Cryptocurrencies are all correlated and members of "crypto twitter" often tweet about why their altcoin is the best and why everyone should buy it. As an introduction to how optimal portfolios acan be constructed from a basket of instruments, the Capital Asset Pricing Model is applied to the top cryptoassets.
Throughout this project the return on Bitcoin was used to approximate the returns on the market. It would be better to use the cryptocurrency market cap as the returns on the market however this data is not easily accessible (I think you have to pay for it through CoinMarketCap). In the future, changing the market returns to the market cap returns is an easy fix once the data is obtained. Below are the results when applying the CAPM.
- Obtain the market cap data from CoinMarketCap and apply the CAPM
- Obtain data on more cryptocurrencies and apply the CAPM
- Learn about how to construct portfolios based on the CAPM and begin testing different methods