Correlation between cryptocurrency prices sharply increased in 2018

Quick Take

  • The prices of cryptocurrencies were highly correlated in 2018 with correlation growing substantially this year
  • The most correlated cryptocurrency was Ethereum followed by Bitcoin while the least correlated one was TRON
  • The traded volume of cryptocurrencies were also correlated, although significantly less so than prices
  • Bitcoin and Ethereum had the most correlated traded volume

Increasingly it’s becoming clear: if you own one cryptocurrency, you own them all. One of the issues not talked about enough in crypto is inability to truly diversify cryptocurrencies simple because cross-asset correlations are extremely high. When Bitcoin’s price is falling, generally the price of the majority of other cryptocurrencies will fall as well.