Bitcoin Global News (BGN)
January 23, 2019 -- ADVFN Crypto NewsWire -- Yesterday, we
published a piece on the relationship between Bitcoin and the VIX
Index and how this shows that Bitcoin is, in fact, not exactly an
uncorrelated asset. In the conclusion of our article, we mentioned
the importance of finding and developing indicators that can more
accurately predict Bitcoin’s price movements.
Related to this, today, CoinDesk
published a piece that appears to state that gold and Bitcoin are
negatively correlated. Before we go into exactly what this means,
keep in mind that the article in question stops short of stating
this correlation as a complete fact.
With that in mind, we can then move
on to detail what sort of relationship has been seen between
Bitcoin and gold, as of late. Central to CoinDesk’s argument on the
existence of this is the last 90 days of price movements of the two
assets.
During this time, mathematically,
the two assets showed what is called a correlation coefficient of
quite close to -1. In statistics, if two variables show a
correlation coefficient of -1, that means they have a perfect
inverse correlation. In the case of Bitcoin and gold, this means
that when one goes up, the other goes down.
As the entire basis of this
argument reportedly rests on a period from last November to now, it
should be made clear that this correlation is far from
well-established. Three months does not equal a long-term
trend.
Considering this, it seems
necessary to reiterate the same conclusion that we made yesterday,
related to the VIX index. Until more reliable indicators are
developed with years of price movements to back them up, we should
likely stop short of trying to establish correlations between
Bitcoin and well-established assets.
In other words, maybe predictions
on Bitcoin’s future price movements are largely wishful thinking at
this time.
By: BGN Editorial Staff