Cryptocurrency:A New Asset in Portfolio

Abstract

After the meltdown of all markets in the year 2008, investors were searching for asset classes that would have very little or no correlation with stock market and its volitality. Crypto currency in the form of Bitcoin, came into being in the year 2009 by a process called mining. Block chain technology was used to mine this crypto-currency and since then, more than 1000 altcoins and crypto- tokens have been created and at least of them are traded actively on unregulated exchanges. This entire class of crypto currency have been in some countries recognized as commodities. If crypto currencies are viewed as commodities,their risk and return structures have to be analyzed for it to be incorporated in any portfolio. This paper sets out to understand crypto-currencies and explore the risk and return characteristics using a portfolio currency represented by Crypto-currency Index (CRIX). The pros and cons of Cryptocurrency as an asset class in a portfolio has also been assessed based upon the research conducted worldwide.