All cryptos seem more and more correlated to BTC (but US stocks seem independent)
Traditional knowledge states that it is wise to diversify one's investments. The main technical reason for that is that even if one investment performs poorly, hopefully some of the others will perform better.
This is one of the reasons why I am investing some in stocks, some in crypto, some in bonds and keeping some cash. If one should crash some of the others should (hopefully) do better.
For that to be true, though, the different investments should not be closely linked - i.e. correlated with each other. One formal test of this is Spearman's rank correlation coefficient - a number from 1 to -1 that shows how closely two sets of data are linked.
A rank close to 1 means that if one investment rises, the other will most likely behave similar. A rank close to -1 one means that if one investment rises, the other will most likely fall while a rank of 0 means that the way one investment goes should have little influence on the other. I may expand on this in a future post.
On the following graph, I have plotted a historical investigation of how linked several cryptos are to BTC.
Spearman Correlations to BTC
As you can see the stock market has always had a very low correlation with BTC which is exactly as I had hoped for. If we look at the other crypto projects, we can see that the correlation has become stronger and stronger.
This indicates to me that it currently does not make much sense to carefully allocate one's money around into different projects. They are all rising and following with each other. It would have made a lot of sense before 2018 (and may again in the future) but for now, we should rather support crypto in general rather that fighting over which project that is best.
Good luck to all of you and take care.
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvoting this reply.
Thank you so much for sharing this amazing post with us!
Have you heard about Partiko? It’s a really convenient mobile app for Steem! With Partiko, you can easily see what’s going on in the Steem community, make posts and comments (no beneficiary cut forever!), and always stayed connected with your followers via push notification!
Partiko also rewards you with Partiko Points (3000 Partiko Point bonus when you first use it!), and Partiko Points can be converted into Steem tokens. You can earn Partiko Points easily by making posts and comments using Partiko.
We also noticed that your Steem Power is low. We will be very happy to delegate 15 Steem Power to you once you have made a post using Partiko! With more Steem Power, you can make more posts and comments, and earn more rewards!
If that all sounds interesting, you can:
Thank you so much for reading this message!