Investment management company VanEck recently concluded in a blog post that Bitcoin is an excellent tool for diversifying portfolios.
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Cryptographic currency shows low correlation with traditional assets
It is no secret that bitcoin has barely shown an association with traditional assets. Previously, several well-known asset management companies and hedge funds, including Pantera Capital, have conducted detailed analysis in this regard. As a result, VanEck focuses on the distinctive characteristics of cryptocurrencies, which makes it surprising that it moves independently of other asset groups.
This feature makes BTC a must for any diversified portfolio. VanEck concluded that:
“Bitcoin is less relevant to traditional asset classes (including broad market stock indices, bonds and gold) and may therefore increase the diversity of portfolios.”
Interestingly, VanEck mentions another aspect of Bitcoin that has become a hot topic: the stock-to-flow ratio. The investment management company used the research model proposed by Twitter user PlanB, which was analyzed in detail based on the detailed analysis of cryptocurrency-based stock-to-flow, which is mainly aimed at the scarcity of coins.
Earlier this month, Bayern Bank of Germany released a report on the PlanB model.
Bitcoin's impact on the portfolio
VanEck believes that even a small allocation of bitcoin may increase the potential return on the institutional portfolio. The investment manager provides a chart showing the different allocations to Bitcoin and analyzing the potential impact.
For example, if an institutional investor created a 60% stake and a 40% bond portfolio back in 2012, it would generate nearly 100% return. However, if the same portfolio is only allocated 3% of the funds to BTC, leaving 58.5% and 38.5% of the shares and bonds, respectively, the final income will increase to nearly 200%.
Gabor Gurbacs, VanEck's digital asset strategist, shared more bitcoin as an ideal asset through his Twitter, saying:
"The combination of bitcoin's persistence, scarcity, privacy and the nature of its bearer assets as a minimum of trust helps them hold monetary value. Bitcoin has the potential to become digital gold."
According to previous reports, VanEck and SolidX Management are about to start offering a limited bitcoin exchange-traded fund (ETF) stock.