Does Bitcoin Improve Portfolio Diversification?
Bitcoin may improve portfolio diversification for investors. Bitcoin is often lauded for its potential to act as a hedge against macroeconomic and geopolitical risks. This is because, unlike traditional assets, Bitcoin is not subject to central banks or government regulation. As a result, it is often seen as a safe haven asset that can protect against inflation. On top of this, it boasts what is generally a very low correlation to stock market returns. In this blog post, I am going to answer the question of does Bitcoin improve portfolio diversification, and will walk through why you might actually get higher returns with lower volatility with this asset in your portfolio. For more details and information on all things business and finance, read on or subscribe to our blog for additional details and information.
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Adding Crypto to Your Portfolio
Should you Diversify Globally
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How To Use Bitcoin Via ETFs to Improve Your Stock Portfolio Diversification
If you’re looking to add some bitcoin exposure to your portfolio but don’t want to deal with the hassle of buying and storing the digital currency, then investing in a bitcoin ETF could be the way to go.
There are currently two bitcoin ETFs available on U.S. exchanges: the Grayscale Bitcoin Trust (GBTC) and the Greyscale Ethereum Trust, as well as the Greyscale Digital Assets Trust. Any of these have my blessing in terms of using them to gain exposure in your portfolio to Crypto based assets, but I NEVER recommend using an actual Bitcoin wallet, just because of the additional tax scrutiny and the high fees associated with exchanges.
How Much Does Bitcoin Correlate With The Stock Market And Interest Rates?
Bitcoin has been on a tear this year, with the price of the digital currency soaring to new all-time highs. But how does Bitcoin’s performance compare to other asset classes?
For starters, let’s take a look at how Bitcoin has correlated with the stock market. Over the past five years, there has been virtually an undeniable growth in Crypto, alongside the stock market, though at a massive difference of scale. Bitcoin has grown somewhere in the range of 1500% over the past 5 years, with the stock market increasing by something like 100%.
This being said, there is actually only a low to moderate correlation between Crypto and the US Stock Market, in that Crypto actually gives you some Global volatility exposure and fluctuates so much that it gives you an inflation hedge and allows you to diversify against Stock Market fluctuations.
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