Correlation between cryptocurrency prices is decreasing, but still strong

Quick Take

  • In Q2 2019, Stellar and Ethereum had the strongest correlation with other cryptocurrencies; followed by Monero and Cardano
  • In the same time period, Bitcoin SV and Grin have the weakest correlation with other cryptocurrencies; followed by BNB and Bitcoin Cash
  • Bitcoin was the 8th most correlated cryptocurrency and correlated the most with Monero and the least with Bitcoin SV and Grin
  • Over the long term horizon, the least correlated cryptocurrencies over the long term appear to be Tezos, BNB, TRON and Bitcoin SV
  • The least correlated quarter was Q4 2017 while the most correlated one was Q4  2018

Cross-asset correlations are still high, but they seem to be decreasing, according to new analysis by The Block. 

A major issue for cryptocurrency investors is the inability to truly diversify their cryptocurrency holdings. When the price of one cryptocurrency falls, generally the majority of other cryptocurrencies will fall as well.

The lack of uncorrelated permissionless cryptocurrencies has a negative effect on the creation of on-chain crypto-collateralized derivative markets with sufficient liquidity.