Ark Invest CEO & CIO Cathie Wood is a big proponent of bitcoin (BTC-USD) and Coinbase (COIN) believing firmly in its future. As more investors become interested in the digital seet, they turn to experts like Wood to help explain the best ways to view and engage with the asset.

Cathie Wood joins Yahoo Finance to discuss the digital asset and give investors insight into the proper way to manage the asset in their portfolio.

Wood explains her way of thinking about bitcoin in portfolios: 'The optimal allocation on average over this time period has been roughly 5%, maybe a bit below 5%. That's the average. When we first put bitcoin -- or got exposure to bitcoin through GBTC (GBTC) in 2015, the optimal allocation would've been less than half a percent, but it's been rising. I think one of the things that we learned in the last year, that I think is encouraging asset allocators to think seriously about bitcoin is, it is not only a risk-on asset, but during the regional bank crisis last year, it appreciated as a regional banks were falling apart. It's become a flight to quality asset as well."

Click here to watch the full interview or you can watch this full episode of Yahoo Finance Live here.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- I also wanted to ask you. I know that in your latest disclosure that you did lighten your Coinbase stake a little bit. I mean, it's still the largest position in your benchmark ETF. But I'm just curious what was behind that move.

CATHIE WOOD: Yes, well, Coinbase has had a magnificent move since all of the regulatory concerns were plaguing it last year. I think it's up more than five-fold. And so this is simple portfolio management.

There are other stocks in the portfolio that are lagging. This has had a great move. And so it's simply trimming, profit-taking, and really nothing more than that.

- Let's widen it out a little bit to talk a little bit more about what's been going on in the crypto world. And you were recently out with your big ideas report for 2020 for some of the big infeasible themes that you watch. One of them is Bitcoin allocation.

And, of course, you're now also in the spot Bitcoin ETF business with the introduction of your new spot Bitcoin ETF with 21 shares. But I want to zero in on that. Before we get to that, how are you thinking about Bitcoin allocation? How it will affect the underlying price of Bitcoin? And how normal people should be thinking about how much to allocate to something like Bitcoin?

CATHIE WOOD: Yes, so if you look over the history of Bitcoin, the optimal allocation on average over this time period has been roughly 5%, maybe a little bit below 5%. That's the average.