Correlations are decreasing - what does it mean?

[bene_gesserit]

BTC Hi there,
I'm quite new to crypto trading. I've seen that the correlation between Bitcoin and altcoins seems to follow some sort of cycles:
https://enroyd.com/BTC_Correlations/
https://enroyd.com/Correlations/

I was wondering if a decreasing correlation could be indicative of a BTC rally. Do you think this makes sense? Would you swap alt for BTC when the correlation coefficients go down? Does anybody have any experience with this?

Thanks!
Bene 

[1714855382]

1714855382

[Tankdestroyer]

A decreasing correlation IMO is not a good indicator for a rally. In fact, most of the traders don't even pay attention to correlation coefficients. Most of them focus on determining the current market sentiment(which I believe is biased on the site you have linked OP) and news. Even if correlation coefficients go down, I would not swap my altcoin portfolio to bitcoin unless I see it profitable to do so.

[worldofcoins]

I think, it hints at the fact that the market is not as easy to predict as it used to and now there are are many more variables that need to be accounted for.

[atrocityx]

I think, it hints at the fact that the market is not as easy to predict as it used to and now there are are many more variables that need to be accounted for.

Or more likely is the sentiment of most people can be contradicted by a few whales with opposite sentiment.. we've seen time and time again on leveraged exchanges how people capitulate way too late and just give contrarian whales free liquidity to go the opposite ways..


There are lots of noobs thinking we are going to 3-4k bitcoin.

It goes down to 6k.. they open up shorts as a sell indicator...
It goes to 8k... its a sucker's rally cuz the desired outcome didn't happen.
It goes to 10k... haha fools.. this is obviously going to 4k, right?

The market is not moved by the masses, so what the masses think whether its sentiment, FUD, capitulation, etc doesn't really matter.  The powers that be only care which position short or long they can clear their position safely... and usually going against the masses is the easiest flow of direction this case (leverage and 1000+ btc).

[adaseb]

Basically in a nut shell its like this.

In a bull market you are better off not owning BTC but instead alts. Look at XRP and ETH as an example. ETH went from like $10 to like $1400 and ripple even had higher multiples of gains.... BTC only went like 20x.

In a bear market you are better off owning BTC and no alts. BTC lost like 67% value or so... it seems like much but most alts are like at 85-95% losses from ATH. Hence by owning BTC you lose less money because everybody sells for fiat and BTC.

[bene_gesserit]

A decreasing correlation IMO is not a good indicator for a rally. In fact, most of the traders don't even pay attention to correlation coefficients. Most of them focus on determining the current market sentiment(which I believe is biased on the site you have linked OP) and news. Even if correlation coefficients go down, I would not swap my altcoin portfolio to bitcoin unless I see it profitable to do so.

Thanks for your reply!
Why do you think the sentiment is biased? Could you please elaborate?
The price seems to follow the evolution of the sentiment score (or the other way around.... who knows): https://enroyd.com/btc_sentiment/

I've been trying to think of a strategy that combines correlation and sentiment... well, and also the price predictions by sites like enroyd or walletinvestor. Not sure if this makes sense....?

[Nayborksta]

Basically in a nut shell its like this.

In a bull market you are better off not owning BTC but instead alts. Look at XRP and ETH as an example. ETH went from like $10 to like $1400 and ripple even had higher multiples of gains.... BTC only went like 20x.

In a bear market you are better off owning BTC and no alts. BTC lost like 67% value or so... it seems like much but most alts are like at 85-95% losses from ATH. Hence by owning BTC you lose less money because everybody sells for fiat and BTC.

I'd also add her that during a bear market if you want to make profit it's good to change from Tehter to BTC, but you need to be an already expirenced trader to perform good in this scenario. It's quite hard at times but I know people who make some nice gains with BTC during bad market situations.

[davis196]

I think that the correlations ratio depends on the trading volume+the amount of new people ,who enter the crypto markets with their money.When the trading volume is growing,the correlations between btc and the alts are strong,when the trading volumes are low,the correlations are weak.Most of the newbies buy btc first and some altcoins after that,so this plays a role in the BTC/altcoins correlations ratio.

[robertsu]

The coefficients in the correlation can be a change, this is normal. Important to move towards convergence and detachment of the cost of altcoins and bitcoins. This pattern can and should be use.