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News/14/06/2018

Just Diversify? With Crypto Portfolios, It's Not So Simple

With over 1,560 cryptocurrencies for investors to choose from, the abundance can seem overwhelming.

But it also raises an interesting question: How important is it to have exposure to a range of cryptocurrencies? Is it worth diversifying your holdings in order to mitigate risk? The work of Harry Markowitz might lead you to think so.

The Nobel Prize-winning economist, author of the classic 1952 article "Portfolio Selection," devised modern portfolio theory (MPT), which stresses that diversifying assets is crucial. If you diversify enough, you will make risk go away and get the mean. Time and time again, Markowitz's research has shown that investors can assemble the perfect portfolio.


Indeed, recently published research by the Bocconi Students Investment Club at Bocconi University in Milan, Italy, showed that applying the MPT framework to crypto beat all other portfolios, at the cost of a greater volatility.


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