Price Correlation Between Bitcoin and Other Cryptocurrencies

Bitcoin and Other Cryptocurrencies: Ethereum, Litecoin, Ripple.

Is there a connection between the price fluctuations of Bitcoin and other cryptocurrencies and cryptoassets? The answer to this question largely depends on what asset in question and what period of time is being analyzed. In some cases, it is relatively simple.

Cryptocurrencies have repeatedly moved in tandem during the fringe periods. Altcoins are an excellent example, the price of which has crept up after the SEC decision on March 10, although more alternative cryptocurrencies have significantly lost their positions in the month.

However, in other cases, the loss of bitcoin led to an increase in the price of altcoins. One of the key factors in this scenario is usually important incidents in a cryptocurrency investigation. For example, the rise and fall of the DAO, as the SEC in the Winklevoss brothers’ ETF registration, also won a hand to alternative cryptocurrencies.

If we talk about SEC, it should be mentioned:

  1. before the decision above the SEC, the price of bitcoin briefly climbed $ 1,300 per coin, breaking all previous records;

  2. after the SEC’s refusal, the price of cryptocurrency fell by about 30%, while altcoins rose sharply in value – many of them peaked in their entire existence.

Ethereum, for example, rose more than 200% in value in the week following the SEC’s announcement. Monero and Dash behaved similarly – the prices of these altcoins increased by more than 100% “thanks” to the SEC’s refusal.

But how do price changes of different cryptocurrencies correlate, if we consider not a specific event, but a long period of time?

Bitcoin and ETH: An Unstable Relationship

To understand the relationship of other cryptocurrency pairs, it is not enough to analyze quarterly data – you have to dive deeper into statistics.

For example, if we take the data for one quarter, then the BTC / ETH pair demonstrates rather modest correlations at the level of 0.57. However, if we consider a shorter period of time, for example, one week, then the picture becomes much more interesting – the correlation reaches 0.98 in several short periods of time. For example, for the week from August 1 to August 7, 2016, the BTC / ETH price relationship was above 0.9.

However, the correlation of these cryptocurrencies has not always been so high, showing extremely low numbers at times. For example, during the week in August and October 2015, when their ratio reached 0.04.

The cryptocurrency space is becoming more and more developed and some digital assets participating in the formation of this market may well show progress, for example, occupying narrow niches, which over time will lead to a change in trends in their pricing. If such cryptocurrencies manage to stand out and attract the attention of traders, then their relationship with bitcoin can weaken significantly over time.

Bitcoin and XRP: complete opposites

Another example of a cryptocurrency pair that showed a strong relationship is 1 btc to xmr, whose correlation was below 0.2 in every quarter of 2015 and 2016. Moreover, if we average all the available price data for these cryptocurrencies, it becomes clear that 0.2 is the average result of the BTC / XRP price correlation over the entire existence of these cryptocurrencies on exchanges.

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