From April 2016 to September 2026 bitcoin returned 66% a year at 66% volatility, with a worst fall of 83% and a 2022 of −64%. Any optimizer fed those ten years and asked for the best mix of stocks, Treasuries, gold and bitcoin answers with a lot of bitcoin: 69% at a low risk aversion, still 8% at the highest tested. The ten years are the best decade the asset will ever have, and the question is what to do with that.
What a small sleeve did
Carving 3% out of the Grow wealth book pro rata, so the mix reads 63 stocks, 10 Treasuries, 24 gold, 3 bitcoin, rebalanced monthly, from April 2016:
| book | a year | worst fall | 2022 | $1 became |
|---|---|---|---|---|
| Grow wealth | 13.4% | −23% | −13% | $3.73 |
| Grow wealth + 3% bitcoin | 15.5% | −23% | −15% | $4.52 |
| Balanced FI | 11.8% | −18% | −12% | $3.21 |
| Balanced FI + 2% bitcoin | 13.2% | −19% | −13% | $3.67 |
Two points a year for a worst fall a third of a point deeper, in a decade when the asset compounded at 66%. Scale that to the optimizer’s 69% and the household holds a portfolio whose worst fall is bitcoin’s own, 83%.
The sizing rule
The weight is set by the loss the household can absorb in the sleeve, not by its expected return. A sleeve of 3% that loses 80% takes 2.4% off the book, the size of a bad month for stocks. A sleeve of 10% that loses 80% takes 8%, the size of 2022. So the caps run 3% in Grow wealth, 2% in Balanced financial independence, none in Leave a legacy, where the household never needs to sell and a sleeve that can lose 80% has no job.
The rule does not depend on a view of bitcoin’s future return, which is the point. Nothing in ten years of data separates a 66% compounding asset from one that has finished compounding; the sizing has to survive both.
Once a year is not often enough
The three books rebalance once a year, and for stocks, Treasuries and gold that changes little. For bitcoin it changes the sleeve. In the first iteration of these books, a 3% bitcoin sleeve rebalanced annually returned 16.0% a year against 14.1% monthly, and its worst fall deepened from 21% to 26%.
The reason is drift. Bitcoin rose 305% in 2020; a 3% sleeve set in March was near 10% of the book by December, and the 2022 fall landed on that larger sleeve. A cap that is only enforced once a year is a cap in name. If the sleeve exists, it is rebalanced when it drifts past a band, say half again its target, or monthly, while the rest of the book keeps its annual schedule.
Next: 60/40 is the floor.