According to a recent report, Bitcoin was the best-performing asset of the past 10 years. Mark Yusko, who is the Morgan Creek Capital CEO, stated that all investment portfolios should include at least 1 percent in Bitcoin. Yusko made those comments to Max Keiser in an interview on the Keiser Report. Yusko added that each portfolio with at least 1 percent Bitcoin allocation has exceeded almost all other investments in the past five years.
The volatility of Bitcoin has lead many investors to take a look at it over the past six years. Adding it to a diverse portfolio might not lead to as much gain, but it reduces risk. Investments in cryptocurrency often eschew traditional diversification strategies. The volatility of Bitcoin is often seen as unreasonable in its risk. That is what has stopped a lot of traditional investment firms from considering it. On the other hand, that volatility is one of the reasons why Bitcoin can lead to such large investment gains.
One way investors can consider the risk is to compare it with other investments. When looking at whether or not a diverse cryptocurrency portfolio delivers an above-average return compared to traditional markets while also mitigating risk, some analysts looked at the diversification of traditional stock indices. Those were the S&P 500 and the Nasdaq Composite. The 10 year government bond treasury bills were also considered. These were compared against the Grayscale Bitcoin Trust.
When looking at seven investment basket options, Bitcoin alone had the best return from all of them. Its return was 293 percent. This was followed by a 270 percent return for investors of the Grayscale Bitcoin Trust. However, from a risk-adjusted approach, both Bitcoin-only and Grayscale investors are taking on too much risk.
For the lowest risk option, the 50 percent Bitcoin and 50 percent Nasdaq composite was the best. It had a 222 percent return. The basket with the worst return was the one with the most diversification. The analysts also looked at risk-adjusted performance. The best investment basket had a 33 percent Bitcoin, 33 percent Nasdaq and 33 percent S&P allocation.