Top 5 Cryptocurrencies With Negative Correlations to Bitcoin
It has become almost a law of cryptocurrency markets that where bitcoin goes, altcoins follow.
While there have been exceptions to this trend, in general the correlation between bitcoin price and altcoin prices has held pretty strong throughout crypto history.
Why are Negative Correlations Important?
What’s interesting however, is that some altcoins have shown a consistently negative correlation with the bitcoin price. As any asset manager will tell you, negative correlations are exciting for investors.
In short, this is because negative correlations mean that investors can hedge their investments – if stock or crypto A goes down, B goes up – and so reduce the risk of their portfolios. Managers can also reduce the volatility of their portfolios by offsetting wild swings in some assets with other assets swinging in the opposite direction.
In this post, we take a look at the top 5 altcoins with negative correlations to bitcoin, a little about these cryptoassets, and what might be driving the trend.
1. Repocoin (REPO)
An unusual cryptocurrency, REPO is a token that rewards users for reporting vehicles that are tagged for repossession. Users can scan the license plate of any car, and if the car is liable for repossession – users are rewarded with REPO tokens if the vehicles are successfully recovered.
Garnering substantial media attention this year, the token has seen its price soar in the first quarter of 2019, generating a sizeable 63% negative correlation with bitcoin – year-to-date.
Digitex is an exchange token which derives its value from the performance of the exchange. In order to trade on the exchange, all traders must own DGTX to be able to trade commission free.
Because the exchange has seen its volumes grow, traders have been incentivized to buy DGTX to save on their trading fees. Like other exchange tokens such Binance Coin (BNB) – which is also not correlated with the bitcoin price – this growing interest in the exchange and its token has seen a negative correlation with the bitcoin price emerge.
3. Chainlink (LINK)
Aiming to connect smart contracts to real world data, LINK has performed well in the last year against the market trend with its price largely decoupled from the price of bitcoin. LINK’s year-to-date performance has been particularly strong compared to BTC, which has moved around the $4000 mark for most of 2019 so far.
4. Qubitica (QBIT)
Qubitica (QBIT) has increased by over 550% since it was launched last year, and a sudden, uninterrupted rise seen since February could explain the 30% negative correlation with the bitcoin price.
The cryptocurrency, according to its website, is a token used within a “community of blockchain and AI experts developing and investing in products of the future.” Looking at its trading patterns shows QBIT doesn’t seem to be trading in an organic way. Over 98% of its trading volume occurs on a little-known exchange called P2PB2B.
5. Bitcoin Gold (BTG)
A controversial hard fork of Bitcoin, Bitcoin Gold came under fire in the crypto community upon launch due to the forking party’s pre-mining of 1% of the supply. After its launch, it has been hit with 51% attacks, affecting its reputation.
The BTG price, in contrast to the others on this list, has had a negative correlation with the bitcoin price in the last year – as it has actually performed worse than BTC, dropping substantially in 2018 and 2019.