• As Bitcoin Trading Volume Increases, A Portfolio Diversified in Gold and Bitcoin Makes Sense
  • Gold Stability Offsets Bitcoin Volatility
  • In this way, investors can participate in Bitcoin’s upside potential without sacrificing risk parameters.

Portfolio management deals with managing risk. Not all risks can be avoided. Risk-averse investors do not want to take no risk at all.

Rather, risk-averse investors want higher risk-adjusted returns. Naturally, the higher the potential return, the higher the risk.

Investors build portfolios of different assets to find the best possible risk-adjusted returns. Ideally, the assets are negatively correlated, giving the investor a diversification advantage.

But it also makes sense to build a portfolio with correlated assets. Portfolios are riskier, but some other asset characteristics may be attractive to more risk-taking investors.

As Bitcoin’s average daily trading volume increases, such a diversified portfolio could include gold and Bitcoin.

Why Add Gold and Bitcoin to Your Portfolio?

Diversifying a portfolio spreads risk across uncorrelated assets. The portfolio manager’s challenge is to find a level of diversification beyond which diversification provides no benefit.

Traditionally, gold’s role in a portfolio is to provide stability. By adding Bitcoin to your portfolio, you can participate in the upside potential of cryptocurrencies, while combining with gold to mitigate the risks associated with Bitcoin’s volatility.

By Jules

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