BITCOIN AS AN INVESTMENT INSTRUMENT: OPPORTUNITIES AND CHALLENGES

Abstract

This analysis examines the role of crypto-assets, particularly Bitcoin, in an investment portfolio. The crypto-asset market, with its rather rapid growth, has begun to attract the interest of a broad range of investors, and despite the uncertainties still existing in the legal framework regulating the sector, international experience shows that the involvement of institutional structures is also growing. The study investigates the impact of including Bitcoin – the largest crypto-asset – within a portfolio of traditional investment assets, focusing on the dynamics of portfolio risk-return indicators to reveal the investment potential of cryptocurrencies. Correlations with other assets were considered, and the possibility of constructing a Markovitz portfolio by including cryptocurrency in a traditional portfolio was considered. Within the framework of portfolio analysis, three scenarios were discussed to see the impact of cryptocurrency inclusion on the portfolio's risk-return indicators, Sharpe ratio. The results of the study generally confirm the hypothesis that cryptocurrencies can serve as a tool to enhance portfolio performance when included in a limited proportion.