Research

The Case for Diversification Within Crypto Investing

San Francisco • March 1, 2018 UTC

Many crypto investors only hold a single coin, like bitcoin. This white paper lays out why that’s a suboptimal strategy.

This report explores the value of diversification for cryptocurrency investing. It quantifies the relationship between the performance of different large-cap crypto assets through a number of measures: variability of monthly returns, correlations, and performance during drawdowns. As an example, the analysis finds that the average monthly difference in returns between the top- and bottom-performing large-cap crypto asset during the past year is 300.1%. Also, during the 60%+ drawdown in the price of bitcoin in December-January, three of the top 10 crypto assets posted positive returns, with one rising 69%. Though cryptocurrency has a limited track record, the report finds that there has been meaningful variability in performance. Investors stand to benefit from diversification in their cryptocurrency portfolios.

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About Bitwise

Bitwise Asset Management is the largest crypto index fund manager in America. Thousands of financial advisors, family offices, and institutional investors partner with Bitwise to understand and access the opportunities in crypto. For six years, Bitwise has established a track record of excellence managing a broad suite of index and active solutions across ETFs, separately managed accounts, private funds, and hedge fund strategies. Bitwise is known for providing unparalleled client support through expert research and commentary, its nationwide client team of crypto specialists, and its deep access to the crypto ecosystem. The Bitwise team of more than 60 professionals combines expertise in technology and asset management with backgrounds including BlackRock, Millennium, ETF.com, Meta, Google, and the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and has been profiled in Institutional Investor, Barron’s, Bloomberg, and The Wall Street Journal. It has offices in San Francisco and New York. For more information, visit www.bitwiseinvestments.com.

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