By The Molesy Message on The Capital
Audio version of this article:
I hope everyone had a great 4th of July weekend with friends and family. It seems there was a mixed sentiment in the air as our national flag waved proudly in the breeze. Some are proud of America and others are growing skeptical. What type of leader do we have in America? What does the flag mean? What values did our founding fathers have to ignite this great country? How is the US going to overcome issues around racism and COVID’s impact?
Regardless of the answers, the 4th seemed much more important of a day to spend time with those you loved than express national pride.
The kind of pride I want to talk about today is around Bitcoin. The investor community has a lot of pride in the way they have always done things. They are proud of their investment thesis and firm on a belief that Bitcoins is the enemy or “way too risky.”
I take an extremely risky approach when it comes to Bitcoin. I am putting eggs in a basket and watching that basket very closely. I don’t recommend or encourage the average person or investor to sell everything and risk it all on Bitcoin. We should all do our own due diligence before investing. Research. Invest. And invest some more.
I read an intriguing report this morning from Bitwise Investments titled, “The Case for Crypto In An Institutional Portfolio”
The research suggests,
“…that allocating to Bitcoin can significantly increase a portfolio’s risk-adjusted return, provided the investor takes the time to systematically rebalance their portfolio to ensure allocations stay in line with target weights.”
Simple answer: Start adding BTC to your portfolio.
The main question this research presents is what would happen to a traditional 60/40 portfolio consisting of Stocks/Bonds if you added a 1, 5, or 10% Bitcoin allocation to it? The data is overwhelmingly clear who the true winner was.
“In a 1% portfolio, Bitcoin never exceeds 1.5% of the total portfolio weight, an easy-to-digest allocation for conservative investors. Nonetheless, it contributes an additional 4.5% to the total return, and does so without altering the portfolio’s risk: Monthly volatility rises from 6.5% to just 6.7%, while the Max Drawdown actually falls slightly. This unique combination boosts the Sharpe ratio from 0.80 to 1.02.
A little Bitcoin, it turns out, goes a long way.”
A 10% allocation of BTC to the portfolio would have returned 78.38% from Jan. 1, 2014 through March 31, 2018, compared to 26.53% of the traditional portfolio.
You can read the full piece here.
For an investor to not even consider a small amount of Bitcoin to their portfolio is absurd. Like I said before, I am not telling you to sell the house and the kid and risk it all. However, don’t ignore the noise of the future and the exponential returns of digital-based assets.
Come to the dark side. Take the red pill.
As a reminder, this is not financial advice. Do your own research.
Thank you for reading or listening.
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The Case for Bitcoin In An Institutional Portfolio was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.