An analysis has emerged suggesting that institutional investors can increase their risk-adjusted returns by adding Bitcoin (BTC) and Ethereum (ETH), the top two cryptocurrencies by market capitalization, to their investment portfolios composed solely of stocks and bonds.
On the 23rd, Kobit Research Center, under the cryptocurrency exchange Kobit, announced the publication of 'Virtual Asset Allocation Strategy 2.0 for Institutional Investors' with these findings.
This report is a follow-up to the 'Virtual Asset Allocation Strategy for Institutional Investors' published in February 2022, significantly updating its content to reflect the rapidly changing cryptocurrency market environment and institutional changes.
Kobit Research Center proposed ETH as a key asset for portfolio diversification for institutional investors. The report stated that "ETH is establishing itself as a strategic asset within the traditional digital financial system alongside BTC" and explained that it is "a consumable asset used for network operations beyond a value storage medium, and a capital asset that generates rewards through staking".
The report analyzed that when BTC and ETH are incorporated up to 8% in a traditional portfolio composed of 60:40 (stocks:bonds), the Sharpe ratio rises from 0.87 to 1.74. The Sharpe ratio is an indicator of risk-adjusted returns. The report explained that "these two assets are not simply high-risk assets but can provide independent risk premiums as strategic assets".
The report also included an analysis of the appropriate proportion within the cryptocurrency portfolio. Based on quarterly rebalancing, a composition of 73% BTC and 27% ETH recorded the highest Sharpe ratio (1.49), emerging as the most risk-efficient combination.
Yun-Young Choi, Director of Kobit Research Center, said, "Including ETH in the portfolio goes beyond simple asset holding to a strategic investment in future digital financial infrastructure" and "demonstrates the potential to improve risk-adjusted expected returns through strategic allocation of BTC and ETH".
- Reporter Shin Jung-seop
- jseop@sedaily.com
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