More and more wealth managers are looking to include BTC in their portfolios.
London: 2020 is already off to an eventful start. From Brexit to the US Presidential primaries, to the ongoing coronavirus outbreak across the globe, our news cycles are dominated by change, possibility, and some turmoil as well. Momentous times can lead investors to consider the state of their portfolio, and in these times of change, many are looking to Bitcoin (BTC) as an important part of their fully diversified portfolio. When one looks at the risk-adjusted returns of BTC compared to US stocks and US real estate, using the Sharpe ratio, it is not hard to see why more and more wealth managers are looking to include BTC in portfolios.
Risk Adjusted Returns for Bitcoin, US Stocks and US Real Estate
As recently as two years ago, this idea would have been laughable. The rollercoaster ride of 2018 discouraged most investors from taking BTC and other digital assets seriously. We’ve been still seeing volatility in the market, but with an upwards trend rather than downwards. It seems that we’ve already seen the bottom of the cycle, and BTC is exhibiting qualities that are causing institutions, regulators, and investors to reconsider their initial judgement of cryptocurrency. Institutions like JP Morgan are finding that more of their clients are interested in this new asset class (like BTC) with JP Morgan having recently released a report titled: “Blockchain, digital currency and cryptocurrency: Moving into the mainstream”?
The case for BTC
Even whilst writing this, BTC is sitting at an impressive 33% YTD return and a one-year performance of 150%! BTC’s Sharpe ratio is above 1, making it the highest in its asset class. It’s no wonder that the more traditionally-minded investors are considering BTC’s potential value as part of their portfolio in 2020 and beyond.
In a simulated portfolio, a portfolio which had 57% equities…