21Shares report: 2%-5% crypto allocation boosts portfolio returns

21Shares released a research report on Nov. 5 indicating that allocating 2% to 5% of a traditional 60/40 portfolio to Bitcoin and altcoins enhances risk-adjusted returns. The report highlighted Bitcoin's correlation with U.S. stocks at 38% and with gold at 4% from October 2023 to September 2026, demonstrating effective diversification compared to traditional assets. Following the launch of spot ETFs in January 2024, Bitcoin's three-month rolling volatility stabilized at 38%, similar to major U.S. growth stocks like Tesla at 46% and Palantir at 59%. The asset-allocation model showed that all three profiles—conservative at 2%, neutral at 4%, and growth at 5%—achieved higher annualized returns and Sharpe ratios compared to the standard 60/40 benchmark, which had a return of 10.86% and a Sharpe ratio of 0.57. The crypto-allocation profiles reported annualized returns between 11.64% and 13.17%, with Sharpe ratios ranging from 0.64 to 0.74. 21Shares recommended classifying Bitcoin as an alternative asset like gold, while treating Ethereum and Solana as growth technology stocks, emphasizing the need for quarterly rebalancing to manage maximum drawdown and exposure during market volatility.

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