In a recent study, Yale professor Aleh Tsyvinski examined the properties of different crypto currencies and finally came to the conclusion that each portfolio should contain bitcoin – whether crypto-investor or crypto-sceptic.
Tsyvinski: Bitcoin belongs in every portfolio
Aleh Tsyvinski, Professor of Economics at Yale University, concluded in a new research paper that bitcoin is an indispensable ingredient in any portfolio – regardless of whether one is convinced of or rather sceptical about the crypto currency.
Investors who believed that Bitcoin would continue to develop positively and increase in value should invest at least six percent in the digital currency. Those who are generally rather averse to cryptocoin should have at least four percent of their portfolio stocked with bitcoin.
However, the absolute minimum is one percent for diversification purposes alone.
The Yale professor came to this conclusion in his study “Risks and Returns of Cryptocurrencies”. He compared digital currencies with traditional asset classes such as equities or bonds. However, only Bitcoin, Ethereum and Ripple were part of the studies.
The study found that crypto currencies could not be classified either as traditional currencies or as equities due to numerous factors.
“Our results cast doubt on popular tales that crypto currencies derive their value either from a unit of account, such as the usual currencies, or as a means of preserving value, such as precious metals,” reports Tsyvinski.
To this end, he examined market sentiment in 354 industries in the US and 137 industries in China and concluded that digital assets had the ability to disrupt markets, while bitcoin did not. While he succeeded in causing positive disruptions in the healthcare and consumer goods industries, Bitcoin did not have the potential to cause disruptions in the financial, retail and wholesale sectors.
Ultimately, however, the digital currency is indispensable in any investment portfolio, as Tsyvinksi summarizes his findings as crypto currencies have a higher yield potential than other asset classes despite extreme volatility
Valuable investment opportunity
Professor Dragan Boscovic of Arizona State University also came to a similar conclusion in an earlier study: “Institutional investors recognize this new asset as a valuable investment opportunity; this will encourage private investors. It will also encourage consumers and small businesses to start trading in crypto currencies.