Comparative Performance of Cryptocurrencies through the Aumann and Serrano Economic Index of Riskiness

Abstract

We present comparative performance of cryptocurrencies by the performance index based on the Aumann-Serrano –henceforth, AS– economic index of riskiness. We consider three cryptocurrencies: Bitcoin, Ethereum and Binance-coin, which have the largest market capitalizations among all cryptocurrencies. Ethereum is about twice as good as Binance-coin and fourteen times as good as Bitcoin when we evaluate them by the AS performance index. Therefore, Bitcoin is rated quite poorly –much riskier– compared to other cryptocurrencies although it is the most popular and has the largest market capitalization among all the cryptocurrencies. On the other hand, SPY is rated the best –least risky– and much better than the three cryptocurrencies by the AS performance index. The evaluation by the AS performance index contrasts sharply to that made by the Sharpe ratio, performance index contrasts sharply to that made by the Sharpe ratio, according to which the difference among the three cryptocurrencies and SPY is fairly small.

Keywords: Cryptocurrencies, Performance index, Aumann-Serrano index, Multi-period gambles

JEL Classification: G11, C22, C46