The Case for Crypto in an Institutional Portfolio

This paper examines the case for adding bitcoin to a diversified portfolio of stocks and bonds. Specifically, we consider the impact that different allocations to bitcoin would have had on a Traditional Portfolio consisting of 60% equities and 40% bonds under a myriad of different market regimes.

The paper shows that bitcoin would have contributed positively to a diversified portfolio’s cumulative and risk-adjusted returns in 74% of one-year periods, 97% of two-year periods, and 100% of three-year periods since 2014, assuming quarterly rebalancing.

In addition, the size of that positive impact has been significant: On average, assuming quarterly rebalancing, a 2.5% allocation to bitcoin would have boosted the three-year cumulative return of a traditional 60% equity/40% bond portfolio by an astonishing 15.9 percentage points.

There is, of course, no guarantee that the relationships between a bitcoin allocation and key portfolio performance metrics will persist going forward. But the results are strong enough to suggest that many institutional investors should carefully consider bitcoin as a portfolio asset.