The post A Smarter Way to Crypto Diversification? appeared on BitcoinEthereumNews.com.

The investment conversation around crypto has transitioned from questioning the survival of cryptocurrencies to discussing efficient allocation strategies. Most notably, institutional investors are moving on from testing the waters with bitcoin to seeking diversified exposure to the broad crypto market. With a total market cap of over $3 trillion, cryptocurrencies represent approximately 1.5% of the market portfolio of all listed, investable assets that are easily accessible to investors (Bloomberg, WisdomTree, 1/31/2025). You’re reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday. Figure 1: The market portfolio Source: Bloomberg, WisdomTree. Data as of 31 December 2024. Market caps are shown in USD billion. Historical performance is not an indication of future performance, and any investment may go down in value. In 2024, institutional investors started to recognize that the market-neutral position for multi-asset portfolios involves investing approximately 1.5% in cryptocurrencies, as determined by the market portfolio. They also realized that including cryptocurrencies in diversified multi-asset portfolios can also potentially improve their risk/return profiles. While allocating approximately 1.5% to cryptocurrencies became a reasonable strategy for investors without a specific investment thesis against the asset class, a question arose as to whether investors should allocate the entire 1.5% to bitcoin or diversify that allocation across multiple cryptocurrencies. Figure 2: Cryptocurrency market caps Source: Artemis Terminal, WisdomTree. As of 31 January 2025, using US Dollar market caps. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value. For background, bitcoin dominates the cryptocurrency market, accounting for 55% of the total market capitalization. The next 19 largest cryptocurrencies collectively make up around 33%, while the remaining 12% is distributed among all other…

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Filed under: News - @ February 27, 2025 12:22 am