Bitcoin, a standalone investable asset, could be transformative for investors seeking to maximize returns, BlackRock said in a groundbreaking asset allocation study.
Conducted in April 2022, the study tracks BTC as a standalone investable asset. From July 2010 to December 2021, BlackRock conducts monthly research on Bitcoin’s performance as an asset.
BlackRock’s findings show that for a 60-40 portfolio (60% stocks and 40% bonds) with a fixed risk aversion of γ = 1.50, the optimal allocation to BTC is a staggering 84.9%. The remaining 15.1% is recommended for allocation to stocks and bonds.
The study found that adding bitcoin to a portfolio can significantly boost its risk-adjusted return, as measured by the Sharpe ratio.
The Sharpe ratio is a measure that expresses the excess return per unit of investment risk. The study showed that the 60-40 portfolio without bitcoin had a Sharpe ratio of 0.72, while the portfolio allocated 84.9% bitcoin had a Sharpe ratio of 1.53.