RT Journal Article
SR Electronic
T1 An Investor’s Guide to Crypto
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 146
OP 171
DO 10.3905/jpm.2022.1.428
VO 49
IS 1
A1 Harvey, Campbell R.
A1 Abou Zeid, Tarek
A1 Draaisma, Teun
A1 Luk, Martin
A1 Neville, Henry
A1 Rzym, Andre
A1 Van Hemert, Otto
YR 2022
UL http://jpm.pm-research.com/content/49/1/146.abstract
AB The authors provide practical insights for investors seeking exposure to the growing cryptocurrency space. Today, crypto is much more than just bitcoin, which historically dominated the space but accounted for just a 31% share of total crypto trading volume in June 2022. The authors discuss a wide variety of tokens, highlighting both their functionality and their investment properties. The authors critically compare popular valuation methods, and they contrast buy-and-hold investing with more active styles. The authors only deem return data from 2017 representative, but the use of intraday data boosts statistical power. Underlying crypto performance has been notoriously volatile, but volatility-targeting methods are effective at controlling risk, and trend-following strategies have performed well. Crypto assets display a low correlation with traditional risky assets in normal times, but the correlation also rises in the left tail of these risky assets. Finally, the authors detail important custody and regulatory considerations for institutional investors.