As institutions are increasingly considering incorporating cryptocurrency into their portfolios, one question remains: How do you allocate money to bitcoin without taking on too much risk?
Traditional risk modeling strategies like factor, statistical, or macroeconomic models cannot be applied to bitcoin in the same way that they are applied to other asset classes, according to new research from Joel Coverdale, a risk consultant with Hong Kong-based consulting and advisory firm Eight Isle and ex-BlackRock director.
“Bitcoin, as an emergent asset class, poses a tricky dilemma in that it doesn t fit neatly into the existing modeling frameworks,” according to Coverdale’s paper. “At least, not at first glance.”