Is High Volatility A Feature And Not A Bug? The Case Of Bitcoin

Conservative investors usually shy away from very volatile assets. But is this the right approach? By comparing Bitcoin with a hypothetical asset called “Boringcoin” we show that, all else being equal, high volatility assets are preferable as diversifiers due to better capital efficiency. Asset allocators should remember to think about their portfolio holistically and avoid looking at assets in isolation, particularly when they are very volatile.