Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Business and Policy Studies
Series Vol. 11 , 13 September 2023
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Access | Article
Correlation and Impact of Bitcoin with Other Cryptocurrency Portfolios
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Abstract
Bitcoin is a peer-to-peer form of digital currency proposed in 2008. Unlike other currencies, Bitcoin does not rely on a specific institution to issue it, it is based on a specific algorithm that generates it through a large number of calculations. In some countries, government agencies, central banks and academia regard Bitcoin is a virtual currency rather than a currency. This is because of Bitcoin’s high volatility, which does not have the two basic functions of the unit of account and the store of value that are unique to the currency. In recent years, Bitcoin has seen increasing media coverage and other cryptocurrency portfolios, as well as the significant capital gains have been seen in the high volatility environment. In this paper, we shed light on the low correlation of Bitcoin with traditional investment assets, making Bitcoin a potentially high-quality source of portfolio diversification. The results of the finding suggest that Bitcoin investments offer significant diversification benefits and should be included in optimal portfolios. In addition to this, we find that hedging strategies involving gold, oil, stocks and Bitcoin significantly reduce portfolio risk.
Keywords
Bitcoin, portfolio diversification, portfolio optimization, volatility
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2nd International Conference on Business and Policy Studies
- ISBN (Print)
- 978-1-915371-49-2
- ISBN (Online)
- 978-1-915371-50-8
- Published Date
- 13 September 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/11/20230524
- Copyright
- 13 September 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited