Bitcoin
Bitcoin and Ethereum separate from trading markets, what does this mean
Data shows that Bitcoin and Ethereum have little correlation with traditional markets, implying that the cryptocurrency is forging its destiny.
Bitcoin and Ethereum have been the masters of their fates recently
According to data from the market intelligence platform Inside the blockthe correlation between BTC and ETH with traditional markets and commodities has been close to zero recently.
O “correlation” here refers to the correlation coefficient (r) of statistics, a metric that tracks how connected two quantities were during a given period.
When the value of this metric is greater than zero for any two assets, it means that there is some positive correlation between their prices, which implies that the assets move together. The closer this value is to 1, the closer the relationship will be.
On the other hand, the negative value of the indicator suggests that, although there is some correlation between the two, it is negative, as the price of one asset reacts to the movements of the other, moving opposite to it. In this case, the extreme where the correlation is strongest is -1.
A correlation coefficient equal to or close to zero suggests no relationship between the assets. In statistics, the variables are considered independent in this case.
Now here is a table that shows what the 30-day correlation looks like between the two largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, relative to some of the traditional assets:
The data for the correlation matrix of BTC and ETH | Source: IntoTheBlock on X
As can be seen above, Bitcoin and Ethereum appeared to have a low correlation with these assets over the last month. Of these, the coins are the most correlated with the S&P 500, with the coefficient situated at 0.4 for BTC and 0.49 for ETH.
Thus, this would mean that ETH is slightly more correlated with the S&P 500 than BTC. Thus, ETH also has a more prominent relationship with the others on the list compared to BTC, although it is still not strongly correlated with any of them.
The low correlation coefficient with traditional markets suggests that cryptocurrencies have been operating more or less independently over the past month.
Generally, correlation can be something to look at when an investor wants to add an asset to their portfolio. Assets that have a high correlation compensate for poor diversification options, as they would imitate similar performance (positive coefficient) or contradict each other (negative coefficient).
Since Bitcoin and Ethereum do not have any solid correlation with traditional markets and commodities, both currencies can be viable options for traditional investors to add to their portfolios.
BTC Price
Bitcoin retraced its previous recovery in recent days, returning to the $61,100 mark.
Looks like the price of the asset has been sliding down over the last few days | Source: BTCUSD on TradingView
Featured image by Pierre Borthiry – Peiobty on Unsplash.com, IntoTheBlock.com, chart by TradingView.com