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The Case for Diversification Within Crypto Investing

San Francisco • March 1, 2018

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

Based in San Francisco, Bitwise is one of the largest and fastest-growing crypto asset managers, offering both index and active strategies across a wide array of investment vehicles. The firm is known for creating the world’s largest crypto index fund (OTCQX: BITW), a suite of crypto-focused equity and futures ETFs, and investment products that span Bitcoin, Ethereum, DeFi, NFTs, and the Metaverse. Bitwise focuses on partnering with financial advisors and investment professionals to provide quality education and research. The team at Bitwise combines expertise in technology with decades of experience in traditional asset management and indexing, coming from firms including BlackRock, Blackstone, Meta, and Google, as well as the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and asset management executives, and has been profiled in Institutional Investor, CNBC, Barron’s, Bloomberg, and The Wall Street Journal.

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