Cryptocurrency analysis company Alphractal made remarkable assessments regarding the altcoin market in its latest report.
The report stated that altcoins have performed better than Bitcoin in recent days, and investors have achieved higher returns by taking positions in altcoins instead of BTC, according to daily signals.
However, one chart highlighted by Alphractal is a warning for the market: the Correlation Heatmap. This map shows that the average correlation between altcoins and Bitcoin is rapidly declining, even turning negative in some cases. This means that altcoins are no longer tracking Bitcoin’s price movements.
According to Alphactal analysis, this is a warning signal that has been frequently observed in the past: low correlation is often preceded by high volatility and mass liquidations (of long or short positions).
Alphractal CEO Joao Wedson, in his assessment, highlighted Bitcoin’s correlation with classic market indicators. According to Wedson, the correlation between Bitcoin and the CBOE Volatility Index (VIX) could also be a key indicator.
“Bitcoin is currently showing a low, even negative, correlation with the VIX. This means that BTC has weakened its bond with the S&P 500 and is inclined to move more independently. Historically, this coincides with periods of increased volatility and often price rallies in the following year,” he said.
Wedson also issued the following warning to investors:
If the VIX is low, don’t spend too much time on the correlation between BTC and the S&P 500. This could mean that Bitcoin is in for an explosive move. However, if the VIX is high, it makes more sense to watch stocks, as fear in the markets could also impact BTC.
*This is not investment advice.