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Question
What does the Kelly Criterion suggest about the appropriate size of a crypto allocation for a diversified investor?
1
The Kelly Criterion proves that 10% is the mathematically optimal crypto allocation for any investor with a 10-year horizon
2
Given crypto's extreme variance and significant probability of failure, Kelly-style thinking — maximising long-run growth by balancing expected payoff against variance penalty — typically points to single-digit percentage allocations, even for investors who believe the long-run bull case
3
Kelly analysis is inapplicable to crypto because it assumes normally distributed returns
4
Kelly analysis suggests allocating 25–50% to crypto given its historically high returns
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