Cryptocurrencies
Bitcoin
| Real return | Long term 12% ? |
| Volatility | 60% |
| Correlation | Somewhat high but with idiosyncratic movement |
| Testfolio | BTCSIM |
| Inflation | Real(?) but interest rate sensitive |
Bitcoin is difficult to value because it has no fundamental value. This means that it trades on sentiment and more recently comparison with technology equities, e.g. Nasdaq-100 (QQQSIM). The main claim to fame of Bitcoin is that it is the first succesful cryptocurrency, which makes it almost synonymous with cryptocurrency as a whole. As of 2025-03-01 Bitcoin is 62% of the total cryptocurrency market capitalization.
Ethererum, Solana, …
| Real return | Long term 0% ? |
| Volatility | 60% |
| Correlation | Somewhat high but with idiosyncratic movement |
| Testfolio | - |
| Inflation | Real(?) but interest rate sensitive |
These are the “shovels” of the cryptocurrency world, allowing other “tokens”, decentralized finance apps, NFT’s and such to be easily created. Ethereum was the first, but doesn’t quite have the brand name that Bitcoin has, which makes it vulnerable to others replicating and improving its niche. These are valued based on cryptocurrency masket beta, active users, value locked, sentiment etc.
Tokens, shitcoins, NFTs
| Real return | Long term -20% ? |
| Volatility | 90% |
| Correlation | Low |
| Testfolio | - |
| Inflation | ? |
These are the “lottery tickets” of the cryptocurrenc world, which is already highly volatile itself. Valuation is very self-reflexive (fully diluted value of comparables, whatever valuation some VC invested at) and sentiment based. Value tends to decline after the hype dies down, often after listing on exchanges.