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Cryptocurrencies and Portfolio Diversification

Feb 13, 2018

Cryptocurrencies and Portfolio Diversification

Active investors are continually searching for new opportunities to diversify their investments. The meteoritic rise, as well as subsequent dip, in the value of cryptocurrencies, however, has left many investors hesitant as to how to approach this burgeoning asset class. According to a JP Morgan report titled “Decrypting Cryptocurrencies: Technology, Applications and Challenges” discussed in a article, cryptos may allow investors to better diversify their stock and bond portfolios one day, but that day is, at best, a number of years away. This, of course, is predicated on the belief that cryptocurrencies are viable for the long run. The report cautions that this is a big “if”.

If able to survive their growing pains, however, there exists the possibility that cryptos become woven into the global markets. This would require them moving past their current speculative phase, and generating returns more suitable to long term stability. The blockchain technology on which cryptos are built works to keep them relatively independent of their price with greater potential from future advancements.

Many well-known investors, including the likes of Warren Buffet, have been vocal about their skepticism regarding the viability of cryptocurrencies. It may be difficult, however, to deny the investment opportunity they represent. Cryptocurrencies in their current volatile form may not provide investors the asset diversity they are seeking for their portfolios, but that day may be coming.

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