New Study Shows Top Altcoin Assets are Becoming Less Correlated with the Wider Market
As per an all new research piece released by the folks over at Hodlbot.io, individual crypto coins are becoming increasingly less correlated with the wider market at large. This stands especially true in 2019, a year when this trend has become more visible and obvious for everyone to see.
In this regard, many experts such as Vinny Lingham too have expressed similar opinions recently. To be a bit more specific, we can see that Lingham has often called for a “decoupling” of BTC from the rest of the market so as to help usher in a new wave of bullish sentiment for the premier altcoin.
A Technical Look at the Matter
As most of our readers might already know, the crypto sector from its very inception has exhibited signals wherein if one asset surges, most other currencies seem to follow suit (with the exceptions being low cap tokens that can be easily manipulated).
With this information in mind, we should point out that the research team at Hodlbot.io recently released a study based on the Pearson correlation coefficient — so as to assess the performance correlation of a particular cryptocurrency with the wider market over time.
In 2019, correlations between individual coins and the market dropped when compared to the previous year.
A one-tailed Welch's t-test, confirms that in 2019 #cryptocurrencies have a lower mean correlation.
You can find the full @hodl_bot blog here:https://t.co/qVvWlkKQYj pic.twitter.com/uyeEqGO8oi
— anthony xie (@XieToni) April 6, 2019
Other Key Data Worth Noting
From a technical perspective we can see that a correlation of +1 indicates that the market cap of an asset “will flow in the direction of the wider market”.
- In the same breath, a correlation of -1 means that a particular asset will always move in the opposite financial direction of the market.
- Lastly, a correlation coefficient of 0 suggests that there is absolutely no relationship between the variables of the two entities in question.
As per the above mentioned study:
- The correlation between the top-200 crypto assets (by total market capitalization) and the wider market has dropped quite substantially since 2018.
- As per many experts, reduced correlation between various crypto assets is a positive thing for the market.
In rounding off this piece, it should be mentioned that many Bitcoin advocates believe that the flagship asset will not be able to break free from its bearish tendencies unless it “moves out of sync with the rest of the market”.
On this subject, crypto savant and founder of the Civic (CVC) project, Vinny Lingham, released the following statement recently:
“How can we have a situation where the market price of one asset dictates the value ascribed to other unrelated assets, irrespective of whether or not anything changes in their own separate networks.”