The performance of the crypto market is comparable to equities – Know more
The success of cryptocurrencies and the traditional stocks of various commodities were not related. Based on recent digital asset patterns and actions, it seems that everything is about to disappear into thin air.
Crypto growth
Cryptocurrency coins have experienced exponential growth over time, drawing the attention of the crypto industry. The bear market in cryptocurrencies at the moment, the economist noted, has added these parallels.
However, his study shows that two thirds are related to macro variables, such as inflation and a persistent economic crisis. The remaining third is related to the typical declining outlook attributed to cryptocurrencies. A shift in the risk profile of cryptocurrencies has been highlighted by Coinbase’s senior economist.
Cesare Fracassi’s research shows that the performance of cryptocurrencies is comparable to that of equities. As a result, the values of cryptocurrencies currently follow the same path as equities in industries such as technology, oil and gas and pharmaceuticals. On July 6, Fracassi published a blog post outlining his observations. He stressed that the global pandemic in 2020 increased the link between the values of stocks and digital assets.
In support of his theory, Fracassi pointed out that Bitcoin returns provided more convincing evidence of the similarities of the trend. He claims that there has been no connection between the average BTC return over the last ten years and the stock market development. However, the onset of the Covid pandemic led to a change in the pattern.
According to Fracassis’ view, today’s market swings attract cryptocurrencies. As a result, the price movements and risk profiles of cryptocurrencies are now integrated into the broader financial system.
Comparison of cryptocurrencies with commodity stocks
The economist also made similarities between cryptocurrencies and commodities while analyzing market size and volatility. He found connections between Ethereum, Moderna (MRNA), a pharmaceutical company, and Lucid (LCID), a manufacturer of electric vehicles. He connected Tesla (TSLA), the manufacturer of electric vehicles, with Bitcoin.
Fracassi cited Coinbase’s May report, citing the volatility pattern of BTC and Ether as evidence of his dissertation. The two most popular cryptocurrencies have a daily fluctuation between 4% and 5%, according to the monthly insight report. Similarities with raw materials such as natural gas and oil can be seen in such variations.
Further studies showed that the naturally occurring precious metals gold and silver showed a daily volatility range of 1% to 2%. These prices have a much lower risk profile than the digital gold, Bitcoin.
According to Fracassi’s theory, digital assets should be exposed to macroeconomic factors present in the financial system. He explained that since bitcoin risk profiles are linked to those of the overall system, such an action will affect the market.
