Equity–Cryptocurrency Substitution and Risk-Adjusted Portfolio Performance: A Comparative Study of Growth vs. Value Stocks Across Regions

Abstract

This study evaluates the risk-adjusted consequences of large-weight equity–cryptocurrency substitution and examines whether these effects differ systematically across equity styles (Growth vs. Value) and regions (Asia, Europe, and the Americas). Using daily data from January 1, 2021 to December 31, 2023, the analysis constructs style-segmented MSCI country equity indices and compares annual Sharpe ratios under four constant-mix, daily rebalanced strategies: (S1) 100% equity; (S2) 50% equity / 50% cryptocurrency; (S3) 50% equity / 50% global bonds; and (S4) 33.33% equity / 33.33% global bonds / 33.33% cryptocurrency. Five major non-stablecoin cryptocurrencies—Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), and Binance Coin (BNB)—are evaluated individually to isolate coin-specific substitution effects. Performance is assessed annually and compared across Growth and Value portfolios within identical country–year–cryptocurrency environments to identify style-dependent outcomes. The results show that cryptocurrency substitution generally improves Sharpe ratios, but the effects are benchmark-, coin-, style-, and region-dependent. Improvements are more heterogeneous under direct 50% equity–crypto substitution, especially for Value portfolios, but become uniformly positive when crypto is introduced within an equity–bond benchmark. SOL provides the largest and most consistent improvements, while ETH and BNB are frequently strong and BTC is the least consistent. Growth portfolios benefit more than Value portfolios in Asia and the Americas, whereas Europe shows more style-neutral effects. Because cryptocurrency shocks are common within a given coin-year, statistical inference is interpreted as cross-market evidence rather than fully independent observations.