Matrixport Research: BTC and Gold May Become the Preferred Asset Allocation for Institutions in 2025

The fifth BTC bull market is unfolding at an astonishing pace, with BTC now approaching the $100,000 mark, and it increasingly seems unlikely to peak at this level.

Gold occupies a key position in institutional portfolios, and this trend may accelerate in the coming years. The efforts of global central banks to reduce dependence on the dollar and diversify reserve assets may be a long-term endeavor that could last a decade or even longer. Although BTC has outperformed gold in recent years, both assets deserve a place in institutional portfolios, not only because of their uncorrelated returns but also due to their substantial return prospects in the macroeconomic outlook.

Today's Matrixport research will employ a quantitative approach to analyze institutional portfolio allocation while incorporating our views on asset allocation for 2025.

Due to the strengthening dollar, gold experienced a sell-off after the U.S. elections. However, this may present an excellent buying opportunity for gold investors, as the ongoing gold bull market could run parallel to the sustained momentum of the BTC bull market. Gold occupies a key position in institutional portfolios, and we expect this trend to accelerate in the coming years. The efforts of global central banks to reduce dependence on the dollar and diversify reserve assets may be a long-term endeavor that could last a decade or even longer.

So far, many have attempted to advocate for the inclusion of BTC in institutional multi-asset portfolios. These arguments often emphasize BTC's long-term robust performance, high risk-adjusted returns, and its uncorrelated nature with traditional asset benchmarks like the S&P 500. While the correlation of BTC with other assets may temporarily spike, it remains unpredictable and inconsistent.

Frequent rebalancing may further enhance returns, but the real value lies not in fine-tuning the rebalancing frequency but in making informed judgments about the return assumptions for each asset class and constructing a portfolio optimized for acceptable risk levels. The potential role of BTC in a portfolio depends on forward-looking expectations, not just past performance.

Investors need to optimize their portfolios by combining their views on future returns while managing risk. The Black-Litterman asset allocation model provides a sophisticated solution. This widely used framework combines the Capital Asset Pricing Model (CAPM) with investors' subjective views to create robust and realistic portfolio allocations.

This portfolio allocation is designed for large multi-asset portfolio managers, such as endowments, pensions, and sovereign wealth funds. Based on a Sharpe ratio of 1.6, the optimized portfolio is expected to yield a return of +15.6%.

The above views are derived from Matrix on Target. Contact us for the complete Matrix on Target report.

Disclaimer: Markets are risky, and investment requires caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided herein.