Is Crypto an alternative non-correlated Diversification Strategy?

Until a few years back, typical investment portfolios mostly comprised of stocks, bonds, ETFs and some allocation to alternatives, real estate being the most common alternative investment, though many high net worth individuals also allocated some capital to angel/venture investing, private equity and so on. Bitcoin and other crypto currencies were a somewhat fringe investment. That has changed a lot in the last few years - Coinbase and other centralized crypto exchanges really helped put crypto on the main stage of investments. Subsequently when Robinhood introduced crypto purchases, the lines between public equity and crypto started getting even more blurred. Coinbase has approximately 98 million users and Robinhood has about 31 million users. It is safe to say that some crypto allocation is part of the overall strategy for millions of Americans today (and I am one of them).

Is Crypto an alternative asset class? Alternative assets typically fall outside traditional investments stocks and bonds.?Typically they are both less accessible and less liquid than traditional asset classes. So when you look at whether crypto currencies are alternative asset classes, I would say that they are starting to look more and more like traditional investments - they are widely accessible and between centralized and decentralized exchanges, there seems to be adequate liquidity (for the most part, and at least for prominent crypto currencies like BTC and ETH).

Here is a chart showing the YTD comparison between SPX and BTC/USD:

The chart shows that SPX and BTC/USD exhibit similar movements (at least in the current market). However BTC is almost twice as volatile during down swings (SPX has lost 16% YTD, while BTC is down 37%).

In comparison, GLD is acting as a contra investment strategy and has behaved like a capital preservation strategy during this time.

Alternative or not, if you believe that web3/blockchain will lead technological innovative in the next decade, a small allocation to crypto strategies is not a bad idea (and no, this is not investment advice...you should be aware of all the risks and talk to your financial advisor before making any investment decisions).

In terms of That said, investments in a diversified basket is a safer strategy than trying to pick individual winners.