Analysis of Risk Diversification --Based on Bitcoin

Abstract

Bitcoin is an essential component in the cryptocurrency system and plays a vital role in the economic system. This paper uses analytical methods to conduct in-depth research on Bitcoin. I will explain their opinions about its ability to invest and risk diversification, and then we try to verify some conclusions of the MPT model. First, my research shows that based on the modern portfolio theory, the risks of bitcoin could be diversified with some trading assets on the actual market. Second, two essential risks of Bitcoin are the legality and the cyber risk. On the one hand, the research in this article provides a theoretical speech on Bitcoin. On the other hand, it provides theoretical suggestions for the application and development of Bitcoin.