Exposure to cryptocurrencies has a positive impact on investment portfolios

The study also concluded that the temporary downturn and volatility of the cryptocurrency market are not enough to reduce the importance of cryptocurrencies in investment portfolios.

It was found that the allocation of funds to investment centers in cryptocurrency has a positive impact on the performance of diversified investment portfolios.

According to a research study conducted by Funds Group Iconic Iconic Funds and group assets cryptology Asset Group For crypto asset management, the ability of crypto investments to positively impact the performance of investment portfolios intersects with many asset allocation models.

The impact of digital currencies on investment portfolios

The ability of cryptocurrencies to improve the profitability of diversified investment portfolios comes despite their volatility, particularly the recent market crash that occurred in May.

The research study, “Cryptocurrencies and the Sharpe Ratio for Traditional Investment Models,” examined the changes in the risk-return profile of several portfolio allocation methods due to the addition of crypto assets.

This risk-return examination was conducted by measuring changes in the Sharpe ratio, the measure of excess returns earned versus holding a volatile asset, when crypto positions were included in various asset portfolio models.

With the crypto asset class assumed to be an uncorrelated asset class, the performance of investment portfolios in terms of risk and reward should improve with the addition of cryptocurrencies despite their apparent volatile price movements.

By assuming a passive investment strategy, the study identified changes in the Sharpe ratio of traditional portfolio models with the introduction of exposure to cryptocurrencies against a benchmark without cryptocurrency allocation.

To investigate the effect of increasing crypto positions for each wallet model, the study also rebalanced cryptocurrency allocation based on 1% And 3% And5%.

The study stated in detail:

“This report found that adding cryptocurrencies to any covered portfolio had a positive impact on the returns as well as the risk-reward performance of the portfolio.”

Adding:

“This discovery stands despite a significant correction in the cryptocurrency markets during the beginning of the year 2021.
Moreover, adding more cryptocurrencies resulted in higher returns.”

According to the document, the results of a study 2021 It also lends credence to the conclusions reached in a year's research 2020 Which showed the positive impact of cryptocurrency allocation on investment portfolios despite the market crash in mid-March.

Exposure to cryptocurrencies has become an important trend among institutional investors.

As Cointelegraph previously reported, a recent Bank of America report showed that 20 A major public company in the United States with significant investments based on digital assets.

Last September, a survey conducted by Nickel Digital Asset Management Affiliated with the European Investment Administration that 62% of global institutional investors who are not exposed to any cryptocurrency will start making forays into cryptocurrencies and Blockchain During the months 12 coming.