TLDR
- Morgan Stanley sets a 4% crypto cap for aggressive portfolios to manage risks.
- BlackRock and Grayscale recommend similar allocations for crypto in portfolios.
- Morgan Stanley cautions regular rebalancing to control crypto exposure.
- Financial firms like Fidelity support crypto exposure through specific investment products.
Morgan Stanley has set a cap on cryptocurrency allocations at 4% for its most aggressive client portfolios, a move that aligns with the strategies of other major financial firms like BlackRock and Grayscale. This guideline, announced in a note to clients on October 1, 2025, marks a shift in how Wall Street is approaching the inclusion of digital assets in traditional investment portfolios.
The bank’s Global Investment Committee categorized cryptocurrencies as speculative assets with growing popularity, comparable to digital gold. Morgan Stanley’s recommendation positions the firm in line with several other investment giants that are gradually embracing crypto while offering cautious strategies to manage risk.
Crypto as a Speculative Asset
Morgan Stanley’s recommendation reflects its view of cryptocurrencies as a “speculative and increasingly popular” asset class. The bank suggested that aggressive portfolios, which seek growth but can tolerate higher risk, may allocate up to 4% to cryptocurrencies. For more conservative investors, the bank advised avoiding cryptocurrencies entirely. The rationale behind the cautious approach is the volatile nature of the asset class, with the bank urging regular rebalancing to prevent excessive exposure during bullish periods.
While Morgan Stanley is moving cautiously, it joins a growing list of asset managers that are offering similar frameworks for crypto allocations. BlackRock, for example, has described a range of 1% to 2% in bitcoin as a reasonable exposure in diversified portfolios. Grayscale, a firm specializing in crypto investment products, suggests an optimal allocation closer to 5%.
Other Financial Firms’ Approach to Crypto
Several other prominent financial firms have also begun to weigh in on the role of crypto in investment portfolios. Fidelity, a major player in the retirement and investment space, offers exposure to crypto through IRAs and exchange-traded products (ETPs). Their research indicates that allocating between 2% and 5% of a portfolio to cryptocurrencies could add value, especially in a scenario of broader adoption of digital assets.
Meanwhile, Schwab has yet to publish specific crypto allocation guidelines but has shown openness to the asset class. Schwab offers access to crypto exchange-traded funds (ETFs) and plans to introduce trading for spot bitcoin and ether by 2026. This signals that, while still cautious, Schwab is preparing to offer more direct crypto investment options to its clients in the near future.
Risk Management and Rebalancing
Morgan Stanley’s advice on portfolio management emphasizes the importance of risk control. The firm advised that investors regularly rebalance their portfolios to prevent excessive exposure to cryptocurrencies during periods of price surges. The firm warned that while crypto assets have potential for high returns, they also come with the risk of significant losses due to their volatility.
The bank’s note highlights the potential for “greater drawdowns” during market corrections and emphasizes the need to manage these risks effectively. As a result, clients investing in crypto within these portfolios should be prepared for price fluctuations and the possibility of large losses in the event of market downturns.
Changing Views on Digital Assets in Traditional Portfolios
The recent guidance from Morgan Stanley reflects the evolving stance of traditional financial institutions on digital assets. Once considered too risky for mainstream portfolios, cryptocurrencies have begun to gain acceptance as more financial institutions recognize their increasing popularity and potential for growth. However, these firms are generally cautious, advising clients to allocate only a small portion of their portfolios to crypto.
This cautious approach is indicative of how traditional finance is integrating new, high-risk assets like cryptocurrencies into more conventional portfolios. As these firms continue to refine their strategies, it’s likely that other investment firms will follow suit in adjusting their recommendations regarding crypto exposure.
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