According to Professor Tsyvinski, an optimal constructed portfolio should have Bitcoin at least 6 percent of one’s portfolio. Those who are less enthusiastic about it should hold 4 percent of it. Whether you are in support of the world’s most popular cryptocurrency or not, Bitcoin should ideally comprise a minimum of 1 percent of your portfolio just for diversification purposes.
A similar conclusion was drawn by another scholar – Professor Dragan Boscovic from the Arizona State University. Speaking about his research, Boscovic noted:
“Institutional investors are recognizing this new asset as a valued investment opportunity; this will encourage individual investors. It will also encourage consumers and small shops to start trading in cryptocurrency.”
Are Cryptocurrencies better than Traditional stocks ?
In his study titled, Risks and Returns of Cryptocurrencies, Tsyvinski compares cryptocurrencies to traditional stocks and bonds outlining a very positive feature of the former. He used the Sharpe’s ratio to demonstrate that despite their increased volatility, digital currencies show higher potential for return. Notably, only Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) were examined by the professor for his study.
Quite contradictory to Tsivinsky’s observation, Robert Shiller, a noted economist and Nobel Prize Winner claimed earlier in May that Bitcoin is a failed experiment and “another example of faddish human behavior”. Meanwhile, Bitcoin (BTC) $6373.45 +0.39% and Ripple $6373.45
