Bitcoin in a portfolio: how to size for an 80% fall
How much Bitcoin a portfolio can carry, worked out from the falls rather than the returns: Bitcoin's drawdowns since 2017, how it behaved when stocks fell, what 1–20% did to a 60/40 portfolio, and why rebalancing decides the risk.
Most questions about Bitcoin in a portfolio start with the upside. This guide starts with the downside, because that is what decides whether you can hold it. Since 2017, Bitcoin has fallen more than 75% from a high twice, and more than 50% four times. A position you would sell in such a fall is too large, however good the long-run return looks. Below are Bitcoin's falls since 2017, how it behaved when stocks fell, what a 1% to 20% share did to a 60/40 portfolio, and a sizing method that starts from the loss you can live with. Backtested results are hypothetical.
Bitcoin's falls since 2017
On daily closing prices, Bitcoin has had four falls of more than 50% since 2017:
| Fall | From the high to the low | Size | Back to the old high |
|---|---|---|---|
| 2017–18 | Dec 2017 → Dec 2018 | −83% | Nov 2020, almost 3 years after the high |
| Covid crash | Feb 2020 → Mar 2020 | −52% in one month | Jul 2020, about 5 months after the high |
| 2021 | Apr 2021 → Jul 2021 | −53% | Oct 2021 |
| 2021–22 | Nov 2021 → Nov 2022 | −77% | Mar 2024, about 2 years 4 months after the high |
The most recent fall, from the high of October 2025, had reached about 53% at the end of June 2026. Source: Bitcoin daily closing prices in US dollars; InvestWealth calculations.
Two things in the table matter for sizing. First, an 80% fall is not a rare tail event for Bitcoin; it has happened in two of the three large cycles since 2017. Second, the recoveries were fast by stock-market standards, but only for those who still held. After an 80% fall an asset has to rise 400% to get back to its high, and an investor who sold near the low did not get the recovery. The drawdown recovery calculator shows the arithmetic for any fall.
Other coins fell further. In our data Ethereum's worst fall was about 94% and Solana's about 96%. For anything other than Bitcoin, plan for a fall of 90% or more.
How Bitcoin behaved when stocks fell
Bitcoin is often called "digital gold". In our data it behaved more like a very volatile stock. From August 2017 to June 2026 its volatility was about 75% a year, against about 17% for the S&P 500: roughly four times as large. Its correlation with the S&P 500 on monthly returns was about +0.3: not a tight link, but positive.
The months that matter are the bad ones. In the 12 months of that period when the S&P 500 fell more than 5%, Bitcoin fell in 9. In March 2020 the S&P 500 lost 14% and Bitcoin 27%. In June 2022 the S&P 500 lost 6% and Bitcoin 26%. A Bitcoin position should be sized on the assumption that it falls at the same time as your stocks, not that it cushions them.
The arithmetic of a Bitcoin position
Start with the part you control: the share of the portfolio. If Bitcoin falls 80% and everything else stands still, the whole portfolio loses 0.8 times the Bitcoin share. For other coins, use 0.9.
| Share in Bitcoin | Loss on the whole portfolio if Bitcoin falls 80% | If a coin falls 90% |
|---|---|---|
| 1% | −0.8% | −0.9% |
| 2.5% | −2% | −2.3% |
| 5% | −4% | −4.5% |
| 10% | −8% | −9% |
| 20% | −16% | −18% |
Arithmetic, not a forecast. The table understates the real loss in a bad year, because, as above, stocks tended to fall at the same time.
What 1% to 20% Bitcoin did to a 60/40 portfolio
We added Bitcoin to a 60/40 portfolio (60% S&P 500, 40% long-term US Treasuries), taking the Bitcoin share from both in proportion and rebalancing back to the target every month. August 2017 to June 2026, total return, no costs or taxes:
| Bitcoin share | Return per year | Worst fall from a high | Volatility |
|---|---|---|---|
| 0% | 8.7% | −26.3% | 12.2% |
| 1% | 9.2% | −26.6% | 12.3% |
| 2.5% | 9.9% | −27.1% | 12.6% |
| 5% | 11.1% | −28.0% | 13.2% |
| 10% | 13.4% | −30.0% | 14.9% |
| 20% | 17.8% | −35.3% | 20.0% |
Read the return column with care. In this period Bitcoin rose about 14 times over, which is why every extra percent of Bitcoin added return. That is a record of one period, not an expectation. The worst-fall column is the more useful one: up to 5% in Bitcoin, the portfolio's worst fall moved by less than 2 percentage points, because the monthly rebalancing kept the position small. At 20% the portfolio fell about 9 points more than the plain 60/40 and swung far more along the way. The worst fall here is measured at month-ends, so the daily lows were deeper. Backtested results are hypothetical.
Rebalancing decides the risk
The figures above assume the Bitcoin share was brought back to target every month. Without that, the position grows after every rally, and the next 80% fall hits a much larger share.
A 5% Bitcoin share that was never rebalanced grew to more than 40% of the portfolio at its peak in mid-2025. An 80% fall from there costs about a third of the whole portfolio, not 4%. The investor who started at 5% would, by doing nothing, have ended up holding a very different portfolio from the one they chose. Rebalancing is how a small position stays small: it sells part of the gain after a rally and buys after a fall, on a schedule decided in advance. Monthly, quarterly, or whenever the share drifts past a band you set (for example 5% target, act at 7%) are all common. What matters is that the schedule is written down before the next rally, not invented during it.
A sizing method: start from the loss you accept
- Decide the loss you accept from crypto, as a share of the whole portfolio, in a year when it falls 80% or more. Write it down as a number, for example "4% of my portfolio".
- Divide by 0.8 for Bitcoin, by 0.9 for other coins. A 4% loss budget gives 5% in Bitcoin, or about 4.4% in other coins.
- Add the stock fall on top. Check what your stock and bond part lost in its worst year; the Portfolio Crash Test shows this for your own mix. If the combined loss is more than you would sit through, lower the crypto share, not the plan.
- Write down the rebalancing rule before you buy: target share, schedule, and the band at which you act.
- Decide how you will hold it. Exchange, own wallet or exchange-traded product: each has its own custody, cost and tax questions, which this guide does not cover.
The result of this method is a share you chose before the fall, not one the market chose for you during the rally. For most investors with a loss budget of a few percent, it comes out in the low single digits. That is a result of the arithmetic, not a recommendation; your own number depends on your goals, horizon and other assets.
Follow Bitcoin with data
The free Bitcoin page shows the long-run return, the worst fall and the buy-and-hold record. A free Research Terminal account adds the strategy-versus-buy-and-hold comparison on 30 markets, including Bitcoin, and the research library; no credit card is needed. Premium adds three crypto portfolios with weights and monthly rebalancing lists; see what each plan includes.
Frequently asked questions
How much Bitcoin should be in a portfolio?
There is no single right share; it follows from the loss you accept. If Bitcoin falls 80% and everything else stands still, the portfolio loses 0.8 times the Bitcoin share: 4% at a 5% share, 8% at 10%. Divide the loss you would accept from crypto by 0.8 to get the largest share that fits it. This is arithmetic, not investment advice.
How far has Bitcoin fallen in the past?
On daily closing prices, Bitcoin fell 83% from December 2017 to December 2018 and 77% from November 2021 to November 2022. It also fell 52% in one month in the Covid crash of 2020 and 53% in 2021. It took almost 3 years after the 2017 high, and about 2 years 4 months after the 2021 high, to get back to the old high.
Is Bitcoin a hedge against stock market falls?
Not in the data since 2017. In the 12 months from August 2017 to June 2026 when the S&P 500 fell more than 5%, Bitcoin fell in 9. In March 2020 the S&P 500 lost 14% and Bitcoin 27%. Its correlation with the S&P 500 on monthly returns was about +0.3.
Does adding Bitcoin to a 60/40 portfolio improve returns?
From August 2017 to June 2026 it did: 5% in Bitcoin, rebalanced monthly, raised the return from 8.7% to 11.1% a year, while the worst fall moved from −26.3% to −28.0%. In that period Bitcoin rose about 14 times over, which will not necessarily repeat. Backtested results are hypothetical.
Why rebalance a Bitcoin position?
To keep it at the size you chose. A 5% Bitcoin share that was never rebalanced grew to more than 40% of a 60/40 portfolio at its peak in mid-2025. An 80% fall from there would have cost about a third of the whole portfolio instead of 4%.
How much should I plan for other cryptocurrencies to fall?
More than Bitcoin. In our data Ethereum's worst fall was about 94% and Solana's about 96%. For coins other than Bitcoin, plan for a fall of 90% or more.
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Citation (APA)
Hamann, H. (2026). Bitcoin in a portfolio: how to size for an 80% fall. InvestWealth.com. https://www.investwealth.com/learn/guides/bitcoin-portfolio-allocation
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<a href="https://www.investwealth.com/learn/guides/bitcoin-portfolio-allocation">Bitcoin in a portfolio: how to size for an 80% fall</a> (InvestWealth.com)
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