Bitcoin is No Longer an Uncorrelated Asset

Too Long; Didn't Read

Cryptocurrencies have been promoted as an uncorrelated asset class that should be owned to offset potential dips in traditional <a href="https://hackernoon.com/tagged/investment" target="_blank">investment</a> buckets. So far, the lack of correlation has been proven by showing <a href="https://hackernoon.com/tagged/bitcoin" target="_blank">Bitcoin</a> versus equities and fixed income, as well as gold, real estate, and other commodities. Though the analysis is technically true, the analysis is faulty. Bitcoin has only existed since 2009, when global markets bottomed and began a new cycle; a bull market which has lasted for over nine years. Further, Bitcoin is the only asset in this asset class with enough data to begin to measure. And the data that is measurable is for an asset that today has a market cap of only $100B and around $3B of daily volume (best guess, since much of the volume is OTC). Just 18 months ago, the market cap was only $15B with $200mm of daily volume. This does not have enough statistical significance to measure against traditional investment pools. As for the entire cryptocurrency market, it only has a $250B market cap. Within this asset class is a very disparate group of digital assets, ranging from digital currencies, to network gas, to utility tokens (no different than reward points), to asset backed tokens, and even tokens representing VC ownership.​