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Posted December 8, 2025 at 12:44 pm
Join us for a deep dive into the benefits and risks of constructing a portfolio with crypto assets. WisdomTree in Europe’s Director of Digital Assets Research Dovile Silenskyte discusses the case for digital asset diversification, convincing crypto skeptics, as well as differentiates between different blockchains, unravels the recent crypto flash crash, and more!
The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.
Hello, and welcome to IBKR Podcasts. I’m Steven Levine, Senior Market Analyst at Interactive Brokers, and your host for today’s program. We’ll be discussing portfolio diversification with different digital assets such as Bitcoin, Ether, and others. We’ll also be diving into what seems to be a growing list of blockchain platforms, and these include Solana, and Stellar, along with Ethereum. And with us to break all this down, and provide what I’m sure is going to be some really insightful commentary, is WisdomTree in Europe’s Director of Digital Assets Research – Dovile Silenskyte. Welcome, Dovile!
Hi, great to be here. Thank you for having me.
Great to have you here. Thanks so much for taking the time to do this. I think this is going to be great. This is a topic I’m really interested in, because my background has mainly been in ‘traditional’ finance. I’m sure there are others who have not yet taken this leap into trading and investing in digital assets. I suppose there are different lengths for how wide the bridge is that covers this gap between traditional finance and the digital asset space. For me, I guess it’s like crossing the Atlantic. But if you had to convince someone – let’s say it’s somebody who’s just totally skeptical about investing in digital assets, in general. How do you convince them? How do you convince them to allocate some of their portfolio, say 1% to 3% of their portfolio, to crypto? How do you make this argument? Before you answer, I’m also interested in some of the benefits and risks that you see that investors, and others who transact with them – what should they generally look out for?
Yes, fantastic question. So, when I talk to traditional investors, and those – they are the investors that I talk to all across Europe – I always highlight that if they take a look at market caps or market utilization of all tradable listed instruments that are easily accessible to them, then digital assets represent approximately 1.5% of that market cap portfolio. So, if an investor wants to be market cap neutral, they need to allocate approximately 1.5% of their market cap portfolio to digital assets. Having 0% allocation is an active underweight, which they’re free to do, but before making any active decision to underweight, or active decision to overweight, they need to run the analysis.
And for the analysis, what I like talking about is the fact that – and taking Bitcoin as an example – it’s a very volatile asset. Over the past 11 years, it was the best performing asset during eight of those years, and the worst performing asset during three of those 11 years. It hasn’t found itself anywhere in the middle. It’s either the best or the worst.
While it’s volatile, it’s also very uncorrelated with traditional assets. So, when I run a correlation analysis for the time period from the end of 2013 to the end of October this year [2025], and when I use weekly performance figures, I see that Bitcoin’s correlation with traditional assets is around, or below, 20%.
So, what happens if an investor takes a very volatile asset that is not correlated to traditional assets and adds it to a traditional multi-asset portfolio? Well, the result is that the risk return metrics are improved. Sharpe ratio increases by 6 to 8 basis points (bps), and Information ratio is approximately 1, once [a] 1% Bitcoin allocation is done within that portfolio.
And after I show this analysis to investors, I say, ‘You’re still free to underweight this asset class. You’re still free to have 0% allocation, but please recognize that you’re hurting your clients by not having a small Bitcoin allocation within your portfolio’.
Okay, so it is important, it seems in effect, to have some weighting of crypto in the portfolio for diversification reasons that are basically non-correlative. Is that fair to say?
Correct. So, Bitcoin and other cryptocurrencies – they’re not correlated to traditional assets. And while their performance is very volatile, adding an uncorrelated, volatile asset – what is the impact? The impact on performance is visible at the portfolio level, while the impact on volatility is more or less hidden, because of its low correlation to traditional assets, and the net result is improved risk return metrics.
You also mentioned that you are talking to European investors, or Europe-based investors. Is this a Europe-specific type of strategy or is this a global strategy?
It’s absolutely global. So, it’s global, multi-asset portfolio. It has 60% allocation to equities, 40% allocation to fixed income. And for equities, we’ll look at MSCI – All Country World Index. I just talk to European investors, because I’m based in London, in Europe, so when I travel in Europe and talk to clients here, but if I talk to an investor in the US or in LATAM or in Australia, I would tell the same story.
It’s the same argument. What percentage of these people actually pick up on that argument, would you say? Does everybody follow suit, or do some people still remain skeptical and say, ‘Well, maybe, but I don’t think so’?
So, some people remain skeptical, and they say that while they understand this argument from an investment perspective, that’s not enough for them to convince their risk colleagues or compliance colleagues. And I always encourage [them] to work with us first [and] run any additional analysis that may be helpful for them to convince their colleagues.
When we talk about correlation, I find this really interesting, because – maybe not to other assets, but to the digital asset world itself, and from one digital asset to the next – it seems like, if I look at a chart, say over the past year of the prices of, say, Bitcoin, Ether, Litecoin, Solana, Ripple, there are some departures that you see in this chart, but pretty much, in general, on average, if you just look at the performance of them, they all pretty much move in lockstep. How do you account for this? I mean, is there any kind of, say, utility or purpose behind the digital asset? Any kind of differentiation for an investor when they make a decision from one coin to another – Bitcoin, Litecoin, Ripple. How do I decide?
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That’s [a] brilliant observation. So, what I would suggest – looking at is the total crypto market, [it] is approximately $3 trillion US dollars, and Bitcoin continues to represent approximately 60% of this total crypto market capitalization. There is Bitcoin – and then there is everything else; and everything else is tens of thousands of tokens. And I’m sure that most of them have no value. So, no investors should be putting any money into those tokens.
Okay.
And when I talk to investors, I always say that Bitcoin is [a] store value asset. And you can think about it as digital gold. And everything else, you need to understand the use case of the specific blockchain that you’re examining for your investment.
And you are absolutely correct that Bitcoin’s correlation with other cryptocurrencies is high, and it’s approximately 80% Bitcoin versus key names such as Ethereum, Solana, XRP; and the reason why [an] investor may want to go into something else than just Bitcoin is: Bitcoin [is] store value, but the growth will come from other names. So, the growth will come from [a] blockchain such as Ethereum or Solana, or XRP, or Stellar, or a number of other names, because they are building the future of finance. So, for example, Ethereum has very strong market share with institutional use cases. Now, when large institutions talk about issuing stablecoins, or when large institutions talk about tokenizing real-world assets, they do that on [the] Ethereum blockchain.
Solana has [a] very strong use case with retail apps. For example, if you are a gamer, or if you have friends or family members who play games, you may know that there are economies within those games, and a number of those economies are built on [the] Solana blockchain.
And XRP and Stellar – they are providing real-world use cases by allowing individuals and institutions to transfer money between emerging countries without needing to use US dollar as a bridge currency.
But for every single blockchain that somebody looks at and wants to invest, it’s very important to understand that that blockchain does something – that there is some use case for it – because there are number of meme coins or blockchains that were built by whoever that have nothing, and the money should not be going into those blockchains.
And when you talk about, say, different blockchains, maybe having different capabilities or different purposes. So, I was, I was reading in this industry report – I think it was Cantor Fitzgerald that put this out – they talked in this industry report about a so-called ‘crypto flash crash’. It happened back, I think on October 10th this year [2025]. And there were some extreme spikes, I understand, in network activity. It led to what they call ‘material degradation’ in the performance of Ethereum. Uh, but Solana, according to this paper, ended up remaining stable. This reportedly made the network, this crypto flash crash, of Ethereum effectively unusable. So, clearly there are differences here. What I’m really interested in is more details about this crash – if you can tell us more about that and what it means for investors when they choose to buy a certain digital asset on a certain blockchain. I’m curious about the differences here -these two networks, or these two platforms, Ethereum and Solana.
Yeah, so this is, uh, quite a deep question, so I’ll try to address this question point by point.
Okay, great. I need that!
Excellent. So, from a use case perspective, Ethereum and Solana – they’re different blockchains. So, Ethereum has over 10 years [of a] track record, is very stable, and it delivers what institutional, users demand. So, it delivers stability and risk-managed approach for blockchain. Solana is much younger, is approximately five years old, but it’s faster, cheaper, and has more users than Ethereum. And flash crash day was no different from any other day. So, on any day – for example, at this moment, Ethereum processes approximately 20 transactions per second, while Solana can process and does process, thousands of transactions per second. And that’s why Solana has gained strong adoption from [a] retail apps perspective. That’s why Solana works for gaming economies, and Ethereum is not used for gaming economies. Because if I played a game, and I wanted to buy some clothing right now – I want to buy it right now – and I want my transaction to be processed at the same time as other gamers are getting their transactions processed.
For [an] investor, if you are looking to put your money into either Ethereum or Solana, it’s very important to understand how the economics of blockchain are influenced by the activity that’s happening on that blockchain. And some time ago, one very smart individual told me that when you look at the blockchain, it’s very important to see activity on that blockchain, because [a] blockchain is more or less like an island, and you want [the] island to be connected to continents. You want [the] island to have living beings, living animals. You want activity on there. Because if you look at something that has nothing happening on it, then it’s a dead island, and you should not be touching it with your money.
But nowgoing to the 10th of October, what happened on that day was there was a macro shock when U.S. President Donald Trump announced new tariffs on China.
By the time this announcement was made, markets – traditional markets – were already closed. So, the only way for investors to express their reviews was to trade crypto. And, of course, when they traded crypto, they sold it instead of buying, because that was a negative market shock. But what happened was [the] crypto market was very leveraged.
So, once sales started, margin calls came in, and a number of investor positions were forcefully liquidated. And when I say a number of investor positions, over 19 billion U.S. dollars were forcefully liquidated in [the] crypto market. And all of that happened in a very short time period. And there were moments when altcoins – non-Bitcoin names – even reached the price of zero for a very short time, because there were no buyers. Everybody was trying to sell. And there were a number of sellers who were forced sellers. So, this was an activity that flushed out leverage. I think it cleaned up the market a little bit, but since that day, the market has remained subdued, and we still need to give investors time to recover from that and come back into the market and start buying as strongly and as heavily as they did before that.
Yeah, that’s, that’s very interesting. I mean, I’ve been seeing the performance lately and there’s all sorts of speculation as to where the price of, say, Bitcoin could go from where it stands today and from where it came from in terms of its high this year. I’d be very curious to understand more about the supply and demand dynamics behind Bitcoin, and behind all of the other digital assets as well.
This has been a really great conversation. So, I think that all of this is really, really fascinating. It’s interesting to see the bridge, being at least presented to those traditional finance investors and traders, to give them this opportunity to see how a diversified portfolio in digital assets could possibly give them more benefits than perhaps risks, when realizing the allocation versus no allocation [to crypto] – and that’s what I’m understanding from this.
Yes.
Awesome. This is really great, Dovile. Is there anything else you’d like to add to this?
I can only say: please do not ever panic buy or panic sell anything. If you decide to invest in Bitcoin, run [a] proper analysis, engage with individuals like me to understand what may work or may not work for your portfolios; and if you invest outside Bitcoin, please make sure that that blockchain actually does something, because the last thing that I want any one of you to experience is [to] lose your hard earned money, hard earned savings, to scam activities that may be happening.
This is great, really, really terrific. And I’m sure that listeners can find all of this kind of information within the research that you provide online or otherwise. We can provide some links to those in show notes. Again, thank you so much for taking the time to do this, Dovile! Really, really terrific. Really appreciate it – all great stuff!
And yes, I want to let our listeners know that we will provide some links in the show notes, where they can learn more about Wisdom Tree in Europe, [and] they can learn more about Dovile’s research. And we’ll have extended content on this topic at IBKR Webinars.
Um, you can also read more commentary and market analysis, including about the crypto markets at IBKR Traders’ Insight. Lot of great material there. We also have more information about IBKR crypto offerings on our website – just go to IBKR.com; and for a full list of financial educational offerings, visit the IBKR Campus, where, as always, all of our educational material is provided to the public at no cost.
And until next time, I’m Stevenn Levine with Interactive Brokers. Thanks for joining us.
Thank you.
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Jan 21, 2026
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