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Bitcoin: an uncorrelated asset
Savvy investors seek to build a well-diversified portfolio in order to cope with crises and take advantage of higher market prices. Portfolio diversification is rooted in modern portfolio theory, which suggests that holding uncorrelated assets can help mitigate the risk of loss. In recent years, the market has experienced several tumultuous events, including the Greek debt crisis, the unprecedented volatility of Chinese equities and currency manipulation in several G20 countries. Taking into account these market disruptions, we calculated that Bitcoin, over the past year, had demonstrated a low correlation between various large asset classes and fiat currencies. In addition, the investment lead time for Bitcoin property has been slowly increasing as investors seek to speculate on asset price appreciation and adopt a buy and hold strategy rather than trading daily.
Given the low correlation with other assets and decreasing volatility, investing in Bitcoin could help increase earnings while adding minimal risk to the overall portfolio. Past performance is not a guide to future performance, but it is a good illustration of Bitcoin's added value for improving returns without taking any extra risk.
It is important to remember that we are still in the early days of this asset's life cycle. However, the positive potential of a positive performance for Bitcoin is huge. With more technology solutions simplifying and reducing friction in existing processes, the value proposition for digital money looks promising. As the advent of mobile phones and their ability to transform communication, Bitcoin and its underlying technology are poised to revolutionize asset ownership and value transfer. As a result, it is not surprising that Bitcoin appeared as the world moves towards a digital ecosystem.