Meltem Demirors, the Chief Strategy Officer at CoinShares, one of the largest digital asset managers in the world, notes that billionaire hedge fund manager Paul Tudor Jones recommends a 5% allocation to Bitcoin (BTC) as an “effective portfolio diversifier.”
1/ paul tudor jones suggests a 5% allocation to #bitcoin as an effective portfolio diversifier
our team @CoinSharesCo did the research, and our recommendation? 4%
let's delve into portfolio construction and the numbers – see the full report here https://t.co/LJQqEWRTP3
— Meltem Demir◎rs (@Melt_Dem) June 14, 2021
However, Demirors says that her team at CoinShares has done the research, and their current recommendation is only 4% of an investment portfolio.
During the past 18 months, Bitcoin has been “increasingly financialized as an asset,” Demirors notes while adding that CoinShares’ Weekly Digital Asset Fund Flows Report shows that assets under management or AUM in crypto products is “nearly $50B, a sharp increase from $5B a year ago when Paul Tudor Jones first talked about bitcoin.”
Demirors points out that behavioral analysis of Bitcoin holders also “shows that investors holding bitcoin longer than a year has risen from ~30% in 2012 to ~55% today.” She reveals that in 2020 alone, “~22% of all bitcoin in existence were moved off exchanges (presumably into LT custody + ETPs).”
“Bitcoin sits in a unique place in the economic cycle, and while bitcoin may have emerged in the last economic crisis, we have yet to gather enough data to understand the relationship between bitcoin and inflation, as well as bitcoin and broader macro-economic cycles. If we place bitcoin in a traditional 60/40 portfolio, it outperforms other portfolio diversifiers like gold, real estate, and other common alternative investments. Bitcoin has an asymmetric return profile, with annualized returns 2x that of alternatives w similar downside risk.”
She also mentioned:
“Even if Bitcoin was added to a portfolio at the peak in late 2017, it would still enhance portfolio returns with a significantly better sharpe ratio than other alternatives. The most significant improvements in Sharpe ratio (risk-adjusted return) are seen with allocations of up to 10% bitcoin in the portfolio this highlights how a small allocation can make a dramatic difference in portfolio performance.”
In a new report from CoinShares, the company has also highlighted the “reduced risk from quarterly rebalancing to maintain portfolio weights,” and they also looked at broader macro correlation.
You may visit the CoinShares research portal to learn more.