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Breaking News: Trump Prepares To Allow Crypto Investments In $9 Trillion Retirement Market

Bitcoin Correlation To Altcoins Is Collapsing: A Warning Sign?

Keshav Verma
Keshav Verma
3 weeks ago
2 mins read
Bitcoin Vs Altcoins

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Data shows Altcoins are breaking away from Bitcoin’s lead. Here’s what that could mean for the market, based on historical trends.

Altcoins Are Witnessing A Fast Drop In Correlation To Bitcoin

In a new post on X, analytics firm Alphractal has discussed how the Correlation between Bitcoin and the altcoins has changed recently. The Correlation is an indicator that keeps track of how tied together the prices of any two assets are. The metric can take on both positive and negative values. In both cases, some relationship exists between the assets, but the relative movement in their prices is different.

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When the indicator has a positive value, it means one asset is reacting to movements in the other by moving in the same direction. The closer is the metric to 1, the stronger is this relationship. On the other hand, it being under zero suggests a negative correlation exists between the assets: they are moving in opposite directions. In this case, the extreme point lies at -1.

If the Correlation is sitting exactly at zero, it suggests no relationship exists between the two prices at all. In statistics, this condition corresponds to the variables being independent.

Now, here is the heatmap shared by Aphractal that shows the trend in the Correlation between Bitcoin and the various altcoins in the sector:

Bitcoin Vs Altcoins Correlation
Looks like the metric’s value has declined for these assets | Source: Alphractal on X

As is visible above, the Correlation between Bitcoin and the different altcoins was close to 1 just earlier, but the indicator has seen a quick decline since then. The average value of the indicator for the two has now dipped toward the zero level and has even turned slightly negative.

This change would suggest that while the altcoins were closely following the footsteps of the original cryptocurrency before, they are now following a chart that’s more or less independent. This trend, however, may not actually be a positive sign for the sector. “Historically, low correlation is a red flag,” explains the analytics firm. “It often precedes periods of high volatility and mass liquidations — whether from shorts or longs.”

From the chart, it’s apparent that the last time the Correlation between Bitcoin and the altcoins plunged to zero was back in May, and what followed was a price jump for the asset. In January, the same trend marked the market top instead.

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The latest low Correlation between BTC and the alts has come as various assets have broken out and market dominance has seen a shakeup.

Bitcoin Vs Altcoins Positioning
The dominance of BTC has fallen relative to the alts | Source: Alphractal on X

“Altcoins have been outperforming Bitcoin in recent days, with daily signals suggesting it’s been more profitable to stay positioned in altcoins rather than BTC,” notes Alphractal.

BTC Price

At the time of writing, Bitcoin is trading around $118,000, down more than 2.5% in the last week.

Bitcoin Price Chart
The trend in the BTC price over the last five days | Source: BTCUSDT on TradingView
Featured image from Dall-E, Alphractal.com, chart from TradingView.com
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Keshav Verma
Keshav Verma

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Read more

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

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