Market correlation: How cryptocurrency moves together
The cryptocurrency world has experienced an extraordinary increase in popularity and acceptance over the last decade. From Bitcoin to Ethereum and Litecoin to Monero, each cryptocurrency has unique properties, in cases of use and price changes. Despite their differences, many cryptocurrencies formed correlations with each other, influencing each other on prices and behavior. In this article, we will look into the world correlation between the cryptocurrency world and investigate how they move together.
What is a market correlation?
Market correlation refers to the connection between the prices or investment of different assets in a particular market. It measures how much two or more assets tend to move together, positively (for example, when one property increases, the other property also tends to increase) or negatively (when one property decreases, the other property tends to decrease). Market correlation can be used to determine possible investment capabilities and risk to analyze different assets.
As cryptocurrency moves together
The cryptocurrencies formed a complex correlation network with each other. Here are some examples:
- Bitcoin was historically considered a “lender” cryptocurrency due to its dominance in the early days of blockchain technology, and Ethereum became a popular platform for decentralized apps (DAPPS).
- Bitcoin Cash (BCH) and Litecoin (LTC) : These two cryptocurrencies formed a correlation similar to Bitcoin and Ethereum. They tend to move together, to influence investor mood changes and market interest rates.
- Monero (XMR) and ZCASH (ZEC) : These two private cash alternatives formed a positive relationship with each other. When one cryptocurrency rises, the other tends to follow an example, and vice versa.
- Altcoins
: Wider in the cryptocurrency market also found a correlation between various Altcoins. For example, Bitcoin Cash is often correlated with other smaller cryptocurrencies such as Dogecoin (Doge) or Verge (XVG) while Altcoins, such as EOS and Binance Smart Chain (Ethereum “based on Ethereum,” Bsc) tend to move together with each other.
Why do cryptocurrencies correlate?
There are several reasons why cryptocurrencies correlate:
- And vice versa, when the supply is high and the demand is low, prices tend to decline.
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- Market mood : Investors’ moods, including fear and greed, can lead to changes in cryptocurrency prices. When investors are optimistic, they tend to buy more cryptocurrencies and prices may be higher.
- Regulatory Environment : Changes in regulatory policies or systems can affect cryptocurrency markets, influencing their correlations.
Impact investors
Understanding a market correlation between cryptocurrencies is necessary for investors who want to make reasonable decisions on their portfolios:
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