Does Crypto Belong in Your Portfolio?

Ethereum – a cryptocurrency with a $400 billion market capitalization that’s second in the space only to Bitcoin* – fell more than 25% from its highs of a week prior at one point last Tuesday, September 7th. Nasdaq futures made new all-time highs the same day.

Correlations to Bitcoin

Technology Stocks Stocks, in General Gold US Dollars
+0.3 +0.2 -0.1 -0.2

Source: Yahoo! Finance (

Gain exposure to popular markets with standardized tick values and expiration dates on the Small Exchange. See why the smalls are making a big splash. >>”></a></span></span></p>
<p>It’s become clear that attempting to understand the crypto market by comparing it to popular existing indexes is as lazy as describing an athlete’s talent or musician’s sound in terms of another athlete or musician. It doesn’t get to the root.</p>
<h3>How > What</h3>
<p>Traders might want to start with movement, and appreciating <strong>how</strong> cryptocurrencies move might be more helpful than <strong>why</strong> they move. Asking why in trading can often be moot no matter the market given that it’s probably moved by the time you asked.</p>
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Source: Yahoo! Finance ( and STIX Index Data dxFeed Index Services (

This year alone, Bitcoin has both doubled and halved its value. Pit that kind of volatility against one of its most highly correlated stock sectors in technology and it isn’t even a fight. Not to mention that BTC is moving almost five times as much as STIX on a daily basis (see stats below).

Walk Before You Run

While this excitement has no doubt brought more participants to markets, which can be viewed as a very positive development for other financially active individuals, there is one potentially rough side to all of this:

Many entrants into markets are learning how to invest and trade using the most volatile asset class established in decades.

Of course, you have to cut your teeth somewhere but doing so with a product that has the potential to move thousands of dollars in a flash might not be the best way to kick off a long portfolio life. It’s seldom advisable to try anything new with its most chaotic version (examples include: swimming in deep end, hiking in Himalayas, option trading in naked short VIX calls).

Daily Move in % and $ (in 2021)

Micro Bitcoin
Small Crude Oil
Small Technology
Small US Dollar

Source: Yahoo! Finance ( and dxFeed Index Services (

It’s hard to put cryptocurrencies in a box. They move like nothing else currently in the market, and they don’t seem to be going away anytime soon. But until everyday traders get a smaller, more accessible product, they might want to put that box on the shelf.

*Ethereum data from as of 9/9/21

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