Why Ethereum could be the key to a more balanced portfolio
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If you’re managing a portfolio in today’s market and not paying attention to Ethereum, you might be missing out. That’s according to Wall Street’s Fidelity Investments. Sure, Bitcoin takes the spotlight, but Ether has been steadily carving its place, especially if we’re talking performance, volatility, and return metrics. Quantitative metrics play a huge role in assessing any asset’s performance and its fit in a portfolio. The key ones to focus on for Ether include Beta, CAGR, Volatility, Sharpe ratio, Sortino ratio, and Correlations. These are gonna help us dissect how Ether stacks up against Bitcoin, and the results are pretty clear. Better than Bitcoin? When we compared Ether’s performance in the last four-year cycle (2020-2024) to Bitcoin’s earlier cycle (2016-2020), the former had the upper hand in many areas, showing that its return was stronger than the risk. For those new to these metrics, the Sharpe and Sortino ratios measure risk-adjusted returns. The higher the number, the better the asset compensates you for its volatility. Interestingly, the analysis doesn’t even include the staking yield you could have gotten, which sits around 3-5%. Ethereum’s main benefits come from price appreciation, not just the staking rewards. Bitcoin did outperform Ether back in the 2016 cycle by 8% in CAGR. But the gap between the two’s beta (a measure of volatility compared to the broader market) in recent years is shrinking. Ether has matured. The volatility story: Declining over time Volatility scares people off, but it’s not the monster it used to be. Over time, both assets have shown decreased volatility. Sure, there are dramatic swings, but those have been steadily declining. Fidelity’s Zack Wainwright pointed out that Bitcoin’s volatility is on par with some of the most traded stocks. ETH is right behind. Looking at rolling three-year returns for both Ether and…
Filed under: News - @ September 14, 2024 7:06 pm