New York-based digital asset research firm has released an in-depth report on Ethereum, and one small part of the report involves the potential for Ethereum’s ether token to outperform bitcoin if a crypto market rally were to take place soon. This potential for ether to outperform bitcoin is mostly based on the increased volatility that ether and other altcoins have when compared to bitcoin’s price movements combined with the observation that all crypto assets tend to move in the same direction.
High Beta Risk-Reward
One page of the Delphi Digital report is called High Beta Risk-Reward. On this page, ether’s beta, which is a technical measurement related to volatility, relative to bitcoin is illustrated on multiple graphs to make the point that ether has been much more volatile than bitcoin over the past six months.
“ETH has also been significantly more volatile than BTC over the last six months. It’s 90-day beta relative to BTC is currently 1.5, substantially higher than its historical average (though price history is limited),” reads the report.
In general, crypto assets all tend to move in the same direction. According to LongHash, this phenomenon became even more obvious recently, as altcoins reached their highest level of sustained correlation to bitcoin in history. It’s rather difficult to find an altcoin that will not simply follow the movements of the bitcoin price in a more volatile manner.
Altcoins tend to drop further than bitcoin in bear markets and rise faster than bitcoin in bull markets. With this in mind, it would make sense to predict that ether would perform better than bitcoin if there is a rally in the crypto asset market, at least over the short term.
The report from Delphi Digial noted that ether has been experiencing mostly downside volatility against bitcoin for the past eighteen months, but that could be about to change.
“We are, however, beginning to see upside volatility pick up for ETH. Given the extremely high intra-market correlations we previously discussed, this is a trend we are monitoring closely as ETH may be poised to outperform if BTC rallies,” reads the report.
Anyone in Canada who does decide to jump back into the crypto asset market will want to make sure they are properly tracking their tax obligations, as the Canada Revenue Agency is now targeting bitcoin and other cryptocurrency users with audits.