Introduction
This research investigates the price correlations between three major cryptocurrencies—Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB)—from November 9, 2017, to October 31, 2023. Using 1,504 daily observations, the study employs time-series econometric methods to analyze long-term equilibrium relationships and causal dynamics.
Key Findings
- Cointegration: BTC, ETH, and BNB exhibit a stable long-term connection, limiting risk diversification opportunities.
Granger Causality:
- BTC influences ETH but not BNB.
- ETH impacts BNB but not BTC.
- BNB shows no causal effect on BTC or ETH.
Methodology
Data Sources
- Daily price data for BTC, ETH, and BNB (Yahoo Finance).
- Sample period: 2017–2023.
Analytical Tools
- Vector Error Correction Model (VECM): Assesses long-term equilibrium.
- Granger Causality Tests: Identifies directional relationships.
- Unit Root & Stationarity Tests: Ensures data validity.
Results
Cointegration Analysis
- Confirmed via Johansen’s test, indicating interdependent price movements.
Causal Relationships
| Cryptocurrency | Influences | No Effect On |
|---|---|---|
| Bitcoin (BTC) | Ethereum | Binance Coin |
| Ethereum (ETH) | Binance Coin | Bitcoin |
| Binance Coin (BNB) | None | BTC, ETH |
Implications
- Investors cannot diversify risk effectively across these assets.
- BTC’s predictive power for ETH suggests market leadership.
FAQs
1. Why do BTC and ETH show cointegration?
Their market dominance and shared adoption drivers create long-term price linkages.
2. Can BNB influence BTC in the future?
Market shifts (e.g., regulatory changes) could alter dynamics, but current data shows no causality.
3. How reliable are these findings for trading strategies?
Results are statistically significant but should complement fundamental analysis.
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Conclusion
This study validates interconnectedness among major cryptocurrencies, emphasizing BTC’s predictive role. Future research could expand to altcoins and macroeconomic factors.
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