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Bitcoin Still Correlated with US Markets, But Not for Long

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Source: Adobe/Parilov
Bitcoin (BTC) prices have been correlated with American equities of late, but that situation is set to change, per a new report.

This was the key takeaway from a study published by Binance Research, a unit the global crypto exchange, aimed at uncovering the full effect of the current coronavirus-led financial crisis on international markets.

The report’s authors claimed,

“DESPITE BITCOIN DISPLAYING A SIGNIFICANT POSITIVE CORRELATION WITH UNITED STATES EQUITIES IN THE FIRST QUARTER OF 2020, THIS HIGH CORRELATION COEFFICIENT REMAINS VERY UNLIKELY TO PERSIST IN THE MEDIUM TO LONG TERM.”
The researchers say their conclusion was based on the crypto market performance data from the first quarter of the current financial year (FY2020).

They added that there was a “moderately positive” correlation with American markets, pointing out that the token’s coefficient with the S&P 500 index stood at almost 0.6, and was also over 0.6 with the Russell 2000 index. Assets with a correlation above 0.5 considered to have a positive relationship.

Correlation between the daily business returns of BTC, CMC200, and traditional financial assets in the first quarter of 2020:

Research: Bitcoin Still Correlated with US Markets, But Not for Long 102
Source: Binance Research, Coin Metrics, Yahoo Finance
Regardless, Binance Research suggests that this correlation is very much short-term, meaning that USA markets and major cryptos could be about to embark on two very different trajectories.

The report’s findings made grim reading for crypto enthusiasts, with bitcoin losing over 37% of its market value, and sinking to USD 4,000.

There was a silver lining, though, in the form of a recent recovery that has seen BTC’s total decline for the quarter reduced to just under 11%.

There was also mention of January and February, where most tokens made very healthy gains before the virus made its presence felt in Europe and the United States.

And the report mentioned that a number of altcoins including tezos (XTZ) and bitcoin SV (BSV) had shown evidence that their prices had been affected by “idiosyncratic” influences, including mainnet launches, forks and other news – with some experiencing positive gains.
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