While digital currencies shouldn’t be thought of as an asset investors will flock to in times of uncertainty, not being correlated to other asset classes could be worthwhile if the markets become under a lot of stress and almost all of them are sold off.
Fundstrat’s Alex Kern and Ken Xuan compare Bitcoin and other CCs to other asset classes such as the S&P 500, U.S. Dollar, International equities, U.S. Bonds, Commodities, Gold and Oil. What they found is that there is a very low correlation between Bitcoin and other CCs and pretty much all of these other asset classes.
In the upper right quarter of the chart below their analysis shows that the closest correlation between Bitcoin and other CCs (depicted as the FS CryptoFX Indexes Fundstrat developed and tracks) is in the high-teens with about half of all the comparisons in the single digits. This means that Bitcoin’s and the other CCs price movements are not tied to these other asset classes.
One Chart Explains Why You Should Own Bitcoin And Other Cryptocurrencies
Bitcoin and other cryptocurrencies have very little to no correlation to other asset classes. They could be a worthwhile investment in a turbulent market if all of them move in a downward direction. However, digital currencies are very risky so conduct very detailed due diligence.
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