Gyroscopic Investing

The Permanent Portfolio, created by Harry Browne, is designed to protect wealth through all economic cycles.
Its classic structure is simple and balanced:

25% Gold → Inflation protection

25% Stocks → Prosperity cycles

25% Cash → Liquidity and deflation

25% Long-term Bonds → Deflation and recessions

This portfolio is meant to be stable, low-volatility, and require minimal intervention.

Where Does Bitcoin Fit?

Bitcoin shares some characteristics with gold, but it is far more volatile.
While gold may correct 10–20%, Bitcoin has seen drawdowns of more than 80% during bear markets.
This makes it incompatible with the Permanent Portfolio’s core, which is designed for safety — not speculation.

That’s why many structured investors don’t put Bitcoin inside the PP.
Instead, they use a Variable Portfolio (VP) — a smaller, more flexible allocation for higher-risk, higher-reward assets like Bitcoin.

How Much Bitcoin Should Be in the VP?

Portfolio optimization studies suggest that around 2.5% of total net worth allocated to Bitcoin through the VP can maximize asymmetrical upside without meaningfully increasing portfolio risk.

Example — Total Wealth: €100,000

Permanent Portfolio (PP): €97,500

Variable Portfolio (VP): €2,500 → Bitcoin

This allocation allows you to:

Keep the core stable and defensive

Gain exposure to Bitcoin’s upside potential

Limit the impact of major price corrections

Why This Hybrid Approach Works

Protects your core capital with traditional, stable assets

Gives strategic exposure to financial innovation

Keeps volatility isolated in the VP

Simplifies rebalancing and decision-making

Bottom line:

Bitcoin does not belong inside the classic Permanent Portfolio

It can be added only through the Variable Portfolio (VP)

An allocation of around 2.5% of total wealth is an optimised and balanced approach according to several studies

What about you?
What percentage of Bitcoin do you consider appropriate in your overall portfolio?
Share your thoughts and allocation strategies in the comments — learning from each other is how we grow.

"Portfolio optimization studies suggest that around 2.5% of total net worth allocated to Bitcoin through the VP can maximize asymmetrical upside without meaningfully increasing portfolio risk."

Optimization studies are like backtesting (in fact, they are backtesting). They use historical data, and 100% of the historical data for Bitcoin has taken place during Money Printer Go Brrrr, where it has been a go-go environment for risk assets.

Often, but not always, when NASDAQ gives for a dive, Bitcoin does also, suggesting it's part of the greater risk-on complex.

My approach has been and may again be (I sold mine, but maybe I'd buy it again) is to literally only use money you'd be comfy taking a 100% loss on, which for me would be less than 0.5%. The lower the entry price, the higher than % could be.

That makes a lot of sense — your reasoning is very solid.

What’s interesting is that we’re actually applying the same logic, just at different scales. You’re basically using 1–2 days of PP volatility as your Bitcoin risk budget, while my 2.5% allocation corresponds to roughly 10 days of average PP volatility.

Since the Permanent Portfolio typically moves about 0.2–0.35% per day, I see that as a tolerable impact window if Bitcoin goes south. Even in a worst-case scenario, it would hurt — but it wouldn’t derail the core strategy.

I like your more conservative framing though. It’s a clean and disciplined way to size the exposure.

By the way, do you hold only BTC in your VP and keep the PP standard otherwise?

Are all four classes equally volatile. If you have 100 year duration bonds should that be 25%

Zero. But there’s always the Variable Portfolio.