Binance Report: These three crypto assets correlate least with Bitcoin
Of the more than 5. 00 0 portrait and small format crypto assets, only three have one shown almost zero correlation with Bitcoin. A Binance Research report released on Wednesday named ATOM the cryptocurrency that least cares about Bitcoin's price movements. The stake out mark of the Cosmos blockchain has an average annual coefficient of 0, 31, which indicates the lack of a linear correlation with the benchmark cryptocurrency .
In the same report, Chainlink's LINK and Tezos' XTZ were ranked the second and third lowest Bitcoin correlated assets with coefficients of 0, 32 or 0.4.
The correlation between two assets is usually measured on a scale from -1 to 1. Assets with negative or near zero correlation tend to move in the opposite direction.
Similarly, a coefficient of 0.5 or more indicates directly proportional behavior that allows the two different assets to move in the same direction.
Binance noted that Bitcoin behaves like a standard locomotive for the rest of the cryptocurrency market. The leading asset creates the distortion, while others just follow its direction. This obviously makes it difficult for investors to use risk-averse strategies while fully aligning their portfolios with cryptocurrencies.
“If the returns on two assets have a positive correlation, it means that these two assets tend to move in the same direction and therefore share similar risks,” wrote the exchange in your report. ”
Binance added that a negative correlation between the returns on two assets gives investors the opportunity to diversify their portfolios – sometimes one serves as a “hedge” against the other.
The statement indicated that ATOM, LINK and XTZ served as attractive investments to buy when the bear market was high in the Bitcoin market.
“No crypto can act as a hedge against Bitcoin.”
On the other hand, Narek Gevorgyan, founder of the crypto portfolio management app CoinStats, stated that despite lower correlations, alternative coins can never serve as a safety net against the downside risks of Bitcoin. The entrepreneur said that the real hedge is outside the crypto industry and called the stock market.
“People are invested in altcoins because they expect them to 50 – 100 – make multiple wins, ”he said. “This has nothing to do with securing against Bitcoin. People choose stocks or gold for this type of safety net. ”
Mr. Gevorgyan cited an internal report that showed that CoinStats users made more than 50 investments in Bitcoin. He noted that people consider Bitcoin to be the safest cryptocurrency investment, adding that “it has the longest chain, security, and credibility after surviving all forks.”
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