Evaluating the impact of Bitcoin on portfolio performance through comparative analysis of traditional portfolios and diversified portfolios with hybrid investment strategies

A topic of increasing scholarly and practical interest is the incorporation of digital currencies into conventional investment portfolios. Bitcoin is positioned as an alternative investment option due to its unique features as a decentralized digital asset, including limited supply, low correlation with traditional assets, and significant return potential. This study uses historical data from 2015 to 2025 to examine how Bitcoin affects portfolio performance and diversification. A diversified portfolio that includes a 5% allocation to Bitcoin is contrasted with a conventional mix of stocks, bonds, and gold. While correlation analysis shows how Bitcoin relates to conventional assets, regression analysis is used to estimate risk-adjusted returns. By reducing losses in traditional asset classes without significantly increasing overall risk, the results show that adding Bitcoin improves portfolio resilience, especially during times of economic instability like the COVID-19 pandemic. For institutional investors, wealth managers, and legislators looking to implement creative ways to improve portfolio performance in a financial environment that is changing quickly, this study provides insightful information.