{"id":12053,"date":"2022-07-06T08:56:28","date_gmt":"2022-07-06T08:56:28","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/risk-profile-of-crypto-markets-similar-to-oil-and-tech-coinbase\/"},"modified":"2022-07-06T08:56:30","modified_gmt":"2022-07-06T08:56:30","slug":"risk-profile-of-crypto-markets-similar-to-oil-and-tech-coinbase","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/risk-profile-of-crypto-markets-similar-to-oil-and-tech-coinbase\/","title":{"rendered":"Risk profile of crypto markets similar to oil and tech: Coinbase"},"content":{"rendered":"
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Despite some touting crypto as a hedge against traditional markets, digital assets today share a similar risk profile to commodities such as oil and gas, and tech and pharmaceutical stocks, according to analysis from Coinbase\u2019s chief economist.\u00a0<\/p>\n

The observation comes from a blog post from Coinbase chief economist Cesare Fracassi on July 6, noting that the \u201ccorrelation between the stock and crypto-asset prices has risen significantly\u201d since the 2020 pandemic. <\/p>\n

\u201cWhile for the first decade of its existence, Bitcoin returns were on average uncorrelated with the performance of the stock market, the relationship increased quickly since the COVID pandemic started,\u201d stated Fracassi. <\/p>\n

\u201cIn particular, crypto assets today share similar risk profiles to oil commodity prices and technology stocks.\u201d<\/p><\/blockquote>\n

The economist referred back to his institute\u2019s monthly insights report in May, which found that Bitcoin and Ethereum have similar volatility to commodities such as natural gas and oil, fluctuating between 4% and 5% on a daily basis.<\/p>\n

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Since 2020, the correlation between crypto and the stock market has risen and with recent market movements we see how the market expects crypto assets to become more and more intertwined with the rest of the financial system in the future. (4\/5)<\/p>\n

\u2014 Cesare Fracassi (@CesareFracassi) July 5, 2022<\/a><\/p><\/blockquote>\n

Bitcoin, which is often likened to \u201cdigital gold,\u201d had a far riskier profile compared to its real-world precious metal counterparts such as gold and silver, which see daily volatility closer to 1% and 2%, according to the research. <\/p>\n

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The most appropriate stock comparison to Bitcoin in terms of volatility and market cap was the electric car manufacturer Tesla (TSLA) the economist said.\u00a0<\/p>\n

Ethereum, on the other hand, is more comparable to electric car manufacturer Lucid (LCID) and pharmaceutical company Moderna (MRNA) based on market cap and volatility.<\/p>\n

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Fracassi said this puts crypto assets in a very similar risk profile to traditional asset classes such as technology stocks.\u00a0<\/p>\n

\u201cThis suggests that the market expects crypto assets to become more and more intertwined with the rest of the financial system, and thus to be exposed to the same macro-economic forces that move the world economy.\u201d<\/p><\/blockquote>\n

Fracassi added that roughly two-thirds of the recent decline in crypto prices are the result of macro factors \u2014 such as inflation and a looming recession. One-third of the crypto decline can be attributed to a plain-old weakening outlook \u201csolely\u201d for cryptocurrencies.<\/p>\n

Related: <\/em><\/strong>The crypto industry needs a crypto capital market structure<\/em><\/strong><\/p>\n

Crypto pundits have viewed the fact that the crypto crash being led by macro factors is a positive sign for the industry. <\/p>\n

Erik Voorhees, co-founder of Coinapult and CEO and founder of ShapeShift wrote on Twitter<\/a> last week that the current crash was least worrisome to him, as it was the first crypto crash that was clearly \u201cthe result of macro factors outside of crypto.\u201d<\/p>\n

Alliance DAO core contributor Qiao Wang made similar<\/a> comments to his Twitter, explaining that previous cycles were caused by \u201cendogenous\u201d factors such as the fall of Mt. Gox in 2014 and the bursting of the Initial Coin Offering (ICO) bubble in 2018.<\/p>\n<\/div>\n