Bitcoin has Better Risk-Return Profile than Any Other Asset in Multi-Asset Portfolios
According to a recently published research report done by Binance – one of the largest crypto exchanges globally – all multi-asset portfolios that comprised of Bitcoin, exhibited much better profiles regarding risk-return, than any other multi-asset class portfolios.
Binance Research Specifics
The study entitled “Portfolio Management Series #1 – Diversification Benefits with Bitcoin” was carried out by the research division of Binance and it delved deeply into proper scrutiny of different types of portfolio, to give an in-depth conclusion regarding the variances in all the different risk-return profiles.
The report showed that for about 10 years now, Bitcoin (BTC) has been classified as an “extremely volatile asset”, and has showing very significant surges and pullbacks as well, like has not been seen before in most other markets. The report further notes a considerable disconnect between other assets in traditional markets since inception.
“Despite its volatility, Bitcoin has not exhibited a significant correlation with other traditional asset classes such as commodities, equities or fixed-income products since its creation in 2009.”
However, there is a significant advantage as well. The report states for example, that Bitcoin from a trading perspective, is arguably the most liquid asset in the world with very high volumes and price efficiency. It further adds that:
“Binance Research simulated different Bitcoin allocation techniques in existing diversified multi-asset portfolios. All simulated portfolios which included Bitcoin exhibited overall better risk-return profiles than traditional multi-asset class portfolios. These results show that Bitcoin provides active diversification benefits for all investors worldwide, following multi-asset strategies.”
The research also states that “Bitcoin has become an essential alternative asset” that should probably be included in all multi-asset portfolios because of the diversification options that it brings.
Bitcoin has yielded very considerable returns in recent times and since inception in 2009, it sometimes yields annual returns in three or four figures. As a matter of fact, the years 2014 and 2018 are probably the only years there were no notable gains. This could be because it is still quite the budding technology and is somewhat being
The Binance Research team also suggests that Bitcoin’s noted instability might reduce a bit with a lot more regulation and institutional investment and entrants into the sphere. The institutional endeavors include ETF, mutual funds and other products from firms like Fidelity Digital. The report also stated that Bitcoin is a fantastic choice for any entities which might desire some level of diversification from traditional assets. This is because some of these assets like the FTSE 100, gold, oil, S&P 500 and also silver, are largely disconnected from Bitcoin and may not affect it in anyway.