Over the years crypto currencies have experienced an exponential rise in value, which has raised awareness about the space. The correlation between crypto performance, conventional stock of various commodities was not evident. It seems that all of this is disappearing due to the new activities and trends in digital assets.
Coinbase’s Chief Economist reported on a modification in crypto asset risk profil. According to analysisAccording to Cesare Fracassi crypto’s performance matches that of stocks commodities. It means that crypto assets are now following the same trends as stock commodities like tech stocks, pharmaceutical, oil, gas and so on.
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Fracassi shared his observations in a blog posting on July 6. The 2020 global pandemic was highlighted by Fracassi. It was the result of the increasing correlation between digital assets’ prices and stocks. Fracassi stated that Bitcoin returns were more convincing evidence of the similarity in this trend.
His argument is that the BTC average returns have not been correlated with stock market performance over the last decade. The trend has changed since the COVID epidemic.
In Fracassi’s analysis, the current market movements are taking along crypto assets. The cryptocurrency price trends, as well as risk profiles, are now interrelated with the financial flow.
Comparable to Commodity Stocks, Crypto Volatility reveals similarities
In support of his explanation, Fracassi pointed out Coinbase’s May report highlighting the volatility trend for BTC and Ether. In the monthly insight report the daily swings of the most popular cryptocurrencies are between 4% and 5.5%. These fluctuations are similar to commodity like oil and natural gas.
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Further analysis revealed that natural precious metals like gold and silver have a volatility range between 1% to 2 percent per day. This is a far better risk profile than Bitcoin or digital gold.
Fracassi’s argument stated that digital assets should receive exposure to macro-economic forces obtainable in the financial system. Fracassi argued that cryptocurrency would be moved by such actions, as they are closely linked to other systems in terms of risk profiles.
He also compared crypto tokens to commodities, analyzing market cap and volatility. He linked Ethereum and Lucid(LCID), an electric vehicle manufacturer, and Moderna and MRNA, a pharmaceutical business. He linked Bitcoin to Tesla (TSLA) the electric car maker.
The economist mentionedThis is likely due to the fact that crypto bear markets are currently in place. His analysis shows that two-thirds of the similarities are due to macroeconomic factors, such as inflation or a hovering economy. Another third is related to normal weakness attributed to cryptocurrency.
Analysts and experts agree that macro factors are a positive for the crypto market.
Featured Image from BBC. Chart by TradingView.com