It’s well-known for being a volatile market, but what risks and returns are actually involved with cryptocurrency? In this whitepaper from Yale University, the risk-return tradeoff of cryptocurrencies like Bitcoin, Ripple and Ethereum is assessed.  The whitepaper investigates how the risks and returns of cryptocurrencies are distinct from stocks, currencies and special metals.

So how can the risks and returns of cryptocurrencies be predicted? Liu and Tsyvinski outline that there is a strong time-series momentum effect and that proxies for investor attention strongly forecast cryptocurrency returns. Their whitepaper investigates the different exposures that impact cryptocurrencies of 354 industries in the US and 137 industries in China.

This whitepaper outlines what cryptocurrencies are, how to define them, and how they differ from traditional stocks and assets. The authors distinguish basic characteristics of cryptos, different risk exposures, and macroeconomic factors that need to be taken into consideration. Crypto volatility is explored in depth, with research into volumes and supply factors,

By accessing this index of cryptocurrency exposures, and the rewards and risks they could lead to, you will be in a better position to make decisions about investments and your overall portfolio. By understanding how the market could change, you’ll be more informed about overall risks – such as those to do with day trading, purchasing, and selling.