎃

Bitcoin.

Is it the next great financial frontier? Or a speculative mirage?

While no one has the perfect answers, there is a strategic way to think about it. And that’s exactly what we’ll unpack in today’s feature.

The Wealth Expedition membership platform is almost ready for launch! It’s taken a little longer than planned, but only because I want every detail to look perfect.

And trust me, it’s shaping up to be unlike anything else in financial education. It’s looking awesome! I can’t wait to show it to you.

If you want to help shape the earliest stages of this growing community, put your name on the Founding Member Waitlist today. It’s capped at 100, and those early spots come with lifetime perks.

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And now, let’s take a look at this unique artifact we’ve discovered along our Wealth Expedition: Bitcoin!

Enjoy the read, and your weekend, fellow explorers.

Onward together,

Daniel

FINANCIAL TOOL

Does Bitcoin Belong In Your Portfolio?

Have you ever looked at Bitcoin and wondered whether you should be jumping on what might be the future of currency?

Or maybe you’ve held Bitcoin for years now and wonder whether its run is over, or its time to sell?

Bitcoin isn’t easy to classify.

It behaves partly like a currency (transferable, decentralized), partly like a commodity (limited supply), and partly like a speculative growth stock (volatile and sentiment-driven).

That uniqueness is what both intrigues and unnerves investors.

Where Its Value Comes From

Bitcoin’s value rests not in tangible utility like gold or silver, but in confidence that:

1. No single government or central bank can manipulate its supply.

2. Transfers occur freely, without intermediaries.

3. Its maximum quantity is absolutely predictable: 21 million coins, by the end.

Those features create scarcity and trust in a digital format.

But as with most things, there are some drawbacks:

• It lacks industrial use like precious metals.

• Ownership depends on digital access. Lose the private keys, and you lose the asset.

• And its real-world transactional adoption remains limited; most participants still buy it as an investment, not a currency of daily life.

Whether that changes will determine how enduring Bitcoin becomes.

A Record of Wild Returns

Over roughly the past six years, Bitcoin’s average annual price return has been around 70%. That’s phenomenal by any standard.

But those who rode through that time period will remember that those gains came with extraordinary volatility.

It has also fallen close to 80% or more multiple times (2014, 2017, 2021).

Volatility itself isn’t inherently bad; it’s only dangerous when it dominates a portfolio.

A controlled amount of high-volatility exposure can improve diversification if the asset moves differently from everything else you own.

Current Market Context

Interestingly, Bitcoin’s Short-Term Moving Average Distance (SMAD), which is a measure of how far current prices deviate from their short-term trend, is currently within its normal range compared with the past twelve months.

What does that mean?

It indicates that Bitcoin isn’t showing signs of excessive short-term hype or panic. Its recent price behavior sits in a statistically “neutral” zone, suggesting neither a bubble nor a major discount.

In other words, while that doesn’t make it a buy or a sell signal, it does provide reassurance that Bitcoin’s current trend is not showing erratic behavior.

Understanding Correlation

Diversification isn’t about just owning lots of things.

It’s about owning things that behave differently.

Correlation measures that difference on a scale from +1 to –1:

• +1 means assets move in lockstep.

• 0 means no consistent relationship.

• –1 means they move opposite each other.

Here’s what I found after running the numbers on monthly price-only returns over the last twelve months:

What Those Numbers Tell Us

• Gold & Silver: have moved together (0.70), confirming their traditional precious-metals link.

• Bitcoin & Metals: showed nearly zero correlation, meaning Bitcoin had diversification value among alternative investments like precious metals.

• Bitcoin vs Stocks and Bonds: moderately negative correlations (–0.47 and –0.52). In the past year, Bitcoin often added return when traditional assets struggled, and vice versa.

• Stocks vs Bonds: still mildly positive (0.32), reflecting the post-pandemic environment where both markets respond to interest-rate expectations.

Historically, Bitcoin’s correlation with equities averages closer to +0.2 over longer periods, so these negative readings likely represent a temporary regime shift rather than a new norm.

Bitcoin as an Alternative Investment

Because it straddles multiple categories, Bitcoin belongs under the broader label “alternatives.”

Alternatives (real estate, commodities, private equity, precious metals, digital assets, etc.) often carry higher risk per unit of expected return. Their role isn’t to outperform everything else, but to zig when others zag.

In a diversified portfolio, alternatives typically make up no more than 15% of total assets. Within that slice, Bitcoin could be treated like a high-beta growth position: perhaps 3% to 5% of the overall portfolio being a reasonable slice of the pie.

That small allocation allows potential participation in Bitcoin’s upside while limiting the impact of large drawdowns.

The Case For and Against

Why include it:

• Historically high return potential.

• Low correlation with traditional assets in the long-term.

• Exposure to emerging digital-asset infrastructure.

• Actively support its cause and purpose.

Why limit it:

• Extreme volatility.

• Ongoing regulatory uncertainty.

• Dependence on sentiment and technology adoption.

Its inclusion in a portfolio largely comes down to one’s tolerance for risk and belief in the cause.

Strategic, Not Speculative

For disciplined investors, the goal isn’t to “bet on Bitcoin.”

It’s to build a portfolio resilient to multiple futures.

A modest Bitcoin allocation can strengthen that resilience—if it’s sized prudently, rebalanced periodically, and held within a diversified framework that already covers equities, fixed income, and real assets.

Owning a small stake forces us to engage with an evolving financial system without overexposing ourselves to it.

The Bottom Line

Bitcoin’s place in a portfolio isn’t a matter of chasing momentum; it’s a matter of math and behavior.

Recent data suggest it moves largely on its own, occasionally opposite to both stocks and bonds. That semi-independence, combined with its capped supply, relatively neutral short-term trend, and growing legitimacy, gives it real diversification potential.

But diversification isn’t free.

The same independence that sometimes helps can also hurt in other market cycles.

So if you include Bitcoin, consider these strategic tips:

• Cap exposure at 3–5 % of total assets.

• Rebalance regularly.

• Treat it as part of a thoughtful, long-term plan, rather than a gamble.

In that role, Bitcoin can serve a tool for exploration within your Wealth Expedition, wielded like fire: used wisely and with respect for risk.

Daniel Lancaster, CFA

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