CryptoAssets Have 5x Higher Turnover rate than US Stock Market: Binance Report
According to the latest Binance research report, the correlation between the USD price of cryptos is constantly fluctuating with one of the most important factors being market irrationality along with the nascency of the market.
It has been further stated that data shows whenever correlations almost all altcoins excluding the stablecoins reach a specific positive upper bound (0.8 to 1.0), the trend of Bitcoin against USD tends to reverse or the very least halts the prior price action.
“The most recent “peak correlation period” lasted 90 days until March 14, the longest such period in crypto-history.”
During the period of February 2014 to March 2019, the composite altcoin correlation with Bitcoin also hit an all-time high on 13 Mar 2018. This peak coincided with Bitcoin’s fall from $6k to $3k.
Only 7% Of Cryptoassets Are Held By Institutional Investors
The extreme correlation of crypto assets relates to the highly retail-driven participation in the market. There are around 700 crypto funds today that represents just under $10 billion in assets as of January 2019.
If take Bitcoin as the sole holding asset, it would account for only 14 percent of the total market value of Bitcoin. When altcoins are included, the ‘institutional proportion’ accounts for less than 7 percent for the cryptoasset market.
“Crypto’s estimated 7% institutional participation rate represents only one-thirteenth of that for the U.S. stock market.”
If we compare it with the traditional equity markets, only the Chinese stock market’s structure is somewhat similar to it. Additionally, due to having an unusually high percentage of retail investors, both the Chinese stock market and the cryptoasset market have extremely high turnover rates.
The annual turnover rate of the crypto market has been at 2150% over 2018 which is 6 times of the US stock market and 3 times of the Chinese stock market which the report says shows crypto investors are easily moved by information and news.
Crypto Investors Tend To “HODL” As Prices Drop
The report further highlights that most of the cryptoasset investors prefer to HODL through a prolonged decline and quickly become active when prices recover to near previous highs.
It has been further found that after a significant bear period, the UTXO measure doesn’t pick up quickly, at least until the underlying price approaches its previous peak.
“Having emerged from a period of the highest internal correlations in crypto history, the data may support the notion that the cryptomarket has already bottomed out.”