A study conducted by Bitwise found that adding a portion of Bitcoin to a traditional portfolio with a 60% allocation to stocks and 40% allocation to bonds would have positively contributed to the portfolio’s returns over various rolling return periods. The study showed that a 2.5% allocation to Bitcoin would have increased the three-year risk-adjusted return of the portfolio by 12%. Additionally, the study suggested that quarterly rebalancing effectively captured Bitcoin’s upside returns while controlling drawdowns. It was found that Bitcoin would have contributed positively to a diversified portfolio in 70% of one-year periods, 94% of two-year periods, and 100% of three-year periods since 2014. However, the study also noted that allocations of 5% or more to Bitcoin may result in increased impact on maximum drawdowns, making it uncomfortable for some investors to allocate above this level.
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