Bitcoin (CRYPTO: BTC) finally tipped into the mainstream last year, thanks to the launch of the new spot Bitcoin exchange-traded funds (ETFs). Suddenly, it became as easy to buy and trade Bitcoin as any tech stock. So investors soon began asking the question, "Just how much of my portfolio should I start allocating to Bitcoin?"

The answer might surprise you. For example, billionaire Ricardo Salinas -- one of the five richest people in Mexico right now -- says that 70% of his personal portfolio is in Bitcoin right now. Let's take a closer look at why he's taking such an aggressive stance on Bitcoin.

Is 70% the new 1%?

For the typical 60/40 investor, this is going to sound like madness. Instead of investing 60% in stocks and 40% in bonds, Salinas is investing 70% of his liquid portfolio in Bitcoin and 30% in gold and gold miners. And he says that he doesn't hold any other stocks or any bonds.

Just keep in mind: Allocating 70% of your portfolio to a single asset is risky, and it's riskier still if that asset is Bitcoin. The conventional wisdom is that you should only allocate 1% of your total portfolio to Bitcoin. And, indeed, even BlackRock -- the asset management firm that launched the largest and most successful spot Bitcoin ETF -- says that a 2% allocation is the upper limit for the traditional investor.

Over time, though, this target Bitcoin allocation is likely to rise significantly. Fidelity Investments, for example, now says that anywhere from 2% to 5% of your portfolio can now be in Bitcoin. And Cathie Wood of Ark Invest has been steadily ratcheting up her optimal Bitcoin allocation. In 2015, it was just 0.5%. In 2022, it was 6.2%. And in 2023, it was an astonishing 19.4%.

Perhaps the biggest takeaway here is that optimal Bitcoin allocations can vary widely. It really depends on your overall risk tolerance and your view of the current macroeconomic situation. Right now, for example, with markets experiencing heightened volatility and uncertainty, you might want to adjust your overall Bitcoin allocation.

Also, if you are nearing retirement, you should keep in mind that there have been five distinct periods in Bitcoin's history when it has lost 77% of its value or more. Just imagine how devastating that type of decline would be if you had just retired, and were counting on your Bitcoin holdings to support your nest egg. Most likely, that nest egg would be smashed into a thousand tiny pieces, and you'd be wishing you had invested in a much less volatile and risky asset.

Why is this billionaire so bullish on Bitcoin?

Given that 70% is such a high percentage to allocate to Bitcoin, it's important to understand why Salinas is buying so much of it. The primary reason, he says, is because it is "the hardest asset in the world," even harder than gold. In short, it is the ultimate hedge against currency debasement and hyperinflation. And it is the single best way to protect your money from government expropriation (a much bigger concern outside the U.S.).

In fact, Salinas has become a very vocal supporter of Bitcoin, even going so far as to appear at Bitcoin conferences to discuss its unique properties with other investors. Typically, he offers a warning about investing in fiat-denominated assets, and advises people to invest in Bitcoin instead. The rate of new Bitcoin creation is carefully controlled by an algorithm, and cannot be altered by any central bank or sovereign government. That, combined with its overall scarcity, is what makes Bitcoin such a "hard" asset.

Salinas has been ratcheting up his exposure to Bitcoin for several years. He began buying Bitcoin back in 2016. And in 2020, he publicly announced that 10% of his liquid portfolio was in Bitcoin. In 2022, he announced that 60% of his liquid portfolio was in Bitcoin. So you might say that he went from 0 to 60 in about six years. So don't expect to get to a high Bitcoin allocation overnight -- it will likely take a period of several years as you rebalance your portfolio.

A Bitcoin lesson from a billionaire

As Salinas points out, dollar-cost averaging (DCA) can be a fantastic investment methodology for buying Bitcoin. In a recent Bloomberg interview, he mentioned the virtues of a DCA strategy. Simply put, DCA commits you to buying a fixed amount of Bitcoin, month after month, whether the price of Bitcoin is rising or falling. This prevents your emotions from taking over, and ensures that you are steadily building your position over time.

The ultimate goal, he says, is to "buy everything you can." But let's face facts -- if you're not a billionaire, you may not have a lot of free cash flow at the end of the month to buy Bitcoin. So maybe it makes sense to start with a relatively low number -- such as just $50 or $100 a month -- and use that to build up your Bitcoin position. Over time, you might just be surprised at how such a simple strategy can lead to life-changing gains.

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