As for portfolio allocation, you are right about the volatility being high, thus the allocation being small.
At this point, Bitcoin is being treated as a speculative instrument. It does not share the same status as gold, being a store of value, and thus it will not move based on the fears and hopes of fiat currencies. From that standpoint, it should be entirely uncorrelated from the fiat banking system and traditional investments. Be careful if you are trading for Bitcoins denominated non-USD, as those prices will move with exchange rates as well.
From a regulatory standpoint, Bitcoin is in limbo. Right now, it's no different than trading bottle caps, but when the regulators come down on it, there will be a different story.
In short, the two forms of investment risk you face are volatility price risk and regulatory risk.
At this point, Bitcoin is being treated as a speculative instrument. It does not share the same status as gold, being a store of value, and thus it will not move based on the fears and hopes of fiat currencies. From that standpoint, it should be entirely uncorrelated from the fiat banking system and traditional investments. Be careful if you are trading for Bitcoins denominated non-USD, as those prices will move with exchange rates as well.
From a regulatory standpoint, Bitcoin is in limbo. Right now, it's no different than trading bottle caps, but when the regulators come down on it, there will be a different story.
In short, the two forms of investment risk you face are volatility price risk and regulatory risk.