Bitcoin gains this year drew increasing investor interest and flows in the first half. A growing array of ETF strategies offering spot bitcoin exposure, income, and more create opportunity for a widening subset of investors with the risk tolerance for bitcoin investing. For those advisors and investors looking to add or increase bitcoin allocations this year, Coinshares believes there is value in balancing with T-bills.
Risk is a spectrum, with bitcoin and Treasury bills sitting at opposite ends on a number of levels. The nascence of bitcoin versus long-established U.S. government-backed bonds, the volatility of cryptocurrencies against the reliable performance of short-term Treasuries. These differences are what make the two assets a notable complement in portfolios, adding diversification while hedging embedded risks.
Using T-Bills to Balance Bitcoin Risk
At the other end of the risk spectrum are Treasuries, specifically Treasury bills. T-bills have long been viewed as one of the most reliable assets for investors, with dependable performance. To-date, the risk of the U.S. government defaulting on its debts has been almost negligible. Historically, Treasuries generally (but not always) offer low correlations to stocks, making them a valued portfolio diversifier.
Treasury bills, with their short duration (one year or less), also carry little interest rate risk. This makes them a popular safe haven choice when equities decline, when inflation threatens, or when the perception of risk rises in markets.
Adding Treasury bills alongside bitcoin investments in a portfolio ultimately comes down to the benefits of diversification. As investors have been painfully reminded in recent years, a high degree of portfolio correlations can lead to significant pain when assets decline in tandem. “Separate research by CoinShares based on daily data going back to 2020 shows that Bitcoin and T-bills move in the same direction 24.6% of the time,” the firm noted.
T-bills offer a hedge against bitcoin’s volatility and risk. Given reduced correlations and the potential dampening of portfolio volatility, crypto investors would do well to consider adding Treasury bills alongside their bitcoin allocations this year.
For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.
