"Optimal Institutional Portfolio: 73% Bitcoin, 27% Ether, Suggests Korbit Research"

# Korbit Research Releases Updated Crypto Asset Allocation Strategy for Institutional Investors Korbit Research Center, associated with the South Korean cryptocurrency exchange Korbit, has unveiled its latest report, "Crypto Asset Allocation Strategy 2.0 for Institutional Investors.” Published on October 24, this updated version follows the initial report from February 2022 and includes revisions based on recent market dynamics and regulatory changes in the cryptocurrency arena. The report highlights Ethereum (ETH) as a crucial asset for portfolio diversification for institutional investors. Ethereum is described not merely as a store of value but as a versatile hybrid asset. Its functionalities encompass transaction fee-based consumption, staking rewards, collateral for decentralized finance (DeFi), and enhanced liquidity and security through restaking. The report positions Ethereum as a foundational element of the web3-based digital financial infrastructure. # Bitcoin and Ethereum Enhance Risk-Return Profiles of Traditional Portfolios The report analyzes the potential advantages of integrating Bitcoin (BTC) and Ethereum into traditional portfolios, such as the 60:40 stock-to-bond model. The findings suggest that incorporating up to 8% of these assets can substantially boost portfolio performance, with the Sharpe ratio increasing from 0.87 to 1.74. This indicates that BTC and ETH provide distinct risk premiums with low correlation to traditional assets, making them strategic investments rather than high-risk bets. Although adding these cryptocurrencies can slightly increase maximum drawdowns, the report advises that a quarterly rebalancing strategy can effectively manage risks while optimizing returns. “Integrating Ethereum into portfolios represents a strategic approach towards the future of digital financial infrastructure,” said Yoon-Young Choi, head of Korbit Research Center. “Including Bitcoin and Ethereum can enhance expected returns relative to risk, offering a forward-looking perspective for institutional portfolios.” # Optimal Allocation: 73% Bitcoin, 27% Ethereum The report further explores optimal allocation strategies within crypto portfolios, concluding that a mix of 73% Bitcoin and 27% Ethereum achieves the highest Sharpe ratio of 1.49, outperforming portfolios solely composed of Bitcoin (1.28) or Ethereum (0.92). Even a 50:50 split between BTC and ETH results in a Sharpe ratio of 1.43, underscoring the importance of diversification in the crypto space. Korbit Research emphasized Ethereum’s strategic significance in maintaining a smart contract-based ecosystem, complementing Bitcoin's market position. “Institutional investors should see Ethereum not just as a speculative asset but as a fundamental component of financial systems,” the report stressed. By providing data-driven insights, the report highlights the potential for cryptocurrency to transition from niche investments to vital elements of institutional portfolios, signaling a paradigm shift in asset allocation strategies.