Bitcoin outperforms stocks in the long run, says economist

   2022-05-13 11:05

The recent crashes in the stock and cryptocurrency markets have provided another opportunity to observe better returns opportunities of crypto versus stocks, according to several industry executives.

This week saw the crypto market one of its biggest sell-offs on record, with its total market cap dropping more than 30% from $1.8 trillion on May 4 to just $1.2 trillion on May 12. Bitcoin (BTC), the largest digital asset by market capitalization, tumbled below $27,000 for the first time since late 2020, losing 30% of its value over the same period.



But the market instability is not exclusive to crypto. The stock market has also experienced one of its worst moments since 2020, with the tech-focused Nasdaq Composite falling more than 12% over the period, dipping below 12,000 points.

Tech giants like Apple and Microsoft both saw their market caps drop about 13%, while Tesla’s market caps fell 23% from $986 billion to $754 billion.

Cryptocurrency markets are more volatile than stocks and thus come with higher risks, but they also offer greater opportunities, ANB Investments CEO Jaime Baeza told Cointelegraph.

“Over the long term and without going into too much detail, I believe crypto as a whole offers better risk-return opportunities,” Baeza said.

Huobi Group chief financial officer Lily Zhang made similar comments, stating that crypto’s volatility means there are “more opportunities to make substantial profits from cryptocurrency”.

“It is important to note that we are in the midst of another Fed rate hike cycle and that both cryptocurrencies and technology stocks could be subject to sudden capital outflows, making them prone to deep corrections,” Zhang noted.

According to Ryan Shea, a crypto economist at fintech startup Trakx.io, crypto has a higher beta for market sentiment than stock markets. When investors become more reluctant to take risks, the market experiences relatively larger price drops, but it also means relatively larger price gains as risk appetite improves, Shea said, adding:

“Our long-term view is that certain crypto assets — fixed or limited supply cryptocurrencies like Bitcoin — will experience superior price gains because they offer a better store of value compared to fiat money.”

According to Huobi’s CFO, the correlation between the crypto market and the US stock market has been strong since late 2020. Bitcoin’s correlation with the S&P 500 was 0.7 in January and has remained high since then, she added.

Related: Bitcoin’s Rocky Road to Becoming a Risky Asset: Analysts Investigate

“Given this correlation, it is difficult to hedge against the portfolio’s overall price volatility when assets are distributed across both stocks and crypto assets. However, investors can still smooth out volatility by managing their risky asset positions and adjusting both their asset allocation strategies and the variety of assets they invest in within these two asset classes,” said Zhang.

At the time of writing, the crypto markets are seeing a significant recovery, with Bitcoin rising about 9% in the past 24 hours and trading at $30,610, according to data from CoinGecko. The cryptocurrency is down 23% in the past 30 days.

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CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin29,091 0.62 % 2.97 % 0.61 %
Ethereum1,927.2 0.19 % 5.65 % 7.39 %
Tether1.002 0.13 % 0.12 % 0.60 %
USD Coin1.002 0.10 % 0.01 % 0.15 %
BNB295.91 0.22 % 2.27 % 10.00 %
XRP0.4019 0.43 % 6.38 % 3.56 %
Binance USD1.002 0.19 % 0.06 % 0.09 %
Cardano0.5105 0.78 % 9.20 % 1.13 %
Solana48.81 0.68 % 10.00 % 3.00 %
Dogecoin0.08317 0.21 % 6.71 % 1.28 %
Polkadot9.550 1.27 % 8.46 % 7.33 %
Wrapped Bitcoin29,101 0.85 % 2.97 % 1.03 %
Lido Staked Ether1,896.4 0.52 % 5.65 % 7.74 %
Avalanche27.86 0.75 % 16.74 % 9.85 %
--- --- --- ---
--- --- --- ---
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Litecoin66.64 0.45 % 7.94 % 0.29 %
LEO Token5.000 0.84 % 0.08 % 4.48 %