| Abstract [eng] |
The main goal of this master's thesis is to determine the optimal investment portfolio of cryptocurrencies using the modern portfolio theory and to compare the results with the market average and the Bitcoin cryptocurrency. The work consists of three main parts: the analysis of literature, the research methodology and the research results, conclusion and recommendations. Literature analysis distinguishes the classifications of cryptocurrencies, evaluates the peculiarities of the cryptocurrency market and analyses the scientific research on the creation of cryptocurrency portfolios. Portfolio formation methods, their differences, advantages and limitations are compared, initial assumptions are formed. Based on the literature analysis, by using S&P Cryptocurrency Broad Digital Market Index, author determines the average return, volatility and Sharpe ratios of the cryptocurrency market. The author collects data on price changes of selected 20 cryptocurrencies in 2018-2023. Constructs a correlation matrix and calculates beta coefficients to justify the difficulty of diversification of cryptocurrency portfolios. Based on the mean-variance method and the Sharpe ratio maximization methodology, with the help of Excel “Analytics” and “Solver" plug-ins, the author creates optimal cryptocurrency portfolios and limited risk optimal portfolios, when the standard deviation is not higher than 2%. The study is repeated by dividing the analysed period into shorter periods representing different conditions of the cryptocurrency market based on fear and greed index. The conducted research reveals that optimal cryptocurrency portfolios are modelled from a small number of cryptocurrencies (1-4), which differ in different market periods, indicating that the same cryptocurrencies do not consistently outperform their competitors and high correlation prevents the creation of highly fragmented portfolios. Moreover, the research results show that optimal portfolio mostly consists of mid-cap cryptocurrencies, which generates the highest returns in the studied periods. The research also shows that in order to manage the portfolio risk, in the portfolio should be included Bitcoin cryptocurrency (about 50% of the portfolio size to reduce the portfolio risk to 2%), which has the lowest standard deviation in all analysed periods. The key concepts of the literature analysis and the findings of the conducted research are summarized in the conclusions and recommendations. The study's findings, according to the author, may provide helpful guidelines to investor how to create optimal cryptocurrency portfolio and how to manage cryptocurrency portfolio risk according to the investor's risk tolerance. |
