One of the grievances that some have against the crypto industry is that it is still growing. In other words, it is not advanced enough to generate substantial revenue or benefit from regulation worthy of the name. A new study tends to prove the opposite.
Is the crypto market as mature as the stock market?
Pessimistic cryptos and analysts who believe that the crypto-asset market is not mature enough may be wrong. The results of a recent study tend to show the opposite.
The study is titled “Collective dynamics, diversification and optimal portfolio construction for cryptocurrencies”. It demonstrates that, in fact, the crypto industry is showing similar signs of maturity to stocks.
To carry out this work, the authors, Nick James of the Center for Data Science at the University of Melbourne, and Max Menzies of the Institute of Mathematical Sciences and their Applications in Beijing, compared the crypto market to that of stocks. Their goal: to determine the role that cryptos play in the diversification of portfolios.
The diversification of crypto portfolios within everyone’s reach
To achieve this, the analysts used the so-called collective dynamics method. This, in order to distinguish the mathematical properties that underlie the functioning of the two markets. And their conclusions are far from anecdotal. Because, if these two markets are different, that of cryptoassets shows the same signs of maturity as that of equities.
“Overall, we discovered nuanced similarities and differences between the crypto market and the equity market. These mathematical properties point to increased signs of maturity in collective dynamics and the diversification benefit of different portfolios,” explain the experts.
Furthermore, the study shows that in terms of portfolio diversification, the cryptocurrency industry is less complex. So, “complex portfolios made up of many cryptos can be sufficiently diversified with a relatively small portfolio made up of only 16 cryptocurrencies”.
Still, the crypto market is not quite at the same level of maturity as the stock market. The situation could absolutely change. Provided that the various commercial activities induced by cryptos are more transparent. This is not possible without the implementation of “crypto investing principles better understood and widely disseminated.
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