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’s chief economist.
The observation comes from a blog post from Coinbase chief economist Cesare Fracassi on July 6, noting that the “correlation between the stock and crypto-asset prices has risen significantly” since the 2020 pandemic.
“While 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,” stated Fracassi.
“In particular, crypto assets today share similar risk profiles to oil commodity prices and technology stocks.”
The economist referred back to his institute’s 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.
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)
— Cesare Fracassi (@CesareFracassi) July 5, 2022
Bitcoin, which is often likened to “digital gold,” 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.
The most appropriate stock comparison to Bitcoin in terms of volatility and market cap was the electric car manufacturer Tesla (TSLA) the economist said.
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.
Fracassi said this puts crypto assets in a very similar risk profile to traditional asset classes…
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