Bitcoin Earns More Than Stocks Over the Long Term, Economist Says

Bitcoin Earns More Than Stocks Over the Long Term, Economist Says

The recent declines in the equity and crypto markets have provided another opportunity to look at the best return opportunities for cryptocurrencies versus equities, according to several industry executives.

This week, The cryptocurrency market experienced one of its biggest sell-offs in its history, with the total market capitalization plummeting more than 30%, from $1.8 trillion on May 4 to $1.2 trillion on May 12. Bitcoin (BTC), the largest digital asset by market cap, fell below $27,000 for the first time since late 2020, losing 30% in value in the same period.

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

Tech giants like Apple and Microsoft saw their market capitalization decline by around 13%, while Tesla’s plunged 23%, from $986 billion to $754 billion.

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

“Long term and without going into too much detail, I think cryptocurrencies as a whole offer better risk-return opportunities,” Baeza said.

Huobi Group CFO Lily Zhang made similar comments, stating that the volatility of cryptocurrencies means there are “more opportunities to make substantial profits from cryptocurrency.”

“It is important to note that we are in the midst of a new cycle of Fed rate hikes and both cryptocurrencies and technology stocks may be subject to sudden capital outflows, leaving them susceptible to deep corrections,” Zhang noted.

According to Ryan Shea, a crypto economist at fintech startup, cryptocurrencies have a higher beta to market sentiment than stock markets. When investors become more risk-averse, the market experiences relatively larger price declines, but it also means relatively larger price gains when 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 as they offer a better store of value relative to fiat money.”

According to Huobi’s CFO, the correlation between the cryptocurrency market and the US stock market has been strong since the end of 2020. Bitcoin’s correlation with the S&P 500 reached as high as 0.7 in January, and has remained high ever since. , he added.

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“Given this correlation, it is difficult to hedge against overall portfolio price volatility when assets are allocated between stocks and crypto assets. However, investors can smooth volatility by controlling their positions in risky assets and adjusting both their strategies asset allocation as the variety of assets they invest in within these two asset classes”Zhang stated.

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

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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