Crypto Diversification Offers Few Benefits, Suggests Fed Study

    According to Bloomberg News, if you are choosing between innumerable losers and winners amidst the thousands of digital tokens in the approximately $2 trillion cryptocurrency market, it may not be worth your while. 

    The cryptocurrency market is interconnected

    The prices across the entire cryptocurrency market tend to move in the same direction and they continue to be vulnerable to shocks since the market is interconnected, as per a finding in a study that was the Federal Reserve Bank of Chicago conducted

    The price of crypto has plunged this year, with the Federal Reserve increasing the rates and the Ukraine war taking a toll on investors’ sentiment. Bitcoin dropped by 20%, and Ether plunged by 10%. The downward trend was bucked by few tokens during the pandemic 2020 aside from Beijing’s crypto ban in the year 2021 caused doldrums in the crypto market. 

    Bloomberg News also reports that the study indicated that the minor price movement could be attributed to the individual features of the single digital currencies despite the nature of the interconnectedness. 

    Ether, which is second after Bitcoin among digital cryptocurrencies witnessed a greater uptick in the last two weeks in comparison to Bitcoin, which has remained range-bound more or less in the past few months. The price of Ether topped $3000 Tuesday for the first time in around 21 days. The movement is partial because Ethereum is undergoing a software network upgrade that aims at bringing down the energy consumption thereby putting efforts to improve the speed and scalability. 


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