Recent research shows that Ether (ETH) was the cryptocurrency most correlated to the rest of the crypto market in 2019.
In a report published on Jan. 22, the research arm of major cryptocurrency exchange Binance suggests that throughout 2019, ETH had an average correlation coefficient of 0.69. The paper, which compared correlation data of 20 top cryptocurrencies, reads:
“Ether (ETH) is the highest correlated asset. With an average correlation coefficient of 0.69 throughout 2019, it is consistently among the most correlated assets. The coefficient started at 0.69 in Q1 and rose to 0.72 in Q4 (Q2: 0.65; Q3: 0.74).”
Per the report, Ether was much less correlated in the first half of 2019 and became the most correlated in the second half. Interestingly, the paper points out that “programmable blockchains” such as Ethereum, NEO and EOS often showed higher correlations with each other than with non-programmable assets.
USD price correlation in the crypto market
Other crypto assets that have shown a high correlation with the rest of the market include Cardano (ADA), EOS, Litecoin (LTC), XRP and Binance Coin (BNB). Furthermore, the researchers observed that correlation is typically higher among cryptocurrencies with the highest market caps.
Comparison of quarterly average correlation coefficients for the five most correlated assets. Source: Binance
The assets with the lowest correlation to the rest of the market, on the other hand, are Cosmos (ATOM), with a correlation of 0.31, followed by Chainlink (LINK) and Tezos (XTZ) with respective coefficients of 0.32, 0.4. Overall, the median correlation between large cryptocurrencies slightly decreased over the last quarter of 2019
Binance’s effect on the crypto market
Another interesting phenomenon pointed out by the researchers is the “Binance Effect,” which refers to the fact that cryptos listed on Binance displayed higher correlations than with the assets not present on the exchange. The firm’s research also claims that, among the top ten cryptocurrencies by market cap, its own crypto asset Binance Coin is the one that has seen the highest returns.
Comparison of quarterly price changes for the ten largest assets by market cap. Source: Binance
While the correlation between crypto assets has been widely observed, the correlation between Bitcoin (BTC) and traditional assets — especially gold — is still subject to debate. Nonetheless, new data suggests that BTC is less correlated to gold than many believe it to be.
In the past, some also observed that Bitcoin had an inverse correlation to the stock market. As Cointelegraph explained in a market analysis piece at the end of October 2019, at the time this trend broke.