Crypto Has Lost the Correlation with the Rest of the Financial Market. And That Might not be a Good Thing
Bitcoin, Ethereum are exhibiting low and often negative correlation with equities, commodities and market indices.
What assets classes is Bitcoin correlated to in the current market conditions? That question pops up all the time and, even without thinking, our mind gravitates towards answers like tech stocks, of course crypto-related equities like Coinbase, small cap stocks? Think again!
Correlation is a horrendous and often misleading statistical metric we can’t stop using to evaluate relationships between financial vehicles. In the case of crypto, quite often we use correlation metrics to evaluate the behavior of large cap assets like Bitcoin or Ethereum against better understood asset classes. At the beginning of the market downturn, Bitcoin exhibited a tremendous correlation with big technology equities which signaled tough times ahead. However, when you analyze the current behavior of BTC-ETH with traditional market vehicles the results might shock you. Bitcoin and Ethereum are effectively trading uncorrelated with the rest of the capital market. Let’s take a deeper look.
