Binance, a major cryptocurrency exchange, has published a report investigating price correlations between major cryptocurrencies. The report comes specifically from the research arm of the exchange – Binance Research. Per the report, Bitcoin has become less correlated with other crypto assets in the 2nd quarter of 2019.
Whenever the price of Bitcoin rises or falls, the price of altcoins such as Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH) move in tandem. However, Binance’s 2019 Q2 Crypto-Correlations Review reveals that Bitcoin price is becoming less and less correlated with other digital coins. The report reads in part:
“Correlations declined between Bitcoin and altcoins, with a decrease in the average correlation of -0.11. The overall market capitalization rose by 139%, whereas altcoin aggregated market capitalization (including stablecoins) increased by ‘just’ 71% over the same period,” according to Binance Research.”
The report also showed a weakening relationship with PoW-based digital coins such as Ethereum Classic, Bitcoin Gold, Bitcoin Cash, and Dogecoin. They offered average correlations which were lower than before. In addition, privacy coins such as Monero indicated higher than average correlations with one another.
Related coins such as Ripple and Stellar Lumens also seem to show higher than average correlations with each other.
As the digital currency industry becomes more mature, the individual coins that make up this market may carve out their own individual niches, a development that could lead to their price determinants to change over time.
Should these cryptocurrencies successfully differentiate themselves in the eyes of investors, their correlations could deteriorate further. It is, therefore, advisable to select coins that you truly believe will pay out in the long term and concentrate your investment there, rather than diversifying your portfolio to dozens of different coins.
Bitcoin is still the king
The researchers also found out that Bitcoin – the top-ranking digital asset – has performed better than almost any cryptocurrency in 2019. Also, institutional investors aren’t looking toward any other crypto assets apart from Bitcoin.