The April report from Binance showed that the "herd effect" significantly affects the course and reversal of cryptocurrency trends. At the same time, the report says that the "bottom" of Bitcoin has already been passed and the market is not threatened with a price correction.
Binance: the "bottom" of Bitcoin and the "herd effect"
"Alt Sezon" is a term by which researchers designated a sharp rise in the cryptocurrency market in April of this year: it depends on mental factors. As shown by Binance studies, the degree of correlation between cryptocurrencies relative to each other, and especially to Bitcoin, increased in 2018.
"The correlation between the value of crypto-assets in US dollars is constantly fluctuating due to a variety of factors – one of the most important is the irrationality of the market, which has an effect similar to the "herd effect"or the phenomenon of joint movement"
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According to the results, the correlation of the price of digital assets is no more than the "herd instinct", which initially influenced the beginning of the bearish move and the trend, then the rise in value. The main reason for the high volatilityVolatility
– is a financial term that means a statistical indicator of price change. In the cryptocurrency world, it is used by traders as an indicator for managing financial risks. That is, it is a measure of trade risk and as a financial analytical tool for gambling. Details of crypto, researchers has identified the "irrational behavior" of retail investors, which provokes a chain of reactions and the phenomenon of joint action.
"Unique factors, such as news and catalysts for specific projects, can influence the degree of correlation between crypto-assets."
The main evidence of general conformity in the emerging market of cryptocurrency was the price indicators of altcoins in relation to Bitcoin. Binance researchers used data in dollar equivalent, information showed that the lion's share of altcoins are rising or falling depending on the course of Bitcoin. So, for example, if you pay attention to the rate of coins from 2014 to 2019, it is easy to see that the price is strongly correlated depending on the trend of digital gold (Bitcoin).
Taking into account the above-mentioned facts, the Binance research group suggested that the "bottom" has already been passed and we should expect a price increase, as well as a global price reversal.
The Binance study showed that the "herd effect" can change the course of cryptocurrency. Recall that on April 12, the Center for International Security and Defense Policy of the RAND American Corporation, published a report on the use of cryptocurrency by terrorists.
Editor: Jerg Wos