One of the most significant innovations in the world of finance has been the creation and evolvement of cryptocurrencies. These digital means of exchange have been the focus of extensive news coverage, especially the Bitcoin, with a primary focus on the tremendous potential return and the high level of accompanying risk. In this chapter, we examine the risk-return pattern for an array of cryptocurrencies, contrasting the pattern with those of conventional currency and equity investments. We find the measures of cryptocurrency returns and risk to be a very high multiple of those of conventional investments, and the pattern is determined to be robust relative to the time frame. Consequently, cryptocurrencies are determined to provide an alternative to investors that involves tremendously high risk and return.
Part of the book: Blockchain and Cryptocurrencies