Cryptocurrencies as an Asset Class?

34 Pages Posted: 2 May 2018 Last revised: 20 Jul 2018

Sinan Krueckeberg

University of the German Federal Armed Forces - Helmut Schmidt Universität; HSBA Hamburg School of Business Administration

Peter Scholz

Hamburg School of Business Administration

Date Written: April 14, 2018

Abstract

Cryptocurrencies are a new and unclassified emergence at the intersection of technology and finance. It is therefore of particular interest whether cryptocurrency can form a new asset class for investment purposes. We find that cryptocurrencies show characteristics of a distinct asset class based on strong internal correlation, an absence of correlation with any traditional asset class as well as strong market liquidity, while market stability has room for improvement. Adding a 1% allocation of cryptocurrencies to traditional portfolio structures leads to significant and persistent risk weighted outperformance. These results support the careful introduction of cryptocurrencies into the asset management mainstream.

Keywords: Cryptocurrency, Tokens, Coins, Asset Class, Portfolio Optimization, Asset Management

JEL Classification: G11, G23, E42

Suggested Citation

Krueckeberg, Sinan and Scholz, Peter, Cryptocurrencies as an Asset Class? (April 14, 2018). Available at SSRN: https://ssrn.com/abstract=3162800 or http://dx.doi.org/10.2139/ssrn.3162800

Sinan Krueckeberg (Contact Author)

University of the German Federal Armed Forces - Helmut Schmidt Universität ( email )

Hamburg
Germany

HOME PAGE: http://www.krueckeberg.us

HSBA Hamburg School of Business Administration ( email )

Germany

Peter Scholz

Hamburg School of Business Administration ( email )

Adolphsplatz 1
Hamburg, 20457
Germany

HOME PAGE: http://think-finance.de

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