Analyzing Market Correlation Between Altcoins And Bitcoin During A Bull Market
The alchemy of cryptocurrency markets: explore the relationship between Altcoin and Bitcoin during a bull market
In recent years, the global financial market has witnessed an unprecedented growth, led by the rise of digital currencies. Among these, cryptocurrencies such as Bitcoin (BTC) have cut out a distinct niche in the markets. However, the performance of other altcoin, or cryptocurrencies alternatives, often differs from that of its flagship resource. In this article, we will deepen the correlation of the market between Altcoin and Bitcoin during a bull market, examining the dynamics at stake.
Understanding of market correlation
The correlation of the market refers to the statistical relationship between two or more movements of the prices of the activities. In the context of cryptocurrencies, the correlation is particularly crucial, as it can have a significant impact on investment decisions. When a single activity experiences a significant increase in value, it is likely that its peers follow the example, creating a chain effect that can have large consequences for the market as a whole.
Altcoins and Bitcoin: a story of two markets
During a bull market, Bitcoin constantly overperformed its Altcoin cousins. The latter are often late compared to various factors, including lower adoption rates, limited use cases and more rigorous regulatory requirements. However, when Bitcoin experiences a strong bull race, he tends to lead the prices of his peers upwards.
data analysis
To obtain insights on the correlation of the market between Altcoin and Bitcoin during a bull market, we analyzed historical prices data for both activities using various technical indicators and statistical analysis tools. Our results revealed the following observations:
- Absolute average deviation (Mad) : the Mad Metric measures the average difference in prices between two activities for a certain period. When the Bitcoin price increases by 10%, it is also mad on Altcoin tends to increase, indicating that other activities tend to follow the example.
- Relative resistance index (RSI) : the RSI is a motorcycle indicator that measures the volatility of an activity and the purchase of feeling. During a bull market, the RSI for Bitcoin tends to be more aggressive than that of its Altcoin peers, suggesting greater interest in purchase and higher negotiation volumes.
- Bollinger bands : Bollinger bands are volatility indicators used to smooth out prices. When the Bitcoin price reaches certain levels, often a sign of sales in its Altcoin triggers, causing them the drop.
- Correlation coefficient (R)
: the correlation coefficient measures the strength and direction of the linear relationship between the returns of two activities. Our analysis revealed that the R Bitcoin score with its cousins Altcoin tends to be higher during the bull markets, indicating a stronger positive relationship.
Conclusion
The correlation of the market between Altcoin and Bitcoin during a bull market is complex and influenced by various factors. Although it is essential to note that not all Altcoin are created equal, the research suggests that they tend to follow the guidance of their flagship resource. By analyzing historical data and technical indicators, investors can obtain insights on the relationship between these activities and make better informed investment decisions.
Recommendations for investors
- diversification : spread your investments on an altcoin variety to minimize risk.
- Balance sheet : concentrate on the most popular and widely used altcoin cousins of Bitcoin during the Taurus markets.
- Risk management : Set the arrest levels and the sizing strategies of the position based on RSI, Mad and other technical indicators.
Future research limitations and directions
While our analysis provides valuable information on the correlation of the market between Altcoin and Bitcoin, there are several limitations to consider:
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