Algorand Price Correlation
Q109. Is the price of Algorand more closely correlated with the crypto market, and assets such as BTC or ETH, or is it more correlated with network usage such as number of transactions or ALGO transfers?
In this dashboard we are gonna find out if Algorand price is more correlated with its own blockchain metrics than other crypto prices such as BTC and ETH
We will consider the last 6 months for our evaluations
By looking at Algorand price over last 6 months, we can observe that the price has just been dropping and dropping as well as the entire crypto market. So one should expect that ALGO price very correlated with BTC naturally and this is true BUT there are some thing happening under the hood , which means that a competition between Ethereum and other Layer 1 is emerging as we will see from the more correlation between ALGO and SOL for example in relation to ALGO and BTC
Let's first compare ALGO price with BTC: as you can see there is a strong correlation but not as much as with other layer 1 alternative to Ethereum like Solana or Polygon. In fact, Algorand aims to be the Ethereum killer
As you can see from the chart prices of ALGO and ETH , the correlation seems to be quite similar to the one with BTC
But things change if we compare ALGO and SOL. Here charts are almost the same, very strong correlation. The reason, as we said, is that they are both Ethereum killer
Same argument applies to ALGO and MATIC
Now let's move on the correlation between ALGO price and its blockchain metrics such as ALGO transfers and the number of transactions
There seems to be some sort of correlation here as well, especially with the number of daily transactions
Let's dive into by properly calculating the correlation between ALGO price and all those metrics and other crypto prices using the PostgreSQL function COR
We have the highest correlation with the price of SOLANA, then with the price of BTC and a discrete correlation with the blockchain metrics
We can say that ALGO price is still very linked with the market rather than its blockchain metrics so there is a big portion of speculation embedded with its price in USD
The correlation coefficient with MATIC is even a bit higher than SOLANA