We note that the cryptocurrency niche will not disappear, even though the industry is struggling. This will primarily be facilitated by market giants that have no plans to cease operations.

Examples here include the cryptocurrency exchanges Binance and FTX. The head of the former, Changpen Zhao, stated the day before that they have the largest reserves in the industry of any of its representatives that Binance is aware of. Accordingly, the trading platform is able to survive even the toughest of times.

Binance chief executive Changpen Zhao

At the same time, FTX chief Sam Bankman-Fried said that the company has “several billion dollars to support the crypto industry in case of need”. That is, if the niche collapse continues, the company is ready to provide financial assistance to those in need.

What’s going on with digital assets?

Here’s a quote from Fracassi that explains his point.

While Bitcoin’s returns were, on average, uncorrelated with stock market performance during its first decade of existence, this correlation quickly intensified after the COVID-19 pandemic began. Crypto-assets, in particular, now have a similar risk profile to oil prices and technology stocks.

Note, the correlation of the cryptocurrency industry with other asset classes does not mean it is forever. This is now the case because of the collapse in markets, which is caused by problems in the global economy and geopolitics. Obviously, there is less reason for crypto to grow in such an environment than there was a year ago, for example.

Bitcoin exchange rate

The Economist mentioned Coinbase research data for May. They note that the volatility of Bitcoin and Etherium at the moment is in line with that of natural gas and oil prices. The value of cryptocurrencies fluctuates by an average of 4 percent to 5 percent a day.

Volatility of the crypto market compared to traditional assets

That said, the risk of investing in Bitcoin compared to its traditional alternatives of gold and silver is significantly higher. Prices of precious metals fluctuate in the range from 1 to 2 percent a day, the expert said.

Volatility of the crypto market compared to different stocks

According to Cointelegraph’s sources, the market dynamics of the main cryptocurrency are very similar to Tesla stock price movements. Etherium, on the other hand, has a stronger correlation with the securities of carmaker Lucid and pharmaceutical company Moderna. Thus, crypto is closest to technology stocks, according to Fracassi.

This speaks to the market’s expectation that crypto-assets will become more and more integrated into the rest of the financial system. And that means they will be exposed to the same macroeconomic forces that drive the global economy.

The economist concluded that the crypto market is now, for the most part, driven by the macroeconomy. That is, the industry itself is not a closed system, as it is very responsive to all problems in the economy. In other words, Bitcoin is unlikely to go into a new bull run until the macroeconomic situation stabilises.

We believe that it is always possible to find similarities in the behaviour of different asset classes, but this hardly means anything for the future of the market. Be that as it may, the fundamental features of crypto-assets remain the same. Many of them still have limited maximum supply, while other coins like AVAX and ETH are deflationary. In addition, no government can influence what happens inside blockchains, nor can it increase the supply of a particular cryptocurrency at will. At the very least, these advantages are enough to make you choose crypto over something else.

Look for even more interesting and useful information in our millionaires’ cryptochat. There we will discuss other developments related to the world of decentralized assets.