Bitwise, an asset manager based in San Francisco, recently conducted research regarding Bitcoin’s potential impact on the crypto investors’ portfolio. The results show that having Bitcoin as part of a mixed portfolio almost always improves the portfolio’s overall value.
In fact, the investor does not even have to buy the coin when it hits its bottom in order to improve the portfolio. The same value improvement was noticed in those portfolios that added Bitcoin while the coin was at its all-time-high.
The company found investors who decided to add BTC to their portfolios that were otherwise containing stocks and bonds. The results have shown a notable rise in cumulative returns, even during the past three years following BTC’s ATH. This is interesting to note, considering that almost half of this period was marked by a bear market.
How the Portfolio Returns Change Due to Bitcoin
The report gave several examples of Bitcoin’s influence on the overall performance. One example says that a 2.5% allocation of the coin in January of 2014 — rebalanced quarterly — had the ability to improve the returns of the entire portfolio anywhere between 26% and 45% by March 31st, 2020.
If, however, the allocation was 5%, the returns would have been at 65% after the same period.
As mentioned, this does not come as a total surprise. The price of BTC did move from $750 per coin to over $6,500 in the last six years, and it has grown to become the best-performing asset of the entire previous decade.
The interesting part comes from the fact that the returns went up even though BTC hit its ATH of $20,000 in December 2017, only to drop to the $6,500 on March 31st, 2020. This is a 66% reduction in the price, which still saw major growth in the returns.
Another interesting detail is that the assessment says that a portfolio without any Bitcoin would have actually decreased by 0.54%. At the same time, if more than 1% of BTC allocation would have lead to a drop in the portfolio’s value of 0.51%.
Benefiting From Bitcoin’s Volatility and Lack of Correlation
The findings seem a bit paradoxical, but Bitwise has an explanation for them. The explanation says that Bitcoin’s nature is responsible. On one hand, the coin is extremely volatile. However, at the same time, it is mostly uncorrelated to other assets.
This has allowed it to grow when every other asset falls, or vice versa. It is also what makes it unpredictable, and a good asset to bet on. In fact, betting on the real cryptocurrency rate has become a rather large trend, and platforms such as AlphaPlay are seeing more and more traffic as they grow in popularity.
AlphaPlay, in particular, acts as a decentralized organization that takes the form of a collective ownership. What this means is that there is no human factor influence that could impact bets in any way, positive or negative. Instead, everything is done via blockchain-based smart contracts.
Meanwhile, token owners on the platform receive 6% of all platform turnover as bonuses. Not only that, but 90% of the turnover can be won as prizes by any participant. On top of that, any user can create their own client base of active players, and earn up to 4% of the turnover.
The users also have a guarantee that the prices will be 100% fair, as the platform draws them from Binance, a leading crypto exchange. If they want just to try, they can use a 1000$ demo budget with no registration required.
The platform’s native token, is currently in the middle of the token sale. The token sale started on April 26th of this year, and it will end on August 8th. Also, token sale participants who invite their friends to join the token sale will also earn bonuses in USDT.
As for adding Bitcoin to the portfolio to improve its growth, Bitwise expects that the coin will continue to have this kind of impact, provided that the coin continues to show the same characteristics, and keeps the same upside in the future.
However, it is exactly this future that remains unknown. Some expect that the coin’s adoption will have to be put on pause due to the pending uncertainty. Others, however, believe that the coin is an extremely attractive asset. After all, it has a known total supply, it is completely uncorrelated, and with transportability, that doesn’t require social contact.
Now it remains to be seen what will happen to BTC over the next six years, but Bitwise definitely gave a good reason why a small portion of BTC should definitely find its way to every portfolio.