Do privacy coins correlate with the trend of Bitcoin?

Privacy coins seem to be somewhat different from other coins in the cryptocurrency market. Some believe that privacy coins carry particularly high risks because they are sometimes used in criminal activities and may attract regulatory attention. Others argue that precisely because of their censorship-resistant properties, privacy coins may be a better investment compared to other cryptocurrencies.

However, the performance of privacy coins has proven to be not significantly different from other tokens in the crypto world.

To observe the correlation between privacy coins and other tokens, we examined the historical USD prices of privacy coins Monero, Zcash, and Dash on Coin Metrics and compared them to Bitcoin by calculating the correlation between their prices.

The table below shows the Pearson correlation coefficient, and other methods used to calculate correlation also yielded very similar results. The prices of Monero and Dash are closely correlated with the price of Bitcoin. The price of Zcash is also correlated with the price of Bitcoin, although not as closely.

The visual charts of these token prices more clearly indicate that historically, these three tokens have a close connection to Bitcoin:

But what about recently? After calculating the correlation between these three privacy coins and Bitcoin annually, we found that this correlation has decreased. These three tokens were highly correlated with Bitcoin in 2017 and 2018, but in 2019 so far, Zcash and Dash only show weak correlations with Bitcoin. However, we should not overstate its significance. If we further break down the data and look at the price data from the second half of 2019—specifically from July 1 to December 9—the correlation between these three tokens and Bitcoin has once again strengthened:

Of course, the attention of future regulators may likely separate privacy coins from the rest of the crypto landscape associated with Bitcoin, perhaps due to targeted regulatory crackdowns on privacy coins or because crypto advocates are starting to use privacy coins to evade regulation.

However, as Bitcoin has already celebrated its tenth birthday and many countries have established regulatory frameworks for cryptocurrencies, there is currently not much evidence to suggest that these regulations have made significant changes regarding privacy coins. This means that for now, privacy coins are basically in sync with Bitcoin.

This article is from our partner LONGHASH

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