Bitcoin investment strategy in the future based on the correlation of altcoins

Bitcoin hit a new high for 2020 on February 13, surpassing $10,497, up 42% since the beginning of the year. In addition to the rise in Bitcoin’s price, the prices of altcoins have also been surging, with NEM and Tezos (XTZ) achieving astonishing double-digit growth in the past week. The question of altcoins’ correlation with Bitcoin has once again come under the spotlight.

Altcoin correlation during Bitcoin rallies

From April to June 2019, Bitcoin experienced a strong rise, reaching $13,800 on June 26, with a cumulative increase of more than 200%. Using the current correlation between Bitcoin and the top 30 cryptocurrencies on the market, we found that 58% of cryptocurrencies showed a correlation with Bitcoin higher than 60% during this period of growth.

The most notable currencies that correlate with Bitcoin are Ethereum (ETH), Dash, Bitcoin Cash (BCH), Monero (XMR), and EOS, with correlations between them ranging between 74% and 82%. USDC has the lowest correlation of all currencies, with a negative correlation (-4.3%).

During this period of growth, coins such as Chainlink (LINK), Cosmos (ATOM), Crypto.com Chain (CRO), and Huobi Token (HT) also showed low correlations with Bitcoin — between 20% and 30%.

Correlation during periods of altcoin rallies

During the observed altcoin rally from December 2018 to March 2019, all major altcoins showed stronger correlations with Bitcoin than during Bitcoin’s rally, except for USDC, which showed a lower correlation of -7.8% than during Bitcoin’s rally.

77% of the major altcoins have a correlation with Bitcoin of more than 60%, with Monero having the highest correlation at 92.3%. In addition, Dash, EOS, Ethereum, XRP, and ZCash (ZEC) all have a correlation with Bitcoin above 87%.

During the altcoin rally, BSV, Chainlink, Huobi Token, and Tezos had correlations with Bitcoin between 50% and 60%.

What do you think about the future market?

Bitcoin has shown that a bullish scenario could be in the works throughout 2020, with the digital asset having grown by over 35% since the start of 2020. Throughout this period, high correlations have been consistently observed with major altcoins such as Bitcoin Cash, Ethereum, Litecoin (LTC), NEO, TRX, and XRP.

In terms of low correlation, both USDC and Cosmos showed consistent results during the last bullish period and the uptrend in early 2020.

Chainlink, Crypto.com, HedgeTrade, Huobi Token, and Dash’s correlation with Bitcoin is not exactly consistent with the previous bullish period.

In the case of bullish Bitcoin and altcoins, stablecoins have the lowest correlation with Bitcoin, while major altcoins such as Ethereum, Litecoin, Bitcoin Cash, NEO, Monero and XRP are always highly correlated with Bitcoin. However, the altcoins studied in this article have a higher correlation with Bitcoin during the altcoin rally period than during the Bitcoin rally period.

In terms of investment, if a new Bitcoin bullish period begins, investors can accumulate altcoins as they have higher upside potential. In addition, investors who only buy Bitcoin can take a more conservative approach by buying stablecoins with low correlation with Bitcoin to hedge their riskier Bitcoin investments.

Translated from: cointelegraph "https://cointelegraph.com/news/does-correlation-between-bitcoin-price-and-altcoins-mean-buy-the-dips"