Binance Research: Bitcoin Dominance Weakens BTC-Altcoin Correlations in Q2

During the second quarter of 2019, the best three-month growth for cryptocurrencies since 2017, Bitcoin’s correlation with other cryptocurrencies fell, according to a new report from Binance Research.

Binance Research, the market research and analysis arm of Binance, released a new report that studied the decline in correlations between Bitcoin and other cryptocurrencies during the second quarter of 2019, as well as various degrees of correlations between cryptocurrencies with distinct similarities. 

According to the “2019 Q2 Crypto-Correlations Review,” which analyzed potential similarities between valuations of various cryptoassets, the second quarter of 2019 marked the third-best quarter the crypto industry has seen since 2014 and the highest growth since 2017. During this period, Bitcoin’s price increased by 300%, pushing its market dominance to above 60% and marking new highs for the year. This increase also played a factor in the significant decrease in Bitcoin’s correlation with other cryptoassets.

“Correlations declined between Bitcoin and altcoins, with a decrease in average correlation of -0.11. As indicated in the previous section, the overall market capitalization rose by 139%, whereas altcoin aggregated market capitalization (including stablecoins) increased by ‘just’ 71% over the same period,” according to Binance Research.

Aside from Bitcoin, certain cryptoassets with more important idiosyncratic factors (e.g. major news and events) exhibited relatively low average correlations with other cryptoassets. These include Binance Coin, which moved to its own native blockchain and benefited from various news and updates that increased the market’s interest; Chainlink, which revealed collaborations with Google as well as Matic Network, and Bitcoin SV, which indicated unusual price fluctuations and was delisted from some major exchanges.

Here are other key findings highlighted in the Binance Research report:

- The decrease in crypto correlations was also seen in some Proof-Of-Work cryptoassets such as Bitcoin Cash, Dogecoin, Ethereum Classic, Bitcoin Gold, and more, which exhibited lower average correlations than before. 

- Coins not listed on Binance exhibited lower average correlations than coins listed on Binance, further affirming our hypothesis of the “Binance Effect” in correlations.

- Privacy coins display higher than average correlations with each other.

- Similar functions (e.g. Ripple with Stellar Lumens) seem to lead to higher than average, correlations between two cryptoassets.

- Cryptoassets that conducted a public sale on Binance Launchpad are, on average, less correlated with all other cryptoassets possibly owing to greater idiosyncratic factors. However, Fetch and Celer Network displayed an extremely high correlation in the second quarter of 2019.

Read the full report here. 

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About Binance Research 

Binance Research provides professional, data-driven insights and analysis for investors in the crypto space to increase the level of transparency and improve the quality of information within the current crypto ecosystem. The team consists of professionals with a background and experiences in blockchain engineering, investment banking, strategy consulting, academic research and data science. For more information, visit: https://research.binance.com/