Insights

Demystifying Crypto in Asset Allocation

Highlights include:

  • Optimal portfolios maximizing risk-adjusted returns would have included allocations to bitcoin in every calendar year.
  • The higher volatility of bitcoin relative to other asset classes enable a wider spectrum of risk objectives for unlevered investors.
  • Volatility scaling has improved the risk-reward of bitcoin and can enable an allocation for investors with lower risk tolerance.
  • BTC's correlation to traditional asset classes and hedge fund strategies has varied through time and been low on average.
  • BTC has had higher alpha than any other traditional asset class or hedge fund strategy, and its beta has only been significant on down days.

Demystifying Crypto in Asset Allocation

This report illustrates the effect of adding BTC to a diversified portfolio through the lens of Modern Portfolio Theory. Whilst the extent to which we can make data-driven conclusions are limited by the availability of historical data, there are many aspects of BTC's 10+ year track record that suggest it can play a role in extending the efficient frontier.

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Disclosures
Trading
OTC “digital,” “crypto” and “virtual” currencies are not securities and your cryptocurrency trading is not protected by either the FDIC or SIPC.
Custody
“Digital,” “crypto” and “virtual” currency custodial services are not protected by either the FDIC or SIPC.