Over the past year, the total market capitalization of the cryptocurrency market has achieved staggering growth, reaching $2.1 trillion, an increase of nearly 80%. Bitcoin and Ethereum achieved gains of more than 100% and 75% respectively, showing the strong performance of these two mainstream cryptocurrencies. In addition, the successful launch of the U.S. Bitcoin Spot ETF continues to attract the attention of more traditional investors. These factors have combined to make the cryptocurrency market experience a booming phase in the past year, attracting the attention of more investors. The reasons behind this growth may be multi-faceted, including increased market acceptance of digital assets and growing interest in
Zann Kwan, chief investment officer and partner at the Revo Digital family office, recently said , Asian family offices plan to increase their investment in cryptocurrencies. Investors who once took a wait-and-see attitude are now actively exploring how to integrate cryptocurrencies into their portfolios in pursuit of higher returns.
Coinbase CEO: Cryptocurrency will become an indispensable asset in a diversified investment group
As Brian Armstrong, CEO of Coinbase, the largest exchange in the United States, in last week’s fourth quarter financial report According to the conference call, including crypto assets in investment portfolios has become an inevitable trend. He pointed out that every institution is now starting to hold cryptocurrencies, making crypto assets an integral part of a diversified investment portfolio. Armstrong’s comments highlight the market’s growing interest in and recognition of crypto-assets, signaling that cryptocurrencies will continue to expand in importance in the financial sector. This trend also reflects the growing confidence of institutional investors in the digital asset market and their optimism about cryptocurrencies as a safe haven and value-added asset. Armstrong’s remarks further emphasized the place of crypto assets in today’s investment environment
Armstrong added that the financial system’s official acceptance of cryptocurrencies is an excellent development and stated that Coinbase is the most trusted in this field. Partner, he pointed out that Coinbase is the custodian of 8 of the 11 Bitcoin spot ETFs, which allows the Bitcoin under its custody to account for 90% of the assets of the Bitcoin spot ETF, and emphasized that: the Bitcoin spot ETF has released new capital inflows into cryptography The currency space... we've seen huge demand as Bitcoin is now the second largest ETF commodity in the U.S., surpassing silver.
Institutions will use cryptocurrencies in many ways
Armstrong believes that beyond exposure to cryptocurrencies through ETFs, more possibilities await. As more institutions get involved in the cryptocurrency space, whether through ETFs or other avenues, that's a good thing. He believes these institutions will eventually explore more ways to leverage cryptocurrencies, such as adding them to their balance sheets, using them to pay suppliers or as compensation for their employees. Armstrong is confident in the potential of cryptocurrencies and believes they will be more widely used in the future.
Armstrong concluded that they hope that cryptocurrencies can become an important driver of global GDP growth. To achieve this goal, they must seize every possible opportunity. From his perspective, ETFs would be a huge benefit to their business.
Research report: Allocating crypto assets can increase investment group returns
When Coinbase jointly published the first quarter of 2024 crypto market guide with Glassnode early last month, it also studied the allocation of cryptocurrencies to traditional The results are surprising, showing that adding cryptocurrencies to a portfolio improves both absolute and risk-adjusted returns.
They allocate a small amount of Coinbase Core Index (COINCORE) in the traditional stock and bond investment portfolio, and adjust the proportion of stocks and bonds accordingly. The results can be seen from the table below. When no crypto-assets are allocated (the leftmost column), the absolute return rate is 3.78%. However, after allocating 1% to 5% of COINCORE, the absolute return rate gradually increases to 6.53%.
Of course, it is undeniable that the risk has also expanded. It can be observed that the volatility (Volatility) gradually increases from left to right, so we must also observe the "risk-adjusted return", which is a measure of the investor's commitment. An indicator of how much reward a unit of risk can enjoy. Coinbase lists three such indicators, namely Sharpe, Sortino and Calmar (also known as drawdown ratio). The difference between them is the way to measure risk, which are: total Risk, risk of negative returns and maximum drawdown (i.e. the bottom column of the table below), but no matter what, the results show that after allocating 1% to 5% of crypto assets, the risk-adjusted returns show an increasing trend.
Note: The stock and bond investment portfolio is a portfolio composed of 60% MSCIACWI (Global Stock Index) and 40% USAgg (U.S. Aggregate Bond Index); COINCORE is a cryptocurrency index weighted by market capitalization. It is rebalanced every quarter and is mainly allocated to eight component currencies including Bitcoin (65.3%) and Ethereum (28.7%).
Readers who are interested in incorporating crypto assets into their investment portfolio can refer to Coinbase’s research report in May last year.
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