Risk profile of crypto markets similar to oil and tech: Coinbase


Despite 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 an analysis by Coinbase’s chief economist.

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


“While for the first decade of its existence, bitcoin returns were uncorrelated with the performance of the stock market on average, the relationship grew sharply since the start of the COVID pandemic,” Fracassi said.

“Notably, crypto assets today share a similar risk profile to oil commodity prices and technology stocks.”

The Economist referred to his institution’s Monthly Insights report in May, which found bitcoin and ethereum have similar volatility to commodities like natural gas and oil, fluctuating between 4% and 5% on a daily basis.

Bitcoin, which is often compared to “digital gold”, had a far higher risk profile than real-world precious metal counterparts such as gold and silver, which according to research see daily volatility closer to 1% and 2%. Huh.

The Economist said the most suitable stock against bitcoin in terms of volatility and market cap was electric car maker Tesla (TSLA).

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

Fracassi said it places crypto assets in a risk profile similar to traditional asset classes such as technology stocks.

“This suggests that the market expects crypto assets to become more and more intertwined with the rest of the financial system, and thus exposed to similar macro-economic forces moving the world economy.”

Fracassi said that about two-thirds of the recent decline in crypto prices is the result of macro factors – such as inflation and an impending recession. A third of the decline in crypto can be attributed to “only” a plain-old weak outlook for the cryptocurrency.

related: Crypto Industry Needs Crypto Capital Market Structure

Crypto pundits have viewed the fact that the crypto crash led by macro factors is a positive sign for the industry.

Eric Voorhees, co-founder and CEO of Coinpult and founder of ShapeShift, wrote Twitter Last week that current crash was the least worrisome for them, as it was the first crypto crash that was apparently the result of “macro factors outside crypto.”

Alliance DAO’s main contributor Qiao Wang created similar commented on his Twitter, explaining that previous cycles were due to “endogenous” factors, such as the fall of Mount Gox in 2014 and the initial coin offering (ICO) bubble burst in 2018.