Bloomberg recently published an article that revealed the findings of an extensive study on cryptocurrencies. According to the research, how cryptocurrencies have performed historically has no meaningful connection with the way they will perform in the future. The study saw cryptocurrency trading patterns and their volatility levels be carefully examined over the years.
One of the key findings Bloomberg reported was that Bitcoin and other cryptocurrencies are not suitable for paying salaries or buying everyday items.This, as some would expect, is because of their highly volatile nature.
Furthermore, cryptocurrencies were compared to traditional assets over a 16-month period. Interestingly, the study found that investments with comparable volatility to digital currencies were bonds offered by Bank Otkritie FC, which was “the recipient of Russia’s biggest-ever financial bailout.”
Unhealthy Crypto Market Distribution
Bloomberg criticized Bitcoin’s dominance by stating that its market capitalization and trading volume are excessively high compared to the rest of the cryptocurrency market. In comparison, the study noted, traditional stocks follow a more balanced and healthy distribution.
The write up further mentioned that “lesser-known” cryptocurrencies were similar to “early stage venture capital (VC) investing”, according to LDJ Capital founder David Drake. VC investing usually requires holding assets for a prolonged period of time.
Other notable findings from the study determined that there is a rather weak correlation between traditional investments and cryptocurrencies. However, if traditional banks and hedge funds begin investing in digital currencies, then we might see some meaningful performance correlations between traditional and cryptocurrency markets. Furthermore, it states that “for now cryptocurrencies mostly just move in line with each other.” This as when Bitcoin’s price goes up or down, most of the other cryptocurrencies tend to follow the same trends.
Crypto Regulations May Hit ICOs Hard
The study also notes that Initial coin offerings (ICOs) may no longer be as profitable for investors in the future, thanks to new cryptocurrency regulations set to be introduced by the US Securities and Exchange Commission (SEC). Additionally, Bloomberg warns investors about the unpredictability of the evolving crypto market and to “tread carefully.”
Notably, this study was published on the same day that the South Korean parliament announced it was drafting a bill that would legalize ICOs. This marks the first time that the nation’s parliament has responded to the government’s attempt to ban ICOs last year. Meanwhile, it was reported recently that Goldman Sachs is planning to launch a Bitcoin trading desk.
