Binance Research has published a report that highlights specifics about the effects of the current financial plunge on the world’s financial markets. In the report titled ‘How Has the Recent Market Turmoil Impacted Cryptocurrencies?’, the Binance Research team made a few points about the general performance of the crypto market in the first quarter of 2020.
Despite the price volatility, idiosyncratic factors still play a significant part in crypto-assets
Overall, the market did not exactly have the best of quarters. Most assets performed quite healthily in January and February, with impressive gains. By March, however, things took a sharp turn as a combination of factors including the coronavirus pandemic drove Bitcoin down. On March 12, BTC lost over 37% and was trading at $3,700. It, however, quickly rebounded, ending the quarter down less than 11%.
Sources: Binance Research, CoinMarketCap
Binance Research found that BTC had a “moderately positive” correlation with the US financial markets. For specifics, its coefficient with the S&P 500 was at 0.57 with Russell 2000 at 0.64. However, the report suggests that the correlation is temporary.
Sources: Binance Research, Coin Metrics, Yahoo Finance
The reported stated:
“Despite Bitcoin displaying a significant positive correlation with US equities in the first quarter of 2020, this high correlation coefficient remains very unlikely to persist in the medium to long term.”
The report also mentioned “idiosyncratic factors” as strong enough to affect the price and trajectory of these assets. Some of these factors include forks and important news about the assets like a mainnet lunch. Taking these into account, Binance Research says some assets were positively affected by these factors, pulling in gains for them. These assets include LEO, Tezos (XTZ), Bitcoin SV(BSV), and ChainLink (LINK).
Sources: Binance Research, CoinMarketCap
In general, the market plunge was negative for most assets. Silver fell in Q1 basically because demand could no longer meet supply, eventually decoupling with gold. On the other hand, gold had little to no correlation with Bitcoin and finished the quarter up 8%.
According to the report:
“Finally, unlike our initial finding, gold did not display any sort of relationship with Bitcoin on a longer timeframe. This illustrates both the importance of the sample size and the impact of outliers on results from correlation analyses.”
Across all financial assets, Binance Research found that long-term treasuries (TLT) performed much better, as it finished the quarter up 23%.
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