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Market correlation: The way the cryptocurrencies move together

The world of cryptocurrencies has undergone a remarkable growth of popularity and adoption in the last decade. From Bitcoin to Ethereum and Litecoin to Monero, each cryptomane has its unique properties, use cases and prices. Despite their differences, however, many cryptocurrencies have created correlations and affected mutual prices and behavior. In this article, we immerse ourselves in the world of market correlation between cryptomas and examine the way they move together.

What is market correlation?

Market correlation refers to the relationship between prices of various assets or market investments. It measures the extent to which two or more assets tend to move together, either positive (for example, when an asset grows, another asset also tends to grow) or negative (when an asset decreases, another asset tends to decrease). Market correlation can be used to identify potential investment opportunities and risks by analyzing relationships between different assets.

How the cryptocurrencies move together

Cryptomas have created a comprehensive network of correlations between them. Here are some examples:

  • Bitcoin was considered historically a cryptocurrency “creditor” because of its dominance in the first days of blockchain technology, while Ethereum became a popular platform for decentralized applications (DAPP).

  • Bitcoin Cash (BCH) and Litecoin (LTC) : These two cryptocurrencies have formed a correlation similar to the correlation Bitcoin and Ethereum. They tend to move together, influenced by changes in the feeling of investors and interest rates on the market.

3 When one cryptomane is raised, the other tends to follow the costume and vice versa.

4 For example, Bitcoin money often correlates with other smaller cryptomas, such as Dogecoin (Doge) or Verge (XVG), while Altcoins based on Ethereum such as EOS and Binance Smart Chain (BSC) tend to move together.

Why is cryptocurrencies correlate?

There are several reasons why cryptocurrencies correlate:

  • On the contrary, when the offer is high and the demand is low, the prices tend to fall.

  • Volatility : The price of each cryptomane can be affected by global economic conditions, such as interest rates, inflation and commercial wars.

  • Sent of market

    : Sentimental investors, including fear and greed, can increase price movements in cryptocurrency. If investors are optimistic, they tend to buy more cryptocurrency, which leads to higher prices.

  • Regulatory environment : Changes in regulatory or frame policies can affect cryptocurrencies, which affect their correlations.

Consequences for investors

Understanding the market correlation between cryptomas is essential for investors who want to make the knowledge of their portfolios:

1.

  • Risk management : cryptocurrency prices are known as extremely volatile, so investors should have a solid risk management strategy.

  • Position size

    : Investors should adjust their position dimensions based on market correlation and probability of price changes.

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