A strong correction of the bitcoin price has been passed, and the so-called “bottom” is over, the researchers of the Binance Research division are sure of this. They managed to prove a high degree of correlation of digital money relative to each other due to the “herd effect”, which is manifested on the crypto market.
According to analysts, when the correlation between the prices of altcoins and bitcoins against the US dollar reaches a certain positive price mark, then there is a high probability that the trend of the first cryptocurrency can start a reversal or at least stop moving in a previously specified direction. However, in the report, experts explain that this is only an assumption and it is too early to establish clear relationships.
"Given the short history of the cryptocurrency market, it would be premature to say that there is a causal relationship between correlation peaks and market reversals, or that this is in fact a herd effect during the market reversals themselves," Binance said.
Since the beginning of 2019, the first cryptocurrency has risen in price by more than 40%, with the main increase in April. Other altcoins show positive results of the rise of courses.
According to Binance Research, the internal correlation of cryptocurrency prices increased markedly in a bear market in 2018. Then it became especially noticeable that in the industry a large number of players who do not quite adequately (overly positively or negatively) assess the condition of assets, and this leads to an increase in the volume of transactions, increased volatility, the formation of bubbles and, sometimes, an unreasonably deep drop.
Market analysts believe that the history of the past year can be repeated. In 2018, the pessimistic market sentiment reached its maximum value, a similar situation can occur now. However, in this case, the reversal should go up.