Bitcoin

Bitcoin Has Potential to Boost Investment Portfolio Returns, VanEck Says

Anatol Antonovici | Oct 09, 2019 | 10:00

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Bitcoin is a great tool to diversify an investment portfolio, investment management firm VanEck concluded in a blog post.

The Cryptocurrency Shows Low Correlation to Traditional Assets

It is not a secret that Bitcoin demonstrates almost no correlation to traditional assets. This aspect was previously analyzed in detail by several well-established asset managers and hedge funds, including Pantera Capital. Thus, it is no surprise that VanEck focused on the cryptocurrency’s distinctive attribute of moving independently of other asset groups.

This trait makes BTC a must-have option in any well-diversified investment portfolio. VanEck concluded:

Bitcoin may potentially increase portfolio diversification because of its low correlation to traditional asset classes, including broad market equity indices, bonds and gold.

Interestingly, VanEck mentioned another aspect of Bitcoin that has been a hot topic – the stock-to-flow ratio. Again, the investment manager used the research model proposed by Twitter user PlanB, who made a name for himself after published a detailed analysis based on the cryptocurrency’s stock-to-flow ratio, which is basically focusing on the scarcity of the coin.

Earlier this month, German bank BayernLB published a report that revolved around PlanB’s model.

Bitcoin’s Effect on Portfolios

According to VanEck, even a small allocation to Bitcoin may boost the return potential of institutional investment portfolios. The investment manager presented a chart that shows different allocations to Bitcoin and analyzes the potential impact.

For example, if an institutional investor had created a 60% equity and 40% bonds portfolio back in 2012, it would have generated an almost 100% return. However, if the same portfolio would have allocated only 3% to BTC, leaving 58.5% and 38.5% for equity and bonds, respectively, the return would have increased to almost 200%.

Gabor Gurbacs, digital asset strategist at VanEck, shared via his Twitter more reasons why Bitcoin is an ideal asset, saying:

“Bitcoin’s combination of durability, scarcity, privacy, and its nature as a trust-minimized bearer asset all contribute to it holding monetary value. Bitcoin has the potential to become digital gold.”

1/ I just published The Investment Case for #Bitcoin. See the @vaneck_us blog + slides at below link.
Outline + tweetstorm below:
+ Bitcoin as a store of value
+ Bitcoin in an investment portfolio
+ Accelerating adoption
> Retweet if you like it
> Source: https://t.co/GYlYInbcHU pic.twitter.com/XacvFB97Ef

— Gabor Gurbacs (@gaborgurbacs) October 8, 2019

On a side note, we reported that VanEck in partnership with SolidX Management were about to start offering shares in a limited Bitcoin exchange-traded fund (ETF).

Do you think Bitcoin is a must-have in investment portfolios? Share your thoughts in the comments section!

Images via Shutterstock, Twitter: @gaborgurbags, Vaneck.com