[gottimhimmel]

I would be interested in running a correlation between BTC prices and USD prices to see whether or not there exists a correlation between BTC price movements and USD price movements.

Furthermore, I would be interested to see whether this is a positive or inverse correlation, that is, if USD prices go up, BTC prices go down, and vise-versa.

Should such a correlation or inverse correlation exist, it would indicate that there are one of 2 scenarios:

A. BTC prices *lead* USD prices, that is, if you could predict movements in USD prices positively or inversely correlated with BTC prices. If BTC moves up 5% one day, USD prices move down X%, or if positively correlated, move up X%.

B. BTC prices are a *lagging* indicator, that is, you can predict BTC movements based off of recent USD movements, whether positively or inversely correlated.

Now, my pet theory is that because BTC markets are lower liquidity markets than standard currency markets, one should expect more drastic movements in BTC markets. You wouldn't expect a linear correlation between BTC and USD movements, that is, if BTC goes up 5% one week, USD may fall by only 1-2% that week, in this hypothetical.

It is my belief that Bitcoin is taking the place of Gold & Silver as a way to hedge against standard currency. Therefore I would expect some negative correlation between prices.

Recently, we've observed a massive uptick in prices in Bitcoin. If bitcoin markets are completely unrelated to standard currency markets, then this would not signal any impact on future USD prices.

However, if my theory that BTC is a possible *leading* indicator of USD movements, with a negative correlation, then I would expect a significant drop in USD prices in the near future.

BTC prices have been increasing drastically recently, meaning that the demand for bitcoin is going out of the roof, now, this could be for any number of reasons, but I believe that it may be because some big players in the world are expecting some instability or possible danger in the markets in the near future.

Disclaimer: This is all **opinion**, I do own some bitcoin personally, and believe that it it's a good idea to have a diversified portfolio.

[raiders72001]

No correlation.