Cryptocurrencies are known not to correlate with other capital markets. However, the price pattern of different cryptocurrencies is always in sync. And investors are not encouraged by the general slump of cryptocurrencies.
Price Surge and Market Correlation
The rise in the price of bitcoin will naturally lead to the rise in the prices of other major cryptocurrencies. Bloomberg reported that the correlation between the price of bitcoin and other digital assets has risen from 0.1 to 0.7. And when it reaches 1, it means that there is a strong correlation between these digital assets.
The present correlation coefficient (0.7) between the markets of digital assets is lower than the coefficient recorded in April (0.9). This is as a result of the continuous slump of minor digital assets. Therefore, data from Coinmarketcap suggests that bitcoin represents 55% shares of the crypto market. This percentage is the highest recorded since December when bitcoin peaked at $20,000.
The correlation between digital assets has put crypto investors at a disadvantage since there is presently no safe havens in the crypto market.
The correlation coefficient between the crypto market and other major assets has struggled to cross 0.5.
Will Price of Bitcoin Recover This Year?
Fundstrat’s Co-founder Tom Lee reportedly stated that the price of bitcoin will likely hit $20,000 by the end of this year. Lee explained that the price pattern of bitcoin since the turn of the year is in tune with the price pattern of emerging markets like iShare ETFs. Therefore, he believes that the recent recovery of other emerging markets will rub off on the crypto market. However, Lee did not give precise correlation coefficient between the crypto market and other emerging markets.
Another analyst Anthony Pompilano had earlier stated that the short-time future of bitcoin is not looking promising. Pompilano believes that the current bear market will not be ending any time soon and the price of bitcoin will fall to $3,000 by the end of the year. However, he added that the long-term future will usher in a bull market where the price of bitcoin could rise to $50,000.
At press time, the price of bitcoin is $6432.26, a 0.72% surge from its price on Friday.