Funding rate -olosuhteet ja portfolion tappioriski : havaintoja Bitcoin- ja Ethereum-markkinoilta

Abstract

This study examines how funding rate regimes affect the downside risk contribution of cryptocurrencies in equity portfolios. The research focuses on Bitcoin and Ethereum as the two largest cryptocurrency markets and evaluates whether downside risk differs across market conditions defined by perpetual futures funding rates. The objective is to connect cryptocurrency derivatives market conditions with portfolio downside risk assessment, as earlier literature has mainly examined these topics separately. The empirical analysis uses daily data from 1.1.2020 to 31.12.2025, and the data consists of returns for MSCI World Index, Bitcoin, Ethereum and perpetual futures funding rates. Research portfolios are constructed by adding cryptocurrency allocations of 5%, 10%, 15% and 20% to the equity benchmark portfolio. Downside risk is evaluated using historical Value-at-Risk, historical Expected Shortfall and Maximum drawdown. Downside risk is examined both over the full sample and separately across funding rate regimes. Funding rate regimes are classified into low, neutral and high conditions. The results suggest that adding cryptocurrency exposure increases downside risk relative to the equity benchmark across all portfolio groups. Funding rate regimes reveal meaningful differences in these results, but the effects differ between assets. Bitcoin portfolios show the clearest and most consistent regime dependence, with the most severe downside risk in the low funding regime and the mildest downside risk in the high funding regime. Ethereum portfolios show weaker and less stable regime separation. The results provide some indication that high funding conditions in Ethereum may be associated with less frequent but more severe tail losses. Specifically, high ETH funding environments appear to be associated with relatively mild Value-at-Risk results but more severe Expected Shortfall outcomes. Mixed Bitcoin-Ethereum portfolios produce strong statistical separation between regimes, with neutral funding conditions consistently associated with the mildest downside risk results. The findings suggest that derivatives market conditions may provide useful information when assessing downside risk of cryptocurrencies in equity portfolios. Funding rate conditioning appears particularly informative for Bitcoin downside risk assessment, while Ethereum results suggest that funding conditions may affect the structure of tail losses differently across market environments. The study contributes to existing literature by introducing a regime-conditional framework for evaluating downside risk under changing cryptocurrency derivatives market conditions.