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Correlation Between Bitcoin and Altcoin Prices

Is There a Correlation Between Bitcoin and Altcoin Prices

Bitcoin-price on February 13, 2020, peaked at $ 10,497. The currency has risen 42 percent since the beginning of the year. The rise has prompted cryptocurrency market analysts to say that it is a new uptrend and that some predict it will hit $ 27,000 by the summer. Other analysts believe the price will rise to $ 100,000 before the start of 2021.

 

Altcoin Price Prediction

Along with the rise in bitcoin’s price, the altcoins also increased in price. Last week, the Nem and Tezos exchange rates had a significant rise, and the idea was that there might be a correlation between bitcoin and Altcoins during periods of rising prices.

We will continue to examine “whether this correlation exists in the bearish and bullish market trends.”

 

Correlation of Altcoins with periods of rising bitcoin price trends

Bitcoin has seen a strong uptrend from April 1 to June 2019. During that time, its price rose more than 200 percent to $ 13,800 on June 26. By charting the correlation charts between Bitcoin and the top 30 Altcoins in the current market, it can be seen that 58% of encrypted currencies show a high correlation (over 60%) with Bitcoin in these periods.

0% correlation means that currencies are not correlated at all and a 100% correlation means currencies have a complete and positive correlation. Also, a 100% negative correlation means that currencies are inversely correlated.

The most prominent currencies with a correlation of 74% to 82% with it are Ethereum, Dash, BitcoinCash, Monero and EOS. On the other hand, HedgeTrade with 13.3 percent and USD coin with 4.3 percent have the lowest correlation among all currencies. Currencies such as Chainlink, Cosmos, Crypto.com and Huobi Token also had little correlation (between 20% and 30%) with bitcoin during this period.

 

Solidarity at the time of the Altcoins upward trend

There is a stronger correlation between bitcoin and other market-leading currencies in the uptrend periods, such as the period between December 2018 and March 2019. Only the US coin during the uptrend has a negative correlation (- 7.8%) with it. However, 77 percent of the market’s top currencies, more than 60 percent are associated with bitcoin, and Monero has the highest correlation with 92.3 percent. Besides, the correlation of Dash, EOS, Ethereum, Ripple, and Zcash with bitcoin is greater than 87%.

The correlation of BitcoinSV, Chainlink, Huobi Token, and Tezos with Bitcoin during this period is between 50% and 60%. Crypto.com with 25 percent and Tether with 19.1 percent have the lowest correlation with it in this period.

 

The year 2020 began with price fluctuations. What is going to happen

Bitcoin showed that an uptrend could dominate the market by the end of 2020. The currency has risen more than 42 percent since the beginning of the year. During this period, as in the past, high correlations were observed in major market Altcoins such as BitcoinCash, Ethereum, Litecoin, LEO, Tron, and Ripple. USD Coin and Cosmos have been less correlated since the last bullish trend until the beginning of 2020.

However, Chainlink, Crypto.com, HedgeTraid, Huobi Token and Dash since the latest uptrend have a reverse correlation with it . For this reason, it cannot be concluded that there is stable behavior between these currencies and bitcoin.

Stable currencies in the bitcoin and altcoins ascending scenarios show the least correlation with bitcoin. While larger market currencies such as Ethereum, Litecoin, Bitcoincash, LEO, Monero and Ripple are always highly correlated with it. However, the altcoins investigated in this study are more correlated with bitcoin during the period of the ascending trend.

It is expected that if a new uptrend begins for bitcoin, investors may consider these altcoins to accumulate because they have the potential to raise prices. Also, investors who only buy bitcoin may adopt a more conservative approach and hedge riskier investments by purchasing stable currencies or currencies less correlated during these periods.

Will Bitcoin reach $ 20,000 by the end of the year

After days of declining trends, bitcoin-prices were able to offset some of the losses with a nice incremental correction and a record 42% increase. Bitcoin surpassed the initial resistance level of $ 7,500 and reached above the $ 10,000 resistance level. Bitcoin was subsequently corrected to below $ 9500. The sentiments in the market were then corrected.

So it looks like the way to raise it to $ 20,000, is open and this price level can be imagined as a real level. This price is likely due to several reasons:

 

1) The growth of the bitcoin mastery index

With the recent rise in prices, bitcoin’s dominance index has reached 68%. However, it is still below its peak at 71 percent. Bitcoin certainly dominates many smaller altcoin projects and competes with only a handful of leading currencies that have sufficient liquidity. Bitcoin also has the potential to grow more than any other device and has introduced itself as a leader in currencies that can affect prices. In the long run, bitcoin’s dominance index is expected to reach 90%. The top cryptocurrency in the market has the most liquidity. Increasing the dominance index may increase the attraction of more traders.

 

2) Chinese traders Moving towards the feeling of losing the opportunity

Chinese traders have been leading the way in bitcoin-price discovery for the past few months and have been active in Huobi, Ok and other currency exchanges. But now their interest in bitcoin transactions may grow. The adoption of appropriate rules for cryptocurrencies and enforcement of blockchain laws is expected by January 2020, which means more growth. Besides, the expectation for the National Bank of China’s launch of the National Digital Asset intensifies this interest. In any case, China’s central bank has injected significant capital into its economy. Chinese traders are not just looking for bitcoin. Following the good news about the cryptocurrency market, several altcoins were highly favored by the Chinese. Including Neo, Tron, QTUM, Ontology, and OmiseGO. In the future, the profits from these altcoins may enter Bitcoin.

3) Launching Futures in Bakkt:

Bakkt launches its futures trading on December 9. These derivative instruments may generate more volume and add to the steady growth of exchange-traded contracts. Many whales can affect currency exchange and subsequently prices in the bakkt. Futures contracts create a market that can offset bitcoin-price volatility and avert high risk. The existence of futures trading contracts and their related options can make investment firms invest in bitcoin with less fear of volatility, thus attracting more investors to the market.

 

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About Sean Patterson

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