Cryptocurrency analysis firm Alphractal has argued that the correlation between Bitcoin (BTC) and altcoins plays a critical role in market movements.
According to the company, when the correlation between BTC and altcoins decreases, the markets typically experience a wave of volatility. This movement can be either upward or downward. Citing the Correlation Heatmap data frequently used in its analysis, Alphractal stated that this metric serves as a kind of “thermometer” for the crypto market.
The statement included the following assessments:
- When BTC trades sideways, altcoins stand out and often outperform, which lowers correlation and can lead to subsequent pullbacks.
- When BTC is in a strong downtrend, correlation with altcoins increases and price movements become more synchronized.
It was stated that altcoin rallies are generally short-lived, and after a while, Bitcoin prices “pull to the floor.”
At the time of writing, the BTC price is trading at $110,766 and has gained 1% in the last 24 hours.
*This is not investment advice.
