An Investor’s Guide to Crypto

29 Pages Posted: 2 Jun 2022 Last revised: 29 Jun 2022

See all articles by Campbell R. Harvey

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Tarek Abou Zeid

Man AHL

Teun Draaisma

Man Group

Martin Luk

Man AHL

Henry Neville

Man Group

Andre Rzym

Man AHL

Otto Van Hemert

Man AHL

Date Written: May 31, 2022

Abstract

We provide practical insights for investors seeking exposure to the growing cryptocurrency space. Today, crypto is much more than just bitcoin, which historically dominated the space but accounted for just a 21% share of total crypto trading volume in 2021. We discuss a wide variety of tokens, highlighting both their functionality and their investment properties. We critically compare popular valuation methods. We contrast buy-and-hold investing with more active styles. We only deem return data from 2017 representative, but the use of intraday data boosts statistical power. Underlying crypto performance has been notoriously volatile, but volatility-targeting methods are effective at controlling risk, and trend-following strategies have performed well. Crypto assets display a low correlation with traditional risky assets in normal times, but the correlation also rises in the left tail of these risky assets. Finally, we detail important custody and regulatory considerations for institutional investors.

Keywords: Crypto, currency, bitcoin, ether, gold, custody, NFTs, inflation hedge, stablecoins, DeFi

JEL Classification: C58, E42, E51, G10, G11, G12, G21, G23, G24, K24, K42, L86, O31

Suggested Citation

Harvey, Campbell R. and Abou Zeid, Tarek and Draaisma, Teun and Luk, Martin and Neville, Henry and Rzym, Andre and van Hemert, Otto, An Investor’s Guide to Crypto (May 31, 2022). Available at SSRN: https://ssrn.com/abstract=4124576 or http://dx.doi.org/10.2139/ssrn.4124576

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tarek Abou Zeid

Man AHL ( email )

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

Teun Draaisma

Man Group ( email )

Sugar Quay
Lower Thames Street
London, EC3R 6DU
United Kingdom

Martin Luk

Man AHL ( email )

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

Henry Neville

Man Group ( email )

Sugar Quay
Lower Thames Street
London, EC3R 6DU
United Kingdom

Andre Rzym

Man AHL ( email )

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

Otto Van Hemert

Man AHL ( email )

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

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