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International audience; Bitcoin is foremost amongst the emerging asset class known as cryptoassets. Two noteworthy characteristics of the returns of non-stablecoin cryptoassets are their high volatility, which brings with it a high level of risk, and their high intraclass correlation, which limits the benefits that can be had by diversifying across multiple cryptoassets. Yet cryptoassets exhibit no correlation with gold, a highly-liquid yet scarce asset which has proved to function as a safe haven during crises affecting traditional financial systems. As exemplified by Shannon's Demon, a lack of correlation between assets opens the door to principled risk control through so-called volatility harvesting involving periodic rebalancing. In this paper we propose an index which combines a basket of five cryp-toassets with an investment in gold in a way that aims to improve the risk profile of the resulting portfolio while preserving its independence from mainstream financial asset classes such as stocks, bonds and fiat currencies. We generalise the theory of Equal Risk Contribution to allow for weighting according to a desired level of contribution to volatility. We find a crypto-gold weighting based on Weighted Risk Contribution to be historically more effective in terms of Sharpe Ratio than several alternative asset allocation strategies including Shannon's Demon. Within the crypto-basket, whose constituents are selected and rebalanced monthly, we find an Equal Weighting scheme to be more effective in terms of the same metric than a market capitalisation weighting.

Purpose The purpose of this article is to provide some insights on the true nature of bitcoin and to study empirically its performance by using robust models, widely used in the academic literature. Previous studies assess performance with simple measures such as the Sharpe ratio. Such measures are insufficient because they do not take into account the bitcoin’s specificities, such as the possibilities to diversify risk. Design/methodology/approach The authors use quantitative methodologies to assess the performance of financial assets. Performance is defined as a risk-adjusted return. The authors use regression analysis and measure bitcoin’s performance as the constant term (α) of the projection of its returns on the returns of relevant factors of risk. Findings Bitcoin has low correlation with the market index and with factor-mimicking portfolios, which indicates opportunities to diversify risk. The performance of bitcoin (α) is positive and significant; this result is robust across period and world region specifications. Research limitations/implications The true nature of bitcoin is subject of debate and needs further research. Furthermore, other factors should be considered in analysing the bitcoin’s performance, such as those related to investors’ behaviour or political risk. Practical implications The empirical results obtained in this paper may be used by professional portfolio managers to diversify risk and to enhance their portfolio’s performance. Originality/value This paper adds to the literature by arguing that bitcoin has the nature of common stock, and therefore, its performance has to be assessed with models that are relevant for this type of securities. This paper is the first using performance models that adjust returns for relevant sources of risk.