Most investors have a view on cryptocurrency.
It usually sits at one of two extremes, either it’s dismissed entirely as highly speculative, or it becomes an all-or-nothing bet driven by headlines, momentum, and fear of missing out, like we saw in 2021.
Neither approach tends to lead to good long term outcomes.
If you step back and look at it through a portfolio construction lens, there’s a more sensible middle ground, which is to treat it like any other emerging asset class and focus on how a small allocation might improve diversification and return potential over time.
That’s how we’ve approached it at Stockspot.
How we approach Ethereum in a portfolio
We’ve introduced Bitcoin and Ethereum as part of our thematic exposure, with a fixed allocation of 6.2% within that theme, so even for those who include it, it remains a small position within the overall portfolio rather than a key driver of returns.
Why client interest has been low
What’s been interesting so far is how clients have responded.
Around 0.5% of Stockspot clients have chosen to include Ethereum, while around 1% have added Bitcoin theme exposure, which suggests that even within crypto, Ethereum is still seen as less familiar or harder to understand.
A big part of that low take up is likely explained by recent performance and sentiment.
Over the last couple of years, cryptocurrencies have generally underperformed shares, and even more traditional alternatives like gold. When an asset class goes through a period like that, interest naturally fades and investors become more cautious about adding exposure.
What history tells us about unpopular assets
We’ve seen this before.
When Stockspot launched back in 2014, sentiment towards gold was similarly negative. It had gone through a weak period and many investors questioned its role in portfolios. Fast forward a decade, and gold has been one of the best performing assets over that period.
That doesn’t mean Ethereum will follow the same path, but it’s a useful reminder that the most interesting opportunities don’t usually appear when an asset class is already popular.
Bitcoin vs Ethereum, two very different bets
It’s also worth recognising that Bitcoin and Ethereum are quite different bets, despite often being grouped together.
Bitcoin today at $76,500 has a market capitalisation of around $1.53 trillion US and is generally seen as a form of digital gold, with a relatively simple use case centred around scarcity and store of value.
Ethereum, by contrast at $2,260 sits closer to $273 billion US, which makes it materially smaller and earlier in its development cycle, with a different investment case centred on usage, network growth, and adoption.
In simple terms, Bitcoin is often viewed as a store of value asset, while Ethereum is more of a technology and infrastructure play.
What actually drives Ethereum’s value
Interest in Ethereum peaked in 2021 during the surge in non fungible tokens such as Bored Apes and CryptoPunks, when much of that activity was built on its network and drove a sharp rise in users, transaction volumes, and media attention.
Since then, that speculative activity has cooled significantly.
At the same time, attention has shifted towards artificial intelligence, which has become the dominant theme in technology markets. That shift helps explain why crypto has lagged, while AI and hardware related companies like Nvidia have outperformed.
From hype to real world use cases
That doesn’t mean the underlying trend has disappeared.
For example, the tokenisation of real world assets has moved from a fringe concept to a growing part of financial markets, growing 18 times since 2022. Assets such as funds, bonds, and commodities like gold are increasingly being represented on blockchain networks, and the value of these assets has grown significantly over the last few years.
Large institutions like Blackrock are now actively involved, with asset managers and banks launching tokenised funds and experimenting with new ways to issue and trade assets.
Much of this activity is happening on Ethereum, which strengthens its role as core infrastructure rather than just a speculative asset.
In other words, while the hype has faded and attention has shifted into AI, the underlying system continues to develop and attract institutional capital.
How Ethereum fits into a diversified portfolio
With that context in mind, it’s worth considering why some clients might want to include a small thematic allocation to Ethereum within their Stockspot portfolio.
Ethereum doesn’t move in lockstep with traditional assets like shares and bonds over the long term. While correlations can rise during periods of market stress (like in 2020), it has still behaved as a distinct source of returns over time.
That matters, because diversification isn’t about avoiding losses altogether, it’s about combining assets that don’t all move in the same way at the same time, which can help smooth overall portfolio performance.
Even a small allocation can contribute to that effect.
The asymmetric return profile
One of the more compelling aspects of Ethereum is the shape of its potential return profile.
You’re not allocating because it’s stable or predictable. You’re allocating because the potential upside, if the ecosystem continues to grow, is meaningfully larger than the downside when held as a small position.
Put simply, you’re risking a small amount for the chance of a much larger payoff.
That kind of return profile is difficult to access through traditional assets.
Exposure to financial infrastructure
Ethereum is often described as a cryptocurrency, but that doesn’t fully capture what it represents.
It’s a platform that supports a wide range of applications, including decentralised finance, smart contracts, and digital ownership of assets.
That makes it closer to owning a piece of infrastructure than a single product or company.
If parts of the financial system continue to move towards blockchain based rails, then Ethereum is one of the main networks where that activity is taking place.
The growth of tokenisation
Another structural trend supporting Ethereum is the growth of tokenising real world assets.
This allows assets to be traded more efficiently, with faster settlement, lower costs, and improved access for investors.
While still early, this trend is gaining traction, particularly as large financial institutions begin to adopt the technology.
If it continues, Ethereum is well positioned to play a central role in how these assets are issued and traded.
Why access has improved through ETFs
One of the biggest barriers to crypto adoption historically has been how difficult it was to access.
Direct ownership involves custody risk, exchange risk, and a lack of consistent regulation.
ETFs have changed that. Accessing that exposure through an ETF also removes much of the operational complexity that has historically been associated with crypto, which makes it easier to include within a diversified portfolio.
They also make it possible for institutional investors to participate, which can support broader adoption over time.
where Ethereum fits, and where it doesn’t
Ethereum isn’t a core holding within the Stockspot portfolios – it’s a volatile and evolving asset with ongoing uncertainty.
That’s why position sizing matters.
At a small allocation through Stockspot themes, it can add something different to a portfolio, whether that’s diversification, exposure to emerging financial infrastructure, or a return profile that’s hard to find elsewhere.
The real question investors should ask
The fact that only a small percentage of clients have included it so far reflects both recent underperformance and the shift in attention towards themes like AI.
At the same time, the continued growth in tokenisation, rising institutional participation, and Ethereum’s role as a core settlement layer suggest the long term case remains intact, even if sentiment is currently subdued.
The question isn’t whether to put your whole portfolio into it.
It’s whether a small, well considered allocation could improve your overall returns over time.
For some investors, that’s where Ethereum can fit.
Disclaimer: Stockspot ABN 87 163 214 319 is a licenced Australian Financial Services provider (AFS License No. 536082) regulated by ASIC. Any advice contained in this article is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice contained in this presentation and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Investment in financial products involves risk. Past performance of financial products is no assurance of future performance. Please read our Financial Services Guide before deciding whether to obtain financial services from us.
