The adoption of disruptive blockchain technology has also allowed the promotion of a new wave of assets linked to this technology
In the opinion of the manager, the fundamentals of cryptoactives have improved considerably
The liquidity of the main cryptoactives has increased and the assessment methods used for them are better known
During these last years, cryptoactives have gained popularity among investors basically because of the attractiveness of their profitability, which stands out above any other asset worldwide. One of the clearest examples of this trend was bitcoin, which increased by 1338% in 2017 alone and despite the decline suffered this year, its long-term profitability remains very high.
In addition, the adoption of the disruptive blockchain technology has also allowed the promotion of a new wave of assets linked to this type of technology, which has attracted the attention of investors who are wondering if these new digital assets can be considered as a true class of assets eligible for investment or not.
In the opinion of Block AM , investors and managers must approach the phenomenon of cryptoactives with a broader perspective and based on diversification. “The latest developments seen in the market indicate that, today, we are on the right track and that the fundamentals of the crypto area continue to improve: new crypto custody services are now offered in the market, the liquidity of the main cryptoactives continues to increase , the evaluation methods of these assets are better known and it has been shown that there is a positive relationship between the regular increase in the intrinsic value of the cryptoactive agents and their long-term upward trend “, explain from Block AM.
In this sense, cryptoactives are increasingly established as an alternative investment that has potential, therefore, does it make sense to add them to a portfolio? For Block AM, yes: “We conducted a statistical study to understand what would be the benefits of adding less diversification in a balanced portfolio. The answer was very clear. An investment of 5% in bitcoin (as an approximation of the market) would have allowed a diversified portfolio (55% variable income, 40% bonds and 5% bitcoin) to overcome a traditional portfolio (60% equity and 40% bonds) in a 9.1% per year (period: 31/05 / 11-31 / 07/18). The volatility of the portfolio increased but was compensated by the level of additional profitability generated by the diversification carried out with cryptoactives. Thus, Each investor will have to assess the percentage of additional risk that can be allowed in order to increase the profitability of their portfolio. In general terms, we conclude that a defensive portfolio should not have more than 2% in cryptoactives, while a more dynamic portfolio could allow a diversification up to 5%, with a regular rebalancing of the crypto exposure in the portfolio (to avoid excesses) “.
From his experience, Block AM the way to face this diversification with cryptoactives is including fundraising strategies in the portfolio. “It allows an investor to easily implement an exposure in cryptoactives with lower loss risk, since the strategy benefits from having made an efficient diversification, a unique due-diligence method and an access to the best funds in the market for each type of strategy. So far, the results have been very good and in line with the initial objective. Block Asset Management’s fund fund strategy allowed its core fund to minimize this year’s market decline, with lower volatility as well.