Bitcoin outperforms equities over the long run, according to one economist
However, despite the greater dangers connected with investing in digital currency, industry leaders believe the potential rewards far outweigh those risks.
In light of the recent falls in both the stock and cryptocurrency markets, numerous industry leaders believe that crypto may provide investors with a higher return than equities.
On May 4, the crypto market’s entire market value was $1.8 trillion, but by May 12, it had fallen to $1.2 trillion, the lowest it has ever been. It was the first time since late 2020 that Bitcoin (BTC), the world’s most valuable digital commodity, has fallen below $27,000.
However, the market volatility is not limited to cryptocurrencies. At one time, the Nasdaq Composite, which focuses on technology, fell by more than 12 percent and fell below 12,000 points, its lowest point since 2020.
A total of 13% was lost by technology behemoths Apple and Microsoft, while Tesla’s market valuation plummeted by 23% from $986 billion to $754 billion.
ANB Investments CEO Jaime Baeza informed Cointelegraph that although cryptocurrency markets are more unpredictable than stock markets, they also offer more potential rewards.
When it comes to long-term investment, “I feel crypto as a whole offers superior risk-return potential,” Baeza added.
Lily Zhang, the chief financial officer of Huobi Group, made similar views, claiming that “additional possibilities to earn large gains with cryptocurrencies” emerge due to the market’s volatility.
In the middle of a fresh Fed rate rise cycle, “it is vital to remember that both cryptocurrencies and tech stocks may be prone to unexpected capital outflows, leaving them open to severe declines,” Zhang added.
As a crypto economist at fintech startup Trakx.io, Ryan Shea, claims that the market mood of crypto has a bigger beta than that of stock markets. Relatively higher price falls occur as investors become more hesitant to take risks, but this also implies that the market sees larger price gains when investors’ risk appetite improves.
Fixed or restricted supply crypto-assets like Bitcoin are expected to outperform fiat money in the long run because they provide a better store of value.
Cryptocurrency and the U.S. stock market have been closely linked since 2020, according to Huobi’s CFO. In January, the connection between Bitcoin and the S&P 500 was as high as 0.7, according to her, and it has stayed strong ever since.
The link between stocks and crypto assets makes it harder to protect against overall portfolio price volatility. By altering their asset allocation techniques and the diversity of assets they invest in within these two asset classes, investors may smooth out volatility,” Zhang said.
At the time of this writing, Bitcoin is trading at $30,610, an increase of roughly 9% over the last 24 hours, according to statistics from CoinGecko. The price of bitcoin has dropped by 23% in the last 30 days.