Volatility in trading bitcoin and other digital coins continues as the cryptocurrency market ramps again, surging past the $6,000 level for the most widely purchased virtual currency.
The bitcoin is closely related to other digital coins, aptly known as altcoins. As the bitcoin rises, these reverse coins, such as Ethereum, Ripple, Bitcoin Cash, Light Coin and Monero, move together. The bitcoin has a positive correlation with other coins, ranging from 0.74 to 0.95, with a score of approximately 1 which would give it an excellent correlation, says Mati Greenspan, a senior market analyst at EToro, a Tel Aviv-based social investor. The Kari network says.
“The relationship between crypto and crypto is very positive,” he says. “This is because of the highly speculative nature of this high risk market.”
Since December, bitcoin, which is lightly regulated, has given investors a show, hitting a high of $20,000 before dipping to $8,500 by mid-March and ultimately reaching lows in the $6,000 range, wiping out billions of dollars in market cap because of extreme volatility, hacking and orders from regulators. Large losses are not unusual for bitcoin and other digital currencies.
While the losses in ethereum, the second-largest digital currency, are sometimes are larger than bitcoin and the dips in ripple are fewer compared to bitcoin, those were only coincidences as the reverse has occurred, says Greenspan.
“This may have been the dynamic over the short term but is not a rule of any kind,” he says.
Ethereum, currently the most used blockchain in the world in terms of transaction rates, has experienced a level of $ 200 per coin as some traders are “nervous” about its value as some investors Concerns have been raised about expanding the network, Greenspan says. In the last 12 months, Ethereum prices have risen from about $ 1,500 to below $ 200.
“We’re still in the early stages of decentralized computing and the future is far from certain,” he says. “Recently there’s been a sign that the path to scalability is once again moving forward.”
Since the beginning of 2018, the price of bitcoin dipped by 70 percent, while ripple lost more than 90 percent, says Marc O’Brien, CEO at Crypterium, a London-based cryptocurrency banking and payments platform.
Bitcoin has a relationship with the U.S. dollar.
Bitcoin has shared many levels of correlation with different assets, including the stock market and the U.S. dollar. In 2017, it was highly correlated with the stock market since both were viewed by investors as “viable places to store excess capital left over from the central bank expansion,” Greenspan says.
The dynamic shifted this year as some stocks have become volatile and in turn, bitcoin gave back a large amount of its gains, he says.
The correlation with the U.S. dollar has always been negative and similar to most commodities, bitcoin trades against the dollar.
“It tends to get stronger on dollar weakness and vice versa,” Greenspan says. “This has played rather distinctly over the last month. This kind of behavior is typical of commodities. As the buck falls, it takes more dollars to buy a barrel of oil or an ounce of gold and vice versa.”