Exclusive: Blockforce Capital on Cryptocurrency Correlations
Correlation analysis conducted on the top 6 cryptocurrencies reveals the following:
- Correlation has been rising in the market for cryptocurrencies
- Analysis conducted on the top 6 cryptocurrencies reveals opportunities for astute investors
- Cryptocurrencies are now as correlated as the FAANGs
These, and more exclusive insights were shared by Eric Ervin, the President and CEO of Blockforce Capital (formerly Reality Shares) and David Martin, the MD for Quantitative Strategies at Blockforce Capital. Bitrazzi recently got in touch with Ervin and Martin, who shared Blockforce Capital’s stance on cryptocurrency correlations with us.
Top 6 Cryptocurrencies’ Correlation Now at 0.5
What Do Rising Cryptocurrency Correlations Imply?
What Does This Mean for Crypto Investors?
While rising correlation implies market inefficiency it also sets the stage for extracting alpha. “From an investors point of view, the more correlations rise, the more inefficient markets get. These little inefficiencies create opportunities for astute investors. As an example, if all assets are falling at a similar pace, astute investors can invest more capital in the higher quality assets for better prices. This also works in reverse, where investors are able to unwind lower quality overvalued assets during rising markets. The risk is, of course, that these correlations can remain high for long periods of time, even in the most efficient markets like the S&P 500, we see intra-market correlations remain high for extended periods making it difficult for the fundamental or quantamental investor to extract alpha,” Ervin told Bitrazzi.