The former lead of Ark Invest's crypto department, Chris Burniske, believes Solana and Ethereum can be used as more than trading and investment instruments but also as risk indicators. Here's how.
Crypto risk spectrum
According to the analyst, the SOL/ETH trading pair can be used as a key indicator of the crypto risk spectrum or, simply put, a tool to evaluate the risk tolerance of cryptocurrency investors on the market. Considering that both Solana and Ethereum are historically far more volatile than Bitcoin, using them to determine if the current risk level on the market is beneficial.
$SOLETH has become a key indicator of crypto risk-spectrum appetite for me, alongside the OG of $ETHBTC.— Chris Burniske (@cburniske) January 24, 2023
However, Solana and Ethereum are not only assets that can be used as risk indicators. The cryptocurrency market as a whole is a reflection of risk tolerance among investors. Digital assets are extremely volatile and sometimes illiquid, which makes crypto investors extremely vulnerable to double-digit swings, especially if margin trading is in effect. Those who expose themselves to such instruments are considered risk tolerant from the standpoint of a traditional investor.
"Doesn't look like it wants to stop"
According to Burniske, it seems like ETH to SOL does not look like it will be retracing any time soon, suggesting that appetite for risk is going to move upward only, instead of going down. However, considering cryptocurrency' s market dependency from stocks and traditional markets in general, Solana or Ethereum should not be considered as market-moving assets or indicators.
In the last few weeks, the cryptocurrency market had an enormous and explosive rally that led to numerous breakthroughs and helped assets to reach important resistance levels that, if broken, will most likely lead to long-term reversals and the beginning of a prolonged new bull market.