Bitcoin is considered a highly volatile and risky asset, and the extent to which it should be included in investment portfolios continues to be debated. At this point, a new study by 21Shares
Bitcoin is considered a highly volatile and risky asset, and the extent to which it should be included in investment portfolios continues to be debated.
At this point, a new study by 21Shares was published, stating that allocating 2-5% of portfolios to cryptocurrencies increases risk-adjusted portfolio returns.
In a research report, 21Shares stated that allocating 2% to 5% of a traditional 60/40 portfolio to Bitcoin and altcoins would clearly improve risk-adjusted returns.
The report states that the research covers the period from October 2023 to September 2026. The study indicates that Bitcoin has a 38% correlation with US stocks and a 4% correlation with gold.
According to 21Shares analysts, these results show that Bitcoin has a clear diversification effect, different from traditional investment assets.
Since the launch of spot ETFs in January 2024, BTC’s three-month moving average volatility has stabilized at 38%, while its annualized volatility over the last 12 months has reached 44%, compared to 46% and 59% respectively for major US growth stocks like Tesla and Palantir, with BTC volatility falling to a comparable level.
The study evaluated three different portfolio models. Accordingly, the traditional model containing 2% Bitcoin, the balanced model containing 3% Bitcoin and 1% Ethereum, and the growth model containing 3% Bitcoin, 1.5% Ethereum, and 0.5% Solana were compared.
The results indicated that all three profiles—those reducing equity exposure and adding cryptocurrency—showed gains in both annualized returns and Sharpe ratios compared to the standard 60/40 portfolio weighting.
The study found that while the traditional 60/40 portfolio yielded an annualized return of 10.86% and a Sharpe ratio of 0.57, models including cryptocurrencies showed returns of 11.64%, 13%, and 17%, respectively, with Sharpe ratios ranging from 0.64 to 0.74.
Finally, 21Shares recommended that Bitcoin be considered among alternative assets like gold, while Ethereum and Solana should be considered as technology-focused growth investments. They also emphasized the need to adhere to a quarterly rebalancing rule to maintain portfolio weighting, control maximum downside, and prevent increased risk during sharp market fluctuations.
*This is not investment advice.
Continue Reading: What Should the Ratio of Bitcoin (BTC) and Altcoins Be in Portfolios? A Noteworthy Study from 21Shares: Both Altcoins Are Mentioned!
