CRYPTO PRICE ANALYSIS
SQL & TABLEAU
In this project, I will analyze several cryptocurrency stocks and compare them to an S&P stock to assess how they measure up against traditional stocks. The primary variables I will focus on are volume, risk, return, and correlation.
data source
Historical prices are sourced from Yahoo Finance, using daily adjusted closing prices. The analysis will cover the period from November 2017 to August 2024.I have selected 5 cryptocurrency stocks for analysis —BTC, ETH, ADA, BNB, and DOGE. These will be compared against the S&P 500 stock SPY.
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hypothesis
The periods of 2017 and 2020-2021 are particularly noteworthy, as they marked significant surges in cryptocurrency popularity. Given the extreme volatility of cryptocurrencies, I anticipate that during these times, volume, risk, and returns will be exceptionally high. Following these peak periods, I expect to see a steep decline.Since traditional stocks are generally more stable, I predict there will be minimal correlation between cryptocurrency stocks and the S&P 500.
data analysis
As expected, there were significant spikes during the periods of 2017 and 2020-2021 when cryptocurrencies gained popularity. DOGE saw the highest returns, reaching almost 800% in 2021. The magnitude of this spike compared to other cryptocurrencies highlights the strong influence of social media and public perception on stock prices. Following these peaks, there was a steep decline in returns in 2018 and 2022.In contrast, the S&P 500 stock SPY exhibited relatively stable returns. Interestingly, there was a slight decline in SPY during the same periods, suggesting that the downturn in the cryptocurrency market may have had some impact on traditional markets as well. After the sharp declines in 2018 and 2022, BTC and ETH rebounded more quickly than ADA and DOGE, reinforcing their status as the two largest and most resilient cryptocurrencies.
In the risk-return profile illustrated above, DOGE stands out as an outlier in the upper right of the plot, indicating high returns coupled with high risk. While DOGE is highly volatile, it offers the potential for substantial returns. In contrast, SPY is located in the lower left quadrant, representing low returns and low risk, making the S&P 500 investment considerably safer but with lower returns.BTC and ETH are also in the lower left quadrant, showing lower risk and lower returns compared to other cryptocurrencies.DOGE’s high risk and return could be tied to speculative behavior, while BTC’s proximity to SPY might indicate growing institutional acceptance and investor confidence.
BTC and ETH have the strongest correlation with each other at 0.7956, suggesting their prices generally move together. For investors looking for exposure to cryptocurrencies with relatively stable returns, BTC and ETH might be preferable due to their strong correlation and lower relative risk compared to other cryptocurrencies.In contrast, DOGE and SPY have the weakest correlation at 0.1348, indicating very little relationship between their price movements. DOGE's low correlation with all other cryptocurrencies further underscores its position as an outlier, with its price largely driven by speculative behavior and social media trends.SPY's low correlation with the rest of the cryptocurrencies reinforces its stability compared to the volatile nature of cryptocurrencies.
In 2021, BTC and ETH experienced a significant surge in trading volume, fueled by a combination of a bull market, increased institutional adoption, speculative behavior, and widespread hype around cryptocurrencies. In contrast, SPY’s trading volume stayed relatively stable, reflecting the more mature and less volatile nature of the traditional stock market, which typically attracts investors who prioritize long-term stability over short-term speculative gains.
conclusion
Our analysis reveals that cryptocurrencies like BTC and ETH demonstrated significant volatility with substantial spikes in daily returns, particularly during 2017 and 2020-2021, driven by speculative behavior and increased institutional adoption. DOGE emerged as a high-risk, high-return outlier, largely influenced by social media trends. In contrast, the S&P 500 stock SPY exhibited stable returns with lower risk, emphasizing the predictable nature of traditional markets. The strong correlation between BTC and ETH suggests that these assets move in tandem, making them more stable options within the cryptocurrency space.