Bitcoin (BTC) Vs US Dollar (USD)
Trading in Bitcoin (BTC) and other digital coins continues to be very volatile, as the cryptocurrency market ramps up once again, running past the 6,000 mark: Bitcoin is the #1 cryptocurrency.
Bitcoin remains highly correlated with the other digital coins, known aptly as the altcoins. When bitcoin rises, these altcoins, such as ethereum, ripple, bitcoin cash, litecoin and monero, move in tandem.
Bitcoin has a positive correlation with the other coins, ranging from 0.74 to 0.95, nearly reaching a score of 1 that would give it a perfect correlation.
The correlations between crypto to crypto are extremely positive,” he says. “This is due to the highly speculative nature of this high-risk market.
Since December of 2017 Bitcoin has given investors a show, hitting a high nearly 20,000 before diving to 8,500 by mid-March and ultimately reaching lows in the 5,000 – 6,000 range, wiping out billions of dollars in market cap because of volatility, hacking and orders from regulators.
Large losses are not unusual for bitcoin and other digital currencies.
While the losses in ethereum (ETH), the 2nd-largest digital currency, are sometimes are larger than Bitcoin and the falls in ripple are fewer compared to Bitcoin, those were only coincidences as the reverse has occurred.
Currently, ethereum is the most widely used blockchain in the world by transaction rate, has tested the 200 per coin mark as some traders appear shaken over its price as concerns on how to grow the network rose with some investors. In the past 12 months, prices in ethereum as traded from nearly 1,500 to -200.
Since the beginning of Y 2018, the price of Bitcoin fallen by 70% while ripple lost more than 90%.
Bitcoin shares a relationship with the USD.
Bitcoin has shared many levels of correlation with different assets, including the stock market and the USD. In Y 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.”
The dynamic shifted this year as some stocks have become volatile and in turn, Bitcoin gave back a large amount of its gains.
The correlation with USD has always been negative and similar to most commodities, Bitcoin trades against the USD.
BTC tends to get stronger on USD weakness and vice versa. This has played rather distinctly over the last month. This kind of behavior is typical of commodities. As the USD falls, it takes more of them to buy a barrel of Crude Oil or an ounce of Gold and vice versa.”
Some analysts believe is that, as the USD dominates the markets, investors turn to it instead of Bitcoin.
The trading of these virtual coins is highly manipulated, says a participant who has traded Bitcoin, litecoin and ethereum to determine whether any of the coins were undervalued, but instead found irrational exuberance in the market.
Every time there is a giant Bitcoin conference, Bitcoin tanks because they are manipulating the price,” he says. “If it happened once, it is a coincidence, but when it occurs 5 times, it signals what is going on. They are creating some volume like penny stocks so they can create more hype.”