Bitcoin and Ethereum Exhibit Low Correlation with Market

Recent data indicates that Bitcoin and Ethereum have little correlation with traditional markets, suggesting independent shaping of cryptocurrencies.

Azcnews Bitcoin And Ethereum Exhibit Low Correlation With Market

Correlation between BTC and ETH

According to data from IntoTheBlock, the correlation between BTC and ETH with traditional markets and commodities has recently been close to zero. “Correlation” here refers to the correlation coefficient (r) from statistics, which is a measurement that tracks the degree of connection between two quantities over a given period of time.

When the value of this coefficient is greater than zero for any two assets, it indicates that there exists a positive correlation between their prices, implying that the assets are moving in the same direction. Conversely, a negative value of the coefficient indicates that although there is some correlation, it is a negative correlation, as one asset reacts to movements in the other by moving accordingly opposite direction.

For coefficients close to zero, no relationship is identified between the assets, suggesting independence between them. In statistics, variables are said to be independent in this situation.

The table below plots the 30-day correlation between the top two cryptocurrencies by market capitalization, Bitcoin and Ethereum, compared to several traditional assets. Bitcoin and Ethereum appear to have a low correlation with these assets recently. Of these, these two coins have the highest correlation with the S&P 500, with coefficients standing at 0.4 for BTC and 0.49 for ETH.

Related: Whale Profit-Taking on Ethereum Sends Market Tumbling

ETH is more highly correlated with the S&P 500

So this implies that ETH has a slightly higher correlation to the S&P 500 than BTC. As such, ETH also exhibits a more notable relationship with the other coins on the list than BTC, although there is still a lack of strong association with any of them.

The low correlation coefficient with traditional markets shows that cryptocurrencies have operated more independently in recent times. Overall, correlation can be an important factor when investors are looking to add an asset to their portfolio. Highly correlated assets can compensate for poor diversification, as they can track similar performance (positive coefficient) or counteract each other (negative coefficient).

Since Bitcoin and Ethereum do not have any solid connection to traditional markets and commodities, these two coins can be reasonable choices for traditional investors looking to expand their portfolios.

(2 votes)

4.5/5

(2 votes)
  1. Avatar of
    Anonymous

    Great job 👍

Comments are closed.

Latest

Pump.fun Acquires Kolscan Wallet Tracker Ahead Of $600 Million Ico

News | Editor Choice | Memecoin

Pump.fun Acquires Kolscan Wallet Tracker Ahead of $600 Million ICO

Pump.fun has unexpectedly acquired the Kolscan wallet tracking tool just ahead of its $600 million ICO, aiming to enhance its analytics capabilities and expand its social trading ecosystem on the blockchain.

Xrp Could Surge To $11, $20, Or Even $30 If Historical Pattern Repeats

News | Altcoin | Editor Choice

XRP Could Surge to $11, $20, or Even $30 If Historical Pattern Repeats

XRP is expected to enter a strong bullish cycle after successfully retesting a key EMA level, with potential price targets of $11, $20, or even $30 if historical trends repeat.

Invite Friends For Big Rewards On Mexc!

Airdrops | Editor Choice

Invite Friends for Big Rewards on MEXC!

Join the referral program at MEXC and invite your friends to trade cryptocurrencies to earn exciting rewards!

Robinhood Launches Ethereum And Solana Staking For U.s. Users

News | Editor Choice | Policy & Regulations

Robinhood Launches Ethereum and Solana Staking for U.S. Users

Robinhood has officially launched Ethereum and Solana staking for U.S. users, allowing participation starting from just $1 as it ramps up its ambitions in the crypto space.

Bnb Foundation Continues To Burn Bnb Worth Up To $1 Billion

Airdrops | Editor Choice

BNB Foundation Continues to Burn BNB Worth Up to $1 Billion

The BNB Foundation has announced its 32nd token burn, destroying 1,595,599.78 BNB, equivalent to approximately $1.024 billion. This reduces the total remaining supply to 139,289,513.94 BNB.