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Correlation of the TOP 10 cryptassets with one another

March 16, 2019


Correlation of the TOP 10 cryptassets with one another

The correlation coefficient is a statistical relationship between two coins over a period of time, which shows how identical the price movements of assets are. It is measured from -1 to 1, where -1 is the inverse identity, 0 there is no dependence, +1 is the complete identity. We decided to compare the correlation of the top 10 cryptassets with one another.

The following conclusions were reached:

1 year Crypto Asset Correlation Map infographics
  1. The market follows Bitcoin. Bitcoin holds a dominant position in the cryptocurrency market, occupying more than 50% by capitalization. This causes the movement of the price of Bitcoin to provoke similar movements in the remaining coins. This is why many traders and investors, in the preparation of technical analyses for altcoins, take into account the situation with Bitcoin. A sharp fall or rise often destroys many altcoin predictions.
  2. Stablecoin USDT practically does not correlate with the top 10 coins because its ratios are near 0. When the market falls, many traders save their assets, transferring them to the “safe port” (stablecoins), and with growth, there is usually a small drawdown at 0.5% -1% for stablecoins, such as USDT.
  3. The least correlated asset among the top 10 coins, with the exception of USDT, was the Binance Coin. This can be explained by the appointment of a coin. BNB  is a coin of the Binance cryptocurrency exchange, with which you can conduct internal operations on the platform and reduce transaction fees. Therefore, in most cases, BNB has a high demand, which increases during the fall of the market.
  4. The highest correlation can be observed among four coins: ETH, LTC, EOSio, and BCH . The correlation coefficient among them is more than 95%, which is considered to be a very high indicator, indicating that the movement of these coins almost completely repeats one another.
  5. The XLM coin has the highest correlation coefficient to Bitcoin: 95.88%.

The correlation coefficient is an indispensable tool for any investor and trader. It can be used to determine how the market indicators of assets correlate with each other and make full-fledged trading decisions. This ratio can be calculated in various time periods—one day, one week, one month, one year, and 10 years. It all depends on the goals that the trader or investor sets.
If the goal is to trade every day, then you should calculate the ratio for 1-7 days.
If you invest for one more year, then you should take a closer look at longer intervals: six, 12, or 24 months.
In our case, the correlation coefficient was calculated for the last year (from March 7, 2018, to March 7, 2019).

You will soon be able to calculate this correlation coefficient between any two assets for any period of time on our DataLight platform.

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