If Oil Continues to Surge, Bitcoin May As Well

8 thg 4, 2019

BTCUSD is clearly a more interesting asset recently with a 16 percent surge in just one trading day. Another asset that displays similar attributes is oil. Both should be considered risk-on investments given the beta or variance (assuming a normal distribution in an ordinary least square model) which both assets display. While oil gives us more insights into global growth, Bitcoin can provide an alternative mode in which investors can diversify especially those younger investors looking for higher gains with higher risk given the time horizon for market departure/retirement.

Obviously the relationship is not always consistently positive and when it turns negative it is not consistently oil increasing while Bitcoin decreases or Bitcoin increasing while oil decreases. Nonetheless, the relationship mostly exhibits a positive correlation coefficient in conjunction with similar standard deviations assuming an ordinary least square model.

The question remains though as to how long this surge risk-on appetite can be maintained and if the growth in high beta assets is merely speculative and wrong-headed or if there are more broader and positive macroeconomic trends that are reversing the volatility that struck markets in December.