5 stars based on
We look at the price correlation between Bitcoin and some traditional financial assets since and notice that the correlation with stocks in the last few months has reached record high levels, although it remains reasonably low in absolute terms. Due to the current correlation with stocks, Bitcoin may no longer offer downside protection in the event of a financial crisis, which some people ethereum and bitcoin price correlation expect.
We calculated the day rolling daily percentage price-change correlation between Bitcoin and a variety of traditional financial assets since As the chart below demonstrates, the correlation never really significantly escaped the Bitcoin ethereum and bitcoin price correlation correlation versus various traditional assets — ethereum and bitcoin price correlation price percentage change over a rolling day period. The R-squared between Bitcoin and other assets in the chart below is low, peaking at only 6.
In addition to this, we have not been able to prove the statistical significance of any daily price-change correlation between Bitcoin and any traditional asset using any robust methodology.
Scientifically speaking therefore, this article is speculative. This comparison may be somewhat spurious, since the stock market actually peaked at the end of January while Bitcoin peaked in December and earnings estimates reset to higher levels for the year ending December at the end of The price correlation between these coins and Bitcoin is obviously far higher than for traditional assets and it is statistically significant.
During the massive crypto-coin rally inthe price correlation to Bitcoin fell dramatically to the 0. After the price ethereum and bitcoin price correlation started inprice correlations have began to climb as the coins seem to move together again. Bitcoin price correlation between Ethereum and Litecoin — daily price percentage change over a rolling ethereum and bitcoin price correlation period. These traditional portfolio managers are then expected to allocate a weighting in their portfolios for crypto-coins, which may cause further price appreciation.
It appears that Bitcoin has been a reasonably non-correlated asset class throughout its history. During the recent rally to a valuation of hundreds of billions of dollars, however, correlations — and, crucially, correlations to risk-on assets — started to increase. Although there is some merit to the hypothesis of crypto-coins not correlating with traditional assets, if crypto-coin prices remain elevated or increase further and become a significant part of the global financial system, higher correlation with traditional assets may become inevitable.
Skip to content Abstract: Overview We calculated the day rolling daily percentage price-change correlation between Bitcoin and a variety of traditional financial assets since During the Bitcoin price rally, a moderately strong gold-price correlation returned again and gold and Bitcoin both had a strong year.
This indicates that the same underlying economic factors and political uncertainty the economic slowdown in China, Brexit, and the election of President Trump may have contributed to price movements of both assets during this period. During the recent Bitcoin price rally, things appeared somewhat different, with the price correlation between Bitcoin and stocks reaching record levels almost 0. Increased levels of liquidity available to investors and the amount of enthusiasm for new technology, may be driving price movements in both stocks and Bitcoin, to some extent.
In addition to this, the price correlation with gold recently became slightly negative. Litecoin — The correlation normally tends to be high, at around the 0. The price correlation dipped to around 0.
Ethereum — After Ethereum launched, the system was reasonably small and exposed to some unique risks, such as uncertainty surrounding its launch and the model of giving funds to the founding team. Therefore its price correlation with Bitcoin started low before eventually reaching levels similar to Litecoin.