Looking for the Optimal Cryptocurrency Portfolio: Benefits of Diversification

Abstract

This paper contributes to the literature on cryptocurrencies by examining performance of nave (1/N) and individual cryptocurrency portfolio of ten largest cryptocurrencies. We employ daily data and two time durations for each type of portfolio. For the investing in individual cryptocurrency portfolio, the first time duration is the full time duration from the earliest day in our data sample. The second time duration is after Covid-19. (after 1st of January 2020). For the nave portfolio, the first time duration is the same as individual cryptocurrency portfolio. However, the second time duration is when all ten cryptocurrencies are available. (after November 10th 2018) Our result shows that investing in single cryptocurrency portfolio outperforms than nave portfolio in both time duration. Further research could add the better performing cryptocurrency portfolio to the traditional assets portfolio and examine the performance of the combining portfolio in different time duration.