Research: 10% Bitcoin allocation in portfolio, which outperforms traditional asset portfolios

What is the difference in the allocation of 10% bitcoin in your portfolio compared to no bitcoin ?


TradeBlock, an provider of institutional digital currency trading tools, answered this question in a recent article. The company found that a portfolio with 10% bitcoin, 55% stocks, and 35% bonds was "significantly better" than a portfolio without bitcoin (but it contained 60% stocks and 40% bonds).

The initial funding for both portfolios is $ 1,000. Over the course of a year, portfolio 2 containing bitcoin outperformed portfolio 1 and also reached a 2019 high this summer.


(Comparison of the two portfolios, the dark line is a portfolio containing Bitcoin, the light line is a traditional portfolio, image source: tradeblock )

In terms of risk, the 10% bitcoin-equipped portfolio performs better than the other, but due to the increased volatility of this cryptocurrency, the risk of this portfolio is slightly higher.

However, the Sortino ratios (risk-adjusted return on investment assets) of the two portfolios are almost equal, at 1.51 and 1.41, respectively. Earlier this year, Bitcoin's risk-adjusted return was 1.97, which was higher than the S & P 500's 0.25 and gold's 1.06.

When the more popular Sharpe ratio is used to measure risk-adjusted returns, Portfolio 1 has a Sharpe coefficient of 0.66 and BTC Portfolio 2 has a Sharpe coefficient of 0.46.

In fact, Bitcoin is not only the best performing asset in 2019, but also the best performing in the last ten years.

A recent report from Bank of America Merrill Lynch said that if you invested only $ 1 in bitcoin at the beginning of the century, it will now be worth more than $ 90,000.

During the same period, $ 1 U.S. stocks would only rise by 250% to $ 3.46, and $ 1 in gold would reach $ 1.34 in ten years, crude oil would have only 74 cents, and 30-year U.S. Treasuries would be worth $ 2.08, and 1 The Burmese dollar is now worth only $ 0.004.

However, in the past decade, the S & P 500 and Dow Jones Industrial Average have risen by 140% and 130% respectively, but still far below BTC.


As trader Josh Rager points out,

"Although stock returns are so amazing, even at current prices ($ 7200), Bitcoin is likely to achieve similar returns. In the next few years, if we see BTC reaching between $ 75,000 and $ 100,000, then in the next ten years , Bitcoin's potential return will be more than 1000%. "