  This paper aims to analyze the effect of Bitcoin on portfolio optimization
using mean-variance, conditional value-at-risk (CVaR), and Markov regime
switching approaches. I assessed each approach and developed the next based on
the prior approach's weaknesses until I ended with a high level of confidence
in the final approach. Though the results of mean-variance and CVaR frameworks
indicate that Bitcoin improves the diversification of a well-diversified
international portfolio, they assume that assets' returns are developed
linearly and normally distributed. However, the Bitcoin return does not have
both of these characteristics. Due to this, I developed a Markov regime
switching approach to analyze the effect of Bitcoin on an international
portfolio performance. The results show that there are two regimes based on the
assets' returns: 1- bear state, where returns have low means and high
volatility, 2- bull state, where returns have high means and low volatility.
