Interest of Asset Allocation Investors

 ✔ Distributed investment is the norm for allocating less correlated assets

✔ Digital assets are not correlated with existing assets, so pay attention

✔ Need to consider digital assets as a target of asset allocation investment

Heybit is a service that invests in digital assets (cryptocurrency) such as Bitcoin. But why invest in digital assets? There may be many reasons to pay attention to digital assets, but one of them is asset allocation.

the law of asset allocation

Asset allocation investments can generate unwavering returns in a variety of market conditions by simultaneously holding less-correlated assets. Harry Max Markowitz won the Nobel Prize for his only 12-page paper describing it.

Correlation of Digital Assets

But from this point of view, digital assets can be an interesting asset allocation target.

Forbes' One Chart Explains Why You Should Bitcoin And Other Cryptocurrency explains this. The reason is simple. This is because digital assets are less correlated with other assets.

Correlation is the degree to which prices move together. For example, if the prices of both assets move the same way, the correlation is 100. On the other hand, if the price of both assets moves in reverse, the correlation is -100. If the price of both assets is going my way, the correlation is zero.

What about digital assets?

The article shows that Bitcoin has a very low correlation with assets such as the U.S. stock market, the dollar, the global stock market, bonds, commodities, gold, oil, etc. All the values are between -11 and +8, so it's close to zero.

In addition, this characteristic is not only seen in bitcoin, but also in all other digital assets. Most digital assets now have a high correlation with Bitcoin, so it's a natural result.

Why is this information important?

Digital assets are therefore attractive as a target of asset allocation. In a joint paper published by Jim Kyung-Soo Liew, CEO of SoKat Consulting and Professor of Carey Business School at Johns Hopkins, and Leva Hewlett, a Quant Risk Management Associate at the Maryland State Pension Service, digital assets also claimed to have a "unique distributed investment effect."

Of course, nevertheless, cryptographic assets have many risks. Above all, institutions that make asset allocation investments need a considerable level of institutionalization and infrastructure before they can purchase them. It may take more time than you think, or it may not even happen.

But if you think about it the other way around, it might mean that it's possible to get much more attention than it is now if you have that foundation.