Coinbase Economist reveals an important factor that will drive cryptocurrencies in the future
A top economist at the Coinbase Institute reveals a factor that is likely to determine future prices of cryptocurrencies.
Cesare Fracassi, chief economist at Coinbase’s research arm, says changing attitudes to future expectations of the cryptocurrency market could drive up digital asset prices.
“The most important pillar of the market efficiency hypothesis is that every traded asset, from stocks to bonds, commodities and even crypto, incorporates in the price the market’s expectation of the future value of the asset …
According to the market efficiency view of crypto markets, therefore, only changes in the outlook for the crypto industry in relation to what is already expected will result in changes in prices. ”
Fracassi says that the three-digit return generated by cryptocurrencies in recent years indicates that the industry’s future prospects have improved.
“From June 2017 to June 2022, [the] The crypto market value rose 860%, which indicates that the outlook for cryptocurrencies today is much brighter than then:
The adoption of institutional and private investors and the laying of the foundation for Web 3.0 (ie decentralized financial applications, non-fungible tokens (NFT), decentralized identity solutions, tokenization of real assets and decentralized autonomous organizations) were part of the reason. for these exceptional returns. ”
Fracassi further says that the market sees that digital assets are becoming more correlated with traditional assets.
“Since 2020, the correlation between stock and cryptocurrency prices has risen significantly: while the Bitcoin return in the first decade of its existence was not correlated on average with the performance of the stock market, the ratio has increased rapidly since the COVID pandemic began.
This suggests that the market expects cryptocurrencies to become more and more intertwined with the rest of the financial system, and thus to be exposed to the same macroeconomic forces that are moving the world economy. “
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Featured image: Shutterstock / Pavel Chagochkin / Angela Ksen
