Bitcoin: risk-reward ratio in the mainstream

Bitcoin: risk-reward ratio in the mainstream

Bitcoin has gained acceptance in recent years and has become increasingly mainstream, especially since spot ETFs were approved by the US Securities and Exchange Commission (SEC). The approval of these ETFs has made it easier for both retail and institutional investors to invest in Bitcoin. Investing in Bitcoin has become easier and safer, as the complicated storage of the coins is handled by established financial institutions such as BlackRock.

Bitcoin's development has been characterized by volatile price movements, which have led to strong bull and bear markets in recent years. Despite these fluctuations, Bitcoin has now reached a market capitalization that puts it among the top ten largest global assets. The cryptocurrency is now fighting for position with incumbents like Silver and has already managed to overtake tech giants like Meta Platforms.

A study by the Zurich School of Economics shows that Bitcoin has achieved an average annual return of 57% in francs in recent years. Bitcoin's volatility illustrates the dynamic nature of this digital asset class and stands out clearly from traditional forms of investment. Nevertheless, adding Bitcoin to a diversified portfolio has shown that a moderate increase in returns is possible while at the same time moderately increasing volatility.

Bitcoin's low correlation to traditional asset classes such as stocks and bonds makes Bitcoin a useful addition to a diversified portfolio. A weighting of up to 5% in Bitcoin is recommended to improve the Sharpe ratio in the portfolio and achieve a risk-adjusted return. Despite Bitcoin's potential as an asset class, it remains important to keep an eye on risks and volatility and maintain disciplined weighting. Bitcoin can represent a useful addition or diversification to the portfolio in order to improve the risk-reward ratio and optimize long-term performance.