To The Moon

Bitcoin has led a significant rally in cryptocurrencies over the course of 2023 with a 160% price gain. The recent rally over the past week have also given increased interest to crypto investing.

While many of us still do not invest into crypto-currency. I feel that we might want to understand how a small Bitcoin exposure could helps in a balanced multi asset portfolio.

We have many options now to get our hands to Bitcoin related assets like stocks and ETFs. $iShares Bitcoin Trust(IBIT)$ $Coinbase Global, Inc.(COIN)$ $MicroStrategy(MSTR)$ $ARK 21Shares Bitcoin ETF(ARKB)$

Even though we saw Bitcoin staged an impressive comeback, the ghost of the scandal-ridden year of 2022 which saw the demise of 3AC, Celsius, FTX still lingers on many. The recent price resurgence was due to the spot bitcoin ETFs in the U.S. Other factors such as the decrease in U.S. yields in Q4 and a recognition of macro tailwinds contributed to the year-end rally, the main catalyst was indeed the spot ETF.

The fixation of the asset class around this binary event was always going to come with some risks. While Bitcoin has traded on an upbeat note since the approval, the massive retracement that many technical analysts had predicted has not materialized. Flows into the new funds have been encouraging with overall inflows of 9.7 billion recorded Feb. 12.

Implications for the growth of the asset class in the medium term

The approval of the spot bitcoin ETFs constituted a landmark event for the $1.7 trillion digital asset industry. With institutional investors on board, demand for bitcoin will grow significantly. These inflows would come primarily through the channels of the asset management sector, which currently does not have access to secure bitcoin exposure on a large scale. The investments in the billions would also significantly change the value of the cryptocurrency.

How to Gain Exposure in a Balanced Multi Asset Portfolio

Adding a small crypto allocation to a multi-asset portfolio can enhance returns without affecting the risk profile of the portfolio. If we were to allocate a small percentage of Bitcoin to our balanced multi asset portfolio, it will have a significant better returns than one without it.

So the question to us is whether we should be investing in the Spot Bitcoin ETFs, which could be the closest we could have the exposure to Bitcoin?

Efficient Frontier Balanced Portfolio (with and without bitcoin allocation)

Most institutional investors agree that cryptocurrencies have a role to play in their portfolio. But question remain on what is the most efficient way to gain exposure to the Bitcoin as an asset class?

Do we go for Bitcoin or many stable coins, if so, how do we determine the weightage? How often should we rebalance?

From universe selection to regulatory compliance to market structure and liquidity, many factors can shape the outcome of investments in this sector. An alternative approach addresses the issues highlighted above by implementing a smart-beta allocation based on risk parity plus market cap aimed at increasing the exposure to alt-coins in a systematic and controlled manner.

So we might want to consider crypto mining stocks and spot bitcoin ETFs to allow us to have exposure.

Summary

Based on how a portfolio with crypto returns normally perform better than one without it, we might consider to have some Bitcoin related stocks and ETFs into our portfolio.

The reason is we could overcome the issues of what crypto coins we need to buy for a new asset class, but we need to do more assessment on how crypto stocks and ETFs into a balanced multi asset portfolio would perform?

Appreciate if you could share your thoughts in the comment section whether you would consider to have some crypto in your portfolio?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.