Every portfolio should hold at least 6% in Bitcoin?
A new report finds that the optimal investing portfolio should contain some cryptocurrency exposure.
The National Bureau of Economic Research put out a report written by professors Aleh Tsyvinski and Yukin Liu of Yale that finds holding at least some cryptocurrency is an optimal diversification strategy.
Awesome.
I mean we already thought that, but it's nice to have some evidence to back up our thoughts!
How much should we hold?
According to the study, the researchers found that holding roughly 6% of bitcoin is an optimal level of exposure.
The reasoning for this is because bitcoin and cryptocurrencies have no exposure to most of the common stock and macroeconomic factors.
They also noted almost no correlation to other currencies and commodities.
Which means that bitcoin and cryptocurrencies are the ultimate uncorrelated asset.
Some specifics:
The study/report was titled, "Risks and Returns of Cryptocurrencies".
Sharpe’s ratio was utilized to show how cryptocurrencies have a higher potential for returns even though they are more volatile.
Something to keep in mind though is that only Bitcoin, Ether, and Ripple were looked at to come up with their results.
Their conclusions:
The optimal portfolio would have at least 6% of its holdings in Bitcoin.
For those who might be less interested in the cryptocurrrency, 4% was the suggested amount of investment.
At the very least every portfolio should hold at least 1% of cryptocurrency has a hedge against price fluctuation of other assets.
The paper can be found here:
http://papers.nber.org/tmp/37004-w24877.pdf
Stay informed my friends.
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https://bitcoinist.com/new-yale-study-every-portfolio-must-include-at-least-6-bitcoin/
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Gotta give those Yaleis credit! 💰🧐💰
I had targeted upward of 10%. Did it say bitcoin specifically?
They studied Bitcoin, Ether, and Ripple. Bitcoin was mentioned but some combination of those 3 could be used.
informative post
Which part?
I will fight a lot to be a banner for the bitcoin, it should be noted that it is the future and I believe a lot in the cryptocurrency market, it is still new, but we will keep moving forward ..
Fight in what way?
Times are changing fast. Glad to see that cryptos are gaining ground in academia too.
Well it is not so much academia, it is saying that financial portfolios reach optimal performance when bitcoin is included due it not being correlated with anything else and its potential for outsized returns.
In many countries investing in cryptocurrencies is considered a gamble because they say it unpredictable unlike the Stocks , a reason "They also noted almost no correlation to other currencies and commodities."
So yeah , this would get attention now because "Yale" issued a report regarding this otherwise this is what we already knew. Well better late then never
Anything that does not generate cash flows is speculation. In that regard they should not outlaw investing in gold, silver, houses, etc. Basically anything that isn't a stock or doesn't pay dividends. Bitcoin makes sense as a portfolio hedge at the least.
I agree with you, bitcoin is the best to keep in
portfolio and be active.
bitcoin will play a very crucial part in everyone's portfolio for sure only limited amount of supply in existence definitely a must to buy one