A top economist at the Coinbase Institute is revealing one factor that will likely determine the future prices of crypto assets.
Cesare Fracassi, the chief economist of Coinbase’s research arm, says shifting attitudes toward future crypto market expectations could drive up the prices of digital assets.
“The most important pillar of the market efficiency hypothesis is that any traded asset, from stocks to bonds, commodities, and even crypto, incorporates into its price the market’s expectation about the future value of the asset…
Thus, 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.”
Fracassi says the three-digit returns crypto assets have generated over the past few years indicate the industry’s future outlook has improved.
“From June 2017 to June 2022, [the] crypto market cap rose 860%, indicating that the outlook about cryptocurrencies today is much brighter than it was back then:
The adoption by institutional and retail investors and the laying of the foundations of Web 3.0 (i.e., decentralized finance applications, non-fungible tokens (NFTs), decentralized identity solutions, tokenization of real assets, and decentralized autonomous organizations) were part of the reason for these exceptional returns.”
Fracassi further says the market sees digital assets becoming more correlated with traditional assets.
“Since 2020, the correlation between the stock and crypto asset prices has risen significantly: while for the first decade of its existence, Bitcoin returns were on average uncorrelated with the performance of the stock market, the relationship increased quickly since the COVID pandemic started.
This suggests that 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 macroeconomic forces that move the world economy.”
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