The outset of 2022 has seen considerable gains in the cryptocurrency market as a whole. Recently, Bitcoin (BTC) price reached a ii-month tape loftier crossing above the $9,000 mark likewise every bit other cryptocurrencies such as Litecoin (LTC) reaching $62.eighty which is the highest price seen since mid-November 2022.

Cryptocurrency market weekly overview. Source: Coin360

Cryptocurrency market weekly overview. Source: Coin360

Cryptocurrencies' volatile behavior is i of the main concerns raised by researchers and it complicates the statement that Bitcoin should be classified as a traditional investment asset and that it is a reliable shop of value.

Amid those discussions, Bitcoin has been closely compared to gold, while Litecoin has been associated with being "the silvery to Bitcoin'due south gold."

As reported past Cointelegraph, new data suggests that the actual correlation between Bitcoin and golden is not pregnant, as well as gold's explanatory power of Bitcoin returns. Nevertheless, Bitcoin is still oftentimes compared to aureate, peculiarly every bit a potential safe-haven asset.

Since October 2022, silver prices have approached new record-highs. But does the latest data support the argument that Litecoin is the silver of cryptocurrencies? Could Bitcoin instead of Litecoin be closer to silver than to gold?

Silver prices since October 2022. Source: BullionVault

Silver prices since October 2022. Source: BullionVault

Is Bitcoin or Litecoin price action closer to silver?

Our data — from May 2022 until Dec 2022 — shows that Bitcoin and Litecoin returns are very positively correlated (0.67) with 1 implying a strong positive correlation and 0 meaning that the avails are not correlated. A reading of -one shows that the assets are completely inversely correlated.

Meanwhile, the correlation between silvery and Litecoin returns is close to zero (0.026), which is similar to Bitcoin's correlation with silver (0.0025).

We further analyzed the correlation between the lagged silver returns and the two assets. In other words, the correlation between yesterday's silverish returns and today'south Litecoin and Bitcoin returns were compared.

Nevertheless, the results are even more discouraging, since both testify negative correlations with the lagged silver returns. Bitcoin's correlation was -0.03 while Litecoin's was -0.05.

April 2022-December 2022 correlation between silver, Bitcoin and Litecoin returns and silver's lagged returns

Apr 2022-December 2022 correlation between silvery, Bitcoin and Litecoin returns and silverish'due south lagged returns

Analyzing the rolling correlations provides a wider view and each data point in the diagram in a higher place refers to the correlation of argent and Bitcoin returns (BTC/silvery), and betwixt silver and Litecoin returns (LTC/silver) over the last thirty days.

One can see that the correlation between Bitcoin and argent, and Litecoin and silver, is very similar across time during both negative and positive periods.

Rolling correlations between Bitcoin/silver, and Litecoin/silver from May 2022-December 2022

Rolling correlations between Bitcoin/silver, and Litecoin/silverish from May 2022-December 2022

Hence, both Bitcoin and Litecoin take a small correlation and like human relationship with argent. Thus, the Litecoin as "digital silver" narrative is challenged past these very low correlation values. Moreover, information technology'south no surprise that Bitcoin has surpassed both Litecoin and argent equally the best investment option over the past ten years.

Cumulative Bitcoin, Litecoin and silver returns from investments made between May 2022 and January 2022

Cumulative Bitcoin, Litecoin and argent returns from investments made between May 2022 and January 2022

The relationship between digital assets and commodities from 2022 and 2022

For investors, a closer await at these relationships over the short-term tin help draw better insights for future investment strategies. In 2022, the correlation between silver for both assets is slightly higher than the first results from May 2022 to December 2022, albeit still very low. Bitcoin is correlated at 0.05 with silver and Litecoin is correlated at 0.09.

Whereas in 2022, Bitcoin and Litecoin had opposite correlations to argent with Bitcoin and silver correlation being 0.03 and the Litecoin and silver correlation being negative at -0.02. Even the correlation betwixt Bitcoin and Litecoin returns is lower than in other samples (0.74).

Nonetheless, both results are very close to 0, which leads us to believe that the correlation betwixt these assets is not representative enough to describe reliable strategies for investors.

Correlation in 2022 between Silver returns, BTC returns, and Litecoin returns 

Correlation in 2022 betwixt Silver returns, BTC returns, and Litecoin returns

Is silvery a useful predictor of Litecoin and Bitcoin returns?

The data, notwithstanding, suggests that silver returns may work as a predictor for time to come Litecoin returns. From the model employed, if silver's return rose by one% yesterday, we can expect that Litecoin returns may decrease by -0.232% today. This statistically meaning result can pb investors to assume that argent returns may work equally a predictor for future Litecoin returns in a negative way. Similar outcomes were not found in the case of Bitcoin, however.

The ability to predict prices has been the holy grail of financial markets, hence the importance of this relationship between returns. Even though both crypto avails bear witness a very low correlation with argent, the results for the lagged returns shed some lite on the relationship betwixt silvery and future Litecoin returns.

Looking forward, investors may want to look at silver returns to describe strategies when buying/selling Litecoin based on this by silver return's analysis. Nevertheless, whatsoever strategy has to consider the fast-changing crypto market environment and conscientious analysis over unlike time periods, which can crusade different conclusions.

Nonetheless, these findings tin can help the states to conclude that Litecoin equally the digital equivalent of silver is far-fetched due to the low correlations. Notwithstanding, we do highlight the value of investigating the digital silvery narrative past establishing a new connectedness between returns, which is crucial for investors.

The views and opinions expressed here are solely those of the author and do non necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You lot should conduct your own research when making a decision.