Cryptocurrencies (also known as Crypto) are digital currencies designed to be a medium of exchange. There are different types of cryptocurrencies. Bitcoin (BTC) is probably the most well-known cryptocurrency, but several others have developed over time. Cryptocurrencies are notably different from fiat currencies like the United States dollar or the British pound because they are not issued by any central authority or central bank. This makes Crypto potentially unaffected by government intervention or manipulation.

Interest in BTC and cryptocurrencies as an investment asset class emerged sometime around late 2016. Investors began to get very interested in Crypto in 2020 as a result of slowing economies and government shutdowns. Many corporations had already begun to invest into cryptocurrency, and Bitcoin's performance during the pandemic reinforced their positions and outlooks. By the time the economy had recovered to pre-pandemic levels, investors were convinced that Bitcoin was a new asset class that could be used to realize returns under some of the most somber market conditions. 

In late 2021 and into mid-2022, cryptocurrency prices rose and fell similarly to equity prices. Cryptocurrency's price correlation with equity could be a coincidence or indicate that cryptocurrency prices are indeed following trends in equity prices. It is possible that because investors appear to be treating cryptocurrency like stocks, digital assets can respond to the market just like equities do. There is also the theory that investors, as a whole, are treating cryptocurrency the way they treat equities temporarily. Cryptocurrencies are still in their price discovery phase, where the market is determining the role they will play. 

Since it was first introduced, Bitcoin has had a choppy and volatile trading history. In July 2010, BTC began trading at $0.09. Eleven years later, it hit an all time high on November 10, 2021 at $68,789.00 before closing at $64,995.00. On December 7, 2022, BTC closed at $16, 841.11.

The massive volatility of cryptocurrency assets tends to scare off conservative investors. An investment in cryptocurrency does increase the overall volatility of a portfolio.  A 3% investment in Crypto resulted in a rise in overall volatility by 18%.  Yet, according to a historical review of the past five years, that same 3% investment in Crypto yielded a 42% return. 



It’s important to remember that cryptocurrency has only been around for 12 years. Therefore, its long-term return and behavior are relatively unknown compared to the  bonds and stocks that have been around for hundreds of years. Given the instability of Crypto, this may cause equity investments to boost. 

Tickers to consider:  CEI &  FRSX

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