IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2025i3p125-d1602154.html

The Nonsense of Bitcoin in Portfolio Analysis

Author

Listed:
  • Haim Shalit

    (Department of Economics, Ben-Gurion University of the Negev, Beer-Sheva 84105, Israel)

Abstract

The paper demonstrates the nonsense of using Bitcoin in financial investments. By using mean-variance financial analysis, stochastic dominance, CVaR, and the Shapley value theory as analytical statistical models, I show how Bitcoin performs poorly by comparing it against other traded assets. The conclusion is reached by analyzing daily freely available market data for the period 2018–2023.

Suggested Citation

  • Haim Shalit, 2025. "The Nonsense of Bitcoin in Portfolio Analysis," JRFM, MDPI, vol. 18(3), pages 1-14, February.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:125-:d:1602154
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/3/125/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/3/125/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. José Rangel & Robert Engle, 2012. "The Factor–Spline–GARCH Model for High and Low Frequency Correlations," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 109-124.
    2. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(3), pages 335-346.
    3. Gur Huberman & Jacob D Leshno & Ciamac Moallemi, 2021. "Monopoly without a Monopolist: An Economic Analysis of the Bitcoin Payment System [Blockchain Economics]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 3011-3040.
    4. Platanakis, Emmanouil & Urquhart, Andrew, 2020. "Should investors include Bitcoin in their portfolios? A portfolio theory approach," The British Accounting Review, Elsevier, vol. 52(4).
    5. Akhtaruzzaman, Md & Sensoy, Ahmet & Corbet, Shaen, 2020. "The influence of Bitcoin on portfolio diversification and design," Finance Research Letters, Elsevier, vol. 37(C).
    6. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Migliavacca, Milena & Goodell, John W. & Paltrinieri, Andrea, 2023. "A bibliometric review of portfolio diversification literature," International Review of Financial Analysis, Elsevier, vol. 90(C).
    2. Marco Lambrecht & Andis Sofianos & Yilong Xu, 2025. "Does Mining Fuel Bubbles? An Experimental Study on Cryptocurrency Markets," Management Science, INFORMS, vol. 71(3), pages 1865-1888, March.
    3. Castillo León, Jaime & Lehar, Alfred, 2026. "What data have told us about decentralized finance," Journal of Corporate Finance, Elsevier, vol. 96(C).
    4. Sakkas, Athanasios & Urquhart, Andrew, 2024. "Blockchain factors," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 94(C).
    5. Daeyun Kang & Doojin Ryu & Robert I. Webb, 2025. "Bitcoin as a financial asset: a survey," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-28, December.
    6. Jalan, Akanksha & Matkovskyy, Roman & Urquhart, Andrew & Yarovaya, Larisa, 2023. "The role of interpersonal trust in cryptocurrency adoption," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    7. Baumgartner, Tim & Güttler, André, 2022. "Bitcoin flash crash on May 19, 2021: What did really happen on Binance?," IWH Discussion Papers 25/2022, Halle Institute for Economic Research (IWH).
    8. Hinzen, Franz J. & John, Kose & Saleh, Fahad, 2022. "Bitcoin’s limited adoption problem," Journal of Financial Economics, Elsevier, vol. 144(2), pages 347-369.
    9. Cole, Benjamin M. & Dyhrberg, Anne H. & Foley, Sean & Svec, Jiri, 2022. "Can Bitcoin be Trusted? Quantifying the economic value of blockchain transactions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    10. Xinyu Huang & Weihao Han & David Newton & Emmanouil Platanakis & Dimitrios Stafylas & Charles Sutcliffe, 2023. "The diversification benefits of cryptocurrency asset categories and estimation risk: pre and post Covid-19," The European Journal of Finance, Taylor & Francis Journals, vol. 29(7), pages 800-825, May.
    11. Rubaiyat Ahsan Bhuiyan & Afzol Husain & Changyong Zhang, 2023. "Diversification evidence of bitcoin and gold from wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.
    12. Makarov, Igor & Schoar, Antoinette, 2021. "Blockchain analysis of the Bitcoin market," LSE Research Online Documents on Economics 118897, London School of Economics and Political Science, LSE Library.
    13. Lin William Cong & Ke Tang & Yanxin Wang & Xi Zhao, 2023. "Inclusion and Democratization Through Web3 and DeFi? Initial Evidence from the Ethereum Ecosystem," NBER Working Papers 30949, National Bureau of Economic Research, Inc.
    14. Lee, Seungju & Lee, Jaewook & Lee, Woojin, 2025. "Interconnected dynamics of sustainable cryptocurrencies: Insights from transfer entropy analysis," Finance Research Letters, Elsevier, vol. 76(C).
    15. Fabian Woebbeking, 2021. "Cryptocurrency volatility markets," Digital Finance, Springer, vol. 3(3), pages 273-298, December.
    16. Benedetti, Hugo & Rodríguez-Garnica, Gabriel, 2025. "Does what happens on-chain stays on-chain? The dynamics of blockchain token transactions and prices," Journal of International Money and Finance, Elsevier, vol. 158(C).
    17. Garud Iyengar & Fahad Saleh & Jay Sethuraman & Wenjun Wang, 2023. "Economics of Permissioned Blockchain Adoption," Management Science, INFORMS, vol. 69(6), pages 3415-3436, June.
    18. Luciano Somoza & Antoine Didisheim, 2022. "The End of the Crypto-Diversification Myth," Swiss Finance Institute Research Paper Series 22-53, Swiss Finance Institute.
    19. Igor Makarov & Antoinette Schoar, 2021. "Blockchain Analysis of the Bitcoin Market," NBER Working Papers 29396, National Bureau of Economic Research, Inc.
    20. Nikolaus Hautsch & Christoph Scheu & Stefan Voigt, 2024. "Building trust takes time: limits to arbitrage for blockchain-based assets," Review of Finance, European Finance Association, vol. 28(4), pages 1345-1381.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:125-:d:1602154. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager The email address of this maintainer does not seem to be valid anymore. Please ask MDPI Indexing Manager to update the entry or send us the correct address (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.