An evaluation of performance and levels of risk associated with investments in the cryptocurrency market
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Bitcoin is a decentralized digital currency, invented by Satoshi Nakamoto in the wake of the financial crisis in 2008/09. Since then thousands of cryptocurrencies have been created. We evaluate Bitcoin along with Dash, Litecoin, Dogecoin, Ripple, and for comparison reason, gold. This thesis has two main goals: 1) to study the impact of including cryptocurrency in a standard portfolio and 2) to evaluate which approach is preferred when investing in cryptocurrencies, whether a simple buy-and-hold strategy or a momentum strategy. Our result gives evident proof that the investment percentage of each of the cryptocurrencies should be treated individually. The optimal percentage of investments for the cryptocurrencies/gold are the following: 10% Ripple, 5% Bitcoin, 4% Dash, 1% Litecoin and 0,5% for Dogecoin and gold. Moreover, the results conclude that Dash outperforms all the other investments. In addition, we conclude that the weekly momentum strategy is the most efficient approach when investing in cryptocurrencies.
Master's thesis in Economics