Equity risk factors and crypto asset returns

Written by Peter Habermacher, CEO, Aaro Capital

With the rising price and public awareness of Bitcoin, investors have been drawn to cryptocurrencies markets by the promise of significant returns compared to the paltry yields often on offer from cash, bonds and other traditional asset classes. The hyperbolic growth in notional value - with a total capitalisation of around $1 trillion at the time of writing - has led investors and academics to more carefully examine the interplay between risks and returns and how they interact with more traditional investment strategies in what is still a relatively unexplored space. There is the widespread interest in cryptocurrencies as an alternative asset class, yet there is still little consensus on whether they effectively offer a different risk profile compared more traditional asset classes. In this respect, one question keeps looming in the mind of both market participants and commentators: are cryptocurrencies a novel asset class which is truly segmented, meaning driven by alternative econo…