6 percent of your portfolio should be Bitcoin

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A paper has been published at the National Bureau of Economic Research by Yukun Liu and Aleh Tsyvinski discusses the "Risks and Returns of Cryptocurrency". The abstract of the article mentions how they would discuss the "risk-return tradeoff of cryptocurrencies.. distinct from those of stocks, currencies, and precious metals."

Cryptocurrencies have no exposure to most common stock market and macroeconomic factors. They also have no exposure to the returns of currencies and commodities. In contrast, we show that the cryptocurrency returns can be predicted by factors which are specific to cryptocurrency markets.
Source: NBER - Liu & Tsyvinski

Due to restricted access, the summary of the paper was discussed on bitcoinist - Georgi Georgiev, as to how Bitcoin should a part of your investment portfolio. Investors should hold Bitcoin between a minimum of 1 to 6 percent, depending on their appetite, even if it is only for diversification purposes. Less enthusiastic investors can hold at least 4 percent, while optimally at least 6 percent of your portfolio should consist of Bitcoin.

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As previously reported, "Market stability for cryptocurrencies relies on not just retail investors, but also bigger players such as institutional investors which the market is currently lacking." Source: steemit - tysler. Retail investors are somewhat more affected by the media and news. short selling in the midst of panic and uncertainty. Institutional investors usually follow structured investment strategies and set proper margins before any sell off.

The higher potential of returns for digital currencies Bitcoin, Ethereum and Ripple have been studied by Tsyvinski. Although the crypto market is also volatile, analysis with the Sharpe's ratio has shown positive forecasts for the digital currency market.

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While many investors still shrug off the notion to build a portfolio including Bitcoin, recent polls at Gallup has shown at least 26 percent of high volume investors "intrigued by Bitcoin". Source: steemit - tysler. We could see more investors taking up Bitcoin in their portfolio as the prices drop lower in 2018.

As in late June, members of the House Ethics Committee are required to disclose their ownership of cryptocurrency in annual reports. Rep. Bob Goodlatte has disclosed a modest portfolio of Bitcoin valued between $17,000 to $80,000, according to his annual financial disclosure. Source: Sludge - Jay Cassano. Interestingly Goodlatte's son is an angel investor in the cryptocurrency exchange Coinbase and is "publicly bullish" about digital currencies.

Other reasons why institutional investors could flock to cryptocurrencies were discussed in detail on Forbes -Rohit Kulkarni. Quality of ICOs have improved due to additional identity checks by US regulators. While regulation seems to play an important role in Bitcoin's future, the role of large institutions cannot be neglected. They act as crypto custodians, set up trading desks as well as investing the Bitcoin futures market, which is ultimately drawing in more institutional investors.

-tysler