Correlation Between Cryptocurrencies: How Bitcoin, Ethereum, and Altcoins Move Together

When you own Bitcoin, Ethereum, and a few altcoins, do they all go up and down together? If yes, then you might think you’re diversified-but you’re not. Cryptocurrency correlation is the hidden force shaping your portfolio’s real risk. It’s not about what coins you own; it’s about how they move in relation to each other. And right now, most of them are tightly linked-more than you might expect.

What Exactly Is Cryptocurrency Correlation?

Correlation measures how two assets move in relation to each other. It’s a number between -1 and +1. If two coins have a correlation of +1, they move in perfect sync-when one goes up, the other does too. A correlation of -1 means they move in opposite directions. Zero? No relationship at all. Most crypto pairs hover between 0.6 and 0.9, which means they’re strongly linked.

For example, Bitcoin and Ethereum-the two biggest coins-had a 24-hour correlation of 0.82 in early 2023. Over two years, it stayed around 0.83. But over six months? It jumped to 0.90. That’s not a coincidence. During periods of high market stress-like inflation scares or Fed rate hikes-investors treat crypto like a single risky asset class. They sell everything at once. That’s why your portfolio of 10 altcoins might still crash when Bitcoin drops.

How Do We Measure It?

The most common method is the Pearson Correlation Coefficient. It looks at how prices change together over time. If Bitcoin rises 5% and Ethereum rises 4.8% on the same day, over and over, their Pearson score climbs. It’s simple, widely used, and works well for crypto data.

But there are other methods. Spearman and Kendall’s Tau are used when price movements aren’t perfectly linear-like when one coin jumps on news and another lags. These are useful for spotting non-linear relationships, but most traders stick with Pearson because it’s clear, fast, and reliable.

To calculate it yourself, you need historical price data. Tools like CoinGecko, CoinMarketCap, or even Google Sheets can give you daily closing prices. Then, plug them into Excel’s =CORREL() function, or use Python with pandas. Within minutes, you can see how your entire portfolio is connected.

Correlation Isn’t Static-It Changes With the Market

Here’s the catch: crypto correlation isn’t fixed. It shifts with the market. During the pandemic, correlations between Bitcoin, Ethereum, Solana, and Dogecoin spiked as panic selling hit all assets equally. Then, in late 2023, as markets stabilized, correlations dropped back toward pre-2020 levels.

Why? Because market regimes change. When fear dominates, everyone sells. When confidence returns, investors start picking winners. That’s when correlation falls. A study tracking 20 cryptocurrencies from 2018 to 2022 found this pattern clearly: high correlation during crises, lower correlation during calm periods.

This matters because if you’re using old correlation data to manage risk, you’re flying blind. A 0.85 correlation from 2021 won’t help you today. You need real-time or rolling-window data-like a 30-day or 90-day correlation-to see what’s actually happening now.

What About Traditional Assets? Are Crypto and Stocks Linked?

Many investors thought crypto was a hedge against stocks. That’s not quite true. Research shows Bitcoin has a correlation of about 0.41 with small-cap growth funds-higher than with value funds (0.35). That means it moves more with tech stocks than with utility or energy stocks.

Compare that to traditional assets: mid-cap and small-cap value funds have a correlation of 0.97. That’s almost perfect. So while crypto isn’t fully tied to stocks, it’s not independent either. It’s more like a high-risk tech stock with no earnings.

This has big implications. If you’re holding crypto as a hedge against a stock market crash, you might be disappointed. During the 2022 bear market, Bitcoin fell 70% while the S&P 500 dropped 20%. They didn’t move oppositely-they moved down together.

Why This Matters for Your Portfolio

Here’s the brutal truth: owning 10 different cryptocurrencies doesn’t mean you’re diversified if they all move together. You’re not reducing risk-you’re just holding more of the same thing.

Let’s say you own Bitcoin, Ethereum, BNB, Solana, and Cardano. If all five have correlations above 0.8, then your portfolio behaves like a single asset with 5x the volatility. That’s dangerous. You think you’re spread out, but you’re not.

True diversification means owning assets that don’t move in lockstep. In crypto, that’s hard. But you can still improve it:

• Include low-correlation assets like stablecoins (USDT, USDC) for cash-like exposure
• Hold Bitcoin as your core, then pick one or two altcoins with historically lower correlation (e.g., Monero or Zcash-though data is limited)
• Use correlation heat maps to see which coins are acting like clones

Professional investors use tools like Bloomberg Terminal to build correlation matrices across hundreds of assets. You don’t need that. But you do need to check your own portfolio every few months. Just open CoinGecko, export price data for your holdings, and run a simple correlation check.

Advanced Tools: GARCH, EWMA, and Machine Learning

For serious investors, simple correlation isn’t enough. That’s where models like DCC-GARCH and EWMA come in. These aren’t just math-they’re designed to capture how correlation changes over time.

DCC-GARCH adjusts for volatility spikes. When Bitcoin crashes, volatility rises, and correlations often surge. This model captures that. EWMA gives more weight to recent data, so it reacts faster than old-school methods.

Machine learning adds another layer. Studies using LSTM neural networks found that combining correlation data with on-chain metrics (like transaction volume or wallet activity) improved prediction accuracy to 52%. That’s better than random guessing. ARIMA models? They failed. Simple moving averages? Not enough.

You don’t need to build an AI model. But if you’re managing a serious portfolio, learning how to use Python’s statsmodels or scipy libraries to run dynamic correlation models is a game-changer.

What Should You Do Right Now?

Here’s a simple three-step plan:

1. Check your holdings. List every crypto you own. Use CoinGecko to download 90-day price data.
2. Run the correlation. Paste the data into Google Sheets. Use =CORREL(A:A,B:B) for each pair. Make a matrix.
3. Act on the results. If five coins have correlations above 0.8, you’re overexposed. Sell one. Add a stablecoin. Or wait for a period of low correlation to rebalance.

Correlation isn’t magic. It’s math. But math you ignore is dangerous. If you think owning 10 cryptos means you’re safe, you’re mistaken. You’re just holding more of the same bet.

What’s Next for Crypto Correlation?

As crypto becomes more integrated with traditional finance, correlation will become even more important. We’re already seeing hedge funds use correlation data to allocate between Bitcoin, gold, and Nasdaq futures. In five years, your crypto portfolio might be managed the same way as your stocks-using dynamic correlation models, real-time data, and risk-adjusted allocation tools.

The good news? You don’t need to wait. Start today. Open your wallet. Check your numbers. You might be surprised.