Market Commentary
Market Commentary: Progress
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April 26, 2022

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Bitcoin and digital assets show relative strength despite equity weakness as volatility trends show significant progress.

Key Takeaways:

  • Bitcoin declined alongside the third straight week of equity losses, as markets remain focused on the Fed.
  • Even with risk asset weakness, bitcoin and ether show relative strength. Bitcoin outperformed equities last week (BTC -1.9% vs S&P 500 -2.7%) and has outperformed the Nasdaq on a YTD basis (-14.7% vs. -17.9%). Ether outperformed the Nasdaq last week (-3.4% vs -3.8%) and has slightly underperformed YTD (-20.3%).
  • Bitcoin and ether’s volatility continues to improve – we compare against widely held stocks and point out that realized volatility has declined in recent years: institutional investors can now justify larger position sizes.


Much of the same occurred last week, with risk assets experiencing another week of volatility on continued concerns over inflation and the ultimate impact of the Federal Reserve’s process of normalization. The S&P 500 is now down three weeks in a row and the Nasdaq Composite has again entered bear market territory.

But even so, bitcoin and ether have shown relative strength. Last week, bitcoin declined just -1.9% versus the S&P 500’s loss of -2.7% and the Nasdaq Composite’s fall of -3.8%. Ether, which is more volatile than bitcoin, declined -3.4%, but still outpaced the Nasdaq.

All things considered, year-to-date performance is also strong: bitcoin is outperforming the Nasdaq (-14.7% vs -17.9%) and bonds, which are known as safe-haven assets, have even declined 9.5% on the year.

So while markets experience losses across both equities and fixed income, the decline in digital assets is understandable. As correlations are high, price action remains in lock step with traditional assets:

And while broader markets are likely to remain volatile, bitcoin and ether have outperformed off the lows seen earlier this year (tantrum table page 3) and continue to hold around the $40,000 and $3,000 levels. This, alongside attractive fundamentals, is just another signal that the two are likely to outperform broader equities when risk assets bounce to the upside.

The market is now pricing in a US policy rate of 2.7% by December, and market participants are calling for a 50bp and even a 75bp increment in the upcoming Fed meeting next week:

Of course, this is a rather aggressive tightening schedule, particularly when comparing to recent hike cycles. As a result, this sets up for a “not all that bad” rally should participants realize the potential for a soft landing. Any reduction in tightening would be bullish for risk assets, particularly crypto, which continues to bounce harder than traditional equities.

This then provides an attractive opportunity for long-term investors. With price action that is macro-specific rather than idiosyncratic, bitcoin and ether are off 41.7% and 38.7% from their 52-week highs, and these assets are certainly “on sale.”

We point out on page two that volatility is rapidly improving – which should provide comfort for investors with hesitations.


As bitcoin and ether continue to trade like risk assets, we often compare returns to broader traditional equity indices.

But when looking under the hood, digital asset volatility isn’t so bad when compared to some well-known, household stocks. A number of these names have declined more than BTC and ETH on both a year-to-date and 52-week high basis.

Often, volatility is reason for hesitation when investing in digital assets – but really, so are many holdings that are part of traditional portfolios (held outright or through ETFs). The stocks illustrated to the right comprise 8% of the S&P 500.  

This is one of many reasons we recommend swapping exposure from equities to digital assets. In doing so, portfolios exchange a risky asset for another risky asset – with correct position sizing, portfolio volatility is lightly impacted, but return asymmetry rises dramatically.

We continue to update our tantrum table on page 3 to illustrate bitcoin and ether versus popular indices, sectors, and ETFs to help investors feel more comfortable with volatility.


Bitcoin and ether’s 90D annualized volatility also continues to decline, compared to both its history and relative to equities and even gold. This is likely a result of greater awareness, institutional interest, and portfolio adoption as the assets become more mainstream.

The highest volatility seen in 2018 for bitcoin was nearly 130%, while just 91% in 2019 and 2020, just 81% in 2021, and now, 57% in 2022. In the same period, ether’s volatility has declined from around 103% to 70% annualized.

As volatility declines, institutional investors can justify larger position sizes when investing in digital assets: As of now, positions are relatively small – in the low single digits and up - this can certainly grow over the years as investors become more comfortable with price action, drawdowns, and expected volatility.

These are large steps in the right direction.

Click here for the full PDF. As always, please reach out with any questions or comments.

Stay tuned,

Joseph Orsini, CFA
Director of Research

Key Market Data

Investment advisory and management services are provided by Eaglebrook Advisors, Inc., a registered investment advisor. Information presented is for educational purposes only. Past performance is no indication of future results. Please see our Form ADV Disclosures and Privacy Policy in our website.
Price Volatility of Digital Assets – A principal risk in trading Digital Assets is the rapid fluctuation of market price. High price volatility undermines Digital Assets’ role as a medium of exchange as consumers or retailers are much less likely to accept them as a form of payment. The value of client portfolios relates in part to the value of the Digital Assets held in the client portfolio and fluctuations in the price of Digital Assets could adversely affect the value of a client’s portfolio. There is no guarantee that a client will be able to achieve a better than average market price for Digital Assets or will purchase Digital Assets at the most favorable price available. The price of Digital Assets achieved by a client may be affected generally by a wide variety of complex and difficult to predict factors such as Digital Asset supply and demand; rewards and transaction fees for the recording of transactions on the blockchain; availability and access to Digital Asset service providers (such as payment processors), exchanges, miners or other Digital Asset users and market participants; perceived or actual Digital Asset network or Digital Asset security vulnerability; inflation levels; fiscal policy; interest rates; and political, natural and economic events.
Digital Asset Service Providers – Several companies and financial institutions provide services related to the buying, selling, payment processing and storing of virtual currency (i.e., banks, accountants, exchanges, digital wallet providers, and payment processors). However, there is no assurance that the virtual currency market, or the service providers necessary to accommodate it, will continue to support Digital Assets, continue in existence or grow. Further, there is no assurance that the availability of and access to virtual currency service providers will not be negatively affected by government regulation or supply and demand of Digital Assets. Accordingly, companies or financial institutions that currently support virtual currency may not do so in the future.
Custody of Digital Assets – Under the Advisers Act, SEC registered investment advisers are required to hold securities with “qualified custodians,” among other requirements. Certain Digital Assets may be deemed to be securities. Currently, many of the companies providing Digital Assets custodial services fall outside of the SEC’s definition of “qualified custodian”, and many long-standing, prominent qualified custodians do not provide custodial services for Digital Assets or otherwise provide such services only with respect to a limited number of actively traded Digital Assets. Accordingly, clients may use non- qualified custodians to hold all or a portion of their Digital Assets.
Government Oversight of Digital Assets – The regulatory schemes—both foreign and domestic—possibly affecting Digital Assets or a Digital Asset network may not be fully developed and subject to change. It is possible that any jurisdiction may, in the near or distant future, adopt laws, regulations, policies or rules directly or indirectly affecting a Digital Asset network, generally, or restricting the right to acquire, own, hold, sell, convert, trade, or use Digital Assets, or to exchange Digital Assets for either fiat currency or other virtual currency. It is also possible that government authorities may take direct or indirect investigative or prosecutorial action related to, among other things, the use, ownership or transfer of Digital Assets, resulting in a change to its value or to the development of a Digital Asset.

About Eaglebrook Advisors
Eaglebrook is a tech-driven investment manager specializing in bitcoin and digital assets. The firm offers various Bitcoin and Digital Asset SMAs serving financial advisors, registered investment advisors (RIAs), family offices, and institutions. Eaglebrook is backed by wealth management executives and institutions.
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