Investment implications
Despite the hype, we find little evidence that cryptocurrencies offer any meaningful opportunities for institutional investors.
- Portfolio diversifier? While bitcoin was uncorrelated in its early history, it has shown increased correlation since 2020.
- Inflation hedge? In the lone episode of elevated global inflation since bitcoin's inception, it has not held its value well.
- Risk-adjusted return? Since 2018, its Sharpe ratio has been similar to equities and bonds. Combined with the severity of drawdowns, it is not clear there is a strong case for direct investment.
- Digital gold? During the COVID-related market drawdown in early 2020, for example, many markets collapsed, and bitcoin did not exhibit safe-haven characteristics at that critical time while gold held its value throughout.
- Supporting ESG? For sustainability-minded investors, cryptocurrencies are problematic along multiple dimensions of ESG.
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References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities.
The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
