Yale is one of the most respected universities in the world, so recent words from one of its leading economics professors on Bitcoin and its potential certainly haven’t gone unnoticed. Aleh Tsyvinski is the man behind a new research paper titled Risks and Returns of Cryptocurrencies, which recommends that Bitcoin be a pivotal part of an investor’s portfolio. Advising someone to invest in Bitcoin probably isn’t a headline-making story on its own, but the fact that he recommends that it should take up 6% of a portfolio – at minimum – is surprising.
Don’t Bash Bitcoin
Focusing on what Bitcoin is bringing to the table, Tsyvinski said that no matter whether you’re interested in Bitcoin or not you should invest in it. He even went as far as to say that Bitcoin should form an “imperative” part of any investors portfolio. Putting forward tentative advice, he feels that Bitcoin should at least account for 6% of a portfolio – should the investor believe in the cryptocurrency market. Those that don’t carry the same enthusiasm should still invest, but scale that figure back to 4%. Either way, if you’re a trader on investor – regardless of your Bitcoin disposition – you should make it a feature within your portfolio.
Backed by Academics
Tsyvinski’s report makes for fascinating reading, but he’s not the only scholar to back Bitcoin as a viable investment. Professor Dragan Boscovic from Arizona State University has previously spoken about cryptocurrencies in a glowing fashion. He praised Bitcoin as a valuable investment opportunity, “Institutional investors are recognizing this new asset as a valued investment opportunity; this will encourage individual investors. It will also encourage consumers and small shops to start trading in cryptocurrency.” When you consider that crypto crime numbers are falling and mainstream adoption is growing, Boscovic’s words are accurate, as Bitcoin presence is only set to further in the years to come.
Bringing Big Returns
Amidst the interesting revelations in the study, Risks and Returns of Cryptocurrencies also highlights how in certain areas Bitcoin now has the power to outdo traditional bonds and stocks. Making use of the Sharpe ratio, Tsyvinski was able to demote that cryptocurrencies – in spite of wild volatility levels – actually have higher potential returns. For the purpose of the study, he examined Bitcoin, Ethereum, and Ripple, but there is no reason as to why Litecoin, Bitcoin Cash, Dash, and more can’t be just as potent when it comes to profits over the long-term.
Bitcoin Doubters are Dwindling
While Nobel Prize Winner Robert Shiller might have recently attacked Bitcoin as “another example of faddish human behavior,” the number of Bitcoin doubters seems to be dwindling week on week. Tsyvinski, Boscovic, and others are proving that the academic backing of Bitcoin is there, even if it isn’t showing within Bitcoin’s price in recent months.