ROLE OF BITCOIN IN ASSET CLASS PORTFOLIO- A STUDY

1. Presented By
K.shekhar
13031E0016
Under the esteemed Guidance of
Dr.D. RAGHUNATHA REDDY, M.Com, PhD
(Professor, SMS-JNTUH)

2.  INTRODUCTION
 INDUSTRY PROFILE
 RESEARCH METHODOLOGY
 NEED FOR THE STUDY
 OBJECTIVES
 LIMITATIONS
 RESULTS
 FINDINGS
 SUGGESTIONS
 CONCLUSION

3.  In this digital world people wants to make
everything as digital, not only things but also
payments. They want to make everything
online like online shopping, fund transfer etc..,
Now people started using electronic payment
system through crypto currency.
 Crypto currency is a medium of exchange
using cryptography to secure the transactions
and to control the creation of additional units
of the currency.

4.  Bitcoin is the world’s first digital currency
which is not controlled by any one person or
group of persons. Bitcoin has no legal authority
to control like central banks or federal banks.
Bitcoins are not printed like dollars or euros. It
is electronic payment system. This system is
peer-to-peer and transactions take place
between users directly, without an
intermediary.

5.  A software developer called Satoshi Nakamoto
proposed bitcoin in 2009, which was an
electronic payment system based on
mathematical proof. Bitcoin transaction is a
digitally signed message to take effect it must
be recorded in public ledger or public
transaction called the block chain. Bitcoins are
mined using computing power in distributed
networks.

6.  It’s decentralized
 It’s easy to set up
 It’s anonymous
 Low transaction fees
 Fast transaction

7.  The Angel Group is a member of the Bombay
Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading
Commodity Exchanges in the country: NCDEX
& MCX. Angel is also registered as a
Depository Participant with CDSL.

8. Services
 E - broking
 Insurance Services
 Mutual Funds
 NRI Services
 Commodities/
Currency Trading
Our Business
 Equity Trading
 Commodities
 Portfolio Management
Services
 Life Insurance
 IPO
 Depository Services
 Investment Advisory
 Angel Group
 Angel Broking Ltd.
 Angel Commodities Broking
Ltd.
 Angel Securities Ltd.

9.  Our Vision: To provide best value for money
to investors through innovative products,
trading/investments strategies, state of the art
technology and personalized service.
 Our Motto: To have complete harmony
between quality-in-process and continuous
improvement to deliver exceptional service
that will delight our Customers and Clients.

10.  Cross Correlogram: In the analysis of data,
a Correlogram is an image of correlation statistics.
This is used only when we have time series
analysis.
 Co-integration: Co-integration is a statistical
property of time series variables. Two or more
time series are co-integrated if they share a
common stochastic drift. If two time series x and y
are co-integrated, a liner combination of them
must be stationary.
 Y – Βx = u
 Where u is stationary.

11.  Granger causality test:
Granger causality test is a statistical hypothesis
test for determining whether one time series is
useful in forecasting another. A time series X is
said to Granger-cause Y if it can be shown,
usually through a series of t-tests and F-tests on
lagged values of X (and with lagged values of
Y also included), that those X values provide
statistically significant information about
future values of Y.

12.  Augmented Dickey-Fuller Test: Augmented
Dickey-Fuller Test is a test for a unit root in a
time series sample. It is an augmented version
of the Dickey-Filler test for a larger and more
complicated set of time series

13.  Study is to understand the behavior of the
bitcoin as asset class and to measure the
relationship between bitcoin and other asset
class portfolios. It also helps us in comparing
the bitcoin performance with the other
portfolios. It gives you the insight on the
behavior of Bitcoin with gold, reality, dollar,
sharia index and GBI to study the bitcoin
influence on global asset returns performance.

14.  To measure the relationship between bitcoin,
MSCI, global bond index, gold and reality
index.
 To measure the global currency impact on
global assets.
 To study the performance of global asset
returns along with sharia and bitcoin based on
the risk.
 To study the investor sentiment index impact
on global asset class moment.

15. 1. PIMCO has been considered as a global bond index
for the study
2. Global equity sentiment Index has been considered
as a Global portfolio investment Index.
3. Dollar Index has been considered as global currency
Index for the study
4. Bitcoin index data available from 2011 only which
got incepted in 2009.

16.  To measure the relationship between bitcoin,
MSCI, global bond index, gold and reality
 Correlation test indicates that bitcoin is having
slightly to strong negative correlation with
global bond index and gold but of the same
time it is having moderately positive
correlation with MSCI and reality index.

17.  To measure the global currency impact on global
assets.
 The granger causality test has been applied on
ADF stationery data with co-integration the null
hypothesis between dollar index to global assets
has been rejected and accepted the H1 alternative
hypothesis because the probability value is
observed greater than 0.05 with all the assets.
 Inference:
 The global currency dollar index is having the
influence on the global asset returns.

18.  To study the performance of global asset returns
along with the sharia and bitcoin based on risk.
 Modigliani risk adjusted method indicates that bond ,
gold and reality had given negative performance but
MSCI , sheriya and bitcoin had given positive
performance during the study period.
 Inference:
 Modern investments assets had given negative returns
except global equity index (MSCI). Conventional
Sharia investment returns and bitcoin performance is
observed in positive.

19.  To study the investor sentiment index impact on
global asset class movement.
 The vector auto regression(VAR) analysis result
indicate that MSCI, Gold and Bitcoinis expected to
move upside in near future provided the sentiment
index goes upside. Bond and reality indices are
expected to go down side with the sentiment index is
moving upside.

20.  The study observe that MSCI and reality indices are
moving with bitcoin but during the same study period
gold and bond are having negative co-relation
momentum.
 Global currency is causing gold price but MSCI, bond,
and reality were failed to influence by the dollar index.
 The study observed that performance returns of equity
index MSCI, sharia and bitcoin is superior but bond,
gold and reality performance is found to be inferior.
 The bitcoin, MSCI and gold where predicted upside
based on sentiment index in the future period.

21.  The study suggests that position in bitcoin is advised
when global equity indices and reality are moving
upside.
 Bitcoin is in nascent stage and has less history. Investor’s
fraternity is a need to encourage this modern crypto
currency which is having its own advantages.
 Global traders can consider bitcoin for exchanging of
currency so that they can protect their business from
currency fluctuations.
 Across the globe all the central banks are facing to protect
their currency from dollar ups and downs. If people are
started using bitcoin they will be less stress on every
country foreign reserves and which intern strengthen
country’s currency.

22.  I conclude the analysis of ROLE OF BITCOIN IN
ASSET CLASS PORTFOLIO- A STUDY the
analysis been emphasized the global asset class
variables (MSCI, GBI, reality, gold and bitcoin)
variables where considered and found that the
bitcoin performance are superior than the other
asset classes. The bitcoin behaviour is observed
along with the select global asset classes and
considered that global equity index and reality
index where behaving in a same manner. Hence
there is a further scope to do research in this area
by considering various global economic factors
influence on bitcoin returns.

23. Books
 Mastering bitcoin- Andreas Antonopoulos
 The bitcoin big bang- Brian Kelly
 Bitcoin; The future of money?- Dominic Frisby
 Digital Gold: The Untold Story of Bitcoin-
Nathaniel Popper
 Bitcoin, Gold and the Dollar: A GARCH Volatility
Analysis- Anne Haubo Dyhrberg
 Managing Global Currency Risk- Gary
Klopfenstein
 Portfolio Design: A Modern Approach to Asset
Allocation- Richard C. Marston

24.  Journals
 Bitcoin: A Peer-to-Peer Electronic Cash System - S Nakamoto -https:// bitcoin. org/
bitcoin.pdf
 Bitcoin: An Innovative Alternative Digital Currency - R Grinberg -
http://papers.ssrn.com/ sol3/ papers.cfm?abstract_id=1817857
 Bitcoin: Network Based Currency and Its Self-Organizing Emergency - Michael
Paetau - https://isaconf.confex.com/isaconf/wc2014/webprogram/Paper48144.html
 Information propagation in the Bitcoin network - C Decker – ieeexplore .ieee. org/
xpls / abs_all.jsp.
 Is Bitcoin Becoming More Stable Than Gold?
 Alternative Investments Evaluation of Bitcoins, Gold and LQ45 Index-
http://icehm.org/upload/9655ED0814058.pdf
 Bitcoin and the age of bespoke silicon-
http://dl.acm.org/citation.cfm?id=2555745
 An Analysis of Anonymity in the Bitcoin System- http://arxiv.org/abs/1107.4524
 Bitcoin Financial Regulation: Securities, Derivatives, Prediction Markets, and
Gambling- http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2423461

25.  Websites
 http://www.coindesk.com/price/ (Bitcoin Data)
 http://www.msci.com/products/indexes/performance.html (MSCI
Data)
 http://www.mcxindia.com/sitepages/HistoricalDataForVolume.aspx
(Gold Data)
 http://www.pimcoindex.com/Pages/indexdata.aspx?ticker=GLAD
(PIMCO Data)
 http://www.investing.com/currencies/ (EURO,GBP,SWISS FRANC,
DOLLAR ,YEN, CAD Data)
 http://www.exchangetradedgold.com/
 http://www.londonstockexchange.com/exchange/prices-and-
markets/ETPs/company-summary/GB00B15KXX56JEUSDETCS.html
 http://us.spindices.com/indices/equity/sp-500-shariah-index
 http://www.asiaindex.co.in/indices/equity/sp-bse-500-shariah
 http://in.investing.com/quotes/us-dollar-index