Cryptocurrencies as an Asset Class?
34 Pages Posted: 2 May 2018 Last revised: 20 Jul 2018
Date Written: April 14, 2018
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: Suggested Citation