Understanding the complex world of cryptocurrency market correlation
The cryptocurrency world is a complex and rapidly developing landscape, discussing many cryptocurrencies at different prices. One aspect that has been paid considerable attention in recent years is the relationship between various cryptocurrencies. In this article, we strive to analyze the market correlation between different cryptocurrencies and provide information on the factors affecting these relationships.
What is the correlation of the cryptocurrency market?
The correlation of the cryptocurrency market refers to the degree or relationship of the two or more cryptocurrencies. If you have two or more active relationships, this means that their prices generally respond to changes in the price of the device. The reason for this is a number of factors, such as:
1.
- Price movements : If a device experiences a significant price movement, it can affect the prices of other markets in the market.
- Feeling on the market : The feeling of cryptocurrency market is influenced by many factors, such as economic indicators, news and regulatory developments that can affect correlations.
Factors affecting market correlation
Many factors contribute to the relationship between different cryptocurrencies:
- Liquidity : High territorial assets usually attract more merchants and investors.
- Price movements : If a device experiences a significant price movement, it can affect the prices of other markets in the market.
- Market feeling : The feeling of cryptocurrency market is influenced by many factors, such as economic indicators, news and regulatory developments.
4.
Methods of analysis of market correlation
There are many methods to analyze market correlation between different cryptocurrencies:
- Average Correlation Cooperation (MCC) : This is a widely used method that calculates the average of correlation products between each pair of devices and their spray.
2.
- Regression Analysis : This method includes the use of linear or nonlinear regression models to estimate two or more active correlations.
Analysis is an example
Take into account the hypothetical example of market correlation analysis between Bitcoin (BTC) and ETHERUUM (ETH).
| Active Price strip Volatility
| — — —
| BTC | $ 2500 – $ 3000 20% – 30%
| ETH | $ 150 – 200 USD | 50% – 60%
Using the above example, using the following formula can calculate the correlation coefficient between BTC and ETH:
Mcc = (σ (x – x̄) (y – ȳ)) / sqrt (σ (x – x̄) ² \* σ (y – ȳ) ²)
Where x and y are the prices of BTC and ETH, and x̄ and ȳ tools.
After calculating the correlation coefficient (0.95), you can interpret it as follows:
- The correlation coefficient near 1 indicates a strong positive relationship between BTC and ETH.
- The near -1 close correlation coefficient indicates a strong negative relationship between BTC and ETH.
- A correlation coefficient less than or equal to 1 indicates a weak positive ratio, while the value more than 1 indicates a weak negative relationship.
Conclusion
The cryptocurrency market correlation is a fundamental aspect of understanding the complex world of cryptocurrency markets.