Does crypto allocation enhance your portfolio?

livemint.com:

Cryptocurrency acceptance is booming in India, which is now the second-highest nation in terms of crypto adoption, according to a recent report by market research firm Chainalysis. Further, it is estimated that the country added almost 90% of its crypto investors during 2021 despite financial stability concerns and the lack of regulations.

Cryptocurrencies have seen an exponential increase in interest ever since the Reserve Bank of India (RBI) ban was lifted in March 2020, with Indian exchanges clocking impressive user additions and a sustained surge in daily trading volumes. For instance, WazirX witnessed a record trading volume of over $43 billion in 2021 – the highest in India – accounting for 1,735% growth over 2020.

Crypto is a new breed of asset class that has delivered higher returns but with equally higher risk. They are growing in adoption worldwide and some experts believe that they merit inclusion in an investment portfolio.

“It is like what Warren Buffett says, “don’t put all your eggs in one basket". You need to have all the different kinds of asset classes in your portfolio; some commodity, crude oil, currency, stocks, bonds and crypto as well. If you want to maintain a balanced portfolio, you need to have all of them," said Sidharth Sogani, founder and chief executive officer of CREBACO Global, a research company focused on blockchain and cryptocurrencies. Sogani suggests 4-5% allocation in crypto assets can limit the downside risk and provide a boost to the overall portfolio.

But how much does crypto boost a portfolio? We compared a standard investment portfolio of equity and debt in the 60:40 ratio to a portfolio comprising equity, debt and bitcoin in the ratio of 55:35:10 over the last five years.

The