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The volatility of the bitcoin market has been used to argue against digital assets since it puts more risk on investors’ shoulders.
As a result, it must be avoided. However, according to reports, and most recent data, bitcoin and Ethereum, the two most popular cryptocurrencies, are less volatile and profitable than some stocks.
Proof of less volatility
Bitcoin and Ethereum, according to specialists at the analytical firm, were showing less volatility than many stocks, particularly in shares of crypto-related companies.
The Sharpe ratio is a statistic that helps investors evaluate risks and rewards. Analysts at IntoTheBlock developed an automated way to calculate it.
The portfolio’s prior performance is used to compute the ratio. A high ratio is thought to be a good predictor of risk/reward distribution.
The Sharpe ratio for Bitcoin continues at -0.02, whereas it is 0.04 for Ethereum, as shown in the graph. Stocks, on the other hand, perform poorly or similarly to digital assets, contrary to popular opinion.
Since the method can be used to calculate an asset’s return in relation to its volatility, most cryptocurrency-related companies are either matching or underperforming bitcoin and Ethereum, showing that cryptocurrency through crypto-related stocks is a good investment. Direct market exposure can be riskier than indirect market exposure.
While there has always been a belief in the high volatility of cryptocurrencies, this may no longer be the case, since the average volatility of assets like bitcoin and Ethereum is declining drastically in comparison to past years.
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Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
