Crypto market risk profile similar to oil prices and technology stocks, Coinbase says

Crypto risk profiles are like those in oil prices and tech stocks, according to crypto exchange Coinbase.

“The market expects crypto assets to become more and more intertwined with the rest of the financial system, and thus to be exposed to the same macro-economic forces that move the world economy,” Coinbase Institute Chief Economist Cesare Fracassi said on Tuesday. 

“Crypto assets today share similar risk profiles to oil commodity prices and technology stocks.” 

He said two-thirds of the recent fall in crypto prices could be due to macro factors and one-third to a weakening crypto outlook. Crypto and tech stocks became heavily discounted and dropped sharply as the Federal Reserve and other central banks hiked interest rates.

The biggest crypto exchange in the US said the correlation between stock and crypto prices has increased significantly since the Covid pandemic in 2020. 

“According to the market-efficiency view of crypto markets, only changes in the outlook of the crypto industry relative to what is already expected will bring changes to prices,” Coinbase said.

He said crypto markets saw significant returns over the past five years due partly to institutional and retail investors adoption, and the laying of the foundations of web3.

The crypto market is experiencing a sharp crash with prices of major cryptocurrencies plunging as rising inflation, exacerbated by the Russia-Ukraine war, and interest rate increases to tame inflation, have seen investors flee risky assets like crypto. Tech stocks have also fallen for similar reasons.