Nearly Half of Crypto Investors Say They're In It for Diversification, Urban Institute Survey Finds

Cryptocurrency used to sell itself as a revolution. Now it's selling itself as a diversifier.

A report published this month by the Urban Institute, a Washington-based think tank, found that 45% of crypto investors cite diversification as their primary reason for holding digital assets like bitcoin, ethereum, solana and XRP. That was the top answer by a wide margin. Another 27% said they believe crypto is the future, 11% said they expect to make more money in crypto than other investments, and just 5% said they don't trust the U.S. dollar, according to Urban Institute's survey of 3,194 U.S. adults conducted in January.

That's a shift from crypto's early identity. In the earlier days of its roughly two-decade existence, investors largely held it to be countercultural and nonconformist, wrapped in anti-establishment rhetoric. Now, the plurality of owners just want it in the mix alongside stocks and bonds.

"As crypto gets more widely integrated into mainstream financial markets, and becomes just another asset, it makes sense that it'll be separated from the anti-establishment views that drove early adopters," said Dan Cassino, a political science professor at Fairleigh Dickinson University and author of "Bitcoin Bros: Masculinity, Cryptocurrency, and the Future of Men," according to CNBC.

Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York, told CNBC the shift is a healthy one. "When the primary motivation moves from ideology or speculation toward portfolio construction, that's a sign of maturation," said Boneparth, who also sits on CNBC's Financial Advisor Council.

The catch nobody should skip

Wanting crypto to diversify your portfolio and it actually doing that are two different things.

Boneparth said how well crypto diversifies a portfolio "depends entirely on the quality of the execution." That's not a hedge. That's the whole ballgame. Diversification only works if the assets you're holding don't move in lockstep. Own ten different things that all crash together and you haven't diversified anything, you've just added complexity.

The basic diversification premise, as financial advisors describe it, is straightforward: hold assets that move independently of each other rather than in tandem. Investors can diversify across asset classes, mixing stocks, bonds, cash, commodities and crypto, or within a class, like holding both U.S. and international equities. Over the past 10 years, bonds have shown a correlation of just 0.02 to the S&P 500, according to Veronica Willis, a senior investment strategist at Wells Fargo Investment Institute — essentially no relationship at all. Digital assets, by comparison, have carried a 0.2 correlation to the S&P 500 over the same period, Willis said. That's higher than bonds but still "very low," in her words.

But that correlation isn't stable. "Correlations between bitcoin and equities tend to spike during periods of acute market stress, when investors sell whatever is liquid," Boneparth said. Willis made a similar point: crypto tends to move with stocks during broad sell-offs because digital assets act as a hybrid between diversifying assets and growth assets. "When investors start to get spooked a little bit, and get rid of their risk-on assets, crypto gets bundled in with that," she said. Her advice: don't rely on crypto as your only diversifier.

Correlations can also shift over time. Morningstar portfolio strategist Amy Arnott has noted that "assets that were once great diversifiers may no longer be so." In the 10 years through April 2025, bitcoin and other major cryptocurrencies had a correlation of less than 0.4 relative to stocks, bonds, real estate, gold and commodities — low, but not nothing, and not fixed.

A fair point for skeptics

Crypto critics have a legitimate argument here, and it deserves to be stated plainly: an asset whose correlation to stocks spikes precisely during the market stress it's supposed to cushion against is a strange candidate for the "stabilizing" role diversification is supposed to play. That kind of behavior can just as easily wreck a portfolio's risk profile as smooth it out, especially for investors who buy in during a rally and panic-sell during a downturn. The Urban Institute survey doesn't tell us whether the 45% who say they're diversifying actually size their crypto positions sensibly, or whether they're calling a large bitcoin allocation "diversification" when it's really concentration risk with a rebrand.

Saying you're diversifying and building a portfolio that's actually diversified aren't the same thing. The survey only measures the former.

What's still unclear

The Urban Institute survey establishes what investors believe about their own motivations. It doesn't establish whether their actual portfolio allocations back that up, how much of their net worth is in crypto, or how long they've held it through a full market cycle.

Those are the questions that will determine whether this "maturation" story holds up the next time crypto goes through a serious correction, and whether the diversification rationale survives contact with an actual bear market the way it's supposed to on paper.