Can Portfolio Performance Be Improved with Bitcoin during a Global Crisis? - A Study of Portfolio Performance with Diverse Assets during the COVID-19 Outbreak

Abstract: As a relatively new form of financial asset with unique properties, Bitcoin is increasingly included in portfolios to improve performance. However, research remains limited on how Bitcoin actually affects portfolio performance. This study aimed to broaden the field of research by exploring whether Bitcoin can improve portfolio performance during a global crisis. It sought to answer the question by analyzing how the inclusion of Bitcoin affects a diversified portfolio of Swedish assets during the COVID-19 crisis. The study measured how Bitcoin compares to more traditional assets, such as gold, in a portfolio constructed of the Swedish market index OMXS 30 and a Swedish real estate fund. In line with previous research, the results showed that Bitcoin had a low correlation to the portfolio assets selected for the study between 2019 and 2022. More importantly, the thesis concluded that Bitcoin had the relatively highest Sharpe-ratio and thereby confirmed the study hypothesis that Bitcoin would have improved the risk-adjusted returns of all the selected portfolios had it been included. The study therefore suggests that Bitcoin should be viewed as a serious diversification option in times of global crisis.