4 Key Features Combined in 1 Investment: Only in Crypto

By M87 | Blockchain_Space | 31 Dec 2019


In the December 2019 investor newsletter from Bitwise revealed how 4 features are rarely combined in a single investment which makes crypto so unique.

Bitwise

Bitwise was founded in 2017 and is based in San Francisco, California. They started the first crypto index fund and have an experienced team of asset managers that come from companies like Facebook, Goldman Sachs, and a few others.

They have a list of investors and advisors they work with that include:

  • PayPal
  • BlackRock
  • Square
  • Coinbase
  • Stripe
  • Western Asset
  • Royal Bank of Scotland
  • Chain
  • Twitter
  • Palantir
  • McKinsey

4 Key Features

Bitwise claims the combination of these 4 features makes crypto uniquely valuable in investment portfolios:

  • High Potential Returns: Bitcoin is up nearly 100% year to date, and nearly 1,000% over the past three years. And while past performance is no guarantee of future results, bitcoin’s 10-year track record suggests it’s here to stay, and many believe it’s just getting started.

  • Extremely Low Correlations To Other Assets: Crypto’s correlation to the S&P 500 over the past year is -0.16, and its correlation to bonds is -0.01. There’s a good reason for this: Like commodities, crypto has different drivers than stocks and bonds.

  • Liquidity: Crypto trades intraday, and funds like ours offer weekly liquidity.

  • Equal Access: Ordinary investors can access the same crypto exposures as the largest investors in the world—after all, a bitcoin is a bitcoin is a bitcoin.

 

-Bitwise Newsletter

In 2018, Bitwise did a study of the impact crypto has on investment portfolios.

We recently updated and extended a study we did last year on the impact of crypto on a portfolio. Specifically, we looked at what would happen if you added a 1%, 2.5%, or 5% allocation of the Bitwise 10 Large Cap Crypto Index (ticker: BITX) to a traditional portfolio made up of 60% stocks and 40% bonds.

351665157-1a9d2881a8210bfb301ac016eb2011c34c73b149cb47995461ab3f257ba6cfc0.png

Source: Bitwise Newsletter

Bitwise claims investments in the Bitwise Index 10 saw less risk and higher returns than traditional investment portfolios.

Despite the volatility that crypto experienced, adding a 2.5% allocation to the Bitwise 10 over this period boosted the portfolio’s returns by 50% without increasing risk. A 1% allocation boosted returns by 18% while reducing the portfolio’s overall volatility.

Even looking at the most volatile time period in the crypto market from the December 2017 bull run, through December 2018, the Bitwise Index 10 fell 76.8% but a 1% allocation still outperformed the traditional 60/40 investment portfolio by a slim margin at -8.97% compared to 8.98% for the traditional. The Index also had a lower risk of 7.6% compared to 7.7%.

Also mentioned in the December 2019 newsletter was Tezos (XTZ) was added to the Index in November and replaced DASH as a part of their rebalancing and had a turnover of 0.5% for the month.

Bitwise 10 Large Cap Crypto Index (ticker: BITX)

These are the current top 10 crypto assets that make the Bitwise 10 index and how it performs against Bitcoin:

351665157-f874679f688080ece5cd4aff8baceaafbb48e025493353a86e3bae21396e63ed.png

351665157-92a2411b7c5d379f33d54eb6fe34cc99caa947c08653cf8aac9f0a339628e0d9.png

351665157-ccb882617cae8fd63afae562d440bcfda505356f616ea86d3e3de3fa49f28951.png

Source: Bitwise

If this data is true and accurate, this could potentially be a big sign that new and larger investments could be coming into crypto in the near future. We can only speculate if these kinds of results will continue in the crypto market as new regulations are put in place and the ecosystem evolves.

 

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M87
M87

Working towards digital sustainability.


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