The success of cryptocurrencies and the traditional equities of various commodities did not correlate However, based on recent digital asset patterns and actions, everything seems to be disappearing into thin air.
Cryptocurrency coins have experienced exponential growth over time, drawing attention to the crypto industry. The bear market in cryptocurrencies at the moment, the economist noted, has added to these parallels.
However, his study shows that two-thirds are related to macro variables, such as inflation and a persisting economic crisis. The remaining third is related to the typical decreasing outlook that is attributed to cryptocurrencies. A shift in the risk profile of crypto assets has been highlighted by Coinbase’s senior economist.
The research by Cesare Fracassi shows that the performance of cryptocurrencies is comparable to that of stock commodities. As a result, the values of crypto assets are currently following the same trajectory as equities in industries like tech, oil and gas, and pharmaceuticals. On July 6, Fracassi published a blog entry outlining his observations. He emphasized that the worldwide pandemic of 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 persuasive evidence of the trend’s similarities. He contends that there has been no association between the average BTC returns over the last ten years and stock market performance. However, the COVID pandemic’s beginning caused the pattern to change.
According to Fracassi’s view, the present market sways are dragging crypto assets along. As a result, the price movements and risk profiles of cryptocurrencies are now integrated into the wider financial system.
Comparing Cryptocurrency to 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 maker of electric vehicles. He connected Tesla (TSLA), the producer of electric vehicles, with Bitcoin.
Fracassi cited Coinbase’s May report noting the volatility pattern for BTC and Ether as evidence for his thesis. The two most popular cryptocurrencies have a daily fluctuation between 4% and 5%, according to the monthly insight report. Similarities to commodities like natural gas and oil may be seen in such variations.
Further investigation revealed that the naturally occurring precious metals gold and silver displayed a daily volatility range of 1% to 2%. These prices have a far lower risk profile than the digital gold, Bitcoin.
According to Fracassi’s theory, digital assets ought to be exposed to macroeconomic factors present in the financial system. He reasoned that since bitcoin risk profiles are tied to those of the overall system, such action would influence the market.
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