Crypto Relationships: Caught in the Wake: The Correlation of Cryptocurrencies 2019 | message
Binance examines correlation of cryptocurrencies 2019
Ethereum has the highest correlation rate
Least influenced cosmos
If you are interested in the crypto market, you have probably noticed that the prices of cyber currencies often follow the same movements. If, for example, Bitcoin comes under pressure, the other altcoins usually also suffer. So there seems to be a correlation between the different digital currencies. What exactly it looks like was analyzed by the crypto exchange Binance in its annual report on the correlation of cyber currencies. The background is that investors who want to secure cryptocurrencies in their custody with their selection of digital coins naturally want to hedge against any losses and choose Internet currencies that do not necessarily always go in the same direction at the same time.
This is how the correlation is measured
“Correlation statistically measures the strength of a linear relationship between two relative movements of two variables and ranges from -1 to +1”, Binance defines the size to be determined. It is assumed that there is a positive correlation at a value of over +0.5, which means that both cryptocurrencies move in the same direction and therefore share the same risks. If the determined value is below -0.5, one speaks of a negative correlation: the two values move in opposite directions. With a value close to zero there is no correlation, i.e. no linear relationship between the two variables.
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Ethereum at the top of crypto correlations
As can be seen from the analysis of the 20 largest cryptocurrencies measured by their market capitalization, the average correlation spectrum in 2019 will vary between 0.31 and 0.69. All digital currencies therefore have a positive relationship to one another. It is interesting to see that Bitcoin is not the most correlated with the other cryptoassets, but that Ethereum is at the top. The connection between Cosmos and other cyber currencies is the weakest. In addition, Binance found that besides Ethereum, Bitcoin correlated most with Bitcoin Cash and Monero.
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further results
By analyzing the correlations of all quarters of 2019, Binance suspects that the relationship between the crypto values will become stronger if the overall market moves in the opposite direction. However, if the market moves up or sideways, cyber currencies correlate less strongly. According to the crypto exchange, however, further research is needed to support this assumption. Furthermore, the analysis found that “programmable” blockchain currencies such as Neo, Ether and EOS correlate more strongly than “proof-of-work” coins (Bitcoin, Monero etc.). Binance generally points out that the data obtained is only a rough representation of the correlations. It remains to be seen how the relationship will develop.
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