• Bitcoin and Ether returns in 2022 per unit of risk were about the same as equities and significantly better than bonds.
• Stocks were nearly twice as risky in 2022 as 2021.
• According to CoinDesk research, liquidity has been identified as a partial cause of negative events in the cryptocurrency industry.
The cryptocurrency market has seen a rollercoaster of a ride in the past year, with Bitcoin being the largest cryptocurrency by market value, experiencing a 64% decline in value year-to-date. Despite this, research from CoinDesk has shown that the returns for Bitcoin and Ether in 2022 per unit of risk were about the same as equities and significantly better than bonds.
Andrew Baehr, CoinDesk Indices managing director, discussed this on CoinDeskTV, noting that this isn’t too different from the traditional stock markets, where many darlings from 18 months ago have lost 80-90% of their value.
When looking at the causes of this, Baehr stated that liquidity has to be the number one candidate. It has been suggested that deteriorating liquidity conditions could have partially contributed to the negative events in the cryptocurrency industry.
The data collected also showed that stocks were nearly twice as risky in 2022 as 2021, which could be attributed to the high inflation and the looming threat of recession.
Overall, CoinDesk’s research indicates that the cryptocurrency market is not too dissimilar to traditional markets, with both being affected by the same forces. Although the cryptocurrency market has experienced its fair share of ups and downs, the returns in 2022 per unit of risk seem to be on par with equities and significantly better than bonds.