Investing A Small Percentage Of A Portfolio Into Bitcoin Can Make Institutions More Profitable

February 10, 2020 / by Crypto.IQ

A study from investment management firm VanEck shows that investing a small percentage of a portfolio into Bitcoin (BTC) can make institutions more profitable.

Specifically, a portfolio that is 58.5% equities, 38.5% bonds, and 3% Bitcoin (BTC) consistently outpaced the returns of the S&P 500 since January 2012, whereas a portfolio that was 60% equities and 40% bonds performed significantly worse than the S&P 500 during the same period of time.

Further, similar portfolios that were 0.5% and 1% Bitcoin (BTC) performed better than the portfolio that was just bond and equities, but still worse than the S&P 500.

Therefore, it seems investing 3% of a portfolio into Bitcoin (BTC) is an optimal ratio for institutions, where profits are significantly higher but the volatility due to Bitcoin (BTC) remains low.

That being said, a portfolio which is 100% Bitcoin (BTC) would have gained 500,000% since January 2012, so it could be argued that investing purely in Bitcoin (BTC), and abandoning equities and bonds, is the most profitable strategy. However, institutions have a hard time stomaching a 100% Bitcoin (BTC) portfolio due to volatility and uncertainty.

Ultimately, this data shows that institutions like hedge funds should at least have a small percentage of their portfolio invested into Bitcoin (BTC), since it has proven itself to be a profitable strategy while simultaneously avoiding most of Bitcoin’s (BTC) volatility.

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