Key Points

• Bitcoin accounts for only 30% to 46% of the volatility in the cryptocurrency sector.
• AI The annualized volatility of the cryptocurrency sector has reached 85%
• Declining relevance presents opportunities, but it also comes with significant investment risks.

Grayscale The latest research shows that Bitcoin no longer explains most of the price movements in several major cryptocurrency sectors, indicating that despite the continued volatility, the digital asset market is becoming increasingly decentralized.

In the report “Beyond Volatility” released on November 12, this asset management company stated that over the past three years, Bitcoin accounted for approximately 30% to 46% of the earnings fluctuations in six sectors of cryptocurrencies.

Bitcoin only explains a small portion of DeFi and infrastructure earnings.

Grayscale studied the FTSE Grayscale Crypto Sector index, which measures the intensity of response of different segments of the cryptocurrency market to Bitcoin.

Among them, the financial, utilities, and services sectors have the weakest dependence on Bitcoin, with about 30% of the revenue variations that can be explained by BTC.

Secondly, in the artificial intelligence sector, it accounts for 35%; smart contract platforms account for 38%; and the cryptocurrency sector accounts for 43%.

The consumer and culture sector has the strongest connection with Bitcoin, at 46%, yet more than half of the historical fluctuations in returns for this sector cannot be explained by this type of cryptocurrency.

These results indicate that blockchain projects are increasingly influenced by sector-specific developments, rather than just the price of Bitcoin itself.

This is different from early market behavior, when assets like Dogecoin exhibited an abnormally high correlation with Bitcoin during the overall market recovery period.

AI Cryptocurrency Volatility Reaches 85%, Higher than Bitcoin's 43%

Despite the decline in correlation, Grayscale reminds that decentralization does not necessarily mean lower risk.

The annualized realized volatility of Bitcoin has dropped to around 43%, which is lower than the 81% level from five years ago and also below the ten-year average of 64%.

The volatility of each cryptocurrency sector under study is higher than that of Bitcoin.

The lowest volatility is in the currency sector, at 49%; for smart contract platforms, it is 58%, and for finance, it is 59%.

The public utilities and services sector accounted for 67%, consumers and culture for 76%, while the artificial intelligence sector had the highest proportion, reaching 85%.

These findings confirm Grayscale's previous observations regarding the changes in the relationship between Bitcoin and traditional markets.

They also complicate the view that “increased independence of cryptocurrencies from Bitcoin means greater security.”

Is the crypto market becoming less dependent on Bitcoin?

Grayscale has observed that the correlation between different sectors of the cryptocurrency market has fallen from previous highs, and the leaders in performance have become more dispersed as well.

Among the top 10 largest unstable coin cryptocurrencies, 6 of these assets led in performance in terms of returns at least one quarter over the past two years. Bitcoin did not lead in any single quarter.

These findings contrast with the previous widespread selling phases, including the recent round of Bitcoin ETF redemption trends, during which the outflow of institutional funds weakened the sentiment across the entire cryptocurrency market.

Grayscale Previous warnings regarding the concentration of Bitcoin treasuries also emphasized how changes in individual institutional holders can affect the volatility of the entire market.

However, a decline in relevance does not mean that cryptocurrencies have become detached from the broader financial environment.

Previous analyses studying the relationship between Bitcoin and tech stocks have indicated that macroeconomic shocks can still affect multiple asset classes simultaneously.

There were also periods in the market where there was a divergence in the flow of funds between Bitcoin and Ethereum ETF, which reflects differences in institutional demand.