Bitcoin Allocation Boosts Portfolio Returns, Study Finds

A new study by CoinShares has shed light on the benefits of adding bitcoin to balanced portfolios. The research found that allocating four percent of assets to bitcoin resulted in improved returns, despite the asset's recent price weakness.

The analysis examined a range of balanced 60/40 equity-bond portfolios rebalanced quarterly since 2017 and found that a four percent allocation to bitcoin lifted annualized returns from 11.1% to 17%. This increase in returns was achieved with only a modest trade-off in terms of maximum drawdown, which rose by one percentage point.

Bitcoin's low correlation to traditional markets provides diversification benefits that persist even during drawdowns, according to the study. This is particularly evident in times of economic uncertainty, such as the current macro environment, where producer prices have jumped 1.4% month-on-month and Fed funds futures imply a 44% probability of a rate hike by December.