Binance Research has launched its new Portfolio Management Series, and on its first report, the market analysis arm of Binance ran simulations on various multi-asset portfolios to study the benefits and risks associated with diversifying traditional portfolios, with equities and other asset classes, by including Bitcoin.
Binance Research, the market research and analysis arm of Binance, has found that portfolios that include Bitcoin tend to exhibit overall better risk-return profiles than traditional multi-asset class portfolios.
In a new report that studies how Bitcoin fits into multi-asset portfolios, Binance Research simulated different Bitcoin allocation techniques in existing diversified portfolios. Bitcoin has not exhibited a significant correlation with other traditional asset classes such as commodities, equities or fixed-income products since its creation in 2009, according to the report titled “Portfolio Management Series #1: Diversification Benefits with Bitcoin.”
“From a trading perspective, Bitcoin is one of the most liquid assets on the planet with consistently low spreads, high volumes and price efficiency as trading venues are continuously being arbitraged.” Binance Research noted. However, the report also noted that “ Bitcoin has been an extremely volatile asset, exhibiting large drawdowns following some of the largest price rallies recorded in history”
For this report, Binance Research simulated different Bitcoin allocation techniques in existing diversified portfolios. All of these simulated portfolios including Bitcoin exhibited overall better risk-return profiles than traditional multi-asset class portfolios. As a result, Bitcoin provides active diversification benefits for all investors worldwide, following multi-asset strategies.
“With the creation of institutional-focused solutions for custody and other new investment vehicles, Bitcoin has become an essential alternative asset to be included in multi-asset portfolios for its diversification properties,” Binance Research noted.
The Diversification Benefits with Bitcoin report is the first in a planned lineup of reports called the Portfolio Management Series. For the succeeding reports, we will take a look at various portfolio management topics that are related to cryptocurrencies.
About Binance Research
Binance Research provides professional, data-driven insights and analysis for investors in the crypto space to increase the level of transparency and improve the quality of information within the current crypto ecosystem. The team consists of professionals with a background and experiences in blockchain engineering, investment banking, strategy consulting, academic research and data science. For more information, visit: https://research.binance.com/