Crypto Correlation
Relationship between crypto price movements and other assets — BTC as market leader.
Correlation describes the statistical relationship between price movements of two instruments — high positive correlation means they move together, negative means opposite.
Correlations in crypto:
BTC and altcoins:
•High positive correlation (0.7–0.9 typically)
•When BTC falls 10%, altcoins usually fall 15–25%
•BTC is the market "mother" — everyone follows her lead
BTC and S&P 500:
•Pre-2020: low correlation
•2020-2024: correlation rose to 0.4–0.6 (institutions)
•Risk-off periods: high correlation (everyone selling)
•Crypto-native shocks: low correlation with S&P 500
BTC and gold:
•"Digital gold" narrative → occasionally correlate
•Geopolitical crisis: gold rises, BTC can rise or fall
•Long-term: low correlation
Diversification:
•Within crypto: poor diversification (all highly correlated)
•BTC + ETH + altcoins ≠ real diversification
•Real diversification: crypto + stocks + bonds + real estate
Using correlation in trading:
•BTC/ETH divergence: ETH lags BTC → potential ETH catch-up trade