Why is bitcoin and crude oil/natural gas (anti-correlated) trading pairs?

AgentofCoin

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Quote from: Yakamoto on April 18, 2016, 11:25:55 PM

It doesn't really look like Bitcoin and oil have a correlation, I think a lot of it just revolves around coincidences since the movements seem to be fairly erratic and there are only a few points where the values seem to have even some sort of correlation.
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Quote from: r0ach on April 18, 2016, 11:36:20 PM

Sheer coincidence of a small sample size

Yes I agree and it seems to have all come down to a coincidence with a 1 year sample.

I am going to lock this thread now. If anyone has anything important to add, PM me and I'll unlock
for your comment, but seeing as my original result/theory was incorrect, doesn't seem likely.

~Bitcoin~

legendary

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Its just a co incidence i dont think there is anything to corelate this two markets. We cant rely upon this as this cant remain same if we look at pattern of larger period.

r0ach

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Sheer coincidence of a small sample size

Yakamoto

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It doesn't really look like Bitcoin and oil have a correlation, I think a lot of it just revolves around coincidences since the movements seem to be fairly erratic and there are only a few points where the values seem to have even some sort of correlation. It is possible some investors keep moving back and forth, but it doesn't seem like enough investors to show any major movements that occur in response to one or the other.

AgentofCoin

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New graph - couldn't get 3 years of data, only 2.76 years.

Based on this data, BTC & CRUDE OIL is now considered LOW Positive Correlation.
The only thing interesting to note, is that it is positive, till the last year, when then it splits to negative.

AgentofCoin

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Quote from: NUFCrichard on April 18, 2016, 04:07:47 AM

I don't see than as negatively correlated. At the moment the markets seem to be correlated with oil and commodities.

Yes, you are correct as the DJIA does shows high correlation with the following two:
DJIA & OIL = 0.7023
DJIA & COFFEE = 0.6195

Quote from: NUFCrichard on April 18, 2016, 04:07:47 AM

Bitcoin as a risk off trade (!!) is negatively correlated with the markets, thus is also negatively correlated with oil.

Yes, and in theory that is what BTC is programmed to do, but why is OIL leading over the DJIA?
BTC & DJIA = -0.2523
BTC & OIL = = -0.7729
By this data, BTC is a larger hedge against OIL, than with the DJIA.

Quote from: NUFCrichard on April 18, 2016, 04:07:47 AM

That is only at the moment though, the markets were previously lower when oil was higher.

That may be true. This data is only for 1 year back. I'm going to try this with 3 years.

Quote from: NUFCrichard on April 18, 2016, 04:07:47 AM

I would expect that bitcoin would correlate better with PMs long term. Oil does it's own thing.

I would expect this too and was surprised when OIL seemed to be a better negative correlator
than GOLD and SILVER. In fact, Gold & Silver I expected to be a positive correlator.
I'm going to try this with 3 years worth of data as well now

NUFCrichard

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I don't see than as negatively correlated. At the moment the markets seem to be correlated with oil and commodities.
Bitcoin as a risk off trade (!!) is negatively correlated with the markets, thus is also negatively correlated with oil. That is only at the moment though, the markets were previously lower when oil was higher.

I would expect that bitcoin would correlate better with PMs long term. Oil does it's own thing.

talks_cheep

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My gut reaction is to go with the Theory #1. Almost makes perfect sense while the #2 theory would make sense if we saw a huge swing in btc price which did NOT happen. I'm assuming, of course, that if the financial market entered the bitcoin trades, they would make huge entry. The current bitc price would make sense only if a tiny segment of the world's financial professionals discovered bitcoin. It makes no sense to me why we ony have a $428 btc if the traditional financial market, with its multi trillion dollar liquidity, started buying bitcoins.

AgentofCoin

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Still no takers, huh?

So I shall continue then.
Here is my theory for this day:

Theory 2: In the finance world, it is well known that the gold price is currently too high to
purchase reasonable amounts as a hedge for the future financial collapse. Because of this, many
traders/speculators have been looking for other devices/commodities to invest into, and bitcoin
seems to have finally fallen within their radar. When the oil/natural gas prices began to drop,
many trader/speculators began to panic thinking lower oil was a forerunner sign of the coming
world destabilization. To hedge against this, traders/speculators bought into bitcoin during
the oil collapse, since gold prices are clearly too high. (If you look at the graph I provided in the
OP, when oil began it's drop, BTC attempted and began to climb, meanwhile gold didn't move as
much in comparison.)

AgentofCoin

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So no one cares enough to provide any theories?

Well I'll just talk to myself each day then.
Here is my theory for today:

Theory 1: When oil/natural gas prices began to fall, large miner's expenses from those power sources began to fall.
Because of this, miners had extra finances and instead of spending on mining, spent the extra on purchasing bitcoins.

AgentofCoin

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Daily Bump. https://www.youtube.com/watch?v=aHN6AViJAvI&feature=youtu.be&t=23s

AgentofCoin

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Quote from: odolvlobo on April 14, 2016, 12:52:01 AM

You tell us. What is the correlation coefficient? Looking at the graph my guess would be something closer to 0 than to -1.

According to a Pearson Correlation Coefficient Calculator (http://www.socscistatistics.com/tests/pearson/Default2.aspx)
after putting in the raw daily data (took the middle 300 days since calculator only can do 300 x & 300 y inputs)
the correlation coefficient is -0.7729. So it is considered a strong negative correlation.

Updated Edit:
In addition, I ran all the other data I had in the calculator for comparisons:

Sugar & BTC = +0.6957 (considered moderate positive)

DJIA & BTC = -0.2522 (considered weak negative)
Gold & BTC = -0.3376 (considered weak negative)
Wheat & BTC = -0.4773 (considered weak negative)
Coffee & BTC = -0.5235 (considered moderate negative)
Silver & BTC = -0.5885 (considered moderate negative)
Lean Hogs & BTC = -0.6486 (considered moderate negative)
Crude Oil & BTC = -0.7729 (considered strong negative)
Natural Gas & BTC = -0.8327 (considered strong negative)

So, if that is all correct (Crude Oil & Natural Gas), and isn't a coincidence, what would be the logic for this?

Maybe other advanced users/traders might not be surprised with these results, but I am.
Anyone who has some understanding, I would very much like to hear your rational.

odolvlobo

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You tell us. What is the correlation coefficient? Looking at the graph my guess would be something closer to 0 than to -1.

AgentofCoin

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I was bored and decided to grab the last year's closing prices (365 days) for the Dow Jone Industrial Average (DJIA),
Gold, Bitcoin (BTC), and Crude Oil (I also did Lean Hog, but it began to clutter up the graph) and line graph
the data to see how it would all look together.

I was expecting to see some signs that when the DJIA went down, that Gold and/or BTC would go up,
and obviously the reverse would happen if the DJIA would go up.

Assuming that BTC price rise is really associated with Demand, and that Demand should be from individuals/institutions
that wish to diversify their holdings into other areas as a hedge against financial downturns, I was surprised to see the
following data.

As Oil prices began to crash, BTC prices started to rise/react. There was no real significant changes with DJIA or Gold.
The rise of BTC to the fall of Crude is not exact, but it seems more related than with DJIA or Gold.

- Do you think that Crude Oil and BTC are actual anti-correlated pairs?

- Could bitcoin (BTC) actually be likened more to a digital-oil, compared to a digital-gold?

- Why (according to this graph) would adoption or demand of bitcoin (BTC) be associated with Crude Oil price?

- If this is actually correct (and not just coincidence), what could this mean?

Topic: Why is bitcoin and crude oil/natural gas (anti-correlated) trading pairs? (Read 1069 times)