A new research of Binance confirmed the likely reversal of the cryptocurrency market
The research division of Binance has prepared a new report indicating that a deep correction in the prices of Bitcoin and the overwhelming majority of the remaining altcoins may be behind and the so-called “bottom” is indeed passed.
The study also showed the highly correlated nature of the cryptocurrency market due to the “herd mentality” that manifests itself in the later stages of the bull and bear phases.
Since the beginning of this year, Bitcoin has grown by more than 40%, with three-quarters of this growth in April. But even before the first cryptocurrency went up sharply, the altcoin market also showed positive dynamics, which even led to the emergence of the term “altseason”.
One of the main aspects that the researchers pay attention to was the degree of correlation of cryptocurrencies relative to each other. So, the report says that in the bear market in 2018, the internal price correlation increased.
Referring to the phenomenon of joint movement (herd effect), the authors of the report suggest that the irrational behavior of retail investors and the nascent nature of the market as a whole largely contributed to the high internal correlation of cryptocurrencies.
Trying to explain the phenomenon of joint movement, the researchers also compared the structure of investors in the cryptocurrency market on traditional stock exchanges in different countries. As a result, they came to the conclusion that the turnover of funds is significantly higher in China - a phenomenon that the report authors associate with a high share of retail investors in both markets.