Ethereum Was The ‘Most Relevant Benchmark’ for Crypto in 2019

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Fredrik Vold

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June 26, 2023

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Ethereum (ETH), the second-most valuable digital asset by market capitalization, has become the “most relevant benchmark of the crypto market” in 2019, a new research from Binance Research claims.

According to them, ETH displayed the “highest median correlation” with other digital assets over the course of last year, with an average correlation coefficient of 0.69.

For purposes of the study, assets with a correlation above 0.5 were considered to have a strong positive relationship, while assets with a correlation below -0.5 were considered to have a strong negative relationship. The higher the number, the stronger correlation is.

Cardano (ADA) and EOS followed ETH, with correlation coefficients of 0.65 and 0.66, respectively. That compares to a correlation coefficient of 0.31 for cosmos (ATOM), which was the least correlated digital asset for the year, followed by chainlink (LINK) and tezos (XTZ).

Comparison of quarterly average correlation coefficients for the five highest correlating assets

Further, the report also explained how this insight may be used by traders and investors to achieve their diversification goals:

“If the returns of two assets do exhibit a positive correlation, it implies that these two assets tend to move in the same direction, and therefore share similar risks. On the other hand, a negative correlation between the returns of two assets indicates that the two assets move in opposite directions, and it is thus possible to use one asset as a hedge against the other,” the report said.

On the whole, however, Binance concluded that all cryptoassets continue to be “highly correlated with each other,” which is something that has been noted by many crypto analysts over the past few years. Despite this, however, the correlation was found to have “slightly declined” during the 4th quarter of 2019, per the report.

As reported earlier in January, a research from crypto exchange operator SFOX also found a decrease in correlation among cryptoassets. However, it still remains to be seen whether the decrease in correlation within the crypto space is the beginning of a new trend that will continue into 2020, the exchange noted back then.
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