Market Measures

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Attempting to Classify Bitcoin with Correlation

Market Measures

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With Bitcoin’s recent rise in price and entrance into the futures market (/BTC), this cryptocurrency has become the market du jour. This market’s increasing relevance among both financial and nonfinancial types has caused great debate concerning what a cryptocurrency actually means relative to all of our traditional markets.

In today’s Market Measures segment, we put some research and historical trading behind attempting to categorize the cryptocurrency Bitcoin. Is it a currency? Commodity? Stock market?

The Study
  • Compared daily price change of Bitcoin since its inception (2013) to several markets
  • Currencies (US Dollar, Euro, Yen, Aussie Dollar)
  • Commodities (Gold and Silver)
  • Equities (S&P 500, Tech Sector, Nvidia)
The Results

We found that even though Bitcoin is referred to as a cryptoCURRENCY, it has not historically traded similarly to any of the traditional currency markets we looked at in this study. Also, Bitcoin has not moved with any sustained relationship like the commodities Gold and Silver.

Interestingly, Bitcoin has shown the strongest correlation to equities in recent years.

At the moment, cryptocurrencies look like a beast of their own with no real relationship to any other market we trade. However, these relationships change and we will look for the cryptocurrency market to start moving more like some of the markets we have noted above. Check out the segment above for greater detail concerning Bitcoin and where it stands in the trading world.

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