Greener cryptocurrencies are less volatile as they react less to energy price movements

Davide Sandretto's doctoral dissertation in finance shows that traditional trading strategies used in equity markets often do not perform well in the crypto context. The research highlights mechanisms that can help investors navigate this uncertainty. One major finding relates to the environmental impact of different cryptocurrencies.

– We found that more environmentally friendly cryptocurrencies, such as those that transitioned from the Proof-of-Work to the Proof-of-Stake protocol, react less to energy shocks, says Sandretto.

The Proof-of-Work protocol used by Bitcoin among others, requires massive amounts of energy, making the asset's value highly sensitive to shocks in energy prices.

– Volatility is lower because the currencies that made this transition become less exposed to fluctuations in energy markets. It's a win-win for the environment and for the investor, who faces fewer risks from sudden energy price shocks, Sandretto notes.

Investors must understand the complex market

The dissertation also explores enhanced trading strategies that can help investors manage volatility by timing the market. This guidance is useful for asset managers and regulators looking to make more informed decisions in this diverse and complex asset class.

– What stood out to me was the heterogeneity of cryptocurrencies’ functions. Bitcoin represents only one category, while many other projects, such as those enabling smart contracts, operate in very different ways, Sandretto explains.

Given the high risks and complexity, Sandretto's main advice for those interested in investing is to be cautious and informed.

– I would never recommend putting all your savings into cryptocurrencies. A small allocation can support diversification and improve the risk–return profile of a portfolio, but only if you understand the risks and the project behind each coin, Sandretto advises.

Dissertation

Sandretto, Davide (2025) Essays on Financial Innovations: Expected Returns and Volatility in the Cryptocurrency Market. Acta Wasaensia 572. Doctoral dissertation. University of Vaasa.

Publication PDF

Public defence

The public examination of M.Sc. Davide Sandretto’s doctoral dissertation “Essays on Financial Innovations: Expected Returns and Volatility in the Cryptocurrency Market” will be held on Monday 1 December 2025 at 11.00 (UTC +2) in Turin, Italy (University of Turin, School of Management and Economics, Room "O. Volpatto"). The defence is organised in Cotutelle co-operation with the University of Turin.

It is possible to participate in the defence online.

Professor Jonathan Williams (University of Surrey), Professor Enzo Scannella (Universitá di Palermo) and Associate Professor Heikki Lehkonen (University of Jyväskylä) will act as opponents and Associate Professor Klaus Grobys as custos.

Further information

Davide Sandretto, tel. +393454220841, davide.sandretto@unito.it

Davide Sandretto was born in 1998 in Turin, Italy. He completed a Master’s degree in Corporate Finance and Financial Markets at the University of Turin in 2022. Sandretto is currently a joint PhD student in finance at the University of Turin and the University of Vaasa.