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Bitcoin is fearsomely volatile, but it has more than made up for that with appreciation. The Coin Metrics Bletchley Index clocks bitcoin’s Sharpe ratio over the past five years at 1.6. That compares with 1.1 for the Vanguard Balanced Index Fund, which is about as diversified as you can get using stocks and bonds.
The correlation between two series of historical returns measures the degree to which the two assets track one another. A correlation of 1.0 means they march in lockstep. A 0.0 reading means they aren’t connected. The whole point of diversification is to put together a mix of different assets that have low correlations with one another.
To put this in MPT terms: You can boost a portfolio’s Sharpe ratio by adding crypto to it. But there are two reasons to hesitate. Quadrillion? That’s more than the market value of the entire solar system. And yet it’s the feverish history, not a plausible future, that plugs into the formulas for Sharpe ratios, correlations and optimum portfolios.
“It’s a 50-50 proposition.” Seriously? You gamble with retirement funds?
Surprise after retirement will Wait
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