Adding bitcoin alongside gold to your portfolio juiced returns and didn’t raise risk, study shows
A mix of both gold and bitcoin increased the efficiency of a bond-and-equity portfolio over the last 10 years, according to a study by Citi. Bitcoin has become known as “digital gold” but with the popularity of spot bitcoin ETFs continuing to grow, the flagship cryptocurrency’s price action has more consistently started to move in tandem with other risk assets, rather than acting as a hedge. The analogy is forcing investors to question how to allocate to the two assets in a portfolio. Instead of choosing one versus another, Citi suggests investors could hold some of both in small amounts. “A 5% allocation to gold demonstrably increases portfolio efficiency. Splitting this allocation between gold and bitcoin further enhances performance,” Citi analyst Alex Saunders said in a note Thursday. “This combined approach shows improvements in bond-bull scenarios relative to a traditional 60/40 portfolio and better performance in bear-steepening which post-2020, has coincided with fiscal fears and increasing inflation risk-premia which is an environment we anticipate is likely to endure,” he added. “The relative popularity of gold investments relative to BTC also makes the mix more attractive tactically in our view.” Citi also pointed out that when bond markets are weak or unstable, bitcoin can and has performed better better than gold, pointing to recent fiscal fears and equity weakness amid the ongoing conflict in the Middle East. Bitcoin is up 9% over the past two months, compared with spot gold, which has fallen 4%. —CNBC’s Michael Bloom contributed reporting.
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