Crypto markets are arguably one of the most volatile asset classes on the market currently. Despite their volatility, or perhaps because of it, investors continue to flock to the space looking to make money and invest in the promising future of digital transactions. With so many options available for how to gain exposure to cryptoassets, Bitwise makes a very convincing argument in a white paper on the potential that crypto equity investing can offer as a less volatile option still able to harness the gains that the space experiences.
Bitcoin is the most popular cryptocurrency on the market, as well as the most established, and yet it continues to experience giant fluctuations in price. In the past five years alone, while the cryptocurrency has risen over 80 times its value, it has also experienced 10 drawdowns greater than 20%. Also, as there are currently no bitcoin ETFs available in the U.S., investors are relegated to alternate means when seeking bitcoin exposure.
An Analysis on Correlation
For investors that are focused on seeking similar returns to crypoassets, crypto equities can often offer very similar correlations. Bitwise tracked the correlation between the 10 largest pure-play crypto equities that are publicly traded (MicroStrategy, Galaxy Digital Holdings, and Riot Blockchain to name a few) against its own Bitwise 10 Large Cap Crypto Index, which contains the 10 largest cryptoassets by free float market cap, with bitcoin making up over half the allocation of the index as of print.
Correlations between the most popular crypto equities and cryptoassets ranged, on average, between 0.50…