The optimal long-term portfolio share of bitcoin is negative (or zero)

<p dir="ltr">Applying the standard Markovitz mean-variance framework to a two asset portfolio consist?ing of US stocks (S&P500) and Bitcoin (BTC), challenges the notion that BTC offers diversifica?tion benefits for long-term investors. With risk (variance and covariance) estimated using data from 02/14 to 02/25 and long-term returns based on standard efficient markets assumptions, the optimal portfolio share for Bitcoin -1.6% (full sample) and -7.3% (recent sample), regardless of investor preferences towards risk. Other studies of BTC in portfolio management report that a positive BTC portfolio share improves risk-return trade-offs. This difference is explained by their focus on short-term dynamic asset allocation strategies and the more recent data used here, exhibiting an increased +ve correlation between BTC and stock returns. This suggests that BTC is only of interest for speculation and long-term returns to the crypto-industry are available only from the facilitation of this gambling.</p>