Practical Applications of Bitcoin and Portfolio Choice: An Assessment of Bitcoin in Multi-Asset Portfolios

Abstract

In <ext-link><bold><italic>Bitcoin and Portfolio Choice: An Assessment of Bitcoin in Multi-Asset Portfolios</italic></bold></ext-link>, from the Winter 2024 issue of <bold><italic>The Journal of Beta Investment Strategies</italic></bold>, <bold>Kenneth Blay</bold>, <bold>Ankit Agarwal</bold>, <bold>Yuan Gao</bold>, and <bold>Nicholas Savoulides</bold> of <bold>Invesco</bold> find that adding small bitcoin (BTC) allocations to stock/bond portfolios may benefit investors despite an associated risk increase. The finding is based on data from January 2014 through December 2023. The optimal BTC allocation depends on the starting portfolio’s relative allocations to stocks and bonds. The authors simulated the performance of stock/bond/BTC portfolios and found that bond-heavy allocations outperformed those with higher allocations to stocks. The authors caution that historical BTC data is limited and may not reflect the asset’s performance in the future.