Bitcoin $94,525 is carefully evaluated by those investing in alternative assets to find a suitable place in their portfolios. Investors can determine Bitcoin’s suitability for their portfolios by answering three key questions related to return expectations and target portfolio volatility.
Bitcoin’s Price Dynamics
Contrary to popular belief, Bitcoin’s price is shaped more by demand than supply. As seen in five bull markets, innovations in access to Bitcoin impact its price. The establishment of early spot exchanges and various financial products like futures and options has accelerated Bitcoin’s integration into traditional financial markets.
Bitcoin serves as a hedge against risk and inflation for investors. Considered digital gold, Bitcoin accounts for a small percentage of global financial assets with a market value of $2 trillion. However, this share is expected to increase as asset management firms and pension funds include Bitcoin in their strategies.
Portfolio Optimization
Using Markowitz optimization, the ideal allocation of Bitcoin within a portfolio i…
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