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Every Wallet Should Have 6% Bitcoin: Yale Study
With Bitcoin (BTC) hype seemingly settled from its peak levels of late 2017, investors appear to be split into two distinct camps. On one side, there are strong supporters of bitcoin as the leader among cryptocurrencies; these individuals tend to hold large amounts of BTC, often for long periods of time and in the hope that the cryptocurrency will experience a dramatic spike in value again, or they buy and sell bitcoin on a more short-term basis. On the other hand, there are investors who tend to scoff at cryptocurrencies in general. These investors are those who have yet to create a cryptocurrency wallet or incorporate digital tokens in their wallets. According to a recent study from Yale University, this latter group of investors might be better off giving in to the bitcoin hype to some extent.
Optimal portfolio that includes at least 6% BTC
According to a study by Yale economist Aleh Tsyvinski and reported by BitcoinistBTC should occupy about 6% of every portfolio for optimal construction. Even those who are strong bitcoin skeptics should keep at least a 4% allocation to BTC, the study said. The study suggests that even the most ardent cryptocurrency naysayers would be better off investing 1% of their assets in the space, if only for diversification purposes.
Higher potential return?
According to the study, Tsyvinski has shown that cryptocurrencies enjoy a higher potential return than other types of activities despite their superiority volatilityThe study only looked at bitcoin, ethereal AND rippleIt is therefore not intended to provide a comprehensive overview of the sector.
Dragan Boscovic of Arizona State University came to similar conclusions. He noted that “institutional investors are recognizing this new asset as a valuable investment opportunity; this will encourage individual investors. It will also encourage consumers and small shops to start trading in cryptocurrency.” On the other hand, Tsyvinski’s study is in contrast with that of Nobel Prize winner Robert Shiller, who suggested in May that bitcoin is a failed experiment and “another example of capricious human behavior.” In the long-running debate over the feasibility of digital currencies As an investment area, both sides have numerous supporters.
Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the author to invest in cryptocurrencies or ICOs. Since each individual’s situation is unique, you should always consult with a qualified professional before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date of this writing, the author owns bitcoin and ripple.