Crypto Correlations: Diversification Benefits of Bitcoin and a Quantitative Review of Within-Crypto Correlations
By Jackson Moss
April 30, 2021
- Theory 1: A rising tide lifts all boats
- Theory 2: Winner take all and network effects
- Obtain historical prices Bitcoin or Ethereum denominated tokens on Binance. Convert BTC and ETH prices to their equivalent value in USD-Tether. And as before, convert prices to log returns so that Pearson correlations can be calculated.
- Administer applicable statistical techniques (described in more detail below) such that we can treat our correlationships like vectors and capture network features like group clustering.
- Utilize a community detection algorithm to construct network groups
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