CRYPTOCURRENCY; IS AN ALTERNATIVE HIGH RISK, HIGH RETURN INVESTMENT?

Abstract

Cryptocurrency and blockchain are attractive and important topics in today’s world. This technology has emerged as one of the significant financial software platforms. This platform is relying on the secure data structure which is distributed and one of the key components of this system is mining. Mining with combining the recorded past transaction with blockchain (distributed ledger), permit customer for secure access, and robust consensus for each of the transaction. The important attribute of this system is that investors can trade in the blockchain without any intermediaries. Risk and return are the most important attribute of assets for investing. Cryptocurrency as an alternative investment is predicted to find a significant place in the portfolio and will decrease the investment in the other assets, in this study we want analysis that it can be a choice for future investments with high returns and low risk, as a viable investment. For this analysis needs to find the correlation between the cryptocurrency and after that analysis, the volatility and return of that in the portfolio with other assets such as real estate, property, treasury bills and others, analysis of this project have done through the python for getting the accurate answer of this analysis. because of the increase in cryptocurrency finding the price of cryptocurrency is easy from a website like a yahoo, Quandl, and another source. The result of this study shows that it is no difference in the correlation on the price of cryptocurrency and This study explain that almost all the cryptocurrency has correlation with each other’s. and behalf of the cryptocurrency, bitcoin was involved in the portfolio analysis. This analysis explore that cryptocurrency can be a suitable and good option in the diversification of portfolio, due to low correlations among the traditional asset and cryptocurrencies, and higher return of average daily return of most cryptocurrencies than other traditional investments. Also plots of the efficient frontier explain that investor have to be aware about the danger of cryptocurrency for having high return and high risk.