Research Claims Bitcoin Has More Risk-Adjusted Returns Potential Than Gold
Messari, in its latest research report, has noted that Bitcoin has performed way better than other assets in the financial market, especially gold.
In its report, the data analysis platform noted that the Sharpe ratio of Bitcoin is currently ‘3’ as it has performed better than its closest rival, Bridgewater. The Sharpe Ratio is the instrument that is used to measure the performance of all investment-related financial assets in the market. The Sharpe Ratio takes into consideration various factors, especially the risk of a particular commodity. Notably, Bridgewater, the closest rival of Bitcoin and houses assets such as cash, bonds, stocks, and gold, has its Sharpe Ratio at 1.48.
Investors prefer Bitcoin as a hedge over other assets in the market
According to analysts and experts in the financial market, a commodity or asset with a Sharpe Ratio reading of more than one can do well in the financial market. This means that stocks and real estate have the potential to perform better than other traditional assets, precious metals, and bonds. In the review,
the author of the report, Mira Christanto, said that a look at the chart shows that Bitcoin has the lowest correlation compared to other assets in the financial market like gold, crude oil in the last three years. Furthermore, he said that this major quality had endeared the leading digital asset to investors because it possesses the ability to offset a potential market loss.
“Presently, hedge funds and pension houses are turning to Bitcoin as they have come to terms that the digital asset now has the potential to perform well when they invest in Bitcoin in the long term,” Mira Christanto said.
The release of the Messari report came after traditional assets witnessed a massive surge in the financial market, which came off the back of the Black Thursday event. However, it marched into its own bias at different times after posting a zigzag correlation. The author of the report noted that Bitcoin showed a minimal correlation with the other mainstream markets. A typical example was its correlation with the S%P 500, where it had an efficiency of 0.19.
Major firms across the globe are now turning to Bitcoin
She noted that this was the main reason why major high-value investors decided to look to Bitcoin as a hedge instead of the other financial market assets. The report further highlighted major firms that have shifted their focus to accumulating Bitcoin, which has worked for them. A typical example is MicroStrategy, a firm that bought crypto with over $400 million of the cash reserves in its possession.
After the firm announced the move, Bitcoin’s market capitalization surged and experienced an increase of $494 million. “Bitcoin’s recent price shows that investors are interested in accumulating a lot of the coin, and a further price surge is expected in the coming weeks,” Chrisanto said.
According to the report, another firm swayed by Bitcoins risk-adjustment returns was Square, a global payment firm that allocated $50 million of its holding to purchase Bitcoin. Presently, 81,054 BTC is in the confines of 16 corporations. After the notable Black Thursday event in March, Bitcoin has since witnessed a 250% growth to trade above $15,500.