Rewriting the 60/40 Rule: Why institutional portfolios can’t ignore digital assets any longer

Let’s not waste time: the 60/40 portfolio isn’t dead—but it’s no longer enough.

Investors are facing a fundamentally different landscape. Inflation isn’t a brief detour—it could be persistent and sticky. Geopolitical risk is multiplying. Currency debasement is looking like it might be accelerating. And correlations between asset classes are changing. In this new regime, investors aren’t abandoning traditional tools like equities, bonds, or even gold—they’re supplementing them with modern hedges that reflect a more fractured financial world.

Bitcoin is one of those hedges. It doesn’t need to be “digital gold” to matter. Like gold, Bitcoin is increasingly valued for what it isn’t—government-controlled, inflation-prone, or tethered to monetary policy. But unlike gold, it brings high liquidity, 24/7 global access, and asymmetric upside. That combination is rare.

Ray Dalio—founder of one of the largest hedge funds in the world, Bridgewater Associates, and the architect of the All-Weather Portfolio—has said as much. He sees Bitcoin not as a replacement, but as a useful, complementary tool alongside gold. In a world where central banks are printing trillions, portfolio pragmatism demands exploring assets outside the traditional toolkit. Bitcoin’s decentralisation, durability, and rising adoption make it hard to ignore.

Institutions are taking notice. Over US$64 billion flowed into Bitcoin ETFs in 2024. BlackRock has shifted from sceptic to supporter, recommending a 1–2% allocation—not because it’s trendy, but because the math checks out. A simple 5% allocation to Bitcoin, dollar-cost averaged over the past decade, would have more than doubled a traditional A$1 million portfolio. That’s not a bet. That’s a strategy.

Closer to home, SMSF holdings of crypto in Australia are up nearly 10x since 2020. And we’re still early—crypto represents just 0.2% of total SMSF assets. That gap highlights both the under-allocation and the opportunity.

Of course, Bitcoin is not without risk. Volatility, regulation, and infrastructure still pose challenges. But the bigger risk for institutional portfolios may be exclusion. Because for the first time, compliant access pathways are here—licensed OTC desks, regulated custodians, and institutional-grade platforms like MHC Markets are making it possible to execute, settle, and report digital assets under proper oversight.

Which brings us back to portfolio construction.

The original 60/40 rule was designed for a world of predictable inflation, positive real rates, and defined borders between asset classes. That world is gone. Gold still plays a role. Bonds still matter. But diversification today requires looking beyond the familiar.

Bitcoin and Ethereum are two such additions. Bitcoin offers a sovereign hedge, with scarcity and scale that mimic gold, but with digital-native advantages. Ethereum, meanwhile, represents the rails for a programmable financial future—where transactions are transparent, infrastructure is decentralised, and costs are dramatically reduced.

Think of them as tools in a new economic operating system.

Are there risks? Absolutely. But the tools to manage them are improving. Custody is insured. Reporting is audit-ready. And access is no longer the Wild West.

Bottom line: you don’t need to believe Bitcoin will replace fiat or that Ethereum will rebuild the internet. But if you believe the world is changing, you need to believe your portfolio should too.

The old tools still work—but they don’t work alone.