Strategic portfolio allocations for financial resilience: a counter-factual analysis of Bitcoin and gold in US state Rainy Day Funds

I'm happy to announce that we have a new working paper from Satoshi Action Education! It is pretty light on math, so I'm not giving a full summary here - just click on the link in the citation below to go to SSRN and download the paper there.
Citation: Rudd MA, Peterson E, Porter D: Strategic portfolio allocations for financial resilience: a counterfactual analysis of Bitcoin and gold in US state Rainy Day Funds. 2025. SSRN preprint available at https://dx.doi.org/10.2139/ssrn.5104576
Abstract: Rainy Day Funds (RDFs) help U.S. states manage fiscal shortfalls and shocks but often rely on low-risk, low-yield investments that erode under inflation. In this paper, we test whether partial allocations to Bitcoin and gold bolster RDF performance from 2018 to 2024. Using historical prices, RDF flows, and inflation data, we compare asset mixes (0–10% each for Bitcoin and gold) against a ‘risk-free’ interest rate baseline. Modest Bitcoin stakes (3% or more) consistently hedge inflation, boosting real returns above the baseline. Gold aids stability but needs higher allocations for comparable effect. State outcomes hinge on timing of contributions and withdrawals relative to Bitcoin’s price cycles. Our results suggest that adding these investments can help to preserve purchasing power for state governments.
Highlights: The paper contains a large table with real (inflation-adjusted) RDF portfolio returns for all 50 states in the US if they would have allocated to gold and/or Bitcoin on a daily basis from 2018 to 2024. The paper contains details on data sources and how investments / divestments were calculated. The report does not show charts for every state - but this is one example, of New Mexico:

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