Crypto Long & Short: Putting the Bitcoin Sizing Question to the Test

In a follow-up to his essay on sizing crypto risk, Lionsoul Global's Gregory Mall backtests bitcoin in a 60/40 portfolio across bull, bear, and sideways regimes — demonstrating how a direct bitcoin position, a large-cap basket, and a trend-managed sleeve diverge, and why the method of holding bitcoin can matter as much as the amount held.

Crypto Long & Short is CoinDesk's weekly newsletter featuring insights, news, and analysis for professional investors. The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.

Holding Rules: What Allocators Should Know About Adding Bitcoin to a Balanced Portfolio

By Gregory Mall, Chief Investment Officer, Lionsoul Global

This is part two of Gregory Mall's argument that crypto allocation's real question is size, not selection. You can read part one here.

Investors who regard crypto as too speculative to touch tend to frame the decision as binary. The more practical framing concerns dosage and implementation: how much bitcoin a balanced portfolio can carry, and under what rule it should be held.

The Backtest

Mall tested this directly. Starting from a conventional 60/40 portfolio of global equities and core bonds — the default balanced construction that most institutional allocators use as a risk benchmark — spot bitcoin was introduced at 2.5% and 10% weights with monthly rebalancing across the period from January 2021 to March 2026.

The headline results are intuitive. Adding bitcoin lifted returns and Sharpe ratios — a standard measure of return relative to risk — in strong crypto years, while the traditional core cushioned weaker ones. A small sleeve changed the shape of outcomes while leaving the portfolio's 60/40 identity intact. Higher weights also brought greater volatility and deeper maximum drawdowns, and that trade-off sits at the heart of the sizing question.

The exercise was then repeated with a rules-based trend sleeve in place of spot bitcoin — one that toggles between bitcoin and cash based on trend signals. This is the same logic behind systematic tools like the CoinDesk Bitcoin Trend Indicator, which signals the direction and strength of bitcoin momentum from CoinDesk Data. The trend version moderated extreme years in both directions. It landed between the plain 60/40 and the spot mix on risk and return, improving drawdown behavior at the cost of some upside.

What the Regimes Reveal

Splitting the test window into bull, bear, and sideways markets using the 200-day moving average — a widely followed momentum threshold that smooths daily price noise into a directional signal — sharpened the picture considerably.

In bull regimes, both approaches beat the plain 60/40, though the trend version retained much of the upside on a more controlled path. Bear regimes produced the widest gap: spot exposure transmitted more of crypto's drawdown into the broader portfolio, while the trend sleeve — designed to step away from persistent downtrends — kept losses shallower and the ride more survivable.

Sideways markets deserve more attention than they usually receive. Range-bound conditions, where prices churn without a clear direction, offer no strong trend to reward conviction and no clean rebound to rescue poor timing. Through those stretches, direct bitcoin exposure struggled to justify its added volatility, while the rules-based sleeve had a better chance of avoiding risk without reward. Real portfolios spend a great deal of time in exactly these noisy, indecisive transitions.

The Forward Case

Three structural forces will shape how these choices play out. The post-ETF market — transformed since the January 2024 approval of U.S. spot bitcoin ETFs, which opened regulated access to a broad swath of institutional and advisory capital — is more flow-sensitive, so demand shocks travel quickly and can amplify both trends and reversals. Supply growth is anchored by the April 2024 halving, the programmed reduction that cut the rate of new bitcoin issuance in half, and will keep shrinking as subsequent halvings continue on roughly a four-year cadence. Regulatory clarity in major jurisdictions continues to separate investable projects from speculative noise, raising the premium on transparent benchmarks and institutional-grade products.

These charts map the risk personality of each allocation choice. They make no claim to predict the next cycle. Portfolios that look excellent on a return chart can still prove uninvestable once their drawdowns become intolerable, and quieter portfolios often compound better because investors actually stay in them. Risk is experienced as much as it is measured. For allocators, the useful question concerns the holding rule that governs bitcoin exposure, and whether that rule keeps emotion from overriding discipline when it matters most.

Read the full report.

Headlines of the Week

By Francisco Rodrigues

This week's headlines show institutions are now taking a larger role in crypto trading even as the industry's push for U.S. regulatory certainty has stalled. Still, Wall Street giants continue pushing for progress.

Institutional crypto trading hits a record 72% as Wall Street reshapes the market: Institutions generated 72% of spot volume on Wintermute's OTC desk in the first half of 2026, up from approximately 61% in the second half of 2025, as retail participation declined. (CoinDesk)

Wall Street giants back the Clarity Act as its Senate window closes: BlackRock, Fidelity, Franklin Templeton, Goldman Sachs, and SoFi endorsed the market-structure bill, but Senate leadership later confirmed it would receive no floor time before the summer recess. (CoinDesk)

BlackRock debuts tokenized access to $311 billion of European money-market funds: The asset manager introduced 12 tokenized share classes across six funds and 15 markets using JPMorgan's Kinexys blockchain platform. (CoinDesk)

BNY targets $8.6 trillion transfer-agency market on blockchain rails: The bank is adding an onchain ownership ledger to a business servicing $8.6 trillion across 7.6 million accounts. It later selected Galaxy to add staking to its custody platform. (CoinDesk)

First U.S. spot bitcoin ETF to close as inflows dwindle: Hashdex will liquidate its $14.7 million DEFI fund after August 17 as assets and inflows remain concentrated in products operated by BlackRock and Fidelity. (CoinDesk)

Chart of the Week

MetaDAO surpasses $45 million raised as platform traction drives 46% META rally

Cumulative capital raised on MetaDAO crossed $45 million following $5.4 million raised in July alone. This expanding platform adoption coincided with strong market performance, with META trading up 46% month-to-date.

Notable Coverage

Listen: "Wall Street giants back $15M push to quantum-proof Bitcoin as the CLARITY Act nears a do-or-die deadline," on CoinDesk's Public Keys from the floor of the NYSE. Jennifer Sanasie is joined by Charles Schwab Head of Crypto Research Jim Ferraioli, Galaxy Head of Firmwide Research Alex Thorn, and FalconX Head of Derivatives Griffin Sears. (CoinDesk)

Read: In Crypto for Advisors, Aaron Brogan of Brogan Law PLLC analyzes why the Clarity Act may be falling short of industry needs. Then, in "Ask an Expert," Trevor Koverko weighs in on the bill's potential implementation. (CoinDesk)

Watch: "BNY moves $8.6T fund business onchain," with Jennifer Sanasie on CoinDesk Daily. (CoinDesk)

Engage: CoinDesk Research released the July 2026 Stablecoins & Tokenized Assets Report: "Tokenized RWA Hits $32.1B Record as MiCA Era Begins and Stablecoin Market Dips." (CoinDesk Research)