Are cryptocurrencies priced in the cross-section? A portfolio approach

Abstract

We use portfolio sorting to examine cryptocurrency returns in connection to other asset classes. Using the 110 cryptocurrencies with the highest market capitalization from September 2014 to June 2021, we consider 23 financial and uncertainty factors. We find that cryptocurrencies have a strong relationship with measures of uncertainty, equity markets, foreign exchange, and precious metals. Our results provide evidence that cryptocurrencies are related to other assets through portfolio sorting, complementing studies that have found that factors related to the cryptocurrency market itself can explain their prices.