Risk Profile of Cryptocurrency Markets Similar to Oil and Tech: Coinbase

Although some are 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 the analyst’s analysis. Chief Economist of Coinbase.

The observation comes from a blog post by Coinbase Chief Economist Cesare Fracassi on July 6, noting that the “correlation between stock and crypto-asset prices has increased significantly” since the 2020 pandemic.

“While during the first decade of its existence Bitcoin returns were on average uncorrelated with stock market performance, the relationship has grown rapidly since the onset of the COVID pandemic,” Fracassi said.

In particular, cryptocurrency assets today share similar risk profiles to oil commodity prices and technology stocks.

The economist referred to his institute’s monthly news report in May, which revealed that Bitcoin and Ethereum have similar volatility to commodities such as natural gas and oil, fluctuating between 4% and 5%. % on a daily basis.

Bitcoin, which is often equated with “digital gold,” had a much riskier profile compared to its real-world precious metal counterparts such as gold and silver, which see daily volatility closer to 1% and 2%, depending on the research.

The most appropriate stock market comparison to Bitcoin in terms of volatility and market capitalization was electric car maker Tesla (TSLA), the economist said.

Ethereum, on the other hand, is more comparable to electric car maker Lucid (LCID) and pharmaceutical company Moderna (MRNA) based on market capitalization and volatility.


Fracassi said this puts cryptocurrency assets in a very similar risk profile to traditional asset classes such as tech stocks.

This suggests that the market expects crypto-assets to become increasingly intertwined with the rest of the financial system, and therefore exposed to the same macro-economic forces that move the global economy.

Fracassi added that about two-thirds of the recent decline in cryptocurrency prices is the result of macroeconomic factors, such as inflation and a looming recession. One-third of crypto’s decline can be attributed to a “only” cryptocurrency weakening outlook.

Crypto experts considered the macro-driven crypto crash a positive sign for the industry.

Erik Voorhees, Co-Founder of Coinapult and CEO and Founder of ShapeShift wrote on Twitter last week that the current crash was the least worrisome for him, as it was the first crypto crash that was clearly “the result of macro factors. outside of crypto”.

Qiao Wang, senior contributor to the DAO Alliance, made similar comments on his Twitter, explaining that previous cycles were caused by “endogenous” factors such as the fall of Mount Gox in 2014 and the bursting of the bubble. the initial coin offering (ICO) in 2018.

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