Several industry executives said the recent crash in the stock and cryptocurrency markets provided another opportunity to look at better returns for cryptocurrencies relative to stocks.
This week, the crypto market saw one of its biggest sell-off everThe total market capitalization linear decrease From $1.8 trillion on May 4 to $1.2 trillion on May 12, an increase of more than 30%. Bitcoin (bitcoin), the largest digital asset by market cap, fall It fell below $27,000 for the first time since the end of 2020, losing 30% of its value over the same period.
But market instability is not unique to cryptocurrencies.The stock market also had one of its worst times since 2020, with the tech-focused Nasdaq Composite decline Over 12% over the period, it fell below 12,000.
ANB Investments CEO Jaime Baeza told Cointelegraph that cryptocurrency markets are more volatile than stocks and therefore are associated with higher risks, but they also offer greater opportunities.
“In the long run, I believe cryptocurrencies as a whole offer better risk-reward opportunities without too much detail,” Baeza said.
Lily Zhang, chief financial officer of Huobi Group, made similar remarks, saying that the volatility of cryptocurrencies means “there are more opportunities to earn substantial gains through cryptocurrencies.”
“It is important to note that we are in the midst of a new Fed rate hike cycle, and both cryptocurrencies and tech stocks may experience sudden capital outflows, leaving them vulnerable to a deep correction,” Zhang noted.
According to Ryan Shea, a crypto economist at fintech startup Trakx.io, crypto has a higher beta to market sentiment than the stock market. Markets experience relatively large price declines when investors become more risk-averse, but it also means relatively large price gains when risk appetite improves, Shea said, adding:
“Our long-term view is that certain cryptoassets — fixed or limited-supply cryptocurrencies like Bitcoin — will gain higher prices because they provide a better store of value relative to fiat currencies.”
According to the CFO of Huobi, the correlation between the crypto market and the U.S. stock market has been strong since the end of 2020. She added that Bitcoin’s correlation with the S&P 500 hit as high as 0.7 in January and has remained high since.
“Given this correlation, it is difficult to hedge against overall portfolio price volatility when assets are allocated between equities and cryptoassets. However, investors can still control risky asset positions, adjust asset allocation strategies and invest in both asset class by asset class to smooth out volatility,” Zhang said.
At the time of writing, the crypto market is recovering significantly, with Bitcoin up around 9% in the past 24 hours, trading According to CoinGecko, the price is $30,610. The cryptocurrency is down 23% in the past 30 days.