In a recent study, VanEck Research analysed the impact of including Ethereum (ETH) and Bitcoin (BTC) in traditional 60/40 investment portfolios from September 2015 to April 2024.
The results show that the inclusion of up to 6 % of these cryptocurrencies in a portfolio enhances its risk-adjusted return or Sharpe ratio while incurring minimal incremental drawdown.
The analysis also showed that 70% BTC and 30% ETH formed an optimal risk-adjusted return for a pure crypto portfolio. Furthermore, VanEck has raised its 2030 ETH price target to $22,000, influenced by the anticipation of spot ether ETF approvals, scaling progress, and their analysis of on-chain data.
The analysis suggests that the Ethereum network keeps gaining market share from traditional financial institutions and Big Tech. This growth is driven by its strong appeal to entrepreneurs. If Ethereum maintains its dominant position among smart contract platforms, VanEck sees a credible path to $66 billion in free cash flow to token holders, supporting a $2.2 trillion asset, or $22,000 per coin, by 2030.
However, by incorporating the optimal crypto portfolio of 28.6% ETH and 71.4% BTC into a 60/40 portfolio, investors can enhance returns with varying risks. As the risk increased with each holding, it was discovered that the returns adjusted for risk followed a nearly straight line, confirming that higher exposure to cryptos resulted in better returns.
The results provided the allocation of 5% ETH and 1% BTC. Nonetheless, some of the risks that investors should consider in the stock include dependence on speculative information, the fact that regulation is still an issue with most cryptos, interest rate risks, competition risks, and geopolitical risks.
Also Read: Franklin, VanEck, Invesco Galaxy File for Spot Ethereum ETFs; Franklin Sets 0.19% Fee
